CANADIANS DON’T NEED AN AUSTERITY BUDGET

Getting a vaccination probably remains the top priority of most Canadians especially in the middle of a very scary third wave generated by COVID variants. Notwithstanding a new stay at home order, there is some emerging hope that by the summer the situation will be much better and by September anyone who wants a vaccine will have it.

TWO-THIRDS UPDATE, ONE-THIRD BUDGE

CHALLENGES FOR POST COVID BUDGET PLANNING

In the July 8, 2020 “Economic and Fiscal Snapshot”, the Government presented revised fiscal projections for 2019-20 and 2020-21 only.  It stated that “given the unprecedented degree of uncertainty clouding the economic outlook, providing an economic and fiscal forecast beyond 2021 with an appropriate degree of confidence is not possible at this time and would potentially be misleading”.

No Need to Panic About the Deficit - Yet

The economy is in a downfall.  Federal and provincial governments have shut down the economy to contain a deadly virus.  Businesses have closed, jobs have been lost and unemployment has soared.

This year, real GDP could fall by 10 to 15%, or even more, which is larger than the decline in output during the Great Depression. Although some social isolation restrictions are being lifted, at this time, given all the uncertainty, no one really knows how large the decline in output will actually be.

THE GLOBAL VIRUS RECESSION

In 2008, the global economy was shocked into a recession by a meltdown in global financial markets. G-20 leaders reacted quickly to the deteriorating economic situation with a coordinated fiscal policy response. The International Monetary Fund encouraged those countries that had the fiscal flexibility to implement fiscal measures amounting to 2 per cent of the their economies. The resulting fiscal stimulus went a long way to mitigate the impacts of the global recession.

Fiscal Monitor for April 2019 – November 2019

The federal government posted a deficit of $2.7 billion in November 2019, compared to a deficit of $2.2 billion November 2018. All of this deterioration in the monthly deficit was attributable to the timing of payments, most notably transfers to provinces and territories for the Labour Market Development Agreements program and to the Gas Tax Fund and Home Care and Mental Health programs. This implies lower year-over-year expenses in future months.  

Fiscal Monitor for April – October 201

The federal government posted a deficit of $3.3 billion in October 2019, compared to a deficit of $1.1 billion October 2018.

Fiscal Monitor for April – September 2019

Eliminating the Deficit Won’t be so Easy Mr. Sheer

If deficit elimination were so easy, then why haven’t there been more years of balanced budgets or surpluses? In the over fifty years between 1966-67 and 2018-19, the federal budget showed a surplus in only 12 years; in 1969-70 and between 1997-98 and 2007-08. The record in other advanced countries isn’t any better. The fact is, even if you believe very strongly in a balanced budget, the chances of achieving and maintaining them are very low.

LIBERAL POLICY PLATFORM MERITS A BARE “PASS

Green Party budget deserves an "F"

There is a little over three weeks to go to the election. Given the rush by all parties to get their election promises out, having a short election period may be a good thing. The costs of election promises of all parties are rising rapidly without much concern for their impact on the deficit. Not only should Canadians be concerned by this, but they should start thinking about which of these promises will end up in the “trash can” once a party is elected.

DEFICIT ISSUES FOR THE 2019 ELECTION

At the start of the 2019 election campaign, most political commenters did not see the “deficit” becoming a major issue in the election. The reality is that the federal government has neither a deficit nor debt problem. According to the just released Annual Financial Report  (AFR), the deficit for 2018-19 was $14 billion or just 0.7% of GDP. The debt-to-GDP ratio is the lowest among G-7 countries. 

Fiscal Monitor for April 2018– March 2019

The federal government posted a deficit of $14.9 billion in March 2019, compared to a deficit of $10.8 billion in March 2018. 

“TINY” DEFICIT NO BIG DEAL

The 2018 Economic and Fiscal together with Budget 2019 represent the beginning of the 2019 Liberal election platform. It is also the beginning of a major headache for the “deficit elimination” Conservatives. The Harper government, after all, failed to eliminate the deficit over eight years, despite cutting spending in successive budgets. What would Mr. Sheer do to eliminate the deficit that the Harper government hasn’t already done?

Fiscal Monitor for April – December 2018

Fiscal Monitor for April – October 2018

THE 2018 FALL UPDATE IRRESPONSIBLE FISCAL PLANNING

Paul Martin presented the first fall Economic and Fiscal Update in 1995. The purpose of that Update was to present a review of current and future economic circumstances and what these meant for the fiscal situation of the federal government. It contained no new policy initiatives. These were left for the subsequent spring budget. The Minister of Finance and departmental officials appeared before the Commons Standing Committee on Finance to present the Update and to answer questions.

Fiscal Monitor for April – August 2018

The federal government posted a deficit of $1.9 billion in August 2018, compared to a deficit of $2.6 million in August 2017.  Budgetary revenues were up 10.4%, reflecting strong increases in all major components.  Program expenses advanced 6.0%, due largely to higher other transfers and personnel expenses.  Public debt charges were up 10.9% due largely to an increase in the average effective interest rate.

Fiscal Monitor for April – July 2018: The Good News Continues

The federal government posted a surplus of $140 million in July 2018, compared to a deficit of  $193 million in July 2017.  The turnaround primarily reflected higher GST revenues, up 22.1%, due primarily to timing factors given the abnormally low receipts in June 2018 and an increase in other revenues, up 11.8%. These increases were offset in part by lower personal income tax revenues, down 2.6% and higher total expenses, up 2.7%.

