Ottawa posts $1.7-billion deficit in August

[jdobbin]

http://ca.news.yahoo.com/s/capress/081024/.../budget_deficit

The monthly deficit reported Friday was the first since April and shrinks the accumulated surplus so far into the fiscal year to a five-month total of $1.2 billion.

While economists warn it is difficult to make judgments based on one month's accounting, the steep fall-off in the Canadian economy, particularly since this month's plunge in oil prices and stock markets, suggests the second half of the fiscal year will be worse for Ottawa than the first.

Early in the year I was ridiculed in this forum about some of the early monthly deficits resulting in a yearly deficit. I said based on spending, the tax cuts and a possible downturn in the economy, it was entirely possible.

We are so close now. August is a snapshot backwards. What will be September numbers like?

Edited October 24, 2008 by jdobbin

[normanchateau]

In the 2007 federal budget, Harper pledged that beginning in 2008, he'd be giving Quebec another 4.1 billion dollars a year. This so-called fiscal conservative, who is anything but that, took an enormous federal surplus and instead of returning it to Canadians in the form of reduced income tax rates, squandered it with perpetual multibillion dollar handouts to Quebec. Charest, more clever than the fiscally irresponsible Harper, gave the billions back to Quebecers in the form of provincial income tax cuts.

Harper will of course blame the growing deficit on "global" factors and will hope that Canadians forget how he contributed billions to the deficit and squandered the surplus before the global crisis had even begun.

[godzilla]

absolutely criminal...

wonder why this wasn't a topic at election time? i couldn't believe my ears and yet was not at all surprised two weeks after the election that "journalists" were talking raising the question "is a deficit really bad?"! all as a pre-cursor to a government (conservative is too good a word to use for these guys or republicans) whose manifesto is to sell countries to money lenders.

the cbc reports "On Friday, the Finance Department said August revenues were up by about $100 million, or 0.5 per cent, from August 2007, because of higher personal income tax but a lower corporate income tax, goods and services tax, and other sales and excise taxes."

thanks to those who vote for the rich!

[eyeball]

What will be September like?

You could change your handle to Yoda and no one would be any the wiser.

[jdobbin]

You could change your handle to Yoda and no one would be any the wiser.

Well I do possess the force. heh

I intended to say what will be September numbers like?

[kengs333]

Fiscal Monitor - August 2008

http://www.fin.gc.ca/FISCMON/2008-08e.html

Now who was it that was crowing about the trend leading towards a near $10b surplus?????

Edited October 24, 2008 by kengs333

[Topaz]

What did cost Canadians more the tax cuts or the war in Afghanistan. I saw one figure that its 100 million a month and then again there's so many estimates out there who knows what the right figure is!

[madmax]

I don't think anyone is surprised by Flaherty's inability to manage fiscal responsibility. He was useless in the Ontario Government.

However, It shouldn't surprise anyone that the CPC were trying to hide their fiscal incompetence with an early election. You might want to look at Dion who ignored all the sound advice given to him to jump on the economy, and drop the Green Shift.

If you followed the Ontario Election last year. It reminded me of the Liberals beating the heck out of John Tory and him not being able to lay a glove on the McGuinty Liberals.

Both the Ontario Liberals and the Federal CPC have adopted the same policy at the same time to softsell these deficit to the public.

[Smallc]

Good thing they pushed that second 1% GST cut ahead......oh...wait.

[OddSox]

Good thing they pushed that second 1% GST cut ahead......oh...wait.

So, we should increase the GST by at least two points? Immediately?

Actually, I suspect that there will be a number of so-called economists who will soon agree that the GST cut was possibly the best thing they could do in view of recent developments, - and will help to keep the recession from being worse...

Regardless, the CPC campaigned on GST cuts and the electorate apparently agreed with them - so they followed through and kept their promise. (not like some others who were going to eliminate the GST if I recall).

[Smallc]

So, we should increase the GST by at least two points? Immediately?

The second 1% was never supposed to have been cut yet. The government thought they had more room than reality allows.

[jdobbin]

However, It shouldn't surprise anyone that the CPC were trying to hide their fiscal incompetence with an early election. You might want to look at Dion who ignored all the sound advice given to him to jump on the economy, and drop the Green Shift..

You might want to look at the NDP too who wanted to end the corporate tax cut and spend it.

