Thursday, March 4, 2010

Canadian Budget - Reality Check

Let's cut through the BS spin of the budget.  The short of it is, spending increases have been reined in dramatically, but "cuts" aren't yet in place.   The Conservatives "plan" appears to be:

1) Slow down spending increases (but don't actually cut spending).
2) No tax increases.
3) Hope the economy improves.

Emphasis on 3).  They REALLY REALLY hope that happens, because 1 and 2 sure as shit won't balance a record $56 Billion budget deficit.

Mr. Flaherty’s program relies on an outlook for economic growth in 2010 of 2.6 per cent and of 3.2 per cent in 2011, estimates that are based on the consensus of 15 private forecasters.
Those are cautious estimates, because history suggests that economies rally much faster after recessions. While that leaves room for a pleasant surprise, Mr. Flaherty, unlike in his previous budget, hasn’t made allowances for the possibility the consensus could turn out to be too optimistic.

Cautious estimimates?  REALLY?  Is that what the "private economists" (handpicked by the government) say.  They look hopelessly optimistic to me.  After all, the only reason we managed 5.0% growth in the 4th quarter was due to a combination of massive government stimulus spending, and a ridiculous housing boom.  Neither of those are sustainable; we're due to see a snap back to reality this year.  Double dip is very much a likely outcome despite what everyone HOPES happens.  Hope is not a plan.   Look how "hope" is working out in the US.

Some of the "cuts":
Mr. Flaherty’s budget would reduce the planned growth in the Defence Department’s budget by $525-million in the fiscal year ending March 31, 2013 and $1-billion annually the following year. The government will freeze the international aid budget this year, scrapping a previous pledge to increase it by 8 per cent a year, which will save $4.5-billion over five years. Also, departmental operating budgets will be frozen at current levels in 2011-12 and 2012-13.
 The government said it would not cut major transfers to provinces (such as health care and employment insurance), though some minor programs will be affected.

Defense is actually a good start, but where's health care (provincial transfers), education, government pension plans?   Provincial transfers should definitely be on the radar (again).  Too many provinces are utterly dependant on the feds for their funding.  If the federal funding shrinks, maybe the provinces will push towards their own improvements.

Making cuts to every tiny little discretionary program is not going to balance this beast of a deficit.  Some of the "meat and potato" programs have to be trimmed too.  Departmental budgets should be cut 5-10%, not frozen (and just for 2 years).  The aid cut doesn't surprise me in the least.  In fact I don't even recall the pledge to increase aid by 8%  YOY in the first place...seems pretty uncharacteristic of the Cons.   I guess the key to finding savings is to make plenty of unrealistic "pledges" in the first place to buy votes, hope the suckers buy it, then cut when you feel like it so you can make the "Look at the savings!" announcement.   And you wonder why people despise posturing of the liars in office.  That being said, cutting foreign aid is a drop in the bucket and entirely political - "Look we're worried about us, fuck everyone else."

The G&M article cited has an interesting breakdown of revenues/expenses over the last year.

Out of curiosity, I figured I'd take a look to see how revenues and expenses have fared since the Conservatives took office in 2006.

In 2006 revenues were at $235.4B and expenses at $222.2B for a surplus of $13.2B.
In 2007 revenues were at $242.1B and expenses at $232.6B for a surplus of $9.5B.
In 2008 revenues were at $235.9B and expenses at $237.2B for a deficit of $1.3B.
In 2009 revenues were at $213.8B and expenses at $258.6B for a (projected) deficit of $44.8B (this is now revised closer to $56B)

The projections for 2010 have revenues at $231.4B and expenses of $280.5B for a projected deficit of $49.1B.

So, in 4 short years.  Revenues have declined by 1.7% (based on the rosy rebound in revenues projected next year.  And government spending has increased by 26.2%.  Granted, politicians will cite the recession is cause for both the decline in revenues (income and corporate taxes) and the increase in spending due to automatic stabilizers (EI, social assistance).

But if that's the case, and governments have counter cyclical policy firmly in place, then WHY the need for the ridiculous Keynesian stimulus programs?

Answer: Because a politician will never cease to take an opportunity to spend other people's money without being accountable for it.

The Conservatives economic policies have been dismal from the beginning.  Ie. letting CMHC run wild to let people with no money buy houses, cutting progressive consumption taxes like the GST instead of reducing personal income taxes, etc., and letting program spending explode.

Unfortunately, the other parties "plan" is to DO MORE OF THAT.  Seriously, the Liberals have been MIA since Iggy took over.  I guess I can't really blame them, the Conservatives had literally NO POLICY last election beyond "Stephane Dion is a little weeny loser", and look how that worked out.  At least he had a FUCKING PLATFORM (yes a carbon tax might make a lot of sense if it was done correctly, you know, tax the polluters, and give everyone else a tax break).  And don't get me started on Jack "I'm at Gretzky's" Layton.  His plan is to spend even faster than the Liberals...while taxing everyone to pay for it.  Clearly government can't be too big for the NDP.

Seriously, the only reasonable option is "None of the above", or a protest vote for the Greens or a decent independant.  Democracy doesn't work when all the parties are incompetent.

1 comment:

  1. Agreed. What a piece of crap budget. I feel like a mushroom in a windstorm.

    The other parties are clueless. We are so screwed.