Budget 2013: Is Ottawa really on track to balance the books?
Published Friday, March 22, 2013 8:41AM EDT
Last Updated Friday, March 22, 2013 5:02PM EDT
The Conservatives may keep their promise to balance the books by 2015, but the payoff will be more political than economic, says one economist on the day after the new budget was unveiled in Ottawa.
Finance Minister Jim Flaherty unveiled Thursday a budget that shuffled resources to skills training, infrastructure projects, and the manufacturing sector. With no tax cuts and little new spending, Flaherty said it keeps the federal government on track to balance its books by 2015.
TD Bank's Chief Economist Craig Alexander said that goal appears realistic.
"The government has been clear they really want to balance the books by 2015 and I have to say, this is not an economic imperative: it's basically a political imperative," Alexander told CTV's Canada AM.
"The government wants to go back to the polls and tell Canadians, 'Listen, we ran very large deficits during the recession but we balanced the books.' And I think everything in yesterday's budget has to be seen in that light because after balancing the books in two years it doesn't leave them with any substantive money for any new initiatives."
Alexander said Flaherty is banking on modest growth in the coming year with a slight bump in growth in 2014-15. If the forecast pans out, the feds will see the extra funds needed to erase the current $25.9-billion federal deficit by 2015, leaving an $800-million surplus. That would arrive just in time for the next federal election.
"Quite frankly I think if the government wants to balance the books by 2015 they will achieve that goal," he said.
Opposition Leader Thomas Mulcair said Flaherty's plan to eliminate the deficit by 2015 is based on overly-rosy growth projections.
"You have to look at past performances of Mr. Flaherty and the Conservatives and the predictions they made last year and the year before, they never pan out," Mulcair said Friday, adding that the projections are based on an expected 2.7 per cent growth rate.
"Nobody in the OECD (Organization for Economic Co-operation and Development), none of the international organizations that are looking at Canada are predicting a growth rate anywhere near there so what's going to happen again when we get to next year's budget, they'll be way off target," Mulcair said.
However, Flaherty on Friday maintained the government’s intention to reach its goal.
“I want to assure you that Canada has a solid fiscal and economic plan and that we intend to stick to the plan,” he said at the Vancouver Board of Trade.
Flaherty also told reporters that balancing the budget is important “to make sure that Canada is well prepared for the next financial crisis whenever it comes,” as well as to keep taxes low.
The federal budget also included:
• A Canada Job Grant to provide $5,000 per person for job training -- an amount that would have to be matched by provinces and employers for a total of $15,000.
• $76 million in annual tariff relief on baby clothing and sports equipment aimed at reducing the gap between Canadian and U.S. retail prices.
• $6.7 billion in additional revenue over six years to be raised by closing tax loopholes and enforcing tax compliance.
• $47 billion in new funding over 10 years on infrastructure projects.
Mulcair also questioned the government's approach to filling gaps in Canada's skilled labour force. The budget outlined a plan to provide unemployed Canadians with the skills to fill 220,000 job vacancies. But the training will be led by the federal government instead of the provinces, which have traditionally been responsible for education and training.
"We all agree that the training is required, but it was being done. It was being done by those that provide training -- the provinces -- and that's why that deal made sense. It's the same Conservative government that just a couple of years ago handed it over to the provinces and there was a lot of expense involved in putting that in place," Mulcair said.
Alexander said he believes the skills training initiative is a "step in the right direction," but said the government might have a difficult time convincing the provinces to ante up their portion of the matching funds