Author Topic: Remember the $30B deficit? Well, it turns out that it's actually a $20B deficit.  (Read 647 times)

Offline JMT

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http://www.bnn.ca/canada-posts-21-85-billion-deficit-in-2016-17-1.762292

I know a lot of people still won't like this, but it's not really that bad considering it makes just over 1% of GDP.  It causes the debt to go up by just over 3% while nominal GDP growth is looking to be closer to 4% this year (last year it was more like 2%).

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Offline cybercoma

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Anyone who understands the economy knows that deficit is fine as long as it's lower than growth. Very few people buy a house cash these days.

Offline wilber

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Anyone who understands the economy knows that deficit is fine as long as it's lower than growth. Very few people buy a house cash these days.

Maybe. There is a difference between borrowing to buy an asset and borrowing to pay the bills.

Offline segnosaur

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Re: Remember the $30B deficit?  Well, it turns out that it's actually a $20B deficit.
Wasn't that a tactic that Chretien used to use? Over-inflate the deficit projections, then claim success when the real numbers came in at less than expected?

Yes, its a good thing that its closer to $20 billion instead of $30 billion. But, its still more than the $10 billion that had been promised.  And, it should be noted, there are several rather significant spending obligations that are coming up that will impact their ability to reduce the deficit... most notably planned military spending.

Offline segnosaur

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Anyone who understands the economy knows that deficit is fine as long as it's lower than growth. Very few people buy a house cash these days.
Not sure if that's actually a proper comparison.

Yes, growth can eventually make deficits easier to handle, but as another poster hinted at, a house actually has tangible value, while many of the things a government spends money on don't have long-standing value.

Plus, there are other issues, such as whether there are upcoming financial obligations that will need to be dealt with. We're undergoing a demographic shift... our population on average is getting older (meaning higher health care costs, more social assistance, and less taxes). All that might put a strain on our budgets in the future, and it might be a good idea to knock down as much of the deficit/debt NOW before these other obligations become an issue.

Offline JMT

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Actually, we're starting to get into that situation with demographics right now - it very well might be the time to spend.

Offline segnosaur

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Actually, we're starting to get into that situation with demographics right now - it very well might be the time to spend.
I think you might have that backwards.

If we're heading into a demographics crunch NOW, we'd be best to reign in spending as much as possible now, with the expectation that things will get worse in the future. If we spend now, we'll be increasing the debt even more, which will make it harder to deal with the debt in the future.

Offline wilber

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I think you might have that backwards.

If we're heading into a demographics crunch NOW, we'd be best to reign in spending as much as possible now, with the expectation that things will get worse in the future. If we spend now, we'll be increasing the debt even more, which will make it harder to deal with the debt in the future.

I agree. I don't see how increasing the amount of revenue required to service debt now could help us with increased revenue requirements in the future, unless that increased debt is targeted specifically toward increasing future revenues. Unfortunately, with all spending coming out of the same big pot, governments can claim it is being used for anything they want, but the debt and its service costs remain the same regardless of their claims.

Offline JMT

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If we're heading into a demographics crunch NOW, we'd be best to reign in spending as much as possible now, with the expectation that things will get worse in the future. If we spend now, we'll be increasing the debt even more, which will make it harder to deal with the debt in the future.

I disagree - we need to prepare things like the health and support systems for the coming crunch (over the next ~20 years) and we need to do that now.  At the same time, we have to do things like improve our infrastructure and productivity to make up a gap in the total labour pool.

Offline segnosaur

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I disagree - we need to prepare things like the health and support systems for the coming crunch (over the next ~20 years) and we need to do that now.
You seem to be assuming that the current increases in government spending are in large part going to things that will deal with health and support systems for the elderly.  Unfortunately, many of the spending increases under trudeau (such as increases in child care benefits) aren't targeting infrastructure designed to help the elderly. (I could also point out other things the government spends money on that it doesn't need to.. for example the CBC.)

There is also the risk of spending money too soon. Yes, we will eventually need more medical resources to handle the elderly. But if we spend billions for that NOW, the stuff will probably just sit idle for a decade or 2 until its needed.
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At the same time, we have to do things like improve our infrastructure
Infrastructure spending should be something that is done on a consistent basis.

