I pulled this off Canadian Press earlier.
Meanwhile, under pressure from premiers, Harper's government has agreed to extend until March 2007 the existing Liberal child-care plan - an unexpected new cost of about $700 million, according to estimates by the Conference Board of Canada.
That will overlap cheques which Harper has promised to send out come July under his own, new $10.9 billion five-year family allowance scheme.
I think I misquoted in that Harper's plan will cost about 3/4 billion more than was previously planned. Here is the total article.
Last Updated: Sunday, February 26, 02:21 PM EST
Flaherty facing limited cash, wide demands in crafting federal budget
SANDRA CORDON, Canadian Press
OTTAWA (CP) - With Prime Minister Stephen Harper's new Conservative cabinet pledging quick action on billions in spending and tax cuts, his finance minister must already be wondering just how he's going to make ends meet.
Harper and his new cabinet have begun to speak out loudly about where they intend to spend and how quickly they'll be cutting some taxes while raising others.
And some of those promises are going to cost a lot more than the Tories predicted, creating a tough situation for Finance Minister Jim Flaherty as he prepares his first federal budget.
The government's timing for pricey spending plans is good - the Canadian economy is generating near-record job growth and robust corporate profits.
But analysts warn that economic growth won't generate enough cash to fulfil the lengthy list of demands, particularly as the costs rise.
Already hard at work on his first budget, expected in late April, Flaherty says he's confident he can balance everything.
"I've been looking at the numbers and I'm satisfied that we can proceed in a fiscally responsible way over the course of our government," Flaherty said last Friday.
Analysts says they believe Flaherty is too fiscally conservative to risk running the country into deficit.
But the Tory promises are flowing strong and fast.
In recent days, Defence Minister Gordon O'Connor told a conference of defence groups that the Tories intend to carry through with their ambitious military promises, including 13,000 new regular soldiers, three new icebreakers and an Arctic deepsea port, new transport planes and infrastructure.
Critics question how all that can be financed under the Tory platform pledge of $5 billion in new military spending over five years, on top of $5 billion pledged over the same period by the previous Liberal government.
Meanwhile, under pressure from premiers, Harper's government has agreed to extend until March 2007 the existing Liberal child-care plan - an unexpected new cost of about $700 million, according to estimates by the Conference Board of Canada.
That will overlap cheques which Harper has promised to send out come July under his own, new $10.9 billion five-year family allowance scheme.
Another whopping expense in the first Conservative budget will be the promised percentage point cut to the Goods and Services Tax, a move that one analyst reckons will cost $700 million more than forecast in its first year alone.
No wonder Flaherty faces a tough task, trying to balance what's affordable against election promises that will tie the federal government's hands for years to come.
"It's obvious the new finance minister has very little discretion over the next several years," said Dale Orr, economist with forecaster Global Insight.
"The Conservative fiscal plan of election 2006 exhausted virtually all fiscal surpluses in sight."
He calculates that the GST cut alone will cost Ottawa about $5.2 billion in foregone revenues every year, considerably more than the Tory forecast of $4.5 billion.
The cost will be partly funded from a $1.7 billion surplus the Tory campaign platform predicts for fiscal 2006-07.
So watch for higher personal income taxes as the Conservatives cancel previous Liberal tax cuts to pay for their GST reduction.
"It (the GST cut) is their big initiative and it doesn't leave them a lot of room to do other things," said Rick Egelton, chief economist with Bank of Montreal.
About $2.7 billion can be found next year by cancelling a Liberal tax cut that reduced the lowest marginal tax rate to 15 per cent from 16 per cent, calculates Orr.
And a booming resource sector could add an extra $1 billion to federal coffers this year, he says.
But other analysts say that estimate is pretty optimistic and warn the Tories against building a budget on overly optimistic forecasts.
Slower growth in the mighty U.S. economy later this year could spill over into Canada, warns Don Drummond, chief economist with TD Bank.
That would also cut into corporate tax revenues flowing into Ottawa and tighten Flaherty's room to manoeuvre still more.
Flaherty says he's not worried.
"I'm not going to get into particular numbers right now, because there are lots of numbers and we could be here for a long time with respect to various programs. The GST reduction is certainly affordable."
The Conservatives have also made ambitious longer-term pledges they hope to finance from budget surpluses they forecast will total $22.7 billion by 2010-2011 - minus at least $3 billion in annual debt repayments.
Those promises include:
-Another one percentage point cut to the GST;
-Settling the so-called fiscal imbalance with the provinces, a promise that carries no price tag but will likely be costly;
-Honouring corporate tax cuts promised by the Liberals, effective in 2008;
-Slashing hospital wait times;
-Reducing capital gains taxes on investments if proceeds are reinvested within six months.
Still, no one is expecting Flaherty, known as a strong fiscal conservative, to risk running into the red to meet the Conservative government's promises.
"I think they would want to be very careful not to run a deficit. . ,it would look terrible," said Egelton.
The Canadian Press, 2006
02/26/2006 14:09 EST
