March 28, 2011
Bull Meter score:
In 2009, the federal government’s balance sheet went from showing a surplus of $9.597 billion to a deficit of $5.755 billion. Last year, the deficit was a record $55.6 billion. But how did we get here?
According to a November 2008 assessment by Parliamentary Budget Officer Kevin Page, the Tories’ decision to cut the GST, coupled with an increase in government spending caused the deficit—not the global economic crisis. By February 2011, the budget watchdog’s position was much the same: the deficit is structural, caused by policy not recession. The PBO also said that contrary to the federal government’s budget forecast of a surplus for 2015-16, a deficit of $10 billion would remain by mid-decade. “Sustained fiscal actions,” Page reported, are needed to “avoid excessive debt-to-GDP accumulation.”
We called Stephen Gordon, an economist at Laval University, to get his take. “Yes, the Conservatives caused the structural deficit,” he said, adding that cutting the GST was a mistake. “They basically blew $10 to $12 billion, and that’s the PBO’s estimate for the structural deficit in 2015. But at the time [when GST was cut in 2006 and 2008], we were taking those $10 to $15 billion surpluses for granted.”
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