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Fiscal Monitor for April 2016 to February 2017; Consistent with the Revised 2017 Budget Forecast for the Year as a Whole

Fiscal Monitor for April 2016 to February 2017; Consistent with the Revised 2017 Budget Forecast for the Year as a Whole

A surplus of $1.3 billion was reported for February 2017, compared to a surplus of $3.2 billion for February 2016. On a year-over-year basis, budgetary revenues were down $0.4 billion, while program expenses increased $1.5 billion. Public debt charges were virtually unchanged.

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Main Estimates: Reforms Fall Short of what is require

 

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DEFICIT FOR 2016-17 COULD BE $3 BILLION LOWER THAN FORECAST IN NOVEMBER UPDATE

The November 2016 Update forecasts a deficit of $25.1 billion for 2016-17.  Based on the financial results for the first nine months of 2016-17, public debt charges could be as much as $1 billion lower than forecast in the Update, while direct program expenses could be at least $2 billion lower.  Budgetary revenues appear to be on track, with differences in components offsetting each other.  On balance, the final outcome for 2016-17 could be at least $3 billion lower than forecast in the November Update, excluding extraordinary accrual adjustments.

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Reform of the Estimates: Increase the Scope of the Estimates

 

The President of the Treasury Board has recently released a four-pillar approach for Estimates reform to address issues raised by Parliamentarians concerning their inability to properly scrutinize government spending.  They also respond to the 2015 election commitment to better align the appropriations detailed in the Estimates to those in the Budget and Public Accounts.

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DEFICIT FOR 2016-17 COULD BE $3 BILLION LOWER THAN FORECAST IN NOVEMBER UPDATE

 

The November 2016 Update forecasts a deficit of $25.1 billion for 2016-17.  Based on the financial results for the first eight months of 2016-17, public debt charges could be as much as $1 billion lower than forecast in the Update, while direct program expenses could be at least $2 billion lower.  Budgetary revenues appear to be on track, with differences in components offsetting each other.  On balance, the final outcome for 2016-17 could be at least $3 billion lower than forecast in the November Update.

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ESTIMATES REFORM The Finance Minister and the President of the Treasury Board Should Talk More Often

The President of the Treasury Board has recently released a four-pillar strategy (a 2015 election commitment) for Estimates Reform aimed at improving the ability of Parliament to properly scrutinize government spending.  The four pillars are: timing of the tabling of the Main Estimates; the scope and accounting methods used in the Estimates and the Budget; changes to the current vote structure; and changes to the Reports on Plans and Priorities and the Departmental Performance Reports.   This note examines the proposed changes to the tabling of the Main Estimates.

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Changes to the Budgetary Process that Have Gone Largely Unnotic


Finance Minister Bill Morneau introduced some significant changes to the budgetary process in 2016 which went largely unnoticed by the media and financial commentators. In February last year he released  “Backgrounder – Economic Outlook”, which, included the Department of Finance’s latest survey of private sector economists for 2016 and 2017.  This in itself was not new. The previous government had also published revised economic forecasts in advance of the budget.

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MR. MORNEAU’S EMPTY FISCAL CUPBOARD


On the Friday before Christmas, when most Canadians were busy with their last minute shopping, the Department of Finance quietly released its “Update of Long-Term Economic and Fiscal Projections”. This is the first long-term fiscal sustainability report released by the Liberal government, and given its sombre conclusions it is not surprising that the Finance Minister released it hoping that few would notice.

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DEFICIT FOR 2016-17 COULD BE $3 BILLION LOWER THAN FORECAST IN NOVEMBER UPDATE

 

 

The November 2016 Update forecasts a deficit of $25.1 billion for 2016-17.  Based on the financial results for the first seven months of 2016-17, public debt charges could be as much as $1 billion lower than forecast in the Update, while direct program expenses could be at least $2 billion lower.  Budgetary revenues appear to be on track, with differences in components offsetting each other.  On balance, the final outcome for 2016-17 could be at least $3 billion lower than forecast in the November Update.

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DEFICIT FOR 2016-17 COULD BE $3 BILLION LOWER THAN FORECAST IN NOVEMBER UPDATE

 

The November 2016 Update forecasts a deficit of $25.1 billion for 2016-17.  Based on the financial results to date, public debt charges could be as much as $1 billion lower than forecast in the Update, while direct program expenses could be at least $2 billion lower.  Budgetary revenues appear to be on track, with differences in components offsetting each other.  On balance, the final outcome for 2016-17 could be at least $3 billion lower than forecast in the November Update.

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THE FINANCE MINISTER SHOULD INCLUDE A PRUDENCE RESERVE IN HIS BUDGET

 

 

The Parliamentary Budget Office (PBO) recently released its assessment of the federal government’s Fall Economic Statement and offered a number of issues for consideration by parliamentarians.  One of these related to the inclusion of prudence in the government’s economic forecast.

 

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WHY CREATE AN INDEPENDENT INFRASTRUCTURE BANK?

 

 

The Finance Minister’s Advisory Council on Economic Growth recently released its first report, concluding that its objective is to come up with ideas “that will more than double Canada’s growth trajectory”.

 

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THE FINANCE MINISTER JUST TABLED HIS 2017 BUDGET

 

 

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Fiscal Monitor for April – August 2016

 

The federal government reported a deficit of $2.7 billion in July 2016, up $0.4 billion from that reported in July 2015, as increases in program expenses more than offset increases in revenues and a decline in public debt charges. As a result, for the first five months of the 2016-17 fiscal year, the federal government posted a deficit of $5.4 billion, compared to a surplus of $2.8 billion in the same period in 2015-16.

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TOUGH BUDGET DECISIONS LIE AHEAD

Public consultations for the 2017 federal Budget, scheduled for before the end of March, are well underway.  The House of Commons Standing Committee on Finance began its hearings in September, with its report expected before the House winter break.  Finance Minister Bill Morneau has also launched his own consultations, primarily through town hall meetings and on-line submissions.

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Deficit for 2015-16 Lower Than Expected

 

 

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Fiscal Monitor for April – June 2016: The Beginning of Deficits

 

 

In his first budget, the Finance Minister forecast deficits in the coming months and indeed years and deficits he will get. With the release of the June 2016 Fiscal Monitor, a new era of budgetary deficits is again upon us.

From now on, we will be tracking the monthly and cumulative fiscal numbers to see how big those deficits could be and what they mean for the government’s goal of a stable debt to GDP ratio

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2015-16 WILL SHOW A DEFICIT: THE ONLY QUESTION IS HOW BIG?

The federal government posted a deficit of $9.4 in March 2016, compared to a deficit of $3.0 billion in March 2015.  The increase in the year-over-year deficit was primarily due to lower budgetary revenues (down $5.0 billion), reflecting the timing of receipts. As a result, there was a deficit of $2.0 billion for the April 2015 to March 2016 period, compared to a surplus of $2.9 billion in the same period in 2014-15.

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THE FINAL BUDGET OUTCOME FOR 2015-16 IS STLL UNCERTAIN

The federal government posted a surplus of $3.2 in February 2016, compared to a surplus of $4.6 billion in February 2015.  As a result, there was a surplus of $7.5 billion for the first eleven months of 2015-16, compared to a surplus of $5.9 billion in the same period in 2014-15.

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FEDERAL SUPPORT FOR INNOVATION; A SUGGESTION

Canada is suffering from an innovation deficit, which has been worsening for years. The result has been a dramatic decline in productivity growth and the economic growth potential of the economy. For decades, we have been living off unsustainably high commodity prices, particularly for oil and gas, at the expense of innovation and global competitiveness.

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COMPARING FISCAL APPLES TO FISCAL ORANGES

Did the Liberals inherit a small surplus (less than $1 billion) in 2015-16 as recently forecast by the Parliamentary Budget Officer (PBO) or a deficit of $5.4 billion as forecast by the Finance Minister in his 2016 Budget?. That depends on how one interprets the final outcome, which will not be known until the official Public Accounts numbers are released the fall.

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LESSONS FOR THE 2017 BUDGET

It has been almost a month since the government’s budget. Traditionally, a first budget is a political document that focuses on fulfilling election promises. Given the political nature of a first budget, the Prime Minister’s Office is quite naturally very involved in its preparation. The objective is to get the budget over with and off the front pages quickly.  Unfortunately, for the Prime Minister and the Minister of Finance, their first budget is still in the news and not in a favourable way.

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Fiscal Monitor for April 2015– January 2016

The federal government posted a surplus of $1.1 in January 2016, compared to a surplus of $2.2 billion in January 2016.  As a result, there was a surplus of $4.3 billion for the first ten months of 2015-16, compared to a surplus of $1.3 billion in the same period in 2014-15.

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THE TAX ELEPHANT IN THE LIBERAL “BUDGET”ROOM

 

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Finance Committee Pre-Budget Consultations – A Waste of Time and Resources

On March 11th, less than two weeks before the tabling of the Liberals” first  Budget, the Standing Committee on Finance released its budget recommendations based on consultations with 92 Committee witnesses and another 175 witnesses who provided written submissions.  Unfortunately, by then, most budget decisions  had already been made and the chances that the Committee’s recommendations (other than Liberal election promises) would have any impact on the Budget were virtually non-existent.  But no one really expected they would, given the length of time the Com

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THE MAIN ESTIMATES FOR 2016-A PROMISE DELAYED

In his February Economic and Fiscal Update, Finance Minister Bill Morneau forecast that total budgetary expenses would be $293.1 billion in 2015-16 and $304.5 billion in 2016-17. The following day, the President of the Treasury Board, Scott Brison, tabled the Main Estimates for 2016-17, showing total expenditures for 2015-16 at $250.7 billion ($42.4 billion lower than forecast by the Minister of Finance) and $250.1 billion for 2016-17 ($54.4 billion lower than forecast by the Minister of Finance).

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THE FINANCE MINISTER'S UPDATE LEAVES UNANSWERED QUESTIONS

The first unanswered question is why did he do it?

Typically, a Minister of Finance does not release revised economic and fiscal projections that close to the budget.  Instead, revised status quo forecasts, along with detailed explanations of the revisions, are a major component of the budget. It would appear that the Minister wanted to put a damper on public expectations on what be expected in the budget. He may also have wanted to signal to his cabinet colleagues that they should also curtail their expectations for his first budget.

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Fiscal Monitor for April – November 2015

The federal government posted a surplus of $2.2 in December 2015, compared to a surplus of $2.4 billion in December 2014.  As a result, there was a surplus of $3.2 billion for the first nine months of 2015-16, compared to a deficit of $0.9 billion in the same period in 2014-15.

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MORNEAU NEEDS A FISCAL ANCHOR

Finance Minister Morneau and Prime Minister Trudeau have finally admitted that the upcoming deficit will exceed $10 billion and that the deficit will not be eliminated over the next four years. Deficit elimination is no longer a short-term fiscal target for the Liberal government, but a “long term” issue.

 

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RECOMMENDING BAD POLICY TWICE

In a recent Opinion Piece in the Globe and Mail, Ken Boessenkool, the former Chief of Staff to Stephen Harper, argued that a cut in the GST would satisfy most of “the design elements of an ideal stimulus package.to stimulate the economy”. He set out four design elements: timing, speed, target, and sustainability.

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Fiscal Warning Lights are Flashing

Finance Minister Bill Morneau is busy putting together his first budget. No date has been announced. First budgets, after an election, often don’t turn out well for Ministers of Finance. It is very hard to live up to election promises and escalating expectations. Mr. Martin faced a fiscal crisis in preparing his first budget, and high expectations that he would fix the problem. Despite some significant fiscal actions in the budget, they were seen as “inadequate” in resolving the fiscal crisis. In the 1995 budget, Mr. Martin made sure this would never happen again.

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Fiscal Monitor for April – November 2015

The federal government posted a surplus of $0.4 in November 2015, compared to a deficit of $.6 billion in November 2014.  As a result, there was a surplus of $1.0 billion for the first eight months of 2015-16, compared to a deficit of $3.3 billion in the same period in 2014-15.

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IN SEARCH OF A DOMESTIC GROWTH STRATEGY

Last week the Governor of the Bank of Canada, Stephen Poloz, warned Canadians that they should get used to a low dollar, since this was a normal and, indeed, the necessary response to a global reduction in oil and commodity prices.  The necessary adjustment in the economy from the resource sectors to the non-resource sectors could take at least five years, perhaps longer. Private sector forecasters are starting to recognize this. They are again cutting their growth forecasts for 2016 to below 2 percent.

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Fiscal Monitor for April – October 2015

 

The federal government posted a deficit of $0.9 in October 2015, reducing the surplus for the first seven months of 2015-16 to $0.6 billion, up $4.6 billion from the same period in 2014-15. There has been a significant reduction in the year to date surplus, from a high of $5.2 billion reported for the April to July 2015 period to only $0.9 billion for the April to October 2015 period.  

  

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Improving Transparency and Credibility

 

In the last two weeks, Finance Minister, Bill Morneau, has come under a lot of criticism over the economic and fiscal projections in his November Update and the costing of the middle-income tax cut and the new high-income tax rate.  We offer a few suggestions, which would address these criticisms while improving the transparency and credibility, not just of the budget process but the election process as well.

