Deficit

[madmax]

http://www.reportonbusiness.com/servlet/st...y/Business/home

On Friday, the government said it posted a deficit of $517-million for April and May, the first two months of the fiscal year, as income from corporate and sales taxes fell sharply.

The weak fiscal results released Friday were due to a 17 per cent decline in corporate income tax revenue as well as a 21 per cent drop in intake from the goods and services sales tax, the Department of Finance said in a report Friday.

In April, the first month of the fiscal year, the budget was in the red for a total of $864-million, compared with a surplus of $2.02-billion in April, 2007. The budget returned to surplus in May – $347-million – but that was down from $764-million in the same month last year.

[Wilber]

Hardly surprising revenues are down. Looks like they will be treading a fine line this year.

[August1991]

Where governments are concerned, budget deficits just don't matter. Government spending (that is, what governments purchase on our behalf) matters.

This is a point well understood by most economists if not by most others. If you (and I) have the patience, I'll explain it to you with credible links.

For the moment, I'll merely point out the obvious fact that government is unlike other "institutions" in our society, such as an individual, a family or a corporation. A person is wise to reduce her debt or not have one at all. Governments have no such worry. Unlike you or I, governments live forever.

----

Now then, if I learn that the Conservative government has a budget deficit because it has been spending too much money, then I'll be angry. I'm not angry because of the deficit, I'm angry because of the spending.

That's no minor distinction.

If Harper wants to spend a whack of money on big airplanes and military crap, let him do it. But I think he should cut spending elsewhere. Governments are like shopaholics with access to other people's credit and debit cards. Who cares whether they use my credit card or my debit card? It makes no difference.

I simply want the government to buy less stuff.

Edited July 25, 2008 by August1991

[daniel]

Where governments are concerned, budget deficits just don't matter. ...

which is contrary to what Flaherty has stated:

http://www.thestar.com/article/413170

~

And a couple of predictions I had made earlier this year when Flaherty wouldn't stop going on about going "back to a Liberal defict".

Plus their squandering of the budget surplus doesn't leave much wiggle room for emergencies and other adjustments - good fiscal management eh? Just as I had stated two years ago, the Conservatives will George-Bush the surplus.

Remember when the Ontario PCs were campaigning on a balanced budget? Then the Fraser Institute discovered Flaherty actually left a $7billion deficit.

Since the Tories have squandered the $20billion surplus they inherited from the Liberals to only a mere $2billion, I wouldn't be surprised if Flaherty is actually hiding a deficit. His blatant use of the term "back to Liberal deficit" he has been using in the past year is trying to shift the Tory deficit as if it were the Liberals creation.

Edited July 25, 2008 by daniel

[August1991]

Daniel, I guess I disagree with Flaherty, as quoted by The Toronto Star:

OTTAWA–Finance Minister Jim Flaherty says the Conservatives will cut government spending if need be to avoid a budget deficit caused by the economic slowdown.

"No deficit – balanced budget," he said outside the Commons.

But not quite. Flaherty said that he'd cut government spending to avoid a deficit. I agree with part of that statement - "cut government spending".

[jdobbin]

Hardly surprising revenues are down. Looks like they will be treading a fine line this year.

Entirely predictable given their endless spending the last few years.

Treading water means keeping your head above it. Blub, blub lately.

[jdobbin]

Where governments are concerned, budget deficits just don't matter. Government spending (that is, what governments purchase on our behalf) matters.

If Harper wants to spend a whack of money on big airplanes and military crap, let him do it. But I think he should cut spending elsewhere. Governments are like shopaholics with access to other people's credit and debit cards. Who cares whether they use my credit card or my debit card? It makes no difference.

I simply want the government to buy less stuff.

Which this government just doesn't get. It has shown no inclination to control their spending habit and breeze past their promise each year to hold the line.

[Wilber]

Times have been good and they have been spending, just like regular people tend to do. Times have now changed and they will have to change with them or answer for it. Wasn't all spending however, what about the 22B or so in debt reduction over the past two years?

[August1991]

Which this government just doesn't get. It has shown no inclination to control their spending habit and breeze past their promise each year to hold the line.

I have to agree Dobbin and I think Harper will not only lose his chance for majority but he'll also lose 24 Sussex Drive on this point.

Harper has entirely misunderstood the idea of "incremental conservatism".

Both Dion and Harper are tone deaf.

[jdobbin]

Times have been good and they have been spending, just like regular people tend to do. Times have now changed and they will have to change with them or answer for it. Wasn't all spending however, what about the 22B or so in debt reduction over the past two years?

The problem is that they said would hold the line on spending so as not to have to resort to drastic cuts later on when deficits might appear. Well, the deficits are starting to appear.

[jdobbin]

I have to agree Dobbin and I think Harper will not only lose his chance for majority but he'll also lose 24 Sussex Drive on this point.

Both Dion and Harper are tone deaf.

Since we have not seen what Dion's plan for spending is, we don't know if he is deaf or not. We do know that he comes from a past government that controlled and reduced spending.

