Alternative Federal Budget

A new CCPA study examines Canada's debt and deficit and finds that debt in Canada—even after two years of stimulus—is still at very low levels compared to other countries, and compared to the mid-1990s.

Big Train Coming: Does Canada Really Have a Deficit and Debt Problem? says a sharp turn to spending cuts in this fragile economic recovery and weak job market would be a huge mistake. Once the economy has recovered, the report recommends changes in taxation in order to address the small structural deficit and to meet the costs of an ageing population.

Click here to read the full report.

Yesterday's economic update showcases how fragile Canada's economic recovery is and serves as the case against implementing austerity measures anytime soon. Read AFB Coordinator David Macdonald's assessment of the economic update here.

Although released in August, this Parliamentary Budget Office analysis examines the likelihood of government estimates of both GDP growth and deficit projections by using a "fan chart".  Instead of a simple line projecting GDP growth, an ever growing cone or fan is created with probabilities.  The much larger 90% fan means that in 90% of cases, GDP growth will fall somewhere on the fan area.  The much narrower 50% fan means that in only half the cases GDP growth will fall in this range.  This is an interesting approach and improves upon simply averaging bankers' estimates which is generally what’s done(see here).  The PBO analysis also shows that government estimates of growth and deficit reduction may be somewhat optimistic based where they fall in the "fan".

The federal government seems hell-bent on stopping stimulus spending on April 1st 2011 even if it means saddling municipalities with unpaid bills and hobbling the already weak recovery.  The Irish experience may be instructive.  Ireland is even more committed to stopping stimulus spending.  Unfortunately the results are a fairly concerning 1.2% drop in GDP is just one month and bond markets demanding sky high risk premiums with the economic shrinking so rapidly.

The AFB has long argued that budgets are always about choices.  Canada is a rich country and governments can and should spend our money on priorities that are important to us.  Today, it was revealed that the Government spent $130 million on Advertising last year alone driven in part by the endless "Economic Action Plan" signs and ads.  When unemployment is sitting above 8%, spending on ads may seem like a poor choice for Canadians' money.

The AFB 2011 process has begun anew with many new ideas for the 15th anniversary.  Stay tuned with an RSS feed for AFB related developments.