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BUDGET CONFUSION

If Canadians had wanted a Conservative government obsessed with deficit elimination, they would have elected one. Instead, they elected a Liberal government that committed to running the government’s finances in a “realistic, sustainable, prudent, and transparent manner”.

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PBO POURS COLD WATER ON MORNEAU’S ECONOMIC AND FISCAL UPDATE

 

The Parliamentary Budget Officer (PBO) released his assessment of Finance Minister Jim Morneau’s first Update of the Economic and Fiscal Projections (Update), concluding that that the economic and fiscal projections were overly optimistic, especially in the outer years. This raises the question of whether the Finance Minister will be able to balance the budget in 2019-20 if the Government attempts to fully implement its election promises.

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PAUL MARTIN: THE IDOL OF FISCAL CONSERVATIVES

Recently Brian Crowley published two articles in the Globe and Mail arguing that deficits “don’t promote economic growth” and “stimulus proponents disregard dangers of deficits at their peril”. Fortunately, in the last election, the majority of Canadians didn’t agree with him. They elected a government that is prepared to invest in the future and run deficits.

 

 

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ADVICE FOR THE MINISTER OF FINANCE

Last Friday, you presented your first Update of Economic and Fiscal Projections.  Not surprisingly, the outlook has worsened since the April 2015 Budget. During the election, you based your platform on the 2015 Budget projections, adjusted using a July PBO report. That adjusted forecast projected a surplus of $7.2 billion in 2019-20, allowing you to claim a balanced budget in 2019-20, after incorporating the net impact of your election promises.

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Fiscal Monitor for April – September: Coming Into Line

 

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LETTER TO THE HONOURABLE SCOTT BRISON

The Honourable Scott Brison

President of the Treasury Board

Government of Canada

House of Commons

Ottawa Ontario K1A 0A6

 

Dear Minister

Congratulations on your re-election to the House of Commons and your appointment as President of the Treasury Board.  We welcome your appointment to this key Cabinet position and are confident you will serve it well.  

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ADVICE TO THE MINISTER OF FINANCE; STOP BEING A CONSERVATIVE

 

The Parliamentary Budget Officer (PBO) has handed the new Liberal Government its first bit of bad news.  In his latest Economic and Fiscal Update, the PBO is forecasting deficits of about $4 billion a year to 2020-21. His latest Update does not include the cost of the Liberals’ election promises.

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Fiscal Monitor for April – August 2015: Coming Into Line

 

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TRANSITION BRIEFING FOR MINISTER OF FINANCE KEY ISSUES FOR BUDGET PLANNING AN OVERVIEW

INTRODUCTION

 

The purpose of this note is to provide you with an overview of key budget planning issues and the decisions you will have to make in the upcoming days and weeks. Detailed briefings on each of the issues are provided in a separate binder. As you know very well, the economic outlook has deteriorated significantly since last April and this will present a major challenge in the preparation of the 2016 budget. A key objective in budget planning will be to re-establish the credibility, integrity and transparency of the budget process.

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CANADA'S ECONOMIC PROSPECTS ARE GETTING WORSE NOT BETTER

The International Monetary Fund (IMF) has just lowered its forecast of economic growth for Canada to 1.0% for 2015 and to 1.7% for 2016.   In their July 2015 update, the IMF had forecast growth of 2.0% for 2015 and 2.1% for 2016.  This is a major downward adjustment and corresponds to a further reduction for global economic growth to its lowest level since 2009. It will mean that the Canadian economy will continue to operate below its economic potential, a trend that began in 2009.

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Summary Comparison of the Costs of the Election Platforms three Parties - October 6

 

The attached table provides a comparison of the net costs of the platforms of the three major political parties. We have not included the April 2015 Budget/Parliamentary Budget Officer’s forecasts of the surplus over the next four years, given the uncertainties with respect to the current economic environment.

For the Liberals and New Democratics, the figures come directly from their costing of their election promises.  These numbers are not expected to change between now and October 19th.

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COMMITMENTS; EASY TO MAKE, DIFFICULT TO KEEP

Mr. Harper recently announced two new economic and fiscal commitments – one relating to the creation of new jobs and a second relating to legislation prohibiting increases in tax and premium rates over the next four years.

How important are these two commitments and how successful has the Harper Government been in living up to other fiscal commitments made since first forming government in 2006? The answers are not important and very badly.

Aim to Create 1.3 Million New Jobs

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Fiscal Monitor for April – July 2015: Surplus of $5.2billion: What is Going On

 

 

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CONSERVATIVE PLATFORM COSTS AS OF SEPTEMBER 28

None of the Parties are provideing costs for 2015-16.

 

Conservative Party “Boutique” Election Promises

 

 

2016-17

2017-18

2018-19

2019-20

 

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NDP PLATFORM COSTS SEPTEMBER 28

 

 

None of the Parties are providing cost estimates for 2015-16

 

New Democratic Party Election Promises

 

 

2016-17

2017-18

2018-19

2019-20

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LIBERAL PLATFORM COSTS SEPTEMBER 28

None of the Parties are providing cost estimares for 2015-16

 

Liberal Party Election Promises

 

 

2016-17

2017-18

2018-19

2019-20

 

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DO ANY OF THE MAJOR POLITICAL PARTIES HAVE A CREDIBLE FISCAL STRATEGY

What is a credible fiscal strategy? As we evaluate parties' platforms in the lead-up to the federal election, here are four essential criteria to bear in mind.

First, a credible strategy must be realistic. That is, it must be based on sound analysis and a careful and balanced view of economic and fiscal prospects, challenges, and risks.  

 

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COST OF LIBERAL PROMISES AS OF SEPTEMBER 1

The Table below provides cost estimates for most of the Liberal election promises as of September 1. In some cases, it has not been possible to provide estimates since not enough detail has been provided.

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COST OF NDP PROMISES AS OF SEPTEMBER 1

Panel 1 in the Table below provides cost estimates for most of the NDP election promises as of September 1.

 

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COST OF CONSERVATIVE PROMISES AS OF SEPTEMBER 1

The Conservatives have announced few new initiatives since the election campaign started.  The reason is that most oof their platform was already included in the April 21budget. Most importantly, this included the enhanced UCCB and income splitting for families with children 18 years of age and younger. There was also a committment to infrastructure spending beginning in the outer years.

Stephen Harper announced two new initiatives in the first two days of the 2015 election campaign.

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A SURPLUS OF $5 BILLION: WHAT IS GOING ON?

The federal government posted a surplus of $5.0 billion in the first quarter of 2015-16, up $4.6 billion from the same period in 2014-15. The Conservatives were quick to use this as proof that they were on track to post a surplus in 2015-16, despite a warning by the Department of Finance that early fiscal results are not reliable in forecasting results for the year as a whole.

 

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COST OF CONSERVATIVE ELECTION PROMISES AS OF AUGUST 26

The Conservatives have announced few new initiatives since the election campaign started.  The reason is that there platform was already included in the April budget. Most importantly, this included the enhanced UCCB and income splitting for families with children 18 years of age and younger.

Stephen Harper announced two new initiatives in the first two days of the 2015 election campaign.

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COST OF NDP PROMISES AS OF AUGUST 26

Panel 1 in the Table below provides cost estimates for most of the NDP election promises as of August 26.

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COST OF LIBERAL ELECTION PROMISES AS OF AUGUST 26

The Table below provides cost estimates for most of the Liberal election promises as of August 26.In some cases, it has not been possible to provide estimates since not enough detail has been provided.

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FEAR OF DEFICITS AND DEBT

Mr. Harper has successfully managed his policy agenda by appealing to Canadians’ “fears”.  There was his appeal to Canadians’ fear of domestic terrorists that led to Bill C51. The government’s “law and order” agenda was based on Canadians fear of violent crime and their concern for their personal safety. And there is now his appeal to the concern of Canadians over jobs and income security, and their fear that this may not be the right time to risk a change in government (the same appeal was successfully made in the 2011 election).

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WHO WILL BE THE BIGGEST LOSERS IN THIS ELECTION ? YOUNG CANADIANS

The longest election in over 100 years has now formally started and all three political parties have rushed to stake out their campaign slogans on the economy. The economy and jobs have always been the priority election issues for most Canadians, but the possibility that the economy could be in a “technical” recession (two quarters of negative growth) has made it even more so.

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WHO WILL BE THE BIGGEST LOSERS IN THIS ELECTION ? YOUNG CANADIANS

The longest election in over 100 years has now formally started and all three political parties have rushed to stake out their campaign slogans on the economy. The economy and jobs have always been the priority election issues for most Canadians, but the possibility that the economy could be in a “technical” recession (two quarters of negative growth) has made it even more so.

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PAYING FOR NDP ELECTION PROMISSES

Panel 1 in the Table below provides cost estimates for most of the NDP election promises so far.

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PAYING FOR CONSERVATIVE ELECTION PROMISSES

All three leaders have “promised” that their policy platforms will not lead to future budget deficits.  Apparently the one thing Harper, Trudeau and Mulcair can agree on is that deficits, no matter how small, are bad. This leaves raising taxes or finding new funds through reallocations of existing spending and revenues to fund their election promises.

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PAYING FOR LIBERAL ELECTION PROMISSES

Panel 1 in the Table below provides cost estimates for most of the Liberal election promises so far.

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PAYING FOR NEW CONSERVATIVE ELECTION PROMISSES

Although most of the Conservative election platform was set out last October with the introduction of the increases to the Universal Child Care Benefit and the Family Tax Cut, Stephen Harper has announced two new initiatives in the first two days of the 2015 election campaign. At this rate with 75 more days to go, Canadians could be bombarded with new promises before October 19th.

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AN ENCOURAGING START BUT NOT LIKELY TO LAST

In the April 2015 Budget a surplus of $1.4 billion was forecast for this year.  The forecast also included a Contingency Reserve of $1 billion.  However, for the first five months of the year economic activity has been declining. Private sector forecasters, the IMF and the Bank of Canada have all revised down their forecasts of economic growth by about one percentage point.

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PAYING (or not paying) FOR ELECTION PROMISSES-UPDATED

With Parliament recessed for the summer and an election call imminent, all three major political parties will now spend the coming weeks making new election promises. All of these promises - past and future - will cost taxpayers a great deal of money. The question is how will they pay for them?

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PAYING (or not paying) FOR ELECTION PROMISSES

With Parliament recessed for the summer and an election call imminent, all three major political parties will now spend the coming months outlining their campaign promises. All of these promises - past and future - will cost taxpayers a great deal of money. The question is how will they pay for them?

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Deja Vue all over again

In the fall of 2008, private sector economists were forecasting that the Canadian economy was already in a recession due to the financial crisis. Prime Minister Harper and his finance minister, the late Jim Flaherty, ignored these warnings and told Canadians there was nothing to worry about. The Prime Minister even advised Canadians that it was a good time to buy stocks, given the fall in equity prices.

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THE SPENDING LAPSE AND HUDAK MATH

Hardly a week goes by without a major media network breaking news that the federal government is deliberately underspending in order to meet its budget targets.  It has been claimed that Indian Affairs and Northern Development underspent its spending appropriations by $1 billion over the period 2009-10 to 2013-14.  Prior to that, it was claimed that Veterans Affairs had underspent its budget by $1.1 billion over a number of years.

These are shocking numbers if they were in fact true? Fortunately, none of this is true.

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A SURPLUS LAST YEAR; THIS YEAR MAYBE NOT

In his first budget last April, Finance Magician Joe Oliver pulled a handful of rabbits out of his hat to achieve the long-promised balanced budget in 2015-16.  He sold GM shares at cut-rate prices for a net savings of $900 million; cut the contingency reserve by $2 billion; and, booked a “settlement” of $900 million for a new disability and sick leave management system for federal government employees. All this was necessary to pay for the Family Tax Cut package while still honouring the Government’s commitment of a balanced budget in 2015-16.Last week, the Mr.

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IS RAISING THE TOP TAX RATE A BAD IDEA?

Earlier this month, the Liberals released their middle-income tax package, which they intend to promote as a better alternative to the Conservative’s Family Tax Cut package in the upcoming 2015 election.

 

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OMNIBUS, OMINUS, AND ODIUS

It’s not very difficult to find words to describe how this government regards Parliament. Their record over the last several years is very clear. Words that quickly come to mind are irrelevant, bothersome, unimportant, waste of time and money. No doubt this list could be enlarged.

Nowhere is this attitude more obvious than with their use of budget omnibus bills. The Harper Government tabled its 2015 Omnibus Budget Bill (Bill C-59) on May 7th. At 153 pages, it’s a pale shadow of previous budget bills.

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INFRASTSRUCTURE SPENDING: A LOT OF TALK AN NO ACTION

Prime Minister Stephen Harper and Minister of Finance Joe Oliver successfully used up most of the projected budget surpluses with their announcements in the April budget to “put money back in the pockets of Canadians”. They have left the Opposition Parties to figure out how they would deliver their election platforms, while at the same time “committing to balanced budgets.