[August1991]

Since we have not seen what Dion's plan for spending is, we don't know if he is deaf or not. We do know that he comes from a past government that controlled and reduced spending.

We don't know that.

Dion came from a government that lied and made up numbers. This we know.

[jdobbin]

We don't know that.

Dion came from a government that lied and made up numbers. This we know.

You disagree with the Statscan numbers that previous Liberal government reduced spending and ended the deficit?

[daniel]

We don't know that.

Dion came from a government that lied and made up numbers. This we know.

We also know that Flaherty came from a government that lied and made up numbers.

This is just part of the endless cycle conservative governments gets tied into:

surplus>tax cuts>deficit>program cuts>surplus>tax cuts>...

[August1991]

You disagree with the Statscan numbers that previous Liberal government reduced spending and ended the deficit?

Yes.

Ending the "federal" deficit, I may agree to that - sort of. (Depends how you define "federal budget"? Does that include UIC or CPP payments?)

Chretien/Martin then raised CPP contributions, a regressive tax.

Mid 1990s Liberals reduced "government spending" by making many civil servants - contract workers. Under Chretien, the tricks were endless. Almost as good as in Washington.

----

Dobbin, I will agree that Mulroney's GST and FTA (and Reagan's policies) meant that Canadians paid more taxes and received fewer government payouts.

On average, in 1998, federal government revenues were greater than in 1988 while on average, government expenditures were smaller.

What does this prove?

[jdobbin]

Ending the "federal" deficit, I may agree to that - sort of. (Depends how you define "federal budget"? Does that include UIC or CPP payments?)

Chretien/Martin then raised CPP contributions, a regressive tax.

Mid 1990s Liberals reduced "government spending" by making many civil servants - contract workers. Under Chretien, the tricks were endless. Almost as good as in Washington.

I believe all that was covered in the Statscan report. Overall spending was down. That would have included contract workers unless you have evidence otherwise. It included all programs as well.

I know many on the right wing hate CPP but I think it is one of Martin's most successful solutions to ensure that the program remained viable.

Dobbin, I will agree that Mulroney's GST and FTA (and Reagan's policies) meant that Canadians paid more taxes and received fewer government payouts.

On average, in 1998, federal government revenues were greater than in 1988 while on average, government expenditures were smaller.

What does this prove?

It proves the Liberals kept a lid on spending.

[August1991]

It proves the Liberals kept a lid on spending.

No, it proves that in 1996 Canadians were earning higher incomes, governments received higher tax revenues, but the federal government was paying out less money.

Why? Because of Chretien/Martin? No.

Because Mulroney and Reagan changed policies in the 1980s. In particular, Mulroney had the political courage to change the foolish MST into a GST, and negotiate a FTA.

The greatest fraud is that Chretien/Martin cut government spending. Right.

[jdobbin]

No, it proves that in 1996 Canadians were earning higher incomes, governments received higher tax revenues, but the federal government was paying out less money.

The greatest fraud is that Chretien/Martin cut government spending. Right.

I'm afraid the fraud is the claim that the Liberals didn't cut spending. I don't hear many on the right make that argument.

[daniel]

Those postings by August puts him in the same category as those who still think Iraq was involved in 911.

[Visionseeker]

Where governments are concerned, budget deficits just don't matter. Government spending (that is, what governments purchase on our behalf) matters.

This is a point well understood by most economists if not by most others. If you (and I) have the patience, I'll explain it to you with credible links.

For the moment, I'll merely point out the obvious fact that government is unlike other "institutions" in our society, such as an individual, a family or a corporation. A person is wise to reduce her debt or not have one at all. Governments have no such worry. Unlike you or I, governments live forever.

Oh please no, none of that repudiation by deferral nonsense. The fact is that debt has to be serviced and the cost associated with that servicing can literally paralyze the fiscal capacity of the state if the debt rises too high or too quickly. Furthermore, increasing levels of debt represent a transfer of wealth from the generations who have to service it to those who presided over its rise. In effect, if generated by anything other than investment spending for the benefit of those who follow, increasing deficits are nothing more than theft from one’s children.

Now then, if I learn that the Conservative government has a budget deficit because it has been spending too much money, then I'll be angry. I'm not angry because of the deficit, I'm angry because of the spending.

That's no minor distinction.

If I understand your point, I am apt to agree with you here. But I do accept the concept of applying deficit spending during economic down-turns for investment purposes (i.e. building new or repairing crumbling infrastructure) as a way of mitigating short-term concerns (unemployment) while preparing for future needs.

If Harper wants to spend a whack of money on big airplanes and military crap, let him do it. But I think he should cut spending elsewhere. Governments are like shopaholics with access to other people's credit and debit cards. Who cares whether they use my credit card or my debit card? It makes no difference.

As noted above, it's really your kids credit card they'd use. But you raise an important point. As the treasury would again appear to be listing towards new deficits, what spending should they cut to right the ship?

I simply want the government to buy less stuff.

Which is a statement I find a little too simplistic.

Edited July 26, 2008 by Visionseeker

[Visionseeker]

deleted

The response to the question I was posing was already provided in the thread.

