Oops, I ran a surplus again!

Monday, October 25, 2004


Written by Scott Piatkowski

Oops, I ran a surplus again!
by Scott Piatkowski

Paul Martin has got some explaining to do. While he was neither Prime Minister nor Finance Minister when the federal budget surplus 2003-04 was first projected to be a modest $1.9 billion, he is responsible for the revised projection of $3 billion and based his entire election platform on it. And, let’s be perfectly clear (as Martin always says that he likes to be), while he may not have known the exact number, there is absolutely no way in which Martin could have been unaware in May and June that the real numbers for a fiscal year that ended March 31 were substantially higher than both the original and the revised projections.

Treasury Board President Reg Alcock had a curious explanation for such discrepancies when he spoke to The Globe and Mail in January: The federal government “is a big business and there's lots of money all over the place. There is literally some amounts of money that is just there, just sitting there, that we've discovered.” Not satisfied with the absurdity of Alcock’s remarks, Paul Martin decided to top them last week by offering his own explanation. “It's like when you've got a slice or a hook when you're playing golf. It takes a minute change when you hit the ball for a massive slice. And that's what happens in these numbers.”

This “found money” scenario is hardly a new one for the Liberals. Since 1994, the Liberals have consistently under-estimated the budget balance by a total of $86 billion, and had an average error rate of 203.9% per year. Moreover, the game won’t end in the years to come. The Canadian Centre for Policy Alternatives (which has a far better record than the Liberals of predicting surpluses) has reported that “despite the conservative assumptions we have adopted – which in fact may understate potential future budget surpluses – our projections show a budget surplus of $26.8 billion between 2004/05 and 2006/07. The government could spend these surpluses on programs rather than paying down debt and the debt/GDP ratio would still decline substantially. Contrary to current government rhetoric, the federal cupboard is far from bare.”

So why does this matter? Isn’t it good news that the federal government transposed two digits and actually ran a massive surplus of $9.1 billion? Not unless you’re in the camp that believes that debt reduction should be the government’s number one priority. Even if you are in that camp (and it’s a relatively small camp), wouldn’t you want there to be a debate over how to spend the extra cash? If debt reduction is such a high priority, its advocates should have all the tools they need to win such a debate.

Certainly, there are those that would argue that a string of surpluses is a sign that the government is taxing Canadians too heavily. But, given the fact that Paul Martin has already implemented the largest corporate and personal income tax cuts in Canadian history, that’s a hard argument to support.

As well, as we saw in the notorious amendment to a subamendment to the Throne Speech, there are those who will argue that any federal surplus is a sign that more tax money should be going to the provinces. For example, Bloc Quebecois Finance Critic Yvon Loubier has called on the government to introduce legislation “providing for the use of a good part of future surpluses... to benefit Quebec and the other provinces and their citizens.”

On the other side of the equation, there are plenty of places where $9.1 billion (or even $86 billion) could be spent. There is, of course, “the number one priority” of health care, but also the long-promised and never-delivered national child care program, the so-called “cities agenda”, under equipped troops, implementing Kyoto, and public servants who had to hit the pavement to get a decent contract offer.

“Paul Martin has already shown us what he can do with budget surpluses,” said NDP Finance Critic Judy Wasylycia-Leis. “As finance minister and responsible for record surpluses, did Paul Martin spend Canadians’ dollars on social or environmental priorities? No. The Liberals’ books are more and more reminiscent of Nortel’s or Enron’s, making it all the more incredible that pollution, tuition and property taxes continue to rise.”

The Liberals promised in 1997 that, having managed to balance the budget, half of any new surpluses would be spent on new social spending (making up for the cuts that they implemented in order to balance the budget), while the other half would be divided between tax cuts and debt payments. They have not met that commitment. More importantly, by repeatedly low-balling the surpluses, they have made it impossible for Canadians to have a meaningful debate on the subject.

Regardless of the validity of their arguments, those who favour tax cuts, those who argue for remedying the alleged fiscal imbalance, advocates of debt repayment, and proponents of new spending initiatives should all have a chance to make their case to Canadians. When the full scope of the deficit is withheld by the government until after the end of the fiscal year, it is already too late to have that discussion.

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