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DON'T FORGET JOBS AND GROWTH

The 2015 election is at serious risk of being highjacked by tax cut promises made by Prime Minister Harper during the 2011 election campaign; promises that will do absolutely nothing to strengthen economic growth and job creation.  Add to this government’s attempt to play on Canadian’s fear over terrorism.

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BANCED BUDGET LEGISLATION WOULD BE A BIG MISTAKE

 Finance Minister Joe Oliver announced in a speech to the Economic Club of Canada in Toronto that the government would introduce balanced budget legislation (BBL); this would fulfill a commitment made in the September 2013 Speech from the Throne. Reaction by the media quick and most financial commentators was largely negative, and not surprisingly so, because it is a very bad idea.

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LET'S HAVE HAVE A DEBATE ABOUT HOIW WE PAY OIUR TAXES

Mr. Oliver has finally delivered his long waited budget. Conservatives are now spreading out across Canada selling their view of responsible fiscal management (i.e., deficit elimination) and lower taxes (income splitting and increased child care benefits).  The election is off and running paid for by taxpayer dollars.

The so-called “political pundits”, and the media have been quite impressed by the clever way the budget painted the Opposition Parties into a “political corner”.

 

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WE NEED A FACT CHECKER FOR THE ELECTION

 

On April 8th, Joe Oliver stood up before the Economic Club in Toronto and delivered what can only be described as one of the greatest” economic fanatasy” speeches in decades.  

 

In reading his speech, one can only conclude that Mr. Oliver, and by extension the Prime Minister, live in some kind of “parralel economic universe” quite distinct from the one most Canadians actually live in.

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YOU CAN'T HIDE MUCH LONGER JOE

People are beginning to wonder where exactly Minister of Finance Joe Oliver is these days.

 He certainly hasn’t been in Parliament answering questions about the economy and how the government intends to act to strengthen economic growth and job creation. The reason given is that he is working on the budget. Parliament will adjourn this week for another “holiday” and will not return until April 20th. He plans to meet with private sector economists on April 9. Maybe he will come out of hiding after that.

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A WASTED OPPORTUNITY

All political parties love to make public announcements in support of infrastructure spending, and why not? Canadians know that much of the infrastructure in Canada needs to be improved or replaced. This is true for transportation systems, public utility systems, education infrastructure, health care infrastructure, and senior care infrastructure, to mention only some of the areas where more infrastructure investments are needed. Canadians want to hear what their political parties are proposing to deal with upgrading their infrastructure. Unfortunately they are not hearing much.

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INFRASTSRUCTURE SPENDING: A LOT OF TALK AN NO ACTION

All political parties love to make public announcements in support of infrastructure spending, and why not? Canadians know that much of the infrastructure in Canada needs to be improved or replaced. This is true for transportation systems, public utility systems, education infrastructure, health care infrastructure, and senior care infrastructure, to mention only some of the areas where more infrastructure investments are needed. Canadians want to hear what their political parties are proposing to deal with upgrading their infrastructure. Unfortunately they are no hearing much.

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YOU CAN'T HIDE MUCH LONGER JOE

People are beginning to wonder where exactly Minister of Finance Joe Oliver is these days.

 He certainly hasn’t been in Parliament answering questions about the economy and how the government intends to act to strengthen economic growth and job creation. The reason given is that he is working on the budget. Parliament will adjourn this week for another “holiday” and will not return until April 20th. He plans to meet with private sector economists on April 9. Maybe he will come out of hiding after that.

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WHY WOULD THE GOVERNMENT EVEN WANT A BUDGET?

It was only eight weeks ago (January 13th to be precise) that Joe Oliver announced that he was postponing the budget until sometime after April 1st. His excuse was that rapidly falling oil prices were creating an unusual high degree of uncertainty for budget planning and that he needed more time to assess the future course of oil prices and their impact on the economy.

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"PUTTING MONEY BACK IN THE POCKETS OF CANADIANS"

Politicians do not like talking about taxes unless of course they are cutting them, or as the Conservative government keeps telling Canadians, “putting money back in their pockets”.

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JOE OLIVER VISITS TURKEY

“Our Government’s sound economic management and unwavering commitment to balance the budget this year—while creating jobs, growth and long-term prosperity for Canadians—has resulted in a resilient economic performance in a challenging global economy. As Canada is doing with its Economic Action Plan, we encourage G-20 countries to follow through on their commitments to create jobs and a strong, sustainable and balanced global economy.”

 

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WAKE UP JOE THE BUDGERT WILL BE BALANCED THIS YERAR

The government has painted itself into the proverbial “political” corner”. In the March 2011 budget, the government made a commitment “to return to balanced budgets by 2015-16 at the latest”.  

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OUR GRANDCHILDREN WILL BE REALLY ANGRY WITH US

For the past several weeks, politicians and the media have been arguing over Joe Oliver’s decision to delay the budget until after March 31st.  If the Finance Minister keeps to his word, the earliest the budget could be tabled would be in the week of April 20th. The later the budget is tabled, the less time there is to ensure timely passage of any accompanying legislation, without the use of time limits and closure.

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CANADIANS DESERVE A “REAL BUDGET"

 

Budgets are becoming less and less important as policy documents but does anyone really care or does it really matter: certainly not for the Harper government?

Finance Minister Joe Oliver did a 180-degree flip on January 16th.  After much confusion about the impact of the dramatic fall in oil prices, Mr. Oliver announced that the budget would be delayed until after March 31, perhaps to April or even May or maybe even until after the election. There is no legal or constitutional requirement to table a budget.

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DISAPPEARING CREDIBIL.ITY

In last year’s budget, the price of oil was $110 a barrel. In June, the price of a barrel of oil began to fall and by October it was down to close to $80. The government was not at all concerned by this decline or to emerging risks in the global oil market.

 

Indeed the government was so confident that the risks were minimal that in the same month Prime Minister Harper, with great fanfare, announced major tax cuts, including income splitting.

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JOE OLIVEWR HAS A PROBLEM

In last year’s budget, the price of oil was $110 a barrel. In June, the price of a barrel of oil began to fall and by October it was down to close to $80. The government was not at all concerned by this decline or to emerging risks in the global oil market.

 

Indeed the government was so confident that the risks were minimal that in the same month Prime Minister Harper, with great fanfare, announced major tax cuts, including income splitting.

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THE DISAPEARING SURPLUS

 

 

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“BAH” said Fantino; “HUMBUG” said HARPER

 

Hear we are in December, that time of year when families get together to celebrate their shared love; to express thanks for the wellbeing of their families and friends; and, to join together to help those who are suffering, and in need of our help and generosity.

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WHAT IF?

The most important fiscal action taken by the Conservative government after being elected in 2006 was to cut the GST by two points. At the time (and ever since) every credible economist in Canada recommended against it. Was it necessary and are we better or worse off as a result?

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HARPER DELIVERED MORE THAN EXPECTED

Everyone was expecting the Prime Minister to announce a change to the tax system to allow income splitting for families with children up to the age of eighteen. But he went much farther than anyone expected. He delivered much of the 2015 budget.

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READ THE FINE PRINT

Lots of discussion, debate and disagreement over the Prime Minister’s announcement last Thursday of the Conservative government’s proposals for support of families with children, which will be a critical part of their 2015 election platform.

 

Good on them. It was well done and politically very clever.

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ITS THE ECONOMY STUPID

It would be a gross understatement to say that the outlook for the global economy is not good.

In its October 2014 World Economic Outlook (WEO), the International Monetary Fund (IMF) reduced its forecast for global economic growth to 3.3 percent for 2014, 0.4 percentage points lower than in the April 2014 WEO. The global growth projection for 2015 was lowered to 3.8 percent. China accounts for one-third of this growth and without China growth for the global economy would be less than 2.5 per cent.

 

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BUDGET FORECASTING AND A FALL MINI BUDGET

It should not have come to anyone’s surprise that the announcement by the Prime Minister that the federal deficit for 2013-14 was $5.2 billion, substantially lower than the $16.6 billion forecast in the February 2014 budget.

Deficit targets have become political targets. The fiscal credibility of a government depends on achieving or doing better on its deficit targets. Failure by a government to hit its deficit targets is not looked on kindly by bond markets or by the rating agencies.

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DARK CLOUDS ON THE HORIZON

Most Canadians paid little, if any attention to the meeting of G-20 Finance Ministers in Cairns, Australia over a week ago. Too bad, because the communiqué that they issued at the end of their meeting showed that they are very concerned about the prospects for the global economy. It will be interesting to see how the up coming meeting of the G-20 Leaders respond to their Finance Ministers report.

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WELCOME BACK MR. OLIVER

You have been Minister of Finance now for about six months. Parliament will resume sitting this week and the House of Commons Standing Committee on Finance has already begun its pre-budget consultations.

 

You may be wondering what exactly you should do over the next 6 months leading up to the 2015 budget. Expectations are already running very high for this budget and a failure to fulfill these expectations could have serious political consequences.

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WE'LL (aka deficits) BE BACK

The federal government is on track to eliminate the deficit by 2015-16. The last time the federal government recorded a surplus was in 2007-08, with a surplus of $9.6 billion, following a string of surpluses that began in 1997-98. Over the previous three decades a surplus has been recorded in only one year.

 

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A GOVERNMENT WITHOUT A JOBS STRATEGY

What a difference a summer “does not make”.

 

On Friday last week, Statistics Canada released its Labor Force Survey for the month of August. The Survey showed that the economy lost 11,000 jobs in August, following an unprecedented decline of 112,000 private sector jobs, only partially offset by an equally unprecedented increase in self-employment.

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THE START OF THE 2015 ELECTION

For the first three months of fiscal year 2014-15, which ended March 31, the federal government posted a surplus of $400 million, an improvement of $3 billion from the deficit of $2.6 billion recorded in the same period in 2013-14. 

 

In the February 2014 Budget, a deficit of $2.9 billion was forecast for 2014-15. This forecast included a “risk adjustment factor” of $3 billion, which if not needed would imply a balanced budget, if not a surplus for 2014-15. 

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MEMO TO PREMIER WYNE ; THINK CREDIBILITY

No doubt you will be getting a lot of advice, especially from depressed Conservatives, recommending that you take the kind of tough fiscal action Mr. Hudak was proposing, in order to eliminate the deficit and halt the growth in Ontario’s public debt. Ontario, according to them, is in a fiscal crisis: the rating agencies are knocking at your door; and you must act immediately. Our first recommendation is that you ignore this advice. It was non-credible before the election and it still is. Read More

IT'S ALL ABOUT JOBS STUPID

 

In a previous article, we applauded Tim Hudak for giving Ontario voters a clear choice about the future of the Ontario economy and indeed the Canadian economy. Ontario, after all, makes up 40 percent of the Canadian economy. If the Ontario economy is not doing well, then the Canadian economy will not being doing well.

On Thursday, Ontario voters will make a choice about the future of Ontario.

 

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BALANCED BUDGET FOR 2014 CLEARLY WITHIN REACH

The federal deficit for the period 2013-14 was estimated at $12.1 billion, an improvement of $6.6 billion from the same period last year.  Although these are not the final results for fiscal year 2013-14, they clearly indicate that the deficit for the year as a whole will be much lower than the Budget 2014 estimate of $16.6 billion and significantly raising the possibility of a balanced budget/surplus in 2014-15, one year ahead of the Government’s commitment.  Final audited results for 2013-14, however, will not be released until the fall of 2014.

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MAKING SENSE OF THE JOB NUMBERS

 

During elections, all political parties try to “produce” numbers that show their proposed policies are better than the proposed policies of their opponents.

So far there are four numbers for the Progressive Conservative Party (PC) that have attracted a lot of media attention: the number “1,000,000”; the number “100,000”; the number “3”; and the number “$7.4” billion.

Putting out too many numbers runs the risk of attracting a lot of criticism.

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TIM HUDAK-DEFICIT SLAYER OR ECONOMY SLAYER

You have to give Tim Hudak credit. He is presenting Ontario voters with a very clear policy choice  - choose austerity or choose growth.

On the one hand, there is the Conservative Party (PC), which would commit to eliminating the deficit in three years, through deep spending cuts, and on the other, there is the Liberal Party, which is expanding the budget in the short term but “targeting” for deficit elimination within four years.

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DEAR JOE, IS THERE A PLAN B

It has been just over a month since you were appointed Minister of Finance. Perhaps you are still getting over the “shock” of your appointment, or perhaps it doesn’t really matter, since Primer Minister Harper has always been the real Minister of Finance.

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MR. FLAHERTY WOULD BE HAPPY

 

Since 2010, the fiscal “Holy Grail” of the Conservative government has been the elimination of the deficit by 2015-16. Unfortunately, former Finance Minister Jim Flaherty gave his life to that goal. He understood and accepted the factors underlying the emergence of the largest deficit in Canadian history, but he disliked debt and he was absolutely committed to eliminating the deficit.

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HIGHER TAXES OR HIGHER DEBT OR BOTH?