[William Ashley]

http://ca.news.yahoo.com/s/capress/081024/.../budget_deficit

Early in the year I was ridiculed in this forum about some of the early monthly deficits resulting in a yearly deficit. I said based on spending, the tax cuts and a possible downturn in the economy, it was entirely possible.

We are so close now. August is a snapshot backwards. What will be September numbers like?

I wonder how big the deficit would be if he didn't sell the Artic's Oil Rights to US companies.

We should start to ask where this money is coming from if taxes are being lowered, I'm geussing you'll be suprised to know it is by selling off Canada to foreigners

Edited October 24, 2008 by William Ashley

[Vancouver King]

You might want to look at the NDP too who wanted to end the corporate tax cut and spend it.

The above article says year over year corporate tax paid was down 43.1%. And the recession hasn't even locked in yet. What ever happened to business paying it's fair share? Why not just hand the treasury's keys to the banks and oil companies?

[jdobbin]

The above article says year over year corporate tax paid was down 43.1%. And the recession hasn't even locked in yet. What ever happened to business paying it's fair share? Why not just hand the treasury's keys to the banks and oil companies?

My personal preference is on sales taxes over income taxes at every level.

[marksman]

So, we should increase the GST by at least two points? Immediately?

Actually, I suspect that there will be a number of so-called economists who will soon agree that the GST cut was possibly the best thing they could do in view of recent developments, - and will help to keep the recession from being worse...

I doubt that. At the time almost all economists said income tax cuts would be better for Canadians. I'm not sure why that would change. Lower consumption tax may stimulate some spending but having more money each week from income tax cuts stimulates Canadians to spend or invest. And that spending can be used for anything but with GST cuts you only get savings on GST taxable things.

[Oleg Bach]

I doubt that. At the time almost all economists said income tax cuts would be better for Canadians. I'm not sure why that would change. Lower consumption tax may stimulate some spending but having more money each week from income tax cuts stimulates Canadians to spend or invest. And that spending can be used for anything but with GST cuts you only get savings on GST taxable things.

Currency is a current. It is much like a river and when it stops at the top of a mountain and does not or will not be allowed to flow down the otherside - the river is useless and the valley below becomes a desert...power - money - It must flow and it must have a purpose....money has become our enemy when it was by design to be of assistance - now money and it's stagnancy is poisioning not just the nation but the planet. HORDING - brings sorrow not only to those in need but destruction to the horder...It's not like suddenly there is no money - some one damn well has it and they better start to use the damn stuff before it becomes useless...then all hell will break loose.

[kengs333]

Fiscal Monitor - August 2008

http://www.fin.gc.ca/FISCMON/2008-08e.html

Now who was it that was crowing about the trend leading towards a near $10b surplus?????

I think it was "White Doors" or "DogOnPorch"... anyone want to admit to it, or will I have to dig it up myself?

[Mr.Canada]

I think it was "White Doors" or "DogOnPorch"... anyone want to admit to it, or will I have to dig it up myself?

The same thing would have happened no matter who was in power. It's a world wide slow down.

\

Governments are not supposed to be running surpluses, it isn't a corporation. A surplus indicates over taxation and that taxes need to be lowered.

Edited October 27, 2008 by Mr.Canada

[Smallc]

Governments are not supposed to be running surpluses, it isn't a corporation. A surplus indicates over taxation and that taxes need to be lowered.

Says you. I would rather that the government ran a surplus and used it to pay down the debt. Governments aren't supposed to be running deficits. I guess it means we're under taxed.

[White Doors]

I think it was "White Doors" or "DogOnPorch"... anyone want to admit to it, or will I have to dig it up myself?

I merely recorded the facts and what I reported was that the federal government had a 2.9 Billion dollar surplus for the first 4 months of this fiscal year. It's pretty simple, even you can get it.

[kengs333]

I merely recorded the facts and what I reported was that the federal government had a 2.9 Billion dollar surplus for the first 4 months of this fiscal year. It's pretty simple, even you can get it.

Yeah, and suggesting that this would lead to an approximate $10b surplus...

[Mr.Canada]

Says you. I would rather that the government ran a surplus and used it to pay down the debt. Governments aren't supposed to be running deficits. I guess it means we're under taxed.

