Federal deficit

For now, Flaherty’s plan is back on track

Last November, federal Finance Minister Jim Flaherty appeared to be backing away from his long-standing position that the sooner Ottawa could get rid of its deficit, the better.

In fact, at the time, Flaherty said the “flexibility” he

might need could mean living with red ink until 2017 — two years later than planned.

Flaherty said the government might have a tough time reducing spending in the midst of an uncertain global economy. He said the extra money could provide a “cushion in the still uncertain environment as we prepare the federal budget.”

It was disappointing news for those who believe longterm deficits simply end up hurting taxpayers who are forced to pay higher taxes to cover higher debt charges.

Today for example, Ottawa is carrying an annual deficit of $30 billion and a national

debt of $579 billion — $16,852 for every Canadian. It costs $84 million a day in interest to service the debt according to the National Taxpayers Federation.

But it now appears Flaherty’s speech didn’t reflect what was actually going on behind the scenes in Ottawa. In fact, the federal government has been quietly cutting spending faster and deeper than anyone expected.

According to Parliamentary Budget Officer Kevin Page, Ottawa has cut overall government spending by three per cent to $123 billion in the first six months of the year. Page also says operating expenditures dropped more than four per cent to $25 billion in the first half of the fiscal year. Capital spending dipped 15 per cent to $1.5 billion.

Last year’s federal budget and the fall economic update had projected five per cent cuts to departments over three years as part of an $80-billion spending review. That would result in annual savings of $4 billion by 2014-15.

According to Page’s analysis, Ottawa is well on its way to meeting its targets.

“This environment of austerity seems to have taken hold, and I think you do see that in the numbers,” Page said.

And the federal finance minister has recently said that some departments could be cut by more than 10 per cent as part of the government-wide spending review to erase the deficit. That would amount to $8 billion in annual saving by 2014-15.

Even Page had been questioning the Harper government’s resolve to balance the budget on schedule. In fact, last year he said Ottawa was on an unsustainable fiscal path that would still leave the country with a deficit of about $10 billion in 2015, and that was even with a healthy economy.

“We do not have a sustainable fiscal structure,” Page told the Commons finance committee a year ago. “A significant delay in taking fiscal action substantially increases the required amount of corrective measures.”

For now, it looks like the Harper government has found the resolve it will need to get the country’s finances back on the right track.

THE FEDERAL GOVERNMENT HAS BEEN QUIETLY CUTTING SPENDING FASTER AND

DEEPER THAN ANYONE

EXPECTED.