(If the recent increase in the deficit was due to Trudeau deciding to give money to cities to fix roads or engage in similar public works, I would probably complain less. But little of the new budget deficit is targeted at that.
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and productivity to make up a gap in the total labour pool.
Some might question why it is the responsibility of the government to drive productivity increases. Many might assume that it is the private sector itself that drives the majority of innovation and productivity increases.

Offline JMT

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You seem to be assuming that the current increases in government spending are in large part going to things that will deal with health and support systems for the elderly.  Unfortunately, many of the spending increases under trudeau (such as increases in child care benefits) aren't targeting infrastructure designed to help the elderly. (I could also point out other things the government spends money on that it doesn't need to.. for example the CBC.)

Actually, I'd have to disagree to an extent - a large amount of the new infrastructure money is going to social infrastructure.  Much of that includes support systems that will be needed by seniors.

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There is also the risk of spending money too soon. Yes, we will eventually need more medical resources to handle the elderly. But if we spend billions for that NOW, the stuff will probably just sit idle for a decade or 2 until its needed. Infrastructure spending should be something that is done on a consistent basis.

This isn't a far away issue.  We actually have the first wave of boomers reaching retirement age now.  We need to build the health and social infrastructure over the next decade, or we're going to be ill prepared.  Also, I agree that infrastructure spending should have been consistent.  Pre 2008, it really was lacking at the federal level.

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(If the recent increase in the deficit was due to Trudeau deciding to give money to cities to fix roads or engage in similar public works, I would probably complain less. But little of the new budget deficit is targeted at that. Some might question why it is the responsibility of the government to drive productivity increases. Many might assume that it is the private sector itself that drives the majority of innovation and productivity increases.

A great deal of the budget deficit is related to infrastructure (around 50%).  The other half comes from tax changes that were revenue negative, daycare spending, and spending on the Canada Child Benefit.

Offline dia

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There is also the risk of spending money too soon. Yes, we will eventually need more medical resources to handle the elderly. But if we spend billions for that NOW, the stuff will probably just sit idle for a decade or 2 until its needed.Infrastructure spending should be something that is done on a consistent basis.



This issue is already here.  Not sure where you are, but in BC hospitals send dying people home, regardless of how much care there is or isn't available.  No care?  You can walk and speak so home you go - never mind that you can't figure out how to sign a form if someone hands you pen upside down, or that you no longer quite see the need for pants when you go to the grocery store, because after all, the adult diaper covers everything.    In another case, a co-worker had to take almost a month off work because the hospital simply discharged her father one day.   My partner also watched an old woman being sent home around 10 pm; people scurrying around to give her her belongings, call her a cab.  She clearly had no idea what was going on.
 
We're already late on this spending to support health care services for seniors.
Discussion is impossible with someone who claims not to seek the truth, but already to possess it.

Offline cybercoma

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Wasn't that a tactic that Chretien used to use? Over-inflate the deficit projections, then claim success when the real numbers came in at less than expected?
Weird. Conservatives were claiming Trudeau's deficit figures were under-estimated. Now the line of argument is that Trudeau is over-inflating estimates. Such silly partisanship.

Offline segnosaur

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Weird. Conservatives were claiming Trudeau's deficit figures were under-estimated. Now the line of argument is that Trudeau is over-inflating estimates. Such silly partisanship.
I don't remember the conservatives making a claim that the deficit was  under-estimated. (They might have, and if you have a link or reference to show that it was a major issue I would appreciate it.) To me I seem to remember the chief complaints being that 1) the deficit exists at all (after the Harper managed to more or less balance the books), 2) that Trudeau seemed to have no plan to actually reduce the deficit in the future, and 3) the initial $30 billion deficit was much higher than the $10 billion promised in the election.


Offline JMT

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In fairness, the deficit does decrease after next year and decrease consistently after that.  It's basically the same plan the Conservatives had, but with a gentler slope.  Economic growth is also much higher than projected in budget 2017 - you should see numbers that are lower than projected with that.