Governments are supposed to be responsible. Be responsible in their fiscal obligations which doesn't include spending like drunken sailors on shore leave as the Liberals have done and now Mr. Harper seems content to do.

The people are taxed enough and the government needs to work within that framework not create deficits or raise taxes. If they cannot do that then that government no matter of stripe needs to rethink and adjust its policy or simply step down and let someone capable get to work for the Canadian people.

[Smallc]

Governments are supposed to be responsible. Be responsible in their fiscal obligations which doesn't include spending like drunken sailors on shore leave as the Liberals have done and now Mr. Harper seems content to do.

Well I agree, but as long as we have a debt, thats where all of the extra money should go. We've now eliminated almost any room to maneuver and almost any capacity to pay down debt and we may even start adding to it again.

[capricorn]

Governments aren't supposed to be running deficits.

Nor should they post huge surpluses. To achieve large surpluses, the Liberals consistently under-estimated revenues and overstated spending. We just got used to the large surpluses they surprised us with year after year. I would rather see a balanced budget or small deficit than to be duped by creative accounting.

When Tim O'Neill first broached the idea in 2005 that Ottawa ditch its no-deficit rule, the Liberal government of the day politely told the former Bank of Montreal chief economist to take a hike.

It was one of the main pieces of advice he offered in a report that then-finance minister Ralph Goodale commissioned to analyze Ottawa's faulty record of fiscal forecasting. Eliminating the no-deficit rule, Mr. O'Neill said, would lead to better budget forecasting and the end to a string of super-sized surprise surpluses. He added that it would also benefit the economy if Canada fell victim to a protracted downturn.

But within minutes of Mr. O'Neill advice becoming public, Mr. Goodale said he wasn't interested. "Frankly," he said,"it is not an approach that commends itself to me from a public-policy point of view."

---

Stephen Harper, the Prime Minister, just won re-election on a platform of balanced budgets mixed with warnings that his political opponents would run up deficits. But on Friday, Mr. Harper declined to "speculate" about the possibility of a future budget deficit, as opposed to explicitly ruling one out as he did on the campaign trail. That view was echoed by Finance Minister Jim Flaherty yesterday in a television interview.

The recent developments, Mr. O'Neill said in an interview, provide further evidence of the flaws in Ottawa's no-deficit, come-hell-or-high-water doctrine that he highlighted in 2005.

"I always thought my positioning was right," Mr. O'Neill, now the head of his own consultancy in Toronto, said of his advice. "We haven't had a real test of this no-deficit rule until, it appears, now. So we are in a position where we are going to have to cross that Rubicon."

---

The no-deficit rule was officially enacted after the Liberal government posted a surplus in the 1997-98 fiscal year - the first in decades. The Liberal finance minister at the time, Paul Martin, "stated widely and often his commitment that the government would never go into deficit again," Mr. O'Neill wrote in his 2005 report.

In arguing for its removal, Mr. O'Neill said the no-deficit rule led bureaucrats to err on the side of caution when it came to issuing budget forecasts. Hence, officials underestimated annual revenue from taxes and overestimated yearly spending on programs

and debt service to guarantee a surplus at the end of the fiscal year. This led Ottawa to underestimate its budget balance by an average $10-billion a year over a 10-year period.

"I wasn't making a formal proposal that Ottawa start recording deficits," Mr. O'Neill said of his recommendation, in which he advised that deficits be incurred when warranted by circumstances such as a "significant" economic downturn.

"What I was saying is that if you don't change policy rules, there are inevitable consequences. So it makes more sense to think about balancing over a business cycle, or over the medium term, than running a surplus every single year."

---

Meanwhile, the Fraser Institute and the Canadian Taxpayers Federation argue that over-the-top spending is the culprit. Since the federal government balanced its books in 1997-98, program spending has increased by an average of 5.9% per year, faster than the average rate of economic growth (5.7%).

"We think, like normal Canadians who have to spend within their means, so should government," said Adam Taylor, the taxpayers' group's acting federal director, and an advocate of the no-deficit rule. "If it means cutting program spending, so be it."

http://www.financialpost.com/news/story.html?id=892375

I'm not too concerned about the government's books at this time. The year-end bottom line will be much more interesting and telling. But should a deficit materialize, I can't promise I'll join in the hand wringing.