Canada Posts Surplus For Fiscal Year

[TOMapleLaughs]

Surplus during recession seems like bad economic planning: Don Pittis

Not just anti-Keynesian, but the complete opposite.

If the time for deficit spending is when the economy is in recession, then the Harper government seems to have got it backwards.

According to the latest figures, during the years when Canada was reaping the staggering benefits of an oil and commodities boom, the government piled on more debt. We now know that it was only after the economy began shrinking and needed help that the government squeezed out a surplus.

The current government may not be enamoured of a Keynesian analysis, but whether intentionally or by an error in planning, they have done the exact opposite.

Older than Keynes

In its best formulation, the intent of Keynesian stimulus is to smooth out the sharp rises and falls in an economy. The government should run surpluses when the economy is booming [and] spend that surplus when the private sector economy is shrinking.

In its broadest form, the theory is hardly a recent invention. In the Old Testament, Joseph gets a tip-off about a coming famine and during "the good years," he begins gathering food in the storehouses.

"Let the food become as a reserve for the land for the seven years of famine," says the biblical book of Genesis. "And the famine was over all the face of the Earth: and Joseph opened all the storehouses."

Perhaps the government had a cabinet meeting that Sunday. For whatever reason, they seem to have opened the storehouses during the good years and done their gathering during the famine.

The savings that went into the government's surplus were accumulated from spring of last year, just before oil prices began their slide from about $100 to about $50 US a barrel. The period of savings covered in yesterday's budget document continued right through to the first quarter of this year, when a commodities crash caused the Canadian economy to shrink by a little less than one per cent.

And it didn't end there. Harper has also boasted that he had created a surplus during the April-to-June period, when, as we later found out, Canada had entered a technical recession.

Imaginary line

To some extent, surpluses are like recessions. They are an imaginary line in economic bookkeeping. When you are close to the line, it really doesn't matter in practical terms whether you are little above or a little below.

The Liberals and others have said the surplus was "phoney" and that Harper was actually running a deficit. It is true that the government had a political motivation to massage the numbers, including the fact that some of their election promises were contingent upon getting into surplus.

But if we take the numbers at face value, there is no question that the government was fanning the flames of the resource economy when it was burning hot, and taking away fuel when it was cooling.

The modern equivalent of storehouses full of grain is the tax system.

One of the ways the government fanned the flames was with tax breaks. The modern way to create a national war chest is to hold taxes slightly higher than what the government is spending. The accumulating pool of cash can be held in reserve for the bad times.

There is no reserve. So where did the money go instead?

Against the warnings of economists from many different parts of the political spectrum, the government started in 2006 to cut the Goods and Services Tax or sales tax, which immediately increased the deficit. There were also personal income tax cuts that benefited the employed and better off.

Disappearing taxes

By now, those of us who got those tax breaks have either spent all that money or used it to bid up investments like stocks and houses. If stocks and houses start to fall, you tell me where the money has gone.

Cuts in corporate taxes, especially to companies in the resource sector, have also disappeared. Some of the money companies saved was re-invested, but for big resource and industrial firms owned by foreigners, a lot of those tax cuts have left the country as profits and dividends. It could be argued that the money that was invested is disappearing too, as resource firms scale back.

It is good to be optimistic, but it is not yet clear that the Canadian economy is out of the woods. There are dire predictions the commodities bust could last for years. A new-economy boom remains a phantom.

It seems clear to me that the Harper government's greatest sin was one of optimism. Enthused by a private sector-led resource boom, they were more shocked than anyone that their spend-now-and-cut-later plan had gone sour. And by then they were locked into their optimism-laced promises.

But if the hard times continue, no matter who eventually takes the reins of government, the cupboard will be bare. There are no significant government savings and raising taxes will just take money out of one part of the economy and move it around. At that point, the only way to return to the stimulus of deficits will be to borrow from the future.

http://www.cbc.ca/news/business/analysis-of-government-s-announced-budget-surplus-1.3227370

This shouldn't be news, but Harper's botched the economy here. Instead of building a war chest with oil sands gains, we've let it all go to foreign investors and CEO's. And instead of spending our way out of recessions, he's helped create them with cuts.

Harper and the Conservatives are economically insane.

[Mr. Ambien]

http://www.cbc.ca/news/business/analysis-of-government-s-announced-budget-surplus-1.3227370

This shouldn't be news, but Harper's botched the economy here. Instead of building a war chest with oil sands gains, we've let it all go to foreign investors and CEO's. And instead of spending our way out of recessions, he's helped create them with cuts.

Harper and the Conservatives are economically insane.

Why is the idiot in your posted link talking about equity evaporating? The government is stimulating the crap out of the housing market, and have rock bottom interest rates, with the possibility of 0% looming, and prices are rising.

Who knows what he's blathering about.

If that guy in the article says fiscal responsibility is Anti-Keynesian, it's automatically got my stamp of approval, especially after reading that dog **** of an economic opinion.

[TOMapleLaughs]

As the campaign continues, Harper sets them up, JT knocks them down, as the (don't kid yourself) pro-business Libs rise in polls.

Trudeau says Harper quest for surplus hurt many, provoked recession

Justin Trudeau accused Conservative Leader Stephen Harper on Monday of balancing the budget on the backs of a cross-section of vulnerable Canadians after figures were released showing the federal government registered a surprise surplus in the last fiscal year.

