Budget officer and Flaherty differ by $10 Billion


mentalfloss
#1
Budget officer and Flaherty differ by $10B

There's a $10-billion difference between the government's estimates and those of Parliament's budget watchdog when it comes to Canada's structural budget balance, the budget officer, Kevin Page, reported Monday.

Page's report says that between 1975 and 2005, estimates are closely aligned and within about $1 billion of each other. They begin diverging in 2006 and he says the discrepancy largely comes from differences in estimates of how well the economy is performing relative to its potential.

Finance Canada's estimate of the structural budget balance last year is $17 billion higher than the PBO's estimate, Page reported.

The PBO says that based on its assumptions, Finance Canada's numbers suggest that the economy did not recover in 2010 and was operating at a historic low of 5.5 per cent below its potential income.

He also estimates in his report that despite the government's promise to erase the deficit by 2015-2016, there will still be a structural deficit of $1.6 billion on the books in 2016-2017.

The opposition seized on this prediction in question period, accusing the government of taking an overly optimistic view of the economy and digging the country into a structural deficit.

The NDP's interim leader Nycole Turmel said that with corporate tax cuts, the Conservatives are "gutting the fiscal capacity of the government to provide people the services they need."

Foreign Affairs Minister John Baird and Finance Minister Jim Flaherty both defended the government's fiscal management, saying they are taking reasonable measures to ensure Canada returns to a balanced budget and they are focused on economic growth and job creation.

"We are not going to make the mistakes the European countries did with big deficits and big public debt," Flaherty said.

Prime Minister Stephen Harper's government has taken structural budget estimates into account in budget planning, for example, in 2009 when it launched the Economic Action Plan. The program was temporary and meant to be phased out as the economy recovered in order to avoid long-term structural deficits, as opposed to cyclical deficits.

In 2010, Canada's deficit was $42.6 billion, and Finance Canada estimated it was entirely cyclical in nature, reflecting the global recession and government spending on the economic stimulus plan. Page's analysis doesn't line up with that estimation, as he says it is a mixture of cyclical and structural deficits.

Page's report says his office and Finance Minister Jim Flaherty's department both estimate the structural budget balance based on National Accounts and expenditure data, and that they "appear to be based on a similar methodology" that attempts to adjust for fluctuations in commodity prices and stimulus measures.

He says that it's not possible to determine exactly how his estimates and economic assumptions differ from the government's because Finance Canada doesn't publish all the data it uses to calculate its estimates.

He called on the department to be more transparent, a call he has made before, and this is also not the first time Page and the government have clashed when it comes to economic projections and estimates.

Monday's report also shows differences between the PBO and Finance Canada on the cyclical nature of the economy between 2006 and 2010.

In late 2008 and early 2009, when the recession was settling in, Page's office estimated that the economy was operating well above its potential income (between 2.2 and 3.2 per cent) while Finance Canada estimates appeared to suggest that the economy was much closer to its potential, between 0.5 per cent below and one per cent above its potential.

"Consequently, Finance Canada estimates would suggest that the budget surpluses recorded in 2006 and 2007 were largely structural whereas PBO estimates would indicate that they were largely cyclical in nature," the report said.

The numbers are again off when it comes to the economic recovery. The PBO says that the economy began to recover in 2010 as the level of actual income moved closer to its potential, 2.7 per cent below, but Finance Canada estimates would appear to suggest that the economy continued to deteriorate, falling 5.5 per cent below its potential.

"As a result, Finance Canada estimates would suggest that the $42.6 billion budget deficit recorded in 2010 was entirely cyclical in nature whereas PBO estimates that the deficit contained significant structural and cyclical components (approximately 40 per cent structural and 60 per cent cyclical)," the report said.

CBC.ca News - Budget officer and Flaherty differ by $10B
 
JLM
No Party Affiliation
#2
Quote: Originally Posted by mentalfloss View Post

Budget officer and Flaherty differ by $10B

There's a $10-billion difference between the government's estimates and those of Parliament's budget watchdog when it comes to Canada's structural budget balance, the budget officer, Kevin Page, reported Monday.

Page's report says that between 1975 and 2005, estimates are closely aligned and within about $1 billion of each other. They begin diverging in 2006 and he says the discrepancy largely comes from differences in estimates of how well the economy is performing relative to its potential.

Finance Canada's estimate of the structural budget balance last year is $17 billion higher than the PBO's estimate, Page reported.

The PBO says that based on its assumptions, Finance Canada's numbers suggest that the economy did not recover in 2010 and was operating at a historic low of 5.5 per cent below its potential income.

He also estimates in his report that despite the government's promise to erase the deficit by 2015-2016, there will still be a structural deficit of $1.6 billion on the books in 2016-2017.

