Beyond The Commons

Aaron Wherry covers all the goings-on in and around Parliament Hill. Follow Aaron on Twitter: @aaronwherry

Categories: Beyond The Commons, Capital Read

'The budget is not structurally balanced'

by Aaron Wherry on Monday, November 2, 2009 7:03pm - 42 Comments

Kevin Page issues his latest report.

Canada’s economy will not fully recover until 2013 and the federal government will carry a structural budgetary deficit of C$19 billion ($17.6 billion) after the crisis, a report by the parliamentary budget officer said on Monday …“PBO calculations continue to suggest that the budget is not structurally balanced over the medium term,” the report said. ”PBO estimates that the structural balance would deteriorate from essentially a balanced position in 2007-08 to an C$18.9 billion structural deficit in 2013-14.”

Tags: Budget, budget deficit, deficit, economy, Kevin Page, parliamentary budget officer, recession

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http://intensedebate.com/people/s_c_f s_c_f

What the heck is "structurally balanced"? He's making up his own economics.

Ken

I get the impression you are being sarcastic, but in case other readers don't get it what this generally means that if you take the entire deficit and factor out all of the "Cyclical" elements (i.e. lost tax revenue due to the current recession) what you are left with is the "structural deficit"

Cyclical deficits are relatively easy to get out of for governments. Their coffers fill back up when the business cycle returns to a point of decent growth. Structural deficits typically mean that you have either increased permanent spending too quickly, reduced taxes too quickly or a combination of the two.

http://intensedebate.com/people/s_c_f s_c_f

It's a rather subjective exercise to classify something as cyclical. That's why people don't do it. If someone knew when the next boom or recession would hit, then he would be rich. You cannot factor in and out what you *think* are cyclical elements.

Regardless, there is no such term in accounting or economics as "structural balance".

Andrew (not P or C)

His job is to be a 'psychic', not so much a watchdog. Sheila Fraser is the auditor. The PBO is supposed to make fiscal projections and evaluate the impact of policy choices. He's doing exactly his job.

Rather than try to discredit him, perhaps it would be more fruitful to discuss what can be done about the situation. Both major parties are not telling the truth when they suggest we can return to balanced budgets simply by waiting for the economy to recover.

Jesse

I'd like to see what his growth projections are.

He's guessing just like everybody else is. If he lowballs growth then there is a structural deficit but if growth is higher then there isn't.

A lot of this literally has to do with the price of oil.

Page is a glorified commodities speculator. This is amateur hour.

He should be way more humble. Instead he's making these grand announcements based on little more then a guess.
burlivespipe

If you are comparing his "guessing" to the bimbo twins of economics, Harper and Flaherty, there's no doubt who's part of amateur hour. Page delivered better forecasts of the federal mess while Harper and Flaherty were spinning. No doubt you're still in denial about the federal deficit that had been dug BEFORE the economic downturn, that existed and was plain as the eye can see on paper when Harper told us all that there'd be no deficits, no economic downturn in Canada.
If he doesn't come off humble enough, essentially trying to pull the right numbers from the CON's magic 8-ball, maybe you need to open your eyes.

Craig O

No, he's not. The idea of a structural deficit is well established, meaning that the deficit is due to a persisting imbalance in revenues vs expenditures rather than temporary spending measures that will drop off over time. Basically what Kevin Page is saying is that the Conservative's deficit is not due to one-time stimulus spending but rather due to indefinite reductions in revenues and increases in spending.

http://intensedebate.com/people/s_c_f s_c_f

Which begs the question, where did Kevin find his crystal ball? Somehow he claims to know when the next boom or bust will hit.

Craig O

Well, he's the parliamentary budget officer, hired by the Conservatives to fill a post they created to analyze the budgetary numbers, including deficit predictions. It's certainly not an exact science, but making a few relatively boring assumptions (GDP growth of about 3-3.5%, inflation of about 2%, unemployment falling at about 0.5% a year and no new tax/spending policies over that time), the extrapolation is quite easy to do. Page isn't saying "this is what will happen regardless of all other considerations", that's not how these things work. He's saying "if nothing but what is expected to happen happens and the government takes no action, this is what will happen", which is about the same tact the Conservatives (and everyone else) takes when making long-range economic predictions.

Also, his numbers also align pretty well with those predicted by the Conservatives themselves in their last set of budget predictions when Flaherty upped this year's deficit to just under $60 billion. Flaherty too has predicted a $19 billion dollar shortfall in the 2013-2014 fiscal year, just as Page has. In fact, Page's numbers seem to be more favourable than the government's, if only slightly.

