Conservative Canadian Federal Budget from Conservative Minority Government

March 22, 2011

Prime Minister Harper’s government presented a budget today that

  • Offers CAD 7.6 billion over six years in new spending to appease political opposition but
  • Embodies CAD 6.2 billion in savings over five years, escalating from CAD 195 million in 2011/12 to CAD 796 million in FY12/13 and CAD 1.569 in FY13/14
  • Thereby reducing the projected deficit from CAD 55.6 billion in 2009/10 to CAD 29.6 billion in 2011/12, CAD 19.4 billion in 2012/13, CAD 9.5 billion in 2013/14, and CAD 0.3 billion in 2014/15, with a return to surplus (CAD 4.2 billion) by 2015/16,
  • And enabling the Federal debt/GDP ratio to drop to 34.4% next year and 29.7% by FY2015-16.

The budget allows fiscal stimulus to progressively expire such that program spending falls from 16% of GDP last fiscal year to 12.9% of GDP by FY15/16.  This process has already begun.  Program spending from April 2010 through January 2011 was 0.4% smaller than a year earlier, while revenues in the same period showed on-year growth of 6.9%.  Planned cuts in corporate taxes are retained but more than offset with a closure of loopholes, resulting in more, not less, projected revenues.  Pessimistic growth rates are assumed, so the actual decline in the deficit will happen even more quickly than envisaged if more optimistic forecasts by others prove accurate.

This budget, as presented, was quickly rejected by all three Canadian opposition parties, the Liberals, Bloc Quebecois, and the New Democrats.  Without further significant concessions, an election in early May seems unavoidable.  Opinion polls suggest an election, which voters do not want, would result in a similarly divided government to what Canada has now.  The Conservatives will run on this budget and, if they are reelected with a similar plurality to what they have, Canada should end up with a pretty ambitious deficit-cutting budget that will put it ahead of the United States, Europe, and Japan on the road to balanced public finances.

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.



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