Fiscal Monitor for April – June 2018: The Good News Continues

The federal government posted a surplus of $1.1 billion in June 2018, compared to a surplus of only $16 million in June 2017.  As a result, for the first three months of fiscal year 2018-19, the federal government posted a surplus of $4.3 billion compared to a surplus of only $0.1 billion in the same three months of 2017-18. Budgetary revenues were up $6.5 billion, program expenses increased by $1.6 billion, while public debt charges were up $0.7 from year earlier levels.

Deficit Outcome for 2017-18 on Track to be Lower Than Forecast in the 2018 Budget

The federal government posted a budgetary deficit of $10.4 billion in March 2018, compared to deficit of $10.6 billion in March 2017.

Fiscal Monitor for April – May 2017: A Small Surplus That Is Not Expected to Last

For the first two months of fiscal year 2017-18, the federal government posted a surplus of $68 million, compared to a surplus of $114 million from the same period in 2016-17. The slight deterioration in the surplus was largely attributable to a 28.3% year-over-year increase in the Canada Child Benefit, reflecting the 2016 Budget measures, which came into effect in July 2016.

Fiscal Monitor for December 2017

Among the documents released on budget day was the Fiscal Monitor for December 2017. The federal government posted a budgetary surplus of $565 million in December 2017, compared to deficit of $1.3 billion in December 2016.

Deficit for 2017-18 Could Be Lower than That in 2016-17 or Not

The federal government posted a budgetary deficit of $2.8 billion in November 2017, compared to deficit of $3.3 billion in November 2016.

PLANNING THE 2018 BUDGET

By now the Finance Minister should be close to putting the “finishing touches” on his 2018 budget.

Fiscal Monitor for April – September 2017

The federal government posted a budgetary deficit of $3.2 billion in September 2017, compared to deficit of $2.4 billion in September 2016.

LESSONS FROM THE OCTOBER FISCAL UPDATE

Poor Mr. Morneau, his credibility as Finance Minister already in the tank, desperately needed to do something in his Economic and Fiscal Update to begin restoring it. And there was a lot for him to brag about.

Fiscal Monitor for April – July 2017 Budget Outlook improving compare to Last Budget

The federal government posted a budgetary deficit of $193 million in July 2017, compared to deficit of $1.8 billion in July 2016. This improvement was largely attributable to strong growth in tax revenue, up 9.5% over the same period last year.
For the first four months of fiscal year 2017-18, the federal government recorded a deficit of $109 million, compared to a deficit of $2.8 billion for the same period in 2016-17. 

Fiscal Monitor for April – May 2017: A Small Surplus That Is Not Expected to Last

For the first two months of fiscal year 2017-18, the federal government posted a surplus of $68 million, compared to a surplus of $114 million from the same period in 2016-17. The slight deterioration in the surplus was largely attributable to a 28.3% year-over-year increase in the Canada Child Benefit, reflecting the 2016 Budget measures, which came into effect in July 2016.

Final Outcome for 2016-17 will Depend on Impact of Tax Planning on Personal Income Tax results

In the March 2017 Budget, the Minister of Finance lowered his deficit forecast for 2016-17 from $25.1 billion to $23.0 billion. This improvement of $2.1 billion was primarily due to better-than-expected economic conditions and an increase in the lapse ($3.2 billion). These improvements were partially offset by provisions for anticipated Cabinet decisions ($0.9 billion) and the impact of new policy initiatives proposed in the March 2017 Budget ($0.3 billion).

Main Estimates: Reforms Fall Short of what is require

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.

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.

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.

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.

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”.

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.

Deficit for 2015-16 Lower Than Expected

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.

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.

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.

THE TAX ELEPHANT IN THE LIBERAL “BUDGET”ROOM

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).

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.

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.

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.

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.  

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”.

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.

Fiscal Monitor for April – September: Coming Into Line

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.

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.

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 19^th.

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

NDP PLATFORM COSTS SEPTEMBER 28

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

New Democratic Party Election Promises

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.  

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.

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.

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.

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).

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.

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.

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 19^th.

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?

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.

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.

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 7^th. At 153 pages, it’s a pale shadow of previous budget bills.

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.

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”.

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 20^th. He plans to meet with private sector economists on April 9. Maybe he will come out of hiding after that.

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.

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.

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.”

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 20^th. 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.

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.

THE DISAPEARING SURPLUS

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?

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.

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.

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.

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.

MEMO TO PREMIER WYNE ; THINK CREDIBILITY

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.

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.

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.

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.

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.

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. 

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.

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.  

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.

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.

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?

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.

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”.

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.

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.

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.

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. 

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?

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

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.

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”.

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.

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.

"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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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

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

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.

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.

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.
 

"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.

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.

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.

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.

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?

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.

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.

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

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.

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.

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

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.

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.

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.

“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). 

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.

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.

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.

Setting a Deficit Target Isn’t Easy. Mr. Flaherty should take a lesson from Paul Martin.

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.

Recommendations to the Prime Minister and the Minister of Finance for the Fall Economic and Fiscal update

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.

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

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).

SEPTEMBER 6TH BRIEFING FOR JOURNALISTS ONLY: A FEW QUESTIONS

On September 2^nd, 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.

Fiscal Monitor for June 2011

WHAT A MESS THE EURO AND U.S. ARE IN AND IT WON’T GET BETTER SOON. HOW SHOULD CANADA RESPOND?

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

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.

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

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.

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.

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.

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.

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. 

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

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].

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.

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).

“A Faster Track to Fiscal Balance”-Unfortunately Not.

Introduction and Summary

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.

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.

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.

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.

Why Should You Read the Fiscal Monitor?

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

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

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.

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.