As the government made these predictions themselves months ago, this report isn't shocking, surprising or particularly damning. About all that's been revealed is your hyperpartisanship, s_c_f.

Jesse

"unemployment falling at about 0.5% a year"

Really, it went down .3% in a MONTH. Its a guessing game.

The private sector projections are all over the place, much higher and much lower. Bulls and the bears.

The finance department takes an average, lowers it a few notches and goes with that projection.

But that projections is more often then not wrong because usually the bulls or the bears carry the day. The truth isn't always in the middle. Projections have been shown to underestimate or overestimate quite badly.

This is all very foolish. He can't make these sort of predictions with any certainty. d

Let's wait until we're actually out of the worst recession since WW2 and see how the global economic realignment shakes out before guessing.
http://intensedebate.com/people/Andrew_not_PorC Andrew_not_PorC

You're right. We should fire the whole finance department. They're all just guessing anyway.

http://intensedebate.com/people/Jenn_ Jenn_

No, you are missing it, scf. It doesn't matter when the next boom or bust will hit, because we will be in a "structural" deficit whether we are in boom or bust. Let us say we are talking about a family. The breadwinner(s) are winning bread, there is no financial crisis such as big car repairs or medical needs, and yet you are losing money. Obviously, if you take a big hit with a car repair, say, that month you will have a shortage. That would be the bust-time, and it may take two or three months to recover from it. But even after you do recover from it, you still can't meet your financial obligations. That's what this is. If the family wins a small lottery it will be great, but if you keep the same job(s), same lifestyle, etc. eventually that money will be used up and you'll be back to not being able to keep up with the bills.

Jesse

No, if a boom hits we'll be in a "cyclical surplus". That's assuming ANY of these guesses are right. I guess one guy and his crystal ball in the basement of parliament is more believable then the dozens of private sector forecasters eh?
burlivespipe

That his "guessing" has been 99% better than the chumps you are trusting your children's future with must really grate you, right? Did you read the article about where a wide majority of economists foretold that cutting the GST without an equal response on the expenditure side was a recipe for disaster? And that was in good times. Of course, CON times are crappy times…
wilson

What country was it that cut their sales tax as part of the stimulus.

GST is the ONLY tax low income Canadians pay.
Leave the poor people alone.

I'm sure there are a lot of under acheiving govt supported special interest projects that can be cut,
instead of raising taxes.

Start with telling Ruby Dhalla's momma to buy her own airline ticket!
http://intensedebate.com/people/Andrew_not_PorC Andrew_not_PorC

What % of the GST reduction went to the poor? You're a bad spinner. If we wanted to help poor, we would give them money. GST reduction was about upper middle class and up.
Jesse

What are you talking about ??

Poor people continued to get cheques for 6% GST while only paying 5%. This was done on purprose to increase help to them.

They saw the MOST impact from the GST changes.
http://intensedebate.com/people/s_c_f s_c_f

I understand what the concept means, but unlike your example, the government nor Page can actually predict with any certainty how much of their revenues and their expenses are cyclical and how much are not. It's impossible to know at the present, you can only look into the past to see the ebbs and flows of the economy.

First of all, the government has no idea if corporate profits are down because all companies had their cars break down at the same time. Secondly, they have no idea how often in the future company cars will break down, how expensive it will be, or even how many company cars there are.

http://intensedebate.com/people/psiclone psiclone

How come he can come to such conclusions when doesn't have enough information? pretty hard to square that circle – then again who cares about anything this guys says – except oppostion people of course

http://coyne kc

Of course!
Foreigner

A comment like that takes guts.

Holly Stick

And no brains.

Craig O

While Page probably doesn't have the full information, the basics are already available and have been for weeks. Heck, even the government's own budget estimates list a budget deficit of about $20 billion until the 2013-2014 fiscal year.
Anon Lib

How come he can come to such conclusions when doesn't have enough information?
————————————————————————————————————————–

Well Flaherty does that on a regular basis
http://intensedebate.com/people/SisyphusThis SisyphusThis

What he doesn't have enough of is information on the "stimulus" spending. He has plenty of
information on budgetary matters. That's not left in boxes outside his door. Yet.

Lord Kitchener's Own

who cares about anything this guys says – except opposition people of course

Funny how fast the Tories have turned on an office promised by them, created by them in their own Accountability Act, and on the incumbent appointed under their watch. It's one thing to attack institutions and officers appointed by the dastardly Liberals, but attacking people appointed on your watch to positions you created is just hilarious.

Jesse

Usually these matters are dealt with over Christmas. The history of 'crats taking on the elected folks isn't that great.

burlivespipe

So is that some kind of lame John Baird-ish "take it to the people" threat? What, is Jesse going to be swinging the spaghetti noodle this time?