The opposition seized on this prediction in question period, accusing the government of taking an overly optimistic view of the economy and digging the country into a structural deficit.

The NDP's interim leader Nycole Turmel said that with corporate tax cuts, the Conservatives are "gutting the fiscal capacity of the government to provide people the services they need."

Foreign Affairs Minister John Baird and Finance Minister Jim Flaherty both defended the government's fiscal management, saying they are taking reasonable measures to ensure Canada returns to a balanced budget and they are focused on economic growth and job creation.

"We are not going to make the mistakes the European countries did with big deficits and big public debt," Flaherty said.

Prime Minister Stephen Harper's government has taken structural budget estimates into account in budget planning, for example, in 2009 when it launched the Economic Action Plan. The program was temporary and meant to be phased out as the economy recovered in order to avoid long-term structural deficits, as opposed to cyclical deficits.

In 2010, Canada's deficit was $42.6 billion, and Finance Canada estimated it was entirely cyclical in nature, reflecting the global recession and government spending on the economic stimulus plan. Page's analysis doesn't line up with that estimation, as he says it is a mixture of cyclical and structural deficits.

Page's report says his office and Finance Minister Jim Flaherty's department both estimate the structural budget balance based on National Accounts and expenditure data, and that they "appear to be based on a similar methodology" that attempts to adjust for fluctuations in commodity prices and stimulus measures.

He says that it's not possible to determine exactly how his estimates and economic assumptions differ from the government's because Finance Canada doesn't publish all the data it uses to calculate its estimates.

He called on the department to be more transparent, a call he has made before, and this is also not the first time Page and the government have clashed when it comes to economic projections and estimates.

Monday's report also shows differences between the PBO and Finance Canada on the cyclical nature of the economy between 2006 and 2010.

In late 2008 and early 2009, when the recession was settling in, Page's office estimated that the economy was operating well above its potential income (between 2.2 and 3.2 per cent) while Finance Canada estimates appeared to suggest that the economy was much closer to its potential, between 0.5 per cent below and one per cent above its potential.

"Consequently, Finance Canada estimates would suggest that the budget surpluses recorded in 2006 and 2007 were largely structural whereas PBO estimates would indicate that they were largely cyclical in nature," the report said.

The numbers are again off when it comes to the economic recovery. The PBO says that the economy began to recover in 2010 as the level of actual income moved closer to its potential, 2.7 per cent below, but Finance Canada estimates would appear to suggest that the economy continued to deteriorate, falling 5.5 per cent below its potential.

"As a result, Finance Canada estimates would suggest that the $42.6 billion budget deficit recorded in 2010 was entirely cyclical in nature whereas PBO estimates that the deficit contained significant structural and cyclical components (approximately 40 per cent structural and 60 per cent cyclical)," the report said.

CBC.ca News - Budget officer and Flaherty differ by $10B

With annual spending at close to $280 billion, $10 billion doesn't really strike me as that big of a deal. If you split the difference it's only $5 billion. Is Flaherty perhaps erring on the safe side. Isn't Flaherty the one we would assume knows the true picture? Who is this PBO and what are his credentials? When you start looking at fiscal tables it gets very confusing, I know, my dentist's statement baffles me!
 
relic
Free Thinker
+3
#3  Top Rated Post
This is why this once great country is on it's way down the **** hole,10 billion no big deal,one little lie about a "training mission",one little bit of altered paperwork,a few million earmarked for security spent on ****houses and gazeboes.It all adds up ! You can only get away with saying the other guys did it for so long,well that is unless people are apathetic or stupid.
 
mentalfloss
+1
#4
Quote: Originally Posted by JLM View Post

With annual spending at close to $280 billion, $10 billion doesn't really strike me as that big of a deal. If you split the difference it's only $5 billion. Is Flaherty perhaps erring on the safe side. Isn't Flaherty the one we would assume knows the true picture? Who is this PBO and what are his credentials? When you start looking at fiscal tables it gets very confusing, I know, my dentist's statement baffles me!

This is the logic of a "fiscal conservative" who's been hijacked by the party.
 
Machjo
#5
Quote: Originally Posted by JLM View Post

With annual spending at close to $280 billion, $10 billion doesn't really strike me as that big of a deal. If you split the difference it's only $5 billion. Is Flaherty perhaps erring on the safe side. Isn't Flaherty the one we would assume knows the true picture? Who is this PBO and what are his credentials? When you start looking at fiscal tables it gets very confusing, I know, my dentist's statement baffles me!

10 billion no big deal? Tell that to poor, the vulnerable, and the destitute.

Quote: Originally Posted by mentalfloss View Post

This is the logic of a "fiscal conservative" who's been hijacked by the party.