 

 

In the 2014 budget, the government forecast that the deficit would be eliminated in 2015-16 and this would be followed by modest surpluses over the next three years. The Harper government had already promised to use the surpluses to allow income splitting for tax purposes for families with children under the age of 18; to extend the fitness tax credit to adults; and, to reduce debt by $3 billion a year. These three initiatives alone, if adopted, would use up most of the surpluses over the medium term.

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FISCAL MONITOR FOR FEBRUARY 2014

 

For the first eleven months of fiscal year 2013-14, the federal government posted a deficit of $5.4 billion, an improvement of $5.3 billion from the deficit of $10.7 billion reported in the same period in 2012-13. The surplus in February 2014 was about $2 billion higher than that recorded in February 2013.  The financial results for December 2013 to February 2014 represent virtually all of the improvement in the deficit year-to-date.

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ANOTHER REASON TO KEEP THE SENATE


Last June, we wrote an article (“Mr. Flaherty’s Blank Cheques” iPolitics June 18, 2013), which supported Senator Wilfred Moore’s private member’s Bill S-217.  This proposed Act would amend the Financial Administration Act to once again require parliamentary approval for any new borrowing by the federal government in financial markets. 

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UNDERSTANDING FISCAL NUMBERS IS NOT GETTING EASIER

 

Ask anyone who has had the “dubious pleasure” of sitting through a budget lockup, federal or provincial, how easy it is to read and understand the financial documents that governments’ provide. They will just roll their eyes in frustration. It seems to most readers that the sole purpose of budget documents is to create confusion so that they just throw up their hands in defeat.

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ANOTHER OMNIBUS BILL: WHY IS THIS GOVERNMENT SO AFRAID OF PARLIAMENT?

Last Friday, the Government tabled another “large”(359 pages) Omnibus Budget bill, which had little to do with the 2014 Budget. No one was surprised because this has been the practice of this Government since it was elected in 2006. What matters for the Conservative government is the amount of legislation that gets passed, not the “quality” of the legislation. The most recent example of this, among a long list of bad legislation, is the so-called Fair Election Act.

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FISCAL MONITOR FOR APRIL TO JANUARY, 2014

For the first ten months of fiscal year 2013-14, the federal government posted a deficit of $10.5 billion, an improvement of $3.3 billion from the deficit of $13.9 billion reported in the same period in 2012-13. The surplus in January 2014 was about $1 billion higher than that recorded in December 2013.  The financial results for December 2013 and January 2014 mark a significant improvement from the fiscal performance in the previous eight months. 

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BUDGET PLANNING FOR THE 2015 ELECTION

The Conservative government is in a quandary about what to do with the surpluses projected to begin in 2015-16. As for the Opposition Parties, they aren’t saying much.

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RUNNING OUT OF SURPLUSES: WHAT CAN A NEW GOVERNMENT DO?

It should be clear to all political parties that, after 2015, there will be little in the way of “surpluses” for the federal government to deal with critical policy challenges.  The modest surpluses that are currently projected to begin in 2015-16 will be rapidly used up and the potential for economic growth will be unable to generate future sizeable annual surpluses (“We’re Not Out Of The Fiscal Woods Yet” iPOLITICS February 24, 2014). The “surplus” budgets of the 1990s and the years up to 2007-08 will not to be repeated.

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NO TRANSPARENCY OR ACCOUNTABILITY: A MISSED OPPORTUNITY

When Budget 2014 was tabled before Main Estimates 2014-15, we were naively hoping that the President of the Treasury Board would provide a detailed reconciliation between spending in the Main Estimates and spending in the Budget for 2014-15.  No such luck.  No reconciliation was provided.

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FISCAL MONITOR FOR APRIL TO DECEMBER 2013

 

For the first nine months of fiscal year 2013-14, the federal government posted a deficit of $12.7 billion, an improvement of $1.7 billion from the deficit of $13.6 billion reported in the same period in 2012-13. This marks a significant improvement from the fiscal performance in the previous eight months.  

 

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THE SURPLUSES "ARE NOT IN THE BANK"


Last January, we speculated on the possibility of a balanced budget “Ottawa’s Got A Growth Problem” (iPolitics January 2014) or even a surplus, in 2014-15. We concluded that a surplus in 2014-15 was not very likely. We believe, in the absence of some creative book keeping, that a surplus is still unlikely.

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BUDGET 2014: MUCH ADO ABOUT NOTHING

Jim Flaherty’s ninth budget, called “The Road to Balance; Creating Jobs and Opportunities”, consisted of 419 pages and 78 new initiatives.  Sounds like more than a “do nothing budget”, certainly when compared to the 2013 Budget, which contained few new initiatives and 433 pages.  Unfortunately, it is not just a “do nothing budget”, but, even worse, it is a “sleight-of-hand budget”.  And, regrettably, despite the title of the budget, there is nothing of substance in this budget to strengthen economic growth and job creation.

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BUDGET 2014: A WASTE OF MODEST SURPLUSES

 

A debate has broken out over how to use the surpluses projected in the 2014 budget. Everyone expected that during the 2015 election there would be a heated debate between the Conservative government and the Opposition Parties over how to use the projected surpluses. No one expected a heated debate within the Conservative party.

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FISCAL MONITOR FOR APRIL TO NOVEMBER 2013

 

For the first eight months of fiscal year 2013-14, the federal government posted a deficit of $13.8 billion, an increase of $0.2 billion from that the deficit of $13.6 billion reported in the same period in 2012-13. The year-over-year increase was affected by the “booking” of a $2.8 billion liability for disaster assistance for the 2013 flood in Alberta.  In the absence of this one-time liability, the deficit would have been $2.6 billion lower.

 

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FORGET FEBRUARY; ITS THE BUDGET OMNIBUS BILL THAT REALLY MATTERS

 

Last Monday, the Finance Minister announced that the 2014 Budget would be tabled in the House at 4 pm on February 11th. The reaction in the media and among the Opposition Parties was very quick.  Why was the government planning to release its most important annual policy document during the Winter Olympics, when Canadians would be glued to their TV sets watching a tape of the  “luge” event?  Was the Government trying to deliver a “do nothing” budget, which would go unnoticed by all Canadians. Probably, but who cares?

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WHAT ARE THE CHANCES OF A BALANCED BUDGET IN 2014-15?


Following his meeting with the private sector economists, Mr. Flaherty was asked about the possibility of a balanced budget, or even a surplus, in 2014-15 – one year ahead of the government’s commitment to eliminate the deficit by 2015-16.  The Minister did not directly answer the question, but did not explicitly rule out the possibility either.  What are the chances that the deficit could be eliminated a year earlier? Even if the chances were good, why would the government want to announce it in the 2014 budget?

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ANSWER THE PHONE MR.FLAHERTY, THE GOVERNOR IS CALLING

 

On Wednesday, the Bank of Canada issued its regular monetary policy report. To no one’s surprise, the Bank maintained its overnight rate at one per cent.

 

But the real message wasn’t the setting of the bank rate. That rate hasn’t changed since September 2010. The real message is that Governor is very concerned about the prospects for the Canadian economy. There is simply not enough aggregate demand in the economy and the prospects are not that certain.

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GOOD POLITICS BUT QESTIONABLEPOLICY-A FEELING OF DEJA VUE


In the October 16th Speech from the Throne, the Government announced its intention to introduce legislation, requiring “balanced budgets during normal economic times and concrete timelines for returning to balance in the event of an economic crisis”. No details or explanations were provided.

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WHY IS FLAHERTY SO OPITIMISTIC ABOUT THE BUDGET?

The economy lost almost 46,000 jobs in December and the unemployment rate rose to 7.2 percent, with all job losses concentrated in full-time positions. In 2013, only 102,000 net jobs were created, the worst job creation record since 2009, with most of the gains in part-time employment.

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TAXATION AND MIDDLE INCOME FAMILIES


A few days ago, Paul Adams wrote a very compelling article about the nuances and complexities of being “middle class”. Apparently most Canadians consider themselves “middle class”, although the “middle-income is getting a smaller share of the total Canadians earn than they were 30 or 40 years ago”. His article is about the various ways middle income can be defined and what this may mean for Trudeau who is focused on the “middle class”.

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What To Do In Budget 2014?

In our review of 2013, we concluded with the following:

In 2013, the federal government continued, as in the past, to show its ideological arrogance; its unwillingness to confront major economic challenges; its disdain for Parliament; its aversion to openness and transparency; its rejection of a federal role in working with the provinces to strengthen the Federation; and its inability to adopt evidence based policy.
This has been the government’s method of operation for the past seven years. Why change now? Expect more of the same in 2014.

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2013 – A Year Like Every Other Year

Finance Minister Jim Flaherty will no doubt look back on 2013 as a very successful year. He is, after all, on track to achieve the only thing he cares about, and that is the elimination of the deficit in 2015-16. This will allow the government in the 2015 election to fulfill its 2011 election promises to introduce income splitting for families with children 18 years of age and under; to extend the fitness tax credit to adults, and to double the amount allowed for tax-free savings accounts.

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Fiscal Monitor for April to October 2013

For the first seven months (April to October) of the fiscal year 2013-14, the federal government posted a deficit of $13.2 billion, an increase of $1.3 billion from that reported in the same period in 2012-13.  The year-over-year increase in the deficit was more than attributable to a $2.8 billion liability for disaster assistance for the 2013 floods in Alberta.  In the absence of this liability, the federal deficit would have been $1.5 billion lower.

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CPP REORM PUNTED BEYOND THE 2015 ELECTION

At a meeting of federal and provincial ministers of finance on Monday, the federal government punted CPP reform well into the future, certainly beyond the 2015 election.  Despite what appears to be a consensus among provincial finance ministers for more study on the nature and timing of reform, the federal government vetoed the idea by saying global economic growth was too uncertain and the domestic economy was too "fragile". According to Flaherty, the CPP premium is a payroll tax and increasing CPP premiums over the next two to three years would slow growth and kill jobs.

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Now Is A Good Time To Enhance The CPP

In a press release issued on December 8th, the Minister of State for Finance Kevin Sorenson argued that now is not the time to consider provincial proposals to enhance the Canada Pension Plan (CPP), given the fragile nature of the current economic recovery. This raises the obvious question as to when is the right time to consider long-term structural changes, which would improve retirement savings for most Canadians?

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Fiscal Monitor for April to September 2013

For the first six months of fiscal year 2013-14, the federal government posted a deficit of $10.7 billion, an increase of $1.3 billion from that reported in the same period in 2012-13.  The year-over-year increase in the deficit was more than attributable to the booking of a $2.8 billion liability for disaster assistance for the 2013 flood in Alberta.  In the absent of this one-time liability, the deficit over April to September 2013 would have been $1.5 billion lower than in the same period last year.

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Who Knows What The Government Is Spending?

There has been a great deal of speculation as to why federal spending in the last fiscal year (2012-13) was so much lower than expected.  The Minister of Finance stated that it was due to the Government’s “tight control over spending”.  But this claim of good expenditure management is not credible.  The reality is that Minister Flaherty has been “overstating” his forecast of government spending for some time.

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QUELLE SURPRISE: A LARGE SURPLUS IN 2015-16

On Tuesday, Finance Minister Flaherty released his Update of Economic and Fiscal Projections. As had been widely speculated, the government is now forecasting a surplus of nearly $4 billion for 2015-16, almost $3 billion higher than expected in the March 2013 Budget. Hardly a surprise since the government is betting its political future on eliminating the deficit in 2015-16 and being in a position to implement the tax initiatives promised in the 2011 election. 

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TIGHT CONTROL OVER SPENDING: MYTH OR REALITY

In the media briefing following his meeting with private sector economists on October 28th, the Minister of Finance stated that the lower than expected deficit outcome for 2012-13, of $6.9 billion, was due to the Government’s ``tight control over spending``.  The focus of Minister Flaherty’s comments was on the differences between the final deficit outcome and the March 2013 Budget forecast.

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MAXIME BERNIER: THE TED CRUZ OF CANADIAN POLITICS

In an article in iPOLTICS on October 31st, Elizabeth Thompson reported that Maxime Bernier – the Ted Cruz of Canadian politics - would present a resolution at the Conservative Party’s National Convention, which would introduce balanced budget legislation and freeze federal government spending at $300 billion beginning in 2016-17 and continue for the next four fiscal years.   This resolution was passed at the convention.  But did those who voted for this resolution have any understanding of what it means?

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IS HARPER A FISCAL CONSERVATIVE? AN UPDATE FROM 2011

The Conservative party will begin its National Convention in Calgary on Thursday of this week. Prime Minister Harper is no doubt looking forward to a strong convention that would get his government out of its mid-term doldrums.

