Now they tell us
From today’s release of the Fiscal Monitor, updating federal finances to August, or five months into the fiscal year:
There was a budgetary deficit of $1.7Â billion in AugustÂ 2008, compared to a deficit of $0.1Â billion in AugustÂ 2007. …For the first five months of the 2008â€“09 fiscal year, the budgetary surplus is estimated at $1.2Â billion, down $5.5Â billion from the $6.6-billion surplus reported in the same period ofÂ 2007â€“08.
You heard it here first, back in January, with Flaherty’s dismissive response. With seven months to go in the fiscal year, I’m betting that razor thin surplus will become a deficit, as predicted, at least under status quo conditions. The coming November Economic and Fiscal Update will be an important marker of how the government plans to handle fiscal policy as the economy heads south.
Update (Oct. 29): Buried in this Globe story is the line:
Finance Minister Jim Flaherty says Ottawa is on track for a balanced budget this year, but isn’t ruling out future deficits.
No actual quote attributed to Flaherty, but if true, a major flip-flop for the good â€“ a story in itself. This one about a coming First Ministers meeting on Nov 10, and pressure from the provinces for the feds not to cut their transfer payments.
Most of what the federal government does is transfer money around. If transfers to the provinces are not cut, and Flaherty needed to cut spending overall to balance the budget, it would have to look at payments to individuals â€“ that is, seniors’ benefits, children’s benefits and unemployment insurance, and what minority government would want to dump on seniors, kids and the unemployed in the midst of a recession?
Updated update (Oct. 29): Another Globe update on Flaherty’s speech today:
Finance minister Jim Flaherty said today that it would be â€œmisguidedâ€ to try to balance the books under any circumstances.
â€œWe will do what we can, despite the challenging economic circumstances, to keep the budget balanced. What we will never do is to engineer a surplus at any price,â€ Mr. Flaherty said.
â€œOttawa will tighten its belt, he added. â€œDepartments will have what they need to finance essential programs but no more.â€
Equalization programs with the provinces will have to grow more slowly, he said.