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| Last updated at 8:53 AM on 23/10/08 |
Tories brace for deficit, plan to share blame 
OTTAWA
ALEXANDER PANETTA
THE CANADIAN PRESS
The Conservatives are bracing for the prospect of a return to budget deficits and plan to share the blame with their political opponents if Canada slides back into the red.
They say Prime Minister Stephen Harper laid the groundwork in his election night victory speech and in his next-day news conference, where he struck a conciliatory tone toward opposition leaders.
He promised to consult the opposition on the economy and government officials say they will ask other parties for suggestions for next month’s fiscal update and for the 2009-10 federal budget.
With economists already warning that a decade-long string of federal surpluses is about to end, any opposition spending request would carry an additional price tag.
One government official said any program cut the opposition opposes, any tax cut they propose or any spending program they demand would push the federal treasury deeper into the red.
This would make it more difficult for opposition parties to blame the Conservative government for blowing a once-massive federal surplus.
“We’re going to have a deficit next year,” a government official predicted.
“(Harper) will be able to have a deficit and take no criticism for it. Who’s going to criticize him for going into deficit when you get their buy-in first?”
A Conservative MP made it clear what political tack the government would take if forced back into the red. When asked whether he expected a deficit the MP smiled and replied, “Only if the opposition agrees.”
Toronto Dominion Bank chief economist Don Drummond has forecast deficits of $10.4 billion next fiscal year, $9.9 billion the year after, $5.5 billion in 2011-12 and $2.4 billion in 2012-13.
Can’t complain
The government would argue that opposition parties have no right to complain about a deficit if they contribute to it and don’t offer any solutions for escaping it.
The opposition would certainly retort that Harper’s two per cent GST cut — panned by economists as a counterproductive measure — was a poor decision that cost the treasury $12 billion a year.
But those closest to Finance Minister Jim Flaherty refuse to describe deficits as certain.
The finance minister will keep his post in the upcoming cabinet shuffle, insiders say, and they insist he remains hawkish on balanced budgets even if others are starting to resign themselves to red ink.
They say Flaherty has three ways to stay in the black.
The Tories can cut program spending. They can scale back future commitments — reducing the scope of the tax-free savings accounts created in the last federal budget, for instance. And they can freeze public-service hiring.
The economy is so erratic, they say, it’s possible it might outperform gloomy expectations and leave the government with more cash than currently forecast.
But even the most militant of the anti-deficit hawks say the signs aren’t very encouraging. One noted that Harper has stopped guaranteeing a surplus.
“You’ve got the PM talking about it,” said that government official, who has intimate knowledge of the budget-making process.
“Who would ever have expected that in a million years? He’s laying the groundwork. He’s paving the way for a deficit budget.”
Harper has modified his tone on deficits since the election.
During the campaign, he said he understood the consensus among economic theorists that running the occasional deficit is not a bad thing in tough economic times.
But Harper said the political reality is that deficits are addictive — and, like a shopaholic with a credit card, once governments start incurring them they can spiral out of control.
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23/10/08
© 2009 
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Guy Fawks from Jolly Ole, England writes: Now how can the sitting government pass the mess they created back onto the other parties? Was it not Stevie that bragged about the Canadian economy not too long ago as being stable, yet switched mid-stream a few days later and came up with the Oh ya, it might be bad line?
I think the population knows that the global economy is about to hit the skids in the same way it once went during the great depression. Now the only question is what have people done to protect themselves from it?
Have people been investing in alternative sources of energy for home heating and electrical? I have, so I guess thats one step in the right direction. At least when the utility bills that some see reach the $1000.00 a month level my family will be able to use that money to eat. I feel for those that failed to prepare, since employment will dry up, goods and services will linger and fall to the way side due to the lack of income in which to purchase any.
But Danny Boy told us that we were now a HAVE Province. Well Danny Put the Hell up or step down before the end of October. You have had your run, and now you have not a leg to stand on.
We are at the tipping point, and our fair Danny and Stevie have sold us all down the river. The gaps between the haves and have nots is about to become v e r y wide.
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| Posted 23/10/2008 at 10:59 AM | Alert an Editor | Link to comment |
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Steve Giles from Cloyne, ON writes: How can Harper’s two per cent GST cut be panned by economists as a counterproductive measure ? The cut put more money into circulation. I think it was actually the socialists who panned the GST cut because it took potential money out of government which could have been used to expand social programs.