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PBO LEAVES FLAHERTY WITH LESS ROOM TO MANOEUVRE

In its latest “Economic and Fiscal Outlook the Parliamentary Budget Office (PBO) still expects the Government to meet its balanced budget commitment in 2015-16, but with a much smaller surplus than forecast in its April 2003 update.  A surplus of only $200 million is now forecast for 2015-16, down $3.5 billion from the surplus of $3.7 billion forecast in its April 2013 Update, leaving the Government little flexibility to introduce new policy initiatives, or honour its 2011 election promises of introducing new tax expenditures, in advance of the 2015 election.  The PBO estimates th

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UNDERMINING PARLIAMENT ONCE AGAIN

On Wednesday, the Minister of Finance tabled BILL C-4, the second omnibus bill related to measures proposed in the March 2013 Budget.  Like most of the others tabled by the Minister, this was another brick, totalling 322 pages. And like the others, it included measures that were not explicitly referred to in the budget.The Government once again has circumvented the authority of Parliament. This is becoming commonplace and no one seems all that concerned. Everyone is focused on the “senate scandal”, not on the diminished role of Parliament

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FISCAL MONITOR FOR APRIL TO AUGUST 2013

For the first five months of fiscal year 2013-14, the federal government posted a deficit of $6.8 billion, a decline of $0.4 billion from that reported in the same period in 2012-13.  Given the results to date, coupled with the fact that the final outcome for 2012-13 was nearly $7 billion lower than forecast, the budgetary balance projections for 2013-14 and beyond are clearly out-of-date and the commitment to balance the budget in 2015-16 appears to be secured.

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ELIMINATING THE DEFICIT JUST GOT EASIER

The Department of Finance released the final audited financial results for 2012-13 in its Annual Financial Report (AFR).

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Speech From The Throne: Balanced Budgets And Job Creation-Playing To The Conservative Base

Wednesday’s marathon throne speech once again repeated the well worn phrases that “our government is leading the world by example”; “Canada now leads the G-7 in job creation; in income (not GDP) growth; and in keeping debt levels low”; “our government will eliminate the deficit by 2015-16;” and, “our government will reduce the debt/GDP ratio to 25 per cent by 2021”.

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What To Do With The Expected Surplus? — The real question for the 2015 election

In September, the Parliamentary Budget Office (PBO) released its annual Fiscal Sustainability Report. The report provides “a projection of current fiscal policy 75 years into the future to assess the implications of demographic and structural pressures on government financing”. 1

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Fiscal Monitor for April to July 2013

For the first four months of fiscal year 2013-14, the federal government posted a deficit of $4.5 billion, an increase of $0.4 billion from that reported in the same period in 2012-13.  In the March 2013 Budget, the deficit was expected to decline by $7.2 billion for the year as a whole, from $25.9 billion to $18.7 billion. Although the current results appear to be at odds with the expected decline for the year, at least five to six months of financial data are required before one can properly assess the expected decline for the fiscal year as a whole.

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AN UNEXPECTED EI ANNOUNCEMENT BY MR. FLAHERY - WHAT DOES IT MEAN?

Finance Minister Jim Flaherty announced some good news for employees and employers this week – employment insurance (EI) premiums rates would be frozen at their 2013 levels for 2014 and would be no higher for 2015 and 2016. . Rates paid by employers (1.4 times the employee rate) would be adjusted downwards correspondingly.

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HARPER'S AND FLAHERTY'S OBSESSION WITH "MOVING" FISCAL TARGETS

The G-20 has just completed its Summit in St. Petersburg, Russia. Not surprisingly, but quite appropriately, the focus of the meeting was on the crisis in Syria, and not solely on global economic and financial issues.  A lot has changed since the last G-20 meeting. At the previous meeting, the IMF predicted that the emerging market economies would lead global economic growth and the U.S. would lag behind.

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FISCAL MONITOR FOR APRIL-JUNE 2013

For the first three months of fiscal year 2013-14, the federal government posted a deficit of $2.6 billion, down $0.3 billion from that reported in the same period in 2012-13.  In the March 2013 Budget, the deficit was expected to decline by $7.2 billion for the year as a whole, from $25.9 billion to $18.7 billion. Although the current results appear to be at odds with the expected decline for the year, at least five to six months of financial data are required before one can properly assess the expected decline for the fiscal year as a whole.

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"SELF-LEVIATION" ISN'T WORKING: THE GOVERNMENT NEEDS A NEW GROWTH AND JOB STRATEGY

this week the Minister of Finance held his seventh National Policy Retreat with business, academic and other “experts” to discuss job creation and economic growth, particularly “issues” related to “skill shortages, labor mobility, internal trade and promoting investment in Canada.” These are important issues.   It would be even more helpful if he would now meet with his provincial counterparts since these issues fall under provincial jurisdiction.

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FISCAL MONITOR APRIL TO MAY 2013: A DISAPPOINTING START

For the first two months of fiscal year 2013-14, the federal government posted a deficit of $2.7 billion, up $0.9 billion from the same period in 2012-13.  In the March 2013 Budget, the deficit is expected to decline by $7.2 billion for the year as a whole. Although the current results are at odds with the expected decline for the year, at least five to six months of financial data are required before one can assess the expected decline for the fiscal year as a whole. 

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THE SENATE FINANCE COMMITTEE IS DOING SOME IMPORTANT WORK

While the media and most of the public are immersed in the spending irregularities of four Senators, the Senate is actually doing some important work, which is going completely unnoticed. A case in point is Senator Wilfred Moore’s Bill S-217 “An Act to amend the Financial Administration Act”, which would require Parliamentary approval for any new borrowings by the federal government in financial markets.

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CANADA EMPLOYMENT INSURANCE FINANCING BOARD: GONE OR IN HIBERNATION?

“In accordance with Budget Implementation Act C-45, Jobs and Growth Act 2012, which received royal assent on December 14, 2012, the Canada Employment Insurance Financing Board is being dissolved” .  This is the message that appears on the Canada Employment Insurance Financing Board (CEIFB) website.  E-Mail accounts have been disconnected and the telephone number is no longer in service.

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DEFICIT FOR 2012-13 COULD BE SLIGHTLY LOWER THAN ESTIMATED IN BUDGET 2013

For the period April to March of fiscal year 2012-13, the federal government posted a deficit of $18.3 billion, down $3.2 billion from the deficit of $21.6 billion reported in the same period in 2011-12.

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Once Again No Reconciliation

The President of the Treasury Board recently tabled Supplementary Estimates A for 2013-14.  This is the first Supplementary Estimates since the tabling of Budget 2013.  Since Budget 2013 was tabled after the tabling of the Main Estimates for 2013-14, Supplementary Estimates A provided the second opportunity (Budget 2013 was the first) to explain the differences between Estimates and the forecast of total expenses in Budget 2013 for 2013-14.  We are still no closer to discovering how much spending will increase/decrease in 2013-14.

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PBO'S ECONOMIC AND FISCAL OUTLOOK - THE MINISTER OF FINANCE SHOULD BE HAPPY

The Parliamentary Budget Officer’s (PBO) latest economic and fiscal outlook is more optimistic than the forecast in Mr. Flaherty’s 2013 Budget. PBO is forecasting lower deficits and higher surpluses throughout the 2012-13 to 2017-18 period.  In 2015-16, the year in which the Conservatives promised a balanced budget or better, PBO is forecasting a surplus of $3.7 billion, compared to the Budget 2013 forecast of only $0.8 billion. However, PBO’s forecast is based on a number of assumptions, which if not realized, would put their forecast at risk.

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THE GOVERNMENT SHOULD NOT BE ALLOWED TO SHRUG OFF $3.1 BILLION

The major issue, in the Auditor General’s Spring Report, which captured media and public attention, was the revelation that only $9.8 billion of the $12.9 billion earmarked for the Public Security and Anti-Terrorism Initiative (PSAT) could be accounted for, leaving an unexplained shortfall of $3.1 billion.

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FISCAL MONITOR FOR FEBRUARY 2013

For the period April to February of fiscal year 2012-13, the federal government posted a deficit of $11.8 billion, down $0.8 billion from the deficit of $12.6 billion reported in the same period in 2011-12.

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RECONCILIATION OF SPENDING BETWEEN THE ESTIMATES AND THE BUDGET

Ask the President of the Treasury Board about whether spending will be going up or down in 2013-14 and he’ll tell you that it’s going down.  Ask the Minister of Finance and he’ll say it’s going up.  Who is right and why the conflicting answers?  The Minister of Finance will likely be more accurate than the President of the Treasury Board. But why the confusion and why can’t Canadians and Parliamentarians get a straight answer?

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SPENDING RESTRAINT BY "STEALTH" IN BUDGET 2013

The single largest “restraint” measure “not” announced in Budget 2013 was an increase in the “lapse”, which resulted in an estimated “savings” of between $2 to $3 billion (1)  per year.  This, along with an overly rosy economic forecast and increased enforcement and compliance by the Canada Revenue Agency were the main factors underlying the government’s forecast of a balanced budget in 2015-16.

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FISCAL MONITOR FOR JANUARY 2013

For the first ten months (April to January) of fiscal year 2012-13, the federal government posted a deficit of $13.4 billion, down $0.7 billion from the deficit of $14.1 billion reported in the same period in 2011-12.

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BUDGET 2013: BY "HOOK" OR BY "CROOK" - A BALANCED BUDGET IN 2015-16

There were no surprises in Budget 2013.  Minister Flaherty had done an excellent job of pre-conditioning on what to expect: a commitment to eliminate the deficit by 2015-16; no new “risky” spending; some funding for infrastructure and skills training; and further restraint measures to offset revenue losses due to slower economic growth in 2013. But is this the right budget for the current economic circumstances and is the plan to eliminate the deficit in 2015-16 credible?  The answer to both these questions is no.

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ALTERNATIVE BUDGETS: DOES THE GOVERNMENT LISTEN?

On March 11th, the Canadian Centre for Policy Alternatives (CCPA) released their “Alternative Federal Budget 2013”.  On March 18th, the C.D. Howe Institute released its “Prudence and Opportunity: A Shadow Federal Budget for 2013”.  What impact will their policy recommendations have on Minister Flaherty’s 2013 Budget? None at all.

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SOME FINAL THOUGHTS ON THE UPCOMING BUDGET

Minister Flaherty has finally announced that the budget will be presented on March 21st. This is eight days earlier than last year, but unfortunately too late to make the Main Estimates that were tabled before March 1st relevant to Parliament. As has been the case for six of the government’s eight budgets, the Main Estimates will not be based on the most recent budget economic assumptions and policy decisions. Parliament will once again be asked to approve Government spending for the upcoming fiscal year, which will become out of date with the tabling of the 2013 budget.

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THE PRIME MINISTER SHOULD HAVE READ THE ENTIRE C.D. HOWE REPORT

In response to a question by the Opposition regarding our article entitled `”Restoring Integrity and Credibility to the Budget Process”(1) , the Prime Minister replied that according to ``the non-partisan C.D. Howe Institute (2), this government has more transparent public accounts than at any time in history, it is more transparent than any other senior government in the country`` (3).

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MINISTER FLAHERTY SHOULD BE WORRIED

There could be three budgets before the next general election in the fall of 2015.  The sole objective of these budgets will be to eliminate the deficit by 2015-16. This has been the objective of the government for some time, not because there is serious deficit problem, but because the government is betting its “good management” reputation on its achievement prior to the next election.  Whether the deficit will actually be eliminated in 2015-16 will not be known until the fall of 2016, when the final audited results are published, but by that time the election will be over.

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RESTORING INTEGRITY AND CREDIBILITY TO THE BUDGET PROCESS

The Minister of Finance will soon be completing his pre-2013 Budget consultations. Over the coming weeks, the media and pundits will begin speculating about what the Minister of Finance will do in his 2013 budget.

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ONCE AGAIN THE MAIN ESTIMATES ARE MISLEADING


The President of the Treasury Board tabled the Main Estimates for 2013-14 on February 26, 2013.  He claimed that “voted” expenditures were down $4.9 billion from that tabled for 2012-13 in February 2012.  Although his math is correct, the statement is extremely misleading.

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FISCAL MONITOR FOR DECEMBER 2012: SIGNS POINT TO A LOWER DEFICIT OUTCOME FOR 2012-13


For the first nine months (April to December) of fiscal year 2012-13, the federal government posted a deficit of $13.0 billion, down $3.1 billion from the deficit of $16.1 billion reported in the same period in 2011-12.

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A BLACK PERIOD AHEAD FOR THE PARLIAMENTARY BUDGET OFFICE

On March 25th, Kevin Page will end his five-year term as the first Parliamentary Budget Officer. Mr. Page never expected to be the Parliamentary Budget Officer, nor had he actively sought the position He had worked in several federal departments, including the Department of Finance in the Economic Analysis and Fiscal Forecasting Branch and in the Privy Council Office as Deputy Head of the Planning and Priorities Division. He had a reputation as being a solid economist, a dependable professional, and a nice guy.

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OPEN LETTER TO THE MINISTER OF FINANCE: PRE-2013 BUDGET SUBMISSION THREE BUDGETS TO GO TO IMPROVE YOUR LEGACY

Dear Minister Flaherty:

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FISCAL MONITOR FOR NOVEMBER 2012: SIGNS POINT TO A LOWER DEFICIT OUTCOME FOR 2012-13

For the first eight months (April to November) of fiscal year 2012-13, the federal government posted a deficit of $12.4 billion, down $3.1 billion from the deficit of $15.5 billion reported in the same period in 2011-12.