There are few "fiscons" in the Conservative Party of Canada right now.

Honestly, a truly conservative party would also be conservative on its estimates too.
 
JLM
No Party Affiliation
#6
Quote: Originally Posted by Machjo View Post

10 billion no big deal? Tell that to poor, the vulnerable, and the destitute.


Are we talking actual money spent or are we talking estimates/budgets? It's not the money spent so much it's where it's spent. Do we know that at least part of the $10 billion didn't go to "the poor, the vulnerable, the destitute"?
 
Machjo
#7
Quote: Originally Posted by JLM View Post

Are we talking actual money spent or are we talking estimates/budgets? It's not the money spent so much it's where it's spent. Do we know that at least part of the $10 billion didn't go to "the poor, the vulnerable, the destitute"?

Government debt means interest payments to lenders, making it more difficult for the government to then reduce taxes on the poor, or give greater deductions on charitable donations, etc.

Considering that, you'd think any party concerned about this would be extra cautious about balancing the books so as to not pay all that money to lenders.
 
JLM
No Party Affiliation
+1
#8
Quote: Originally Posted by Machjo View Post

Honestly, a truly conservative party would also be conservative on its estimates too.

Less disappointment later if you are overly generous on your estimates! Voters would be more impressed!

Quote: Originally Posted by Machjo View Post

Considering that, you'd think any party concerned about this would be extra cautious about balancing the books so as to not pay all that money to lenders.

On the other side of the coin most of the gov't.'s debt got the way it is by fulfilling voters' demands. We want health care - we pay, we want fire protection - we pay, we want a library- we pay, we want police protection - we pay, we want criminals apprehended and incarcerated- pay. Taxpayers have to learn we can't suck and blow at the same time. Seems most to the populace is sympathetic to teachers' demands................again we pay!
 
Machjo
+1
#9
Quote: Originally Posted by JLM View Post

Less disappointment later if you are overly generous on your estimates! Voters would be more impressed!



On the other side of the coin most of the gov't.'s debt got the way it is by fulfilling voters' demands. We want health care - we pay, we want fire protection - we pay, we want a library- we pay, we want police protection - we pay, we want criminals apprehended and incarcerated- pay. Taxpayers have to learn we can't suck and blow at the same time. Seems most to the populace is sympathetic to teachers' demands................again we pay!

Certainly! That's why I'm hesitant about voting blindly for a politician intent on cutting my taxes or increasing spending on services, and especially both at the same time. Then I know he's just trying to buy my vote. I'm more likely to vote for a politician who promises to raise my taxes or cut spending on services, details considered of course and within reason, with the goal of paying off the federal debt. That's probably why my candidates never win.
 
dumpthemonarchy
Free Thinker
+1
#10
This is the kind of article that makes me wonder, who has been more accurate in their forecasts since 2006? The PBO or the Tories? The article doesn't say or compare the two. How about a simple graph?

In Canada the budget turns into budget politics and the numbers lost in the shouting. Ten billion here, ten billion there, pretty soon it adds up to real money that gets lost in the rhetoric.
 
mentalfloss
#11
Quote: Originally Posted by dumpthemonarchy View Post

This is the kind of article that makes me wonder, who has been more accurate in their forecasts since 2006? The PBO or the Tories? The article doesn't say or compare the two. How about a simple graph?

In Canada the budget turns into budget politics and the numbers lost in the shouting. Ten billion here, ten billion there, pretty soon it adds up to real money that gets lost in the rhetoric.

If it's transparency you want, you won't get it from the Tories..

Show cards on structural deficit, watchdog tells Tories





When Canada’s economy eventually rebounds, will that alone be enough to bring back the days of federal surpluses and balanced budgets?

Or have the Conservatives boosted spending and cut taxes so much that there simply will not be enough revenue left to balance the books, even in good times?

Parliamentary Budget Officer Kevin Page says Ottawa knows the answer – but isn’t saying.

The independent spending watchdog released a new report Monday on one of his favourite topics: the structural deficit. It is a concept that attempts to show whether government finances would be in balance if it weren’t for short term cyclical factors like the current, protracted global economic slowdown.

The statistic is commonly used by other governments. Prime Minister David Camerion is promising to erase Britain’s structural deficit by 2015 while the latest European Union plans included discussion of a structural deficit cap. But in Ottawa, structural deficit forecasts prepared by the government are nowhere to be found.

“That’s standard practice for OECD countries. We’re not getting that,” Mr. Page said in an interview. “We lessen the debate when we don’t use this type of analysis.”