Anon Lib

"who cares about anything this guys says – except opposition people of course"
———————————————————————————————————-

Ah yes. This should be the official motto of the Harperites.

Just switch Page with John Gomery or Sheila Fraser and the hypocrisy becomes even more crystal clear.
http://intensedebate.com/people/TJCook TJCook

Jim Flaherty, lying through his teeth, March 6, 2009:

"How do we make sure that we don’t create long-term, permanent deficits? We had a lot of discussion about this in Finance during the month of January. What we did, and I was insistent on this, is we put in a rule that as we come out of the recession and the Government starts to show surpluses again—which it will in the normal course because we’re not creating a structural deficit—we will use every penny of surplus, as we come out, to pay down the deficits that we are going to incur in the next fiscal year, in the one after that and the one after that. And that will be the rule that we will follow to ensure that we stay away from long-term, permanent deficits."

http://www.fin.gc.ca/n08/09-028_1-eng.asp

Jim Flaherty, lying through his teeth, Dec. 24 2008:

"But Flaherty said the 2009-2010 budget he presents Jan. 27 will show “how we’ll come out of deficit, so that it’ll be clear to Canadians that as the economy recovers the deficit will disappear and we’ll be in surplus again.”"

http://www.theguardian.pe.ca/index.cfm?sid=204116…

Flaherty and Harper, insulting your intelligence, July 2009:

"Flaherty initially reacted to Page's report by saying it was "pessimistic." Harper went further, rejecting the notion that Canada has a structural deficit that would require tax increases or cutting programs to eliminate.

"There is no need for us to start slashing programs, nor is there any need for us to raise taxes," he said from Italy, adding that would be a very dumb policy"

http://money.canoe.ca/News/Other/2009/07/16/10156…

You pay six-figure salaries for these clowns. And you get what you vote for.

Lord Kitchener's Own

WRT to that first quote, what the heck is a "structural deficit"? Flaherty's making up his own economics.

(LOL)

http://intensedebate.com/people/s_c_f s_c_f

Neither Flaherty nor Page have any idea how much of the revenues are structural or cyclical. And as far as I'm concerned, there is no such thing as cyclical spending. Either you spend it, or you don't. Things like EI, for which expenditures are cyclical, should not be coming out of government revenue in the first place, it should be self-financing.

Lord Kitchener's Own

Well, as long as you're arguing that Flaherty's as much a crazy psychic making up his own economics for saying there isn't a structural deficit as Page supposedly is for saying there is a structural deficit, then fair enough.

Jesse

His arguement is that both of them are guessing.

Nobody ACTUALLY listened to what they were saying and said "Ok! So this is what's going to happen! I'll hold them to it and plan my life around this!!"

Well, nobody who isn't a complete dunce and lacks a total understanding of economics.

http://intensedebate.com/people/s_c_f s_c_f

Where's the link to media matters?
wilson

Gee TJ, if you google a bit you will find that Page also changed his forcasts, a number of times.
In an interview he said it was 'a humbling experience' when his own figures were….wrong.

burlivespipe

Wow, an honest guy – and one who expects his words to mean something. Obviously the Cons and their bots have no time for him…

wilson

feel better burly?

http://intensedebate.com/people/Nich Nich

North American Conservatism.

There is more to say than that.
wilson

Aaron, there is a more infomative article on what Page said,
will post at end of comment. (bet you knew that though)

For the record, I like Kevin Page and his work, tho I don't think he is right and Flaherty is wrong or vice versa.

From the article:
"Relative to the size of the economy, the structural deficits projected … are small compared to the structural deficits of the 1980s and early 1990s," he writes.
…
"The growing out option is possible, but the deficit won't get to zero until 2018-19," he said. "The question is is it wise to have deficits for that long a period."

So Flaherty is right, it can be done, but not by 2014.
So is it acceptable to Canadians to run a deficit until 2018-19 ,
or face a tax increase ?
(that will actually impede growth, but balance the fed cheque book)
http://www.ctv.ca/servlet/ArticleNews/story/CTVNe…

wilson

So how can the deficit be structural, if it will dissolve , eventually, by 2018 without any 'permanent' solution.
For there to be a structural deficit/surplus, Page said there had to be a permanent change.

Bruce

The deficit could be gone earlier through spending cuts, like cutting the civil service by say ten percent. If you've ever had to deal with the federal bureaucracy you would recognize that many of them are on perpetual coffee break and do little if nothing at all week in and week out. My personal opinion of Kevin Page aside, at least he seems to be actually working at something and perhaps earning his pay cheque, unlike myriad other civil servants.