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Comments on the Fraser Institute's "Mr. Flaherty, Time to Balance the Budget"

The Fraser Forum January/February 2013  issue contained an article by Niels Velduis and Milagros Palacios entitled “Mr.

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MAKING GOVERNMENT BUDGET AND FINANCIAL PLANNING MORE UNDERSTANDABLE: THE TRIUMPH OF OPTIMISM OVER EXPERIENCE

Once again we have entered the pre-budget speculation period.
 

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FISCAL MONITOR FOR OCTOBER 2012: TOO SOON TO PREDICT DEFICIT OUTCOME FOR THIS YEAR

For the first seven months (April to October) of fiscal year 2012-13, the federal government posted a deficit of $10.6 billion, down $3.3 billion from the deficit of $13.9 billion reported in the same period in 2011-12.

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FINANCE COMMITTEE - PRE-BUDGET CONSULTATIONS: WASTED OPPORTUNITY

On December 12, 2012, the House of Commons Standing Committee on Finance tabled its pre-budget consultations report “Jobs, Growth, Productivity and Demographic Change: Challenges and Opportunities for Canada”.  This “majority” report, primarily reflecting the views of the Government, is a waste of taxpayers’ time and dollars.

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THE FEDERAL-PROVINCIAL FISCAL DIVIDE

Canadians have developed an almost pathological fear of deficits and debt. Perhaps this is a result of the fiscal crisis in the mid-1990s and the tough actions that were taken by both federal and provincial governments to restore fiscal credibility.

The federal Conservative government inherited a surplus of almost $14 billion in 2006 and then took actions almost immediately to wipe it out. The deficit situation was then worsened by the 2008-2009 recession and the temporary stimulus program. Since then, the elimination of the deficit has been the priority of every federal budget.

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ANOTHER ROUND OF BUDGET CONSULTATIONS

Mr. Flaherty has just announced a new round of budget consultations. Basically, Mr. Flaherty is looking for suggestions on how to “strengthen our economy in the face of global economic threats”; with “cost-neutral or low cost measures”, focusing on “more efficient and effective spending” that builds on the “government’s belief of respecting taxpayers’ dollars” and “encourages private sector growth and leadership”.  These are pretty much the same questions that he raised in last year’s budget consultations.

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September 2012 Fiscal Monitor Raises Questions About the 2012-13 Deficit Outlook

For the first six months of fiscal year 2012-13, the federal government posted a deficit of $8.9 billion, down $2.9 billion from the $11.8 billion reported in the same period in 2012-13.  Of the $2.9 billion year-over-year improvement, budgetary revenues were up by $3.4 billion, public debt charges declined by $1.1 billion, while program expenses were up by $1.6 billion.

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No Consistency Between the Estimates and the Budget Spending Projections: What Numbers Are To Be Believed?

On November 8, 2012, the President of the Treasury Board tabled Supplementary Estimates B for fiscal year 2012-13, which indicated that total estimates to date were down 2.0 per cent from the same period last year. He bragged about how the Government was controlling spending.  However, just four days later, the Minister of Finance, in his Economic and Fiscal Update, appeared to contradict his colleague by stating that total expenses for 2012-13 would be 3.9 per cent higher.
 

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NOVEMBER 2012 UPDATE; DON'T BET ON A SURPLUS OVER THE MEDIUM TERM JUST YET.

The Minister of Finance presented his Economic and Fiscal Update on November 13th in a luncheon address to the Fredericton Chamber of Commerce, thereby again bypassing the House of Commons Standing Committee on Finance. The Update incorporates the October 29, 2012 average of the private sector economic forecasts. 

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"TORIES CUT SPENDING BY $8 BILLION" WHAT IS REALLY GOING ON?

The Opposition and media claimed that the federal government “quietly”/”by stealth” cut program expenses by $8.0 billion in 2011-12.  This was based on a table that appeared in Volume I of the Public Accounts of Canada 2012 that compared the final audited outcome for 2011-12 to the June 2011 Budget forecast of program expenses. In response, Minister Flaherty stated, “the numbers show the government is doing all it can to control spending”.


Neither claim is correct.

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PARLIAMENTARY BUDGET OFFICE: OCTOBER 2012 ECONOMIC AND FISCAL FORECASTS - CORRECTION

On October 29, 2012, the Parliamentary Budget Office (PBO) released its fall “Economic and Fiscal Outlook Update”.  The Update is relatively positive, given the significant  international and domestic economic risks that currently exist(see http://www.3dpolicy.ca/node/212). 
 

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FISCAL MONITOR FOR APRIL TO AUGUST 2012

For the first five months of fiscal year 2012-13 (April to August), the federal government’s deficit amounted to $6.2 billion, down $2.8 billion from the same period in 2011-12. Of this year-over-year improvement , budgetary revenues were up $3.4 billion, public debt charges were down $0.9 billion while program expenses were up $1.4 billion.

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AUDITOR GENERAL'S FALL 2012 REPORT CHAPTER 7: LONG-TERM FISCAL SUSTAINABILITY (1)

 In his 2012 fall report, the Auditor General raises the issue of “long-term fiscal sustainability” – the government’s capacity to finance its activities and debt obligations in the future without imposing an unfair tax burden on future generations.  Such analysis is especially important, given the impact of an ageing population on economic growth, and government revenues and spending, especially for public pensions and health care.
 

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THE GLOBAL ECONOMIC OUTLOOK IS DETERIORATING RAPIDLY. MR. FLAHERTY SHOULD BE WORRIED. WE ARE.

 
Right now, the primary focus of the Opposition parties and the media is on the second Budget Omnibus Bill and rightly so. Like the first Omnibus Bill, it is very large - 443 pages. We can now finally discover what those vague and obtuse references in the budget actually mean. Once again the credibility of the budget process is being eroded and the authority of Parliament undermined.

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Canada Employment Insurance Financing Board: Is Its End In Sight?

In the  second Budget Omnibus Bill related to the 2012 Budget, the Government proposes to suspend the operations of the Canada Employment Insurance Financing Board (CEIFB) until such time the Employment Insurance (EI) Operating Account returns to balance.  According to the 2012 Budget, this is not expected until 2016. Is this the end of the CEIFB? Lets hope so.
 

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Improving Budget Accountability and Transparency: The Government Needs to Explain the Deficit Outcome (1)

On October 5, 2012, the federal Department of Finance released the audited financial results for 2011-12 in its Annual Financial Report (AFR).  As has been the case since 2006-07, this year’s report contained little meaningful analyses on what impacted on the financial results for 2011-12.  For example, although the report includes a table showing the differences between the final results for 2011-12 and the March 2012 Budget forecast for 2011-12, explanations of these changes amounted to less than four lines and were questionable.

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Federal Deficit for 2011-12 Higher Than Forecast: Does It Matter for the Government's Fiscal Strategy?

The federal Department of Finance released the final audited financial results for 2011-12 in its Annual Financial Report (AFR) on Friday, October 5, 2012. The deficit for 2011-12 was $26.2 billion; $7.2 billion lower than the final outcome for 2010-12.  This is a significant reduction. However, the deficit for 2011-12 was $1.4 billion higher than the March 2012 Budget forecast of $24.9 billion, due to lower revenues. This outcome will likely impact negatively on the results for 2012-13 and beyond.

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Improving Budget Accountability and Transparency: Parliament and Canadians Should Know What the Government is Planning to Spend: And They Don't

Hypothetical Interview:

Interviewer: Minister Flaherty, according to your 2012 Budget, how much money is the government expected to spend in 2012-13?

Minister Flaherty: $276.1 billion.

Interviewer: Minister Clement, as President of the Treasury Board overseeing government spending, how much do you expect the government to spend in 2012-13?

Minister Clement: $254.2 billion.

Interviewer: That’s a difference of nearly $22 billion.  How do you explain this?

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Improving Budget Accountability and Transparency: Strengthening the Parliamentary Budget Office

Kevin Page’s term as the Parliamentary Budget Officer (PBO) expires in March 2013. He has already announced that he will not seek a renewal of his appointment. In this regard, he has done the government a favour since the chances of the Harper Government renewing his term are virtually non-existent given how they have treated him and his office.

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Fiscal Monitor for April to July 2012

For the first four months of fiscal year 2012-13 (April to July), the federal government posted a deficit of $3.0 billion, $2.9 billion lower than the $5.9 billion reported in the same period in 2011-12.

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A Government on Autopilot

In a recent speech to the Canadian Council of Chief Executives, Mr. Flaherty once again reminded Canadian business leaders that the government had done all it could to support economic growth and job creation, and it was now up to the business sector to do its part.

“Our government continues to create the right conditions to enable Canadians and Canadian businesses to feel confident to invest, to create jobs, to participate in the global market place and to grow our economy. But ultimately, it is up to the private sector to take advantage of all these strengths.” 

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Improving Budget Accountability and Transparency: Setting Limits on Budget Omnibus Bills

Everyone is waiting for the Government to table its second 2012 Budget Omnibus Bill.  The first bill, Bill C-38, “An Act to Implement Certain Provisions of the Budget Tabled in Parliament on March 29, 2012 and Other Measures” contained 425 pages. The first Omnibus bill engendered considerable discussion and hostility because, by including major policy changes in the Bill, it precluded substantive policy reviews by appropriate Parliamentary Committees, and indeed limited review by Parliament itself. The government in effect had circumvented the authority of Parliament.

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Fiscal Monitor for June 2012

For the first three months of fiscal year 2012-13 (April to June), the federal government posted a deficit of $2.0 billion, less than half of the $4.2 billion deficit reported in the same period in 2011-12.  This is encouraging news, although at least five to six months of financial data are usually required before one can properly assess the current results to the latest budget forecast for the year as a whole.  In addition, final results for 2011-12, which will be released in the early fall, are required to fully understand the current year’s fiscal results.  For examp

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Fiscal Monitor April-May 2012

For the first two months of fiscal year 2012-13, the federal government posted a deficit of $0.8 billion, down $1.1 billion from the same period in 2011-12.  Although this is encouraging news, at least five to six months of financial data are required before one can assess the current results to the March 2012 Budget forecast of  $21.1 billion for the fiscal year as a whole. In addition, final results for 2011-12, which will be released in the early fall, are required to fully understand the current year’s fiscal results.  For example, if, as expected, the final audited

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Canada's Lost Credibility in the G-20

As a former G-7 Deputy, and Canada’s Executive Director at the IMF and the European Bank For Reconstruction and Development, I have become increasingly concerned by the approach Canada has been taking with respect to the EURO crisis and the implications it might have for Canada’s future role in the G-20 and the IMF.

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Deficit for 2011-12 to be $2-4 Billion Lower than Forecast in Budget 2012

The March 2012 Fiscal Monitor reports an increase in the year-over-year deficit of $2.8 billion, from $6.2 billion in March 2011 to $9.0 billion in March 2012.  However, more than all of this increase was attributable to the recording of liabilities of $2.2 billion in federal assistance to Quebec for sales tax harmonization and $0.9 billion for the estimated workforce adjustment costs associated with the 2012 Budget employee reductions.

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Why is the Government Cutting $5.2 Billion?

Budget 2012 committed the government to cutting spending by $5.2 billion annually. This followed months of uncertainty as to how big the cut would be- as low as $4 billion, as high as $8 billion. It was a nice compromise.

This commitment followed a decision in the 2010 budget to cut defense spending, capping the International Assistance Envelope at $5 billion and freezing the operating budgets of all government departments for two years.

In both budgets, the government stated that the savings would be found primarily through greater "efficiencies".

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PBO: Deficit Elimination, Joss Loss, Transparency and Fiscal Sustainability

On April 24th, the Parliamentary Budget Office (PBO) released its latest Economic and Fiscal Forecast.  As usual, it generated some controversy, dismissed by the Government over the impact of the job losses resulting from the proposed spending reductions, but embraced by the Opposition, for acknowledging  the job losses.  The PBO is forecasting that the government is on track to eliminate the deficit by 2015-16.This note examines the PBO’s deficit forecast, how it has changed since November 2011Update and some of the issues underlying it.

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The Deficit for 2011-12 will be Lower than Forecast in Budget 2012

The February 2012 Fiscal Monitor reports a surplus of $1.6 billion for February 2012, compared to a deficit of $0.6 billion in February 2011.

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BUDGET 2012: THE NUMBERS JUST DON'T ADD UP


This paper looks at the economic and fiscal projections presented in Budget 2012.  Based on our assessment of the proposed expenditure “savings”, we believe that the Government will not balance the budget in 2015-16, and may have difficulty in achieving a balanced budget by 2016-17.  The fiscal impact of some the expenditure savings are overstated and unless programs and services are cut, it will not be able to achieve the targeted savings through “efficiency” measures.  
 

Economic Assumptions

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A BUDGET WITHOUT TRANSPARENCY, ACCOUNTABILITY AND CREDIBILITY

We had hoped that Budget 2012, the first for a Conservative majority, would provide a bold policy agenda that would confront the longer-run economic and social challenges facing Canada: the consequences of an ageing population; declining employment prospects; growing income inequalities; inadequate savings and investment; poor productivity; and, growing provincial economic and income disparities.  We had hoped that Budget 2012 would be the beginning of a more transparent, accountable, and inclusive budget process.

