Canadians can expect the government to balance the national budget by 2015 and provide a surplus, as deficit progress was announced to be $7 billion ahead of schedule last week.
While this indicates the government is taking steps to responsibly manage our nation’s spending and debt vulnerability, critics have called out their methods for achieving this balance. When it comes to creating a surplus, do the government’s ends justify the budget slashing means? It’s a question all Canadians should be asking.
Budget Surplus Or Bust
There’s been scrutiny that the Harper government is keen to balance the budget for political gain rather than economic progress. With the 2015 election approaching, the Conservatives are pushing to make good on the promises made during Harper’s 2011 campaign. These include introducing income splitting taxation for two-parent families (breadwinners would be able to share up to $50,000 with their unemployed or lower-paid spouse for tax claiming purposes), and upping the annual contribution limit for Tax Free Savings Accounts to $10,000. However, a balanced budget is required to fulfill these promises, and Harper wants the feather in his cap to boost his chances of reelection.
Paying The Price In Jobs?
Both measures would provide relief to taxpayers and savers, but cutting corners inevitably causes pain elsewhere. The drop in federal expenditure is due in large part to slashed public service jobs and underspending by federal departments. After the government announced these measures in the March budget update, the Canadian Centre for Policy Alternatives, a Liberal think tank, released an analysis showing the job cuts would be more severe than represented – 29,000 compared to the announced 19,200.
Last week’s deficit revelation has also prompted an investigation by the Parliamentary Budget Office, the budget watchdog, to find where these savings are specifically coming from. In an interview with the Financial Post, the PBO’s Mostafa Askari said, “There’s a part we still don’t understand … as to why departments spent less than what they were expected to … and why they (Finance) didn’t see it in March.”
He added that the PBO is looking to clarify whether these spending cuts are a one-time occurrence or a longer term trend that could leave to a balanced budget even sooner than the 2015 target.
There Will Be A Balanced Federal Budget – But By How Much?
The PBO also released their own fiscal outlook on Monday confirming the budget will indeed balance, but that the surplus would be much smaller at $200 million than the $800-million boost called for in the Federal Budget, citing that global economic weakness and poor commodity performance could drag the economy down. However, Department Minister Jim Flaherty countered that yesterday, saying the PBO didn’t take into account further department freezes announced by the government in the Throne Speech on October 16.
Do you think a balanced budget is worth cuts to jobs and public service spending? Tell me your thoughts!