Finance Department numbers for 2014-15 show Ottawa posted a $1.9-billion surplus, bringing the books into the black a year earlier than expected. A shortfall of $2 billion had been forecast.

We saw Mr. Harper underspending and making cuts to veterans affairs, to aboriginal affairs, to seniors in the billions of dollars so he could balance the books in time for his election, the Liberal Leader said following an announcement in Toronto.

It was a political goal that actually has helped us slide into the recession that Canada is the only G7 country in right now.

Trudeau has made infrastructure spending a key plank in his bid to become prime minister, a plan that would not see the budget balanced until 2019.

Of the three main party leaders, Trudeau is alone in his commitment to hold off on surpluses for three years. Mondays surplus wont prompt any change in that schedule, Trudeau said, because Canada is still in an infrastructure deficit which is slowing growth, he said.

And overall, the federal government is in deficit again right now, he stated.

The Liberal party is the only party standing straight, looking Canadians in the eye and saying, We need investment and that is what we are going to do to grow the economy, to balance the books in 2019, Trudeau said.

Trudeaus comments came after he promised to enhance the Canada Pension Plan and boost the guaranteed income supplement for low-income seniors by $3 billion over four years.

Trudeau told a Canadian Association of Retired Persons (CARP) town hall that the Liberals would begin talks with the provinces on how to improve the pension system within three months of taking office. He wouldnt say exactly what changes the Liberal party would like to see to the current system.

He said the Liberals would also bring in a seniors price index to ensure old age security keeps pace with inflation, expected to cost $530 million over four years.

Its help that Harper wont deliver and help that (NDP Leader Tom) Mulcair cant deliver because hes made eliminating Stephen Harpers deficit his immediate priority, Trudeau told the crowd in the riding of Spadina-Fort York where Liberal incumbent Adam Vaughan is in a tight race with NDP candidate and former MP Olivia Chow.

He has decided that trying to get rid of a deficit is more important than giving seniors the help they need right now.

The Conservatives say they have helped seniors by lowering taxes while accusing the Liberals of wanting to hike taxes and spend money the country doesnt have.

Trudeaus promises were well-received by the largely partisan crowd and welcomed by CARP executive.

Lena Badhwar, 75 from Toronto, said she was offended on Sunday when Mulcair characterized former prime minister Jean Chretiens presence on the campaign trail as the golden oldies tour.

Seniors are not one-dimensional and only interested about pension-related promises, she said.

What I would love to have is a minister of urban affairs, she said. Canada is not a rural area anymore.

http://www.theglobeandmail.com/news/politics/trudeau-says-harper-quest-for-surplus-hurt-many-provoked-recession/article26354355/

At the end of the day everyone knows there's a mountain of cash available to any incoming government, as the Conservatives have been disappearing billions of dollars for years. So I have to laugh at the notion of austerity or even more cuts.

The Liberals are a less xenophobic party than the neo-Reformatives, for sure. But don't kid yourself, it will be business as usual for the bigtime players in this country and abroad. The moneymakers and owners.

The Liberals have been preaching cuts and austerity for years and years before Harper came along to lay all our perceived benefits to waste. Why in the hell would that change under JT, other than for puffy election promises?

[taxi]

lol...all this excessive demonizing of parties is ridiculous. You do realize that most of you live in ridings that are already firmly entrenched one way? My riding is about 80% NDP and it makes no difference which way I vote.

Honestly, the whole local representative past the post system we have is so backwards. How many candidates actually have any real ties to their riding? We need a system of representative democracy where seats are assigned based on actual votes.

[TOMapleLaughs]

lol...all this excessive demonizing of parties is ridiculous. You do realize that most of you live in ridings that are already firmly entrenched one way? My riding is about 80% NDP and it makes no difference which way I vote.

Honestly, the whole local representative past the post system we have is so backwards. How many candidates actually have any real ties to their riding? We need a system of representative democracy where seats are assigned based on actual votes.

My riding has been Conservative for years. Now it isn't. Opinions change. It's the nature of politics.

[Mr. Ambien]

lol...all this excessive demonizing of parties is ridiculous. You do realize that most of you live in ridings that are already firmly entrenched one way? My riding is about 80% NDP and it makes no difference which way I vote.

Honestly, the whole local representative past the post system we have is so backwards. How many candidates actually have any real ties to their riding? We need a system of representative democracy where seats are assigned based on actual votes.

?

[ronthecivil]

lol...all this excessive demonizing of parties is ridiculous. You do realize that most of you live in ridings that are already firmly entrenched one way? My riding is about 80% NDP and it makes no difference which way I vote.

Honestly, the whole local representative past the post system we have is so backwards. How many candidates actually have any real ties to their riding? We need a system of representative democracy where seats are assigned based on actual votes.

The only people that bother actually talking about it tend to be hyper partisans doing anything they can to swing people in their direction.

Of course, if we didn't have a first past the post system, then you would end up in the fun that is perpetual minority governments. That's when you get fun things like having six different (ok with a few replacements) Australian PMs over a couple of years.....

[BanTSN]

We probably should have minority governments. Maybe with come accountability, governments would start being accountable. Or they might even show up to work.