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Deficit for 2011-12 to be Lower than Forecast in Budget 2012

The January 2012 Fiscal Monitor, released with Budget 2012, reports a surplus of $1.7 billion in January 2012, compared to a deficit of $0.3 billion in January 2011.  This improvement was largely due to the recording of a $1.6 billion receivable from the province of British Columbia for the repayment of the federal transitional assistance resulting from BC's decision to withdraw from the Harmonized Sales Tax.  Without this extraordinary adjustment, the January 2012 surplus would have been only $0.1 billion, an improvement of $0.4 billion from the same period in 2011.

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FEDERAL DEFICIT IS FALLING MUCH FASTER THAN FORECAST

The underlying deficit could fall to $23 billion in 2011-12 and to $17 billion in 2012-13

On Friday March 2nd, Statistics Canada released its first estimate for economic growth for the fourth quarter of 2011 and for the calendar year as a whole. 

Nominal Gross Domestic Product (GDP), a proxy for the federal government’s tax base, increased by 5.8 per cent in 2011 to almost $1.8 trillion. This was $27.7 billion higher than the estimate used in the November 2011 Economic and Fiscal Update.  

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SOME THINGS WE WOULD LIKE TO SEE CHANGED IN THE 2012 BUDGET ("optimism over experience")

There are four issues we would like to see changed in the upcoming budget.  We have written on these in previous blogs.  They are summarized here, in the hope (faint) that changes will be made.

A more realistic Adjustment for Risk

We applaud the Minister’s decision to include an “adjustment for risk to revenues”.  However, we feel that this adjustment should increase over time, rather than decline, reflecting the greater degree of uncertainty in the economic and fiscal projections as one moves forward in time.

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THE MAIN ESTIMATES AND THE BUDGET - NO TRANSPARENCY AND NO ACCOUNTABILITY

The President of the Treasury Board tabled the Main Estimates for 2012-13 on February 28, 2012, approximately one month in advance of the tabling of 2012 Budget scheduled for March 29th.  The President of the Treasury Board indicated that, given that the Main Estimates are being tabled before the Budget, the Main Estimates for 2012-13 would not include the impact of any of the upcoming proposed spending reductions . This would mean that Parliament would be asked to approve the Main Estimates without any detailed information on the expenditure cuts.

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JUDGING THE “CREDIBILITY” OF THE 2012 BUDGET

 

 

Who decides whether fiscal policy is credible and on what basis do they decide? In our experience, governments usually seek the approval of their fiscal policies from four key groups.

 

First, governments seek the approval of financial markets because their approval will be critical in determining the cost of borrowing for the government, as well as for other borrowers in the economy.

 

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Fiscal Monitor for December 2011 Indicates Federal Deficit Outcome for 2011-12 to be at Least $3 Billion Lower than Forecast in November 2011 Update due to Lower-Than-Expected Program Expenses

The December 2011 Fiscal Monitor, released on February 24, 2012 reports a deficit for the federal government of $17.7 billion for the first nine months (April to December) of fiscal year 2011-12, down $9.7 billion from the deficit of $27.4 billion reported in the same period in 2010-11.

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“UNBELIEVABLE, UNRELIABLE, AND INCREDIBLE”

These are the words used by the Minister of Finance in a short scrum with reporters to describe Kevin Page, the Parliamentary Budget Officer (PBO). 

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What Do Harper and Flaherty Mean By “Sustainable”?

In his  “Speech to the World” in Davos on January 26, 2012, Prime Minister Harper proclaimed that steps would be taken to ensure the “sustainability of our social programs and fiscal position over the next generation”. What does this mean?

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Federal Deficit Outcome for 2011-12 to be at least $3 Billion lower than Forecast in November 2011 Update

The Department of Finance released the Fiscal Monitor for November 2011 on Friday, January 27, 2012.  For the first eight months (April to November) of fiscal year 2011-12, the federal government posted a deficit of $17.3 billion, down $8.7 billion from the deficit of $21.5 billion reported in the same period in 2010-11.

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OPEN LETTER TO THE MINISTER OF FINANCE: PRE-2012 BUDGET SUBMISSION "A NEW STRATEGY TO STRENGTHEN ECONOMIC GROWTH AND JOB CREATION"

Dear Minister Flaherty:  

You have recently asked Canadians to provide you with their priorities for the 2012 Budget. In this open letter, we are submitting our recommendations for a new strategy to guide your budget planning.

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Federal Deficit Outcome for 2011-12 on Track to be Lower than Forecast in November 2011 Update

 

For the first seven months (April to October) of fiscal year 2011-12, the federal government posted a deficit of $15.4 billion, down $6.2 billion from the deficit of $21.5 billion reported in the same period in 2010-11.

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Canada Health Transfer: Funding without Reform

 

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CEIFB Sets EI Premium Rate for 2012 at $1.83: Who Cares?

On November 14, 2011, the Canada Employment Insurance Financing Board (CEIFB) released its 2012 Employment Insurance (EI) Premium Rate Report.  It announced that the employee rate for all residents, with the exception of Quebec, would be set at $1.83 per $100 of insurable earnings for 2012, an increase of 5 cents from the rate for 2011.  The employee rate for Quebec residents would be set at $1.47 (Quebec provides maternity, parental and adoption benefits and therefore employees/employers pay a lower rate).  There was little news coverage of this announcement.

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Deficit Outcome for 2011-12 to be Lower than Forecast in November Update

For the first six months of fiscal year 2011-12, the federal government posted a deficit of $13.2 billion, down $4.2 billion from the $17.4 billion reported in the same period in 2010-11.  Of the $4.2 billion year-over-year improvement, budgetary revenues were up by $4.3 billion, while program expenses were down by $0.4 billion. Public debt charges were up by $0.5 billion.

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HOW CREDIBLE IS THE NOVEMBER 2011 ECONOMIC AND FISCAL UPDATE?

 

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Without Growth in the EU, the EURO Crisis will continue

 

Why are EU leaders so happy? Is it because they were at the edge of the “cliff’ and they were able to come to an agreement on a framework that they believe will save the EURO and the EU? This framework includes a recapitalization of the banks; a "voluntary haircut" of 50 percent on Greek debt holders; and, a leveraging of the EFSF to about $1 trillion.

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Fiscal Monitor for April to August 2011

 

For the first five months of fiscal year 2011-12, the federal government posted a deficit of $10.7 billion, down $2.8 billion from the $13.5 billion reported in the same period in 2010-11.  Most of this improvement occurred in August as the year-over-year deficit dropped by $2.2 billion, primarily reflecting lower program expenses (down $1.3 billion), due to lower employment insurance benefits and the timing of transfer payments to the provinces. 

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“We are committed to eliminating the deficit by 2016.” “Budget 2012”

 

New Economic Forecast

On October 25th, the Department of Finance released its October 2011 survey of private sector economic forecasts.  The average of the private sector forecasts forms the basis for the economic assumptions used for fiscal planning purposes in the budget and fall update. 

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Federal Deficit Outcome for 2010-11 Lower Than Expected but the Deficit Will Still Not Be Eliminated in 2014-15

 

The Department of Finance released the audited financial results for 2010-11 today (October 12, 2011) in its Annual Financial Report (AFR). The deficit for 2010-11 was $33.4 billion,  $2.8 billion lower than the June 2011 Budget estimate of $36.1 billion and a whopping $15.8 billion lower than the original forecast of $49.2 billion, released in the March 2010 Budget.

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Employment Insurance Premium Rate Setting – Let’s Get It Right This Time

 

On August 18, 2011, the Minister of Finance launched another round of public consultations on the Employment Insurance (EI) rate-setting process.  This will be the third time that the Government is proposing changes to the rate-setting process in the last five years. Previous governments were also constantly reviewing the EI premium rate-setting process as well.

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Fiscal Monitor for July 2011: Indication of Things to Come?

 

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IS HARPER PREPARED TO PUT UP $40 BILLION OF STIMULUS?

 

Attention is now being focused on EURO zone leaders to take strong and credible action to strengthen the capital of private sector banks in Europe, ensure confidence in bank liquidity and interbank credit, and guarantee support for sovereigns’ debt. This won’t be easy and the situation is only going to get worse.

There is now a good chance that the advanced economies are about to enter another recession and, if not, certainly a protracted period of slow growth and high unemployment.

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A LOW TAX PLAN BUT DEFINITLY NOT GOOD TAX POLICY

 

“We have a low-tax plan for jobs and growth and the resolve to stay the course. The Next Phase of Canada’s Economic Action Plan will preserve this country’s advantage in the global economy.” (Minister of Finance, August 2011: http://www.fin.gc.ca/n11/11-069-eng.asp).

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Don’t Bet on a Surplus in 2014-15 or 2015-16

The EURO area, and by extension the European Union, is confronting a political crisis, a banking crisis, a sovereign debt crisis, and an economic growth crisis.  Even in the best of worlds, growth in the 17-nation EURO zone area will be non-existent in the second half of the year and the prospects for 2012 and 2013 don’t appear much better. Bond markets are now betting that the EURO area will not survive without a major policy turnaround. The potential for global contagion is immense and the consequences would be severe.

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SEPTEMBER 6TH BRIEFING FOR JOURNALISTS ONLY: A FEW QUESTIONS

 

On September 2nd, the Department of Finance announced that there would be a telephone briefing on the upcoming meeting of G-7 and G-8 Finance Ministers and Central Bank Governors on September 6th. This briefing is for journalists only.

We are not journalists, and therefore are not invited to participate in the briefing. It is unfortunate that the government would not allow this briefing to be available to the general public. Nevertheless we do blog on public policy on a regular basis and do submit pieces to the print media, which have been published.

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WE NEED A NEW “ECONOMIC ACTION PLAN” FOR FISCAL SUSTAINABILTY, ECONOMIC GROWTH AND JOB CREATION, NOT A REPEAT OF 2008

 

In August, Mr. Flaherty met with his advisory panel as well as selected business representatives and academics to discuss key issues facing Canada and “to shape the policies and initiatives of the next phase of Canada’s Economic Action Plan”.

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Fiscal Monitor for June 2011

 

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WANTED “POLITICAL LEADERSHIP AND COURAGE”

 

In an article published in the Globe and Mail and the Financial Times on Monday, August 15, the Ministers of Finance from Canada, South Africa, Britain, Singapore, and Australia set out a fairly detailed coordinated strategy that they believe “would help the world get its groove back”.

There was nothing new in their proposed strategy that could not be found in policy statements made by G-7 leaders, G-20 leaders, the International Monetary Fund (IMF), and most credible Economic think tanks over the past decade.

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Does Any One Know What The Government Is Expecting To Spend This Year?

 

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Fiscal Monitor for April and May 2011

For the first two months of fiscal year 2011-12, the federal government posted a deficit of $3.3 billion, down $1.1 billion from the $4.4 billion deficit reported in the same period in 2010-11.  Although this is encouraging news, at least five to six months of financial data are required before one can assess the current results to the June 2011 Budget forecast of  $32.3 billion for the fiscal year as a whole.  In addition, final results for 2010-11, which will be released in the early fall, are required to fully understand the current year’s fiscal results.  For example

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MR. FLAHERTY SHOULD BE WORKING THIS SUMMER

 

Mr. Flaherty was in New York a few weeks ago bragging about Canada’s fiscal situation, and warning the U.S. that it needs to act promptly to get its fiscal House in order. Mr. Flaherty’s trip to New York and his lecturing the U.S. government was clearly meant for Canadian consumption, since the U.S. Treasury Secretary could hardly care less about what Mr. Flaherty thinks. Perhaps Mr. Flaherty’s next stop will be Athens, Lisbon, or Rome.

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USER FEES – HOW MUCH COULD THEY CONTRIBUTE TO THE $4 BILLION AND ARE THEY A TAX?

 

In both the March and June 2011 budgets the government announced that it planned to eliminate the deficit in 2014-15, one year earlier than originally targeted. This would require that the government find  $7 billion in savings over the preceding three-year period. Government departments are currently involved in a Strategic and Operating Review exercise to find ways of “improving the efficiency and effectiveness of government operations and programs” totaling $4 billion annually when fully in place. The results will be contained in the 2012 budget.

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The U.S. Debt Ceiling Impasse – Can It Happen Here?

 

There is presently an impasse between the U.S. Congress and the Executive about increasing the $14.3 trillion (U.S.) ceiling on federal debt.  If no compromise is reached, it is estimated that the U.S. will exceed the debt ceiling by August 2nd and it will have to delay making certain payments in the current fiscal year until the ceiling is increased.  This is a powerful tool by which Congress can hold the Executive accountable.   At the federal level, Parliament used to have such a tool but it was quietly eliminated in the March 2007 Budget.

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June 2011 Budget: Why Bother?

