Much has been written about the Harper government's deficit projections. Jim Stanford writes that, on paper, the budget will be balanced. There are all kinds of accounting tricks that can make that happen. The government is vulnerable, he writes because it has grossly mismanaged the economy:
The October tax cuts were premature; it is tax cuts, not oil prices, which have jeopardized the attainment of a balanced budget. The Conservatives broke their own promise in implementing tax cuts before the budget was even balanced. (Breaking their promise, not running a small deficit per se, is their key point of vulnerability.) In fact, as I show in my column, the federal budget would be balanced right now, even with lower oil prices, were it not for the accelerated first-year tax cuts which the government was so anxious to rush out the door before the election.
- The October tax cuts are socially and economically damaging. The
CCPA's fabulous analysis of the perverse distributional effects of
income-splitting (here and here) is already making this case in spades.
- The government's response to falling oil prices has revealed
confusion and internal division. Joe Oliver delayed his budget to some
unspecified future date (April or even later); perhaps he will
actually "table" the budget on the hustings. Oliver has said that there
will be no further spending cuts to offset the loss in revenue, and
that the government can use its (phony) $3 billion contingency fund to
protect the balanced budget. Employment Minister Jason Kenney, in
contrast, said the exact opposite in public: suggesting that
incremental spending cuts might be required, and that the $3 billion
cushion would not be drawn down (since it is intended, he
argued, for true "emergencies"). Treasury Board President Tony Clement,
meanwhile, also hinted at surprise reductions in spending --
channeling Pierre Trudeau in saying "Just watch us" reduce spending.
Clement's record in consistently underspending authorized operational
budgets (part of the government's "austerity by stealth" strategy).
These mixed messages indicate a breakdown of discipline within
Conservative ranks, and send confusing signals to consumers and
- Most fundamentally, the government's macroeconomic and industrial
emphasis on making Canada an "energy superpower," investing so much
fiscal and political capital to facilitate energy megaprojects
(including fruitless pipeline proposals), vilifying critical voices,
and inadequately responding to the negative side-effects of the oil
boom on other sectors, has left Canada's economy unduly vulnerable to
an oil price decline that was always inevitable.