Monday’s PBO report says “Finance Canada could improve fiscal transparency” by publishing its structural deficit estimates covering the medium term. The report says this information is important because it allows a more informed debate as to whether the government’s response to the deficit should include temporary or permanent measures.

“Distinguishing between structural and cyclical components of a government’s budget balance is crucial because, while the cyclical component may be expected to dissipate over a medium-term horizon as the economy returns to its full potential, the structural component may necessitate policy measures,” states the report, prepared by Chris Matier, the PBO’s senior director for economic and fiscal analysis and forecasting. Mr. Matier previously did similar work for Finance Canada during his 14 years working in the department.

The Finance Minister has repeatedly dismissed the warnings of the PBO and Mr. Page regarding a structural deficit. “He's usually wrong,” Jim Flaherty said in March, 2010.

But it was the minister’s own forecasts that had to be revised last month when Mr. Flaherty announced the government is not planning to erase the deficit until 2015-16 – a year later than promised during the 2011 election campaign.

The PBO’s own analysis concludes that if the Conservative government succeeds at reining in spending as planned over the coming years, the structural deficit will fall from $25-billion this year to only $1.6-billion in 2016-17.

However that does not mean Ottawa’s finances will be sustainable for the long term. The PBO also warns that the federal government faces a long-term cash crunch as the population ages and has called on the government to release estimates of the fiscal impact of this demographic change.

NDP finance critic Peter Julian raised the report Monday afternoon during Question Period, arguing that the government is trying to hide the fact that its own projections are too optimistic. “Why are they hiding the numbers?” he asked.

In contrast to his previous responses to PBO reports, Mr. Flaherty struck a conciliatory – rather than dismissive – tone. He said “we entirely agree” with the PBO’s focus on eliminating the deficit. However the minister did not commit to releasing the numbers Mr. Page is requesting.

Show cards on structural deficit, watchdog tells Tories - The Globe and Mail
 
JLM
No Party Affiliation
#12
Quote: Originally Posted by Machjo View Post

Certainly! That's why I'm hesitant about voting blindly for a politician intent on cutting my taxes or increasing spending on services, and especially both at the same time. Then I know he's just trying to buy my vote. I'm more likely to vote for a politician who promises to raise my taxes or cut spending on services, details considered of course and within reason, with the goal of paying off the federal debt. That's probably why my candidates never win.

The cardinal rule of politics...................If you want to vote for a winner you have to vote for a liar and a thief!
 
dumpthemonarchy
Free Thinker
#13
The media is supposed to present this information clearly to the public so we can see what the govt is doing and has done. The media writes far too many words about the deficit. That's not the whole story, pictures and graphs are. I bet very few people could say how big the deficit has been the last three years. I don't know the total.
 
PoliticalNick
Free Thinker
#14
Quote: Originally Posted by JLM View Post

Less disappointment later if you are overly generous on your estimates! Voters would be more impressed!



On the other side of the coin most of the gov't.'s debt got the way it is by fulfilling voters' demands. We want health care - we pay, we want fire protection - we pay, we want a library- we pay, we want police protection - we pay, we want criminals apprehended and incarcerated- pay. Taxpayers have to learn we can't suck and blow at the same time. Seems most to the populace is sympathetic to teachers' demands................again we pay!

It is not the essential services you speak of that are the problem. Nobody is going to complain too much about fully funded universal heathcare or fully funded education. It is the pork-barrel spending and non-essential stuff that makes the budget so large and creates deficit spending.

The govt should operate based on providing fully funded essential services only unless there is a surplus.
 
JLM
No Party Affiliation
#15
Quote: Originally Posted by dumpthemonarchy View Post

The media is supposed to present this information clearly to the public so we can see what the govt is doing and has done. The media writes far too many words about the deficit. That's not the whole story, pictures and graphs are. I bet very few people could say how big the deficit has been the last three years. I don't know the total.

I bet if you got 10 different accountants to write up the financial statement, you'd get 10 different "bottom lines".
 
PoliticalNick
Free Thinker
#16
Quote: Originally Posted by Machjo View Post

Certainly! That's why I'm hesitant about voting blindly for a politician intent on cutting my taxes or increasing spending on services, and especially both at the same time. Then I know he's just trying to buy my vote. I'm more likely to vote for a politician who promises to raise my taxes or cut spending on services, details considered of course and within reason, with the goal of paying off the federal debt. That's probably why my candidates never win.

We can't pay off the debt. It is impossible. Our monetary system prevents this. If the govt wanted to print enough money to pay the debt they would have to sell bonds which bear interest thus creating more debt. It is unknown to most that the debt can never be paid down under the current system.
 
DaSleeper
+2
#17
This thread and others like it......

For Some................

The party you voted for can do no wrong......

The one you didn't vote for can