The Minister of Finance, Jim Flaherty, tabled a budget on June 6, 2011, just over two months after he tabled his last budget, which died on the order paper with the dissolution of Parliament due to the election.  The latest budget contained two of the election promises: potential reimbursement to the province of Quebec for costs associated with the potential harmonization of the provincial sales tax with the GST and the phase-out of political subsidies.  Both of these initiatives could have been contained in separate legislation.  The Minister also provided an update of the d

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PBO Continues to be More Pessimistic on Budget than Minister of Finance

On June 1st, the Parliamentary Budget Officer (PBO) released its latest Economic and Fiscal Outlook (www.parl.gc.ca/pbo-dpb). The PBO expects the deficit to be somewhat lower in both 2010-11 and 2011-12 than those projected by the Minister of Finance in his March 2011 Budget.  However, PBO is forecasting higher deficits in the outer years with the difference widening to $11.5 billion by 2015-16. By the end of the period, the PBO is forecasting a deficit of $7.3 billion.

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Deficit for 2010-11 will be at least $5 Billion Lower Than Forecast in the 2011 Budget

 

The March 2011 Fiscal Monitor reports a deficit of $34.4 billion for the April 2010 to March 2011 period, $12.6 billion lower than reported for the same period last year.  These are not the final numbers for 2010-11.  Still to come are the end-of-year accrual accounting adjustments.  Final audited results are usually published in the early fall.

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Deficit for 2010-11 will be $3 to $6 Billion Lower Than Forecast in the Budget

 

The February 2011 Fiscal Monitor reports a deficit of $28.3 billion for the first eleven months of 2010-11, $12.3 billion lower than reported for the same period last year.  In the March 2011 Budget, the Minister of Finance forecast a deficit for the year as a whole of $40.5 billion.  Based on the current results, the deficit for 2010-11 could be $3 to $6 billion lower than his current deficit forecast. 

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G&M: Lets Get the Facts Right on EI Premium Rates

 

The Globe and Mail, in a front page article entitled “Consider This” argued that the political “parties should commit to holding the line on EI premium increases”[1]  They argued that EI premium rates are going up by 15 cents per $100 of insurable earnings for every future year and that this is a significant hit on incomes and pocketbooks.  There are few errors/omissions in this article.

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IF PIGS CAN FLY

 

The Harper government is full of promises for Canadian families. So far the Conservatives have promised to allow income splitting for well-off families with children under 18; they have promised to double the contribution to tax-free savings to $10,000, another benefit for well-off Canadians; and, they have promised to double the fitness credit and to extend it to adults. The catch is that none of these promises will be implemented until the deficit is eliminated.

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PLEASE! NO MORE PROMISED TAX CUTS IN 2015: WE CAN’T AFFORD THEM

 

David Dodge, a former Deputy Minister of Finance, Deputy Minister of Health, and Governor of the Bank of Canada, has recently released a study on the growing costs of health care in Canada in the coming decades and the impact they could have on all governments –federal and provincial. He joins a long list of health care experts, economists and policy analysts who have warned governments that the there will need to be radical changes in the way health care services are delivered in Canada and the strong probability that taxes will have to be raised.

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Is the Liberal Platform Affordable?

 

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Prudential Liquidity Management: What is this all about?

 

Buried in Annex 2 of Budget 2011, the Government announced changes to its debt management strategy.  It proposes to increase its holdings of “liquid financial assets” by $35 billion in the form of domestic cash deposits and foreign exchange reserves.  What does this mean and why is it doing this now.

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Deficit for 2010-11 will be $2 Billion Lower Than Forecast in the Budget

The January 2011 Fiscal Monitor, released with the March 2011 Budget, shows the deficit for the first ten months of 2010-11 was $27.7 billion, nearly $12 billion lower than reported for the same period last year.  In the March 2011 Budget, the Minister of Finance forecast an improvement of $15.1 billion for the year as a whole.  This is $4.9 billion lower than what he forecast in the October 2010 Update.  We continue to believe that the deficit for 2010-11 will be about $38.5 billion; $2 billion lower than his current deficit forecast. 

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March 2011 Budget: The Deficit That Won’t go Away

In the 2011 Budget, the Minister of Finance forecasts a small budget surplus in 2015-16. Our analysis of the projections shows that this outcome is highly unlikely  We project a deficit of $8 billion in 2015-16.

Economic Assumptions

The federal government continues to use the average private sector economic forecast for budget purposes.  As shown in Table 1, the economic forecast is changed very little from that used in the October 2010 Update.  Nominal GDP is slightly higher in 2010 and this carries forward. 

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DON’T FORGET PET OWNERS, MR. FLAHERTY

The Prime Minister said that the Budget would include a non-refundable tax credit for families that enroll their children in cultural activities. This continues the Harper government’s tax reduction strategy to provide special “boutique” tax preferences to every voting group in the country. It would appear, however, that he has forgotten one very important group -- PET-OWNERS.

Could a special tax credit for pet owners be justified? Of course, it could, probably a lot more than a tax credit for sports, public transit or cultural activities.

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Not a Budget but an Election Platform

The Canadian Centre for Policy Alternatives (CCPA) recently released its “Alternative Federal Budget 2011 – Rethink, Rebuild and Renew – A Post Recession Recovery Plan”[1].  Releasing this document just one week before the Minister of Finance clearly indicates that the CCPA does not expect that  the Minister of Finance will include any of its recommendations in his 2011 Budget.  At this time, all of the decisions with respect to the 2011 Budget have been made - the Bud

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TD Economics: Looking Ahead to the 2011 Federal Budget

As we approach Budget Day 2011, private sector forecasters are starting to release their projections of the federal budgetary balance. Should there be an election, these projections could become part of the election debate.

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Main Estimates for 2011-12: They tell us very little about what Government Spending will be

The Main Estimates for 2011-12 were tabled on March 1, 2011.  The press release claimed, “For the first time in over a decade, funding needed to sustain the federal government has decreased.  The 2011-12 Main Estimates are over $10 billion lower than the Main Estimates for last year.”[1].

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How Much would it Cost to Avoid an Election?

There is considerable speculation as to what the financial cost would be for the Harper Government (read the taxpayer) to gain opposition support for the upcoming budget.  This would not be the first time a minority government accepted opposition “demands” in order to get support for the passage of its budget and therefore avoid an election.   The New Democratic Party supported the 2005 Liberal budget only after the Liberals bowed to their demands for an additional $4.8 billion in new funding.  

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How Lessons from Canada’s 1995 Budget Can - "Not" - Be Applied Today

Recently, the Fraser Institute released its annual pre-budget report entitled "Budget Blueprint: How Lessons from Canada's 1995 Budget Can Be Applied Today"[1]. The report argues the federal government's current fiscal situation mirrors that of the 1980s and early 1990s and that drastic actions, like those in the 1995 Budget, are again required to return to fiscal balance. Here are some of the lessons we have learned or not learned from the Fraser report.

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FISCAL CONSERVATIVES? -YES, NO, MAYBE

The only thing the 2011 budget will likely be remembered for is that it may trigger an excuse to call an election, because of a 1.5 percentage point reduction in the corporate tax rate; a trivial economic reason, but, for some, an important political reason.

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Deficit for 2010-11 still expected to be $7 billion lower than Forecast

 

The December 2010 Fiscal Monitor shows the deficit for the first nine months of 2010-11 was $27.4 billion, $12 billion lower than reported for the same period last year.  The improvement to date is about $2 billion more than that expected in the October 2010 Update for the year as a whole ($10.2 billion).

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A Plea for More Transparency

On February 15, 2011, the Parliamentary Budget Officer (PBO) appeared before the House of Commons Standing Committee on Finance to present his updated fiscal forecast[1] and to raise with the Committee a number of issues in the context of the upcoming 2011 Budget.

Economics Assumptions

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Canada’s Economic Action Plan: Seventh Report What the Report Didn’t Say

On January 31, the Government released its Seventh Report on the Economic Action Plan (EAP).  The report provided an update on the status of the various measures introduced since the January 2009 Budget.  As in the previous reports, it was full of self-congratulations on taking timely and aggressive actions to ensure a quick recovery from the 2008 recession.  It again contained selective quotes supporting the Government’s actions.  On balance, however, the Seventh Report provided little new information.  There were, however, a number of things that the Report did no

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Private Sector Economic Survey for December 2010 Time to Change Budgetary Process

On February 1, 2011, the Department of Finance released its December 2010 survey of private sector economic forecasts.  For the components surveyed, the December results are “broadly” consistent with the September 2010 survey.

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November 2010 Fiscal Monitor Indicates Deficit for 2010-11 to be $7 billion Lower than Forecast

The November 2010 Fiscal Monitor shows that the deficit for the first eight months of 2010-11 was $26.0 billion, $10.3 billion lower than reported in the same period last year.  The improvement to date is about equal to that expected in the October 2010 Update for the year as a whole ($10.2 billion).

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To: Minister of Finance The Honourable J. Flaherty: Pre-Budget 2011 Submission: Confronting the Structural Deficit

Main Message

The federal government is not confronted with a short-term fiscal crisis but it is facing a stubborn medium-term structural deficit that will prevent you from balancing the budget by 2015-16, without new expenditure cuts and/or tax increases.

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Proof is not in the numbers for Flaherty’s corporate tax cuts

In an article in the Globe and Mail on January 5,  columnist Neil Reynolds argued that the federal Finance Minister’s corporate tax cuts from 19.5% in 2008 to 19.0% in 2009, 18.0% in 2010 and to 16.5% in 2011 “are already paying off”.  However, the facts quoted in the article do not support his claim.

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Whose Credibility is at Risk?

Recently, the Minister of Finance, once again, questioned the quality and credibility of the research undertaken by the Office of the Parliamentary Budget Officer (PBO).  This related both to the PBO’s survey of the Infrastructure Stimulus Fund and the projections of the fiscal balance.  On December 22, 2010, the International Monetary Fund (IMF) released its 2010 Article IV Consultation with Canada.

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Deficit Outcome for 2010-11 will be $7 billion lower than Forecast in October 2010 Update

 

For the first seven months of 2010-11, the deficit was estimated at $21.5 billion, down$10.4 billion from that estimated in the same period in 2009-100

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Fiscal Forecasting is Neither a Science Nor an Art

There has always been, and continues to be, considerable skepticism concerning the federal government’s fiscal projections. During the 1990s and early 2000s, when projections of the budgetary balance were off by wide margins, the credibility of the Department of Finance’s forecasting abilities came under attack from both inside and outside the government. Because of public criticism, the Department of Finance commissioned two independent studies, one in 1994 and one in 2005 to examine the reasons underlying the inaccuracy of budget forecasts and how they might be improved.

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Fiscal Monitor - September 2010

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Why Should You Read the Fiscal Monitor?

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Time to make the Budget Planning Process More Accountable, Transparent and Prudent

In 1994, the budgetary planning process was significantly changed.  An average of private sector economic forecasts for a number of selected economic variables was used for budget planning purposes rather than the Department of Finance’s economic forecast.

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The 2011 Budget Is Over, Let's Start Debating The 2012 Budget

On October 12, 2010, the Minister of Finance delivered his “2011 Budget” in front of the Mississauga Chinese Business Association. This was the first time a budget had been delivered outside the House of Commons and no one noticed, or even cared.

In his “budget”, the Minister maintained the same approach to eliminating the deficit as he did in his 2010 budget.

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How Credible Is The October 2010 Fall Economic And Fiscal Update?

The Minister of Finance presented his Economic and Fiscal Update on October 12, 2010 in preparation for planning the 2011 budget, which showed a small surplus in 2015-16. Given a number of high profile international developments on the same day, the Update has received little public scrutiny. This note presents our assessment of the credibility of the latest Update.

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How to Make $57 Billion Disappear The Canada Employment Insurance Financing Board

The Minister of Finance announced on September 30, 2010 that the government would be limiting the increase in the employment insurance (EI) rate for 2011 to 5 cents (employee rate) rather than the 15 cents “recommended by the Canada Employment Insurance Financing Board (CEIFB)”. In addition, the annual change in future years would be limited to 10 cents rather than the current 15 cents.

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Time to Change the EI Rate-Setting Mechanism - Again

In Budget 2008, the Government established the Canada Employment Insurance Financing Board (CEIFB), a Crown corporation, reporting to Parliament through the Minister of Human Resources and Skills Development. The government set the employment insurance (EI) premium rates for 2009 and 2010, while the new corporation will recommend the rate for 2011. The Board must take into account previous years’ deficits/surpluses (backward focus) rather than just focusing on setting a “break-even” for the upcoming year.

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Taxing jobs to raise revenues-There has to be a better Way

The 2010 Budget assumed the employment insurance (EI) premium rate would increase by 15 cents (employee rate) a year, from 2011 to 2014, (the rate was frozen in 2009 and 2010) contributing an additional $6 billion to government revenues by 2014-15. The increase in EI revenues is critical to the government’s plan to eliminate the deficit over the medium term.

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Good Bye Parliamentary Budget Officer

Kevin Page, the Parliamentary Budget officer (PBO), has just announced that he will not seek reappointment in 2013. This will end an experiment in “transparency and accountability” that was doomed from the beginning. Since its creation, PBO has been in a constant battle with the government over his independence, his inadequate budget, and his lack of staff.

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