The halcyon days of federal surpluses are gone.
Ottawa’s spending is out of control again.
And Canadians will pay for decades to come.
Contrary to the find-the-ball-under-the-walnut sales job, Finance Minister Jim Flaherty’s stimulus package has not caused the deficit.
It existed well before the stimulus package was drafted.
But now it’s crystal clear — once again, Ottawa has a spending problem.
And it’s a doozy.
Successive national deficits were identified by Brian Mulroney’s government as a drain on the lifeblood of the nation. It would, eventually, lead our children into the poorhouse, rendering Canada a basket case.
And, past a certain point, getting out of that situation would be damn-near impossible. Or so we were told.
Past deficits accumulated as a result of tax-and-spend policies. That is, Ottawa raised taxes — on tobacco, gas, booze, income and spending (the GST) — and spent the proceeds. And then some.
It couldn’t continue.
So, for the better part of the 1990s, Canada clawed its way out of a position of fiscal deficit. It sacrificed many progressive social programs to do it.
By 2000, Canada’s fiscal discipline had set it apart from much of the G8 — it had started reducing its debt and had cash in the bank.
That fiscal discipline continued through the Chinese boom, which sent commodity prices through the roof.
But the discipline ended three years ago.
After being elected in 2006, Stephen Harper’s Conservative government adopted a new approach to federal budgeting — a tax-cut-and-spend policy.
Business and personal income taxes and the GST were reduced. (Canadians saved two cents on the dollar, Ottawa lost $13 billion a year in potential stimulus funding.)
And, as the federal government took in far less revenue, it increased its spending.
That was OK as long as the global economy was expanding.
However, last year the easy credit ran out.
And that’s exposed the peril of the tax-cut-and-spend model.
By April 1, 2010, Canada will post $15 billion in debt, according to two separate projections by Dale Orr, managing director of IHS Global Insight (a Bay Street economic forecaster), and Kevin Page, Parliament’s budget officer.
Both men say Canada will post a second $15-billion deficit in 2011.
That’s $30 billion in accumulated debt in the next two years.
And that’s before Flaherty’s stimulus package added to the total this week.
With it, Canada’s annual deficit jumps to a staggering $30 billion.
Barring any further economic stimulus, the national deficit is expected to quickly jump to $80 billion in a couple of years.
As of October 31, after much sacrifice, Canada’s accumulated debt is $457 billion.
The forecasters predict more than $100 billion will be added to that accumulated national debt within five years, putting it at 1999’s level, virtually wiping out a decade’s worth of progress on that front.
Canadians must view this week’s budget in that light.
There is nothing grand in the document, nothing memorable — Flaherty has adopted a parade marshal approach to the crisis, tossing candies to a crowd.
If you qualify for employment insurance, you can get another five weeks’ coverage.
If you spend $10,000 on home renovations, Ottawa will refund you $1,350 in taxes.
If you buy your first house, you’ll pocket $750 — not even enough for a decent flatscreen TV in the den.
And, if your household earns $150,000 a year, your taxes will drop enough to buy two iPods.
If it seems crass, it is.
Essentially, a government that has spent freely wants Canadians to spend more. But it doesn’t have much left in the cupboard.
So the most remarkable feature of Flaherty’s scattergun budget is the size of the deficit.
It has alerted people to the fact Canada’s new government has spent its surpluses and contingency funds — it’s now back to printing cash and borrowing money, something Ottawa hasn’t had to do for more than a decade.
Those bills are adding up quickly.
And Canadians must ask, is Tuesday’s budget worth it?