Edited July 26, 2008 by Visionseeker

[eyeball]

I'm afraid the fraud is the claim that the Liberals didn't cut spending. I don't hear many on the right make that argument.

Damn right about that. In my region the Liberal government started a program of divesting itself of docks, airports, moorage and navigation buoys, and other infrastructure that the Conservatives have shown zero inclination to reverse despite local election promises to do otherwise. Pat Carney tried to argue against this but Conservatives don't seem to care what she says.

As for addressing the deficits that inevitably occur whenever a bunch of conservative right-wing yahoos take over in North America nowadays, getting the hell out of Afghanistan and ending the war on drugs would be a good place to start. But no I expect there will never be an end to funding for military quagmires and moral engineering no matter how far into the red they have to dive.

Morons.

Edited July 26, 2008 by eyeball

[Visionseeker]

No, it proves that in 1996 Canadians were earning higher incomes, governments received higher tax revenues, but the federal government was paying out less money.

Why? Because of Chretien/Martin? No.

Because Mulroney and Reagan changed policies in the 1980s. In particular, Mulroney had the political courage to change the foolish MST into a GST, and negotiate a FTA.

The greatest fraud is that Chretien/Martin cut government spending. Right.

Your ideological bias renders you blind to the facts:

Year--------Revenue---%----------Expenses---%

1993-94--- $128,370-- -nil--------- $170,382---nil

1994-95--- $135,079-- 5.2%-------$172,541--1.3%

1995-96--- $142,510-- 5.5%-------$171,127--(-0.8%)

1996-97--- $152,472-- 7.0%-------$161,369--(-5.7%)

1997-98--- $164,362-- 7.8%-------$160,844--(-0.3%)

1998-99--- $167,543-- 1.9%-------$164,659--2.4%

1999-2000-$178,090--6.3%-------$165,792--0.7%

2000-01--- $193,350-- 8.6%-------$175,202--5.7%

2001-02----$187,647--(-2.9%)----$178,560--1.9%

2002-03----$190,232--1.4%-------$183,264--2.6%

2003-04----$198,547--4.4%-------$189,464--3.4%

2004-05----$211,943--6.7%-------$210,480--11.1%

2005-06----$222,203--4.8%-------$208,985--(-0.7%)

Cum. Total-------------56.7%-------------------21.5%

Average-----------------4.4%--------------------1.7%

Chrétien Total 93-04--45.1%-------------------11.1%

Average-----------------3.5%---------------------0.9%

Source: Public Accounts Canada (via Library and Archives Canada)

http://epe.lac-bac.gc.ca/100/201/301/publi..._can/index.html

You can make a case that Martin largely undid what was accomplished under Chrétien. But the fact remains that under the stewardship of Jean Chrétien, government spending rose an average of less than 1% each year (much less than half the rate of inflation for the decade: 2.4%).

The Liberals cut, and cut deep my friend.

Edited July 26, 2008 by Visionseeker

[msj]

No, it proves that in 1996 Canadians were earning higher incomes, governments received higher tax revenues, but the federal government was paying out less money.

Why? Because of Chretien/Martin? No.

Because Mulroney and Reagan changed policies in the 1980s. In particular, Mulroney had the political courage to change the foolish MST into a GST, and negotiate a FTA.

The greatest fraud is that Chretien/Martin cut government spending. Right.

So, the federal government was "paying out less money" but this was not because of Chretien/Martin "cut[ting] government spending?"

Let's see: Fiscal Reference tables

Ok, lets convert a few years into 2008 $ using the inflation calculator at the Bank of Canada website (looking at total spending excluding debt servicing):

91/92 $157,361 ($157 billion)

92/93 $165,092

93/94 $165,269

94/95 $162,157

95/96 $156,702

96/97 $141,953

97/98 $144,928

98/99 $144,639

99/00 $143,517

00/01 $152,658

01/02 $157,374

02/03 $165,146

03/04 $168,736

04/05 $190,383

05/06 $184,657

06/07 $194,162

07/08 ?????? TBD

Of course one can always compare the nominal numbers to GDP.

Do the same for the revenue side.

By studying the fiscal reference tables it should become obvious that it takes time for spending cuts to lead to tax cuts (or spending increases to eventually lead to tax increases). Seems human nature to defer and procrastinate - that's equally true for the taxpayer/voter as it is for the politician.

Edit:

Looks like Visionseeker beat me to the point.

Note some differences though - I only looked at total spending before debt servicing whereas VS looks at total spending after debt servicing.

I converted the numbers to 2008 $ because I presume the fiscal tables are presented using nominal $. VS does not adjust for this.

In the end, the point is more or less the same - spending was cut during the 1990's.

Edited July 26, 2008 by msj

[myata]

Adding a deficit to its list of "achievements" would be certainly a death knoll for Harpers' government. Maybe that's one of the reasons they urgently added another 3B into their spending plans (for Ontario infrastructure). Perhaprs, counting on an election before the results of their "prudent fiscal management" would come out?

P.S. It's not like I'm opposed to that spending. It's the timing of it that looks highly suspicious. Just like Martin's goodies in 2006. Much good it did to him.