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| Posted 23/10/2008 at 11:39 AM | Alert an Editor | Link to comment |
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Dustin from Ontario writes: @ Guy....
It's a minority Government.. it takes more than 1 party to pass anything.. therefore if the spending goes in the red it's because several parties teamed up to allow that expense.
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| Posted 23/10/2008 at 2:35 PM | Alert an Editor | Link to comment |
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Aatos Lehtila from Belleville, Ontario writes: Like many Canadians, I have lost faith in the majority of our politicians. I see people seeking power only because they love power, and playing whatever games it takes to get that. The GST cut is one example - saving a few pennies for the ones who spend the most, the ones who have the most money, but providing very little to those who have the least to spend. Yet it is sold as good for all, and Canadians buy in, and vote for it. Harper is a shrewd politician in this sense, and once in power is playing more games to look like he should stay there. The conservative MP quoted in the article makes that point very clear. The saddest realization is that Canadians have come to expect and accept this from politics. We see and know the games, and celebrate the best game player instead of the best leader.
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| Posted 23/10/2008 at 2:43 PM | Alert an Editor | Link to comment |
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england sucks from ns writes: why is some negative clown from england commenting on this, hasnt anyone ever told him if you cant say anything nice dont say anything at all, especially since its apparent you are just a sour grapes LIBERAL, get a life you loser guy
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| Posted 23/10/2008 at 2:48 PM | Alert an Editor | Link to comment |
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Phillip Huggan from Wpg, MB writes: S.Giles, the reason every economist panned GST cut is because it is very tough to implement (people love tax cuts more than tax rises even though they like program spending cuts and rises equally) and it is a tax on the rich.
Whether it is good for employment in a recession depends on whether rich spending on goods stimulates domestic employment more than the social spending. Given that homes are a little overvalued and the Liberals/NDP have employment-friendly daycare, it isn't even close. The GST cut was Conservatives selling our soul to get into power. Their whole campaign was won on dishonest media attack ads that dumb us down. Media is no longer being used to further public education of adult, but instead is being used to keep rich people richer. Canada is a failed post-modern country no longer fit to serve as a societal model for the future.
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| Posted 23/10/2008 at 3:25 PM | Alert an Editor | Link to comment |
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John Wright from NL writes: Excellent point, Englandsucks. Your argument is well thought-out and coherent. You managed to tackle him on every point... err... like being from England. Yes, yes. Bravo. If you cant say anything nice, dont say anything at all How wonderfully pithy. Obviously a scholar of Wilde. And people think Conservatives are knuckle-dragging Neanderthals.
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| Posted 23/10/2008 at 3:28 PM | Alert an Editor | Link to comment |
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Mike from ALberta writes: Like most people, I too believe that politicians are a different breed altogether. Trust? Well if truth be known, trust is a word that has little usage in the world of politics.
That being said, the Conservatives led by Harper are being upfront about the situation. To those who still see the Liberals as the party who has the God-Given right to rule the country (they have for the most of our existence anyway) and would not have run a deficit when in power, give your collective heads a good shake.
It was not too long ago that the old Smoke and Mirror Liberals fooled many a person by disguising fiscal management (reducing the nation debt/deficit) by downloading the Health Care cost to each province/territory. And lets not forget the gauging of both worker and empolyer of overtaxing the EI priemums and then utilizing said funds for general revenue.
I don't like deficits as much as the next person but please do not paint the Liberals as a party that is pure and dare I say it, trustworthy .
What say we punt the CBC and the Gun Registry.......billions and billions and billions could be saved on an annual basis. Deficit, what deficit?
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| Posted 23/10/2008 at 3:37 PM | Alert an Editor | Link to comment |
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Jason from Manitoba writes: Well, the federal Liberals just got my vote.
The Conservatives up here are just as reckless and irresponsible as the Republicans down south. They should be ashamed of themselves. Their platform of cutting taxes while ignoring consequences is going to lead us down the same road Brian Mulroney took us down in the '80s, and I'm not going to take that sitting down.
Under the federal Liberals, I was able to know that even though I was paying back debt accrued while I was a small child, we'd at least pay off Mulroney's debt before my kids entered the workforce.
My grandfather had a phrase, passed down to my father, and now I'll share it with you: Conservative times are hard times . It seems nothing changes. Fiscal conservatives vote Liberal.
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| Posted 23/10/2008 at 3:47 PM | Alert an Editor | Link to comment |
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Policy Analyst from Saskatchewan writes: Hey Steve Giles,
Please take some time to answer your own question. Do some research. Almost all economists thought it was dumb to cut the GST. There are a variety of reasons for this. The first, which is more of a principle, is that consumption taxes are good because they don't distort the economy and are efficient. Taxes that distort the economy, such as income taxes, investment taxes, etc are bad and should be reduced. In an economists ideal world, we would only have consumption taxes - things like GST, pollution taxes, etc..
The second reason why it was dumb to cut the GST, was because of the timing of it - but I'll let you research that yourself.
Finally, your assumption that cutting the GST put more money into the economy isn't necessarily true. Many people do not make purchase decisions simply because the GST is lower. Also, any extra money they have may go into investment or savings instead. And again, related to the timing issue, is that IF it did put more money into the economy, depending on what that money was spent on, it could have done more bad that good by increasing inflation.
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| Posted 23/10/2008 at 3:55 PM | Alert an Editor | Link to comment |
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TJ from Ontario writes: I guess I'm the only one who remembers when the GST was introduced, and it was roundly criticized for being regressive. You see, poor people spend a much larger FRACTION of their income than rich people, so consumption taxes tend to take a much larger FRACTION from the poor than the rich.
So the Tories were regressive when they introduced the GST, and now for some reason exactly the same people are accusing them of being regressive when they cut it.
I honestly don't know which, if either, of these positions is correct, but I do know they both can't be. But it's fun to play armchair economist and pretend that you do know, especially when it makes for an excuse to bash the Tories, who certainly do deserve bashing.
The GST cut was, if nothing else, stimulative, as it was an effective 2% cut in prices across the board, leaving that much more money in the hands of consumers. This is one of the reasons why Canada may avoid a recession, although many advocates of deficit spending would like to believe that it would be more efficient to have the government collect more tax revenue and then oh-so-cleverly figure out exactly where to spend 30% of it (after overheads, of course), rather than just letting ordinary Canadians keep their money and spend it where they see fit.
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| Posted 23/10/2008 at 4:06 PM | Alert an Editor | Link to comment |
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Adam from ontario writes: Steady hand on the tiller What? Big rock in the field? Must have been the Liberals. If you have to prepare to blame someone for something that hasn't officially happened yet, is it a surprise that people start to question accountability? Honesty would be a nice change to politics. Please tell me what you're going to do to make Canada a better place and not why a bird is more likely to poop on an opposition party member.
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| Posted 23/10/2008 at 5:02 PM | Alert an Editor | Link to comment |
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Dale Dirks from KELOWNA, b.c. writes: Can anyone out there explain to the rest of us where PM Harper will get the 25 billion to help the financial institutes plus the approx 12 billion to finance Canada in Afghanistan, 100 million to help the french speaking Africans with their green problems and so on while the Finance Minister says we will have a modest surplus around 2 billion dollars and then have the gall to blame the Liberals for this. Didn't SH government start with approx 12 billion surplus before he gave it all back to Canadians in pension splitting, reduced GST and so on. Just asking
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| Posted 23/10/2008 at 5:06 PM | Alert an Editor | Link to comment |
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Bram from NL writes: Why is it that Albertains see fit to tell everyone how to do things. Until 1940 you were a have not province too, begging for scraps. That oil didn't get there by your moral superiority or hard work. Nationalize the oil and gas industry for the sake of the rest of Canada.
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| Posted 23/10/2008 at 5:27 PM | Alert an Editor | Link to comment |
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Mike from alberta writes: Bram, got a dislike for Alberta do you? So be it. You have to understand that when people reply with comments to the columns within this paper and there province shows up as not NL, it does not necessarily that these people are native to the province.
Anyway, for the record, the comments above consists of one Alberta address. I guess the other places of comment origins are not considered a threat to your being. Your dislike for Alberta is showing my friend. BTW, Alberta gives the Federal Gov't more than any other province. It has for well over 25 years now. You also did not mention that in the early 90's, Alberta forgave NL's debt in the way of loans it owned to Albertans. Nice to see the gratitude of those who recieve.
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| Posted 23/10/2008 at 11:35 PM | Alert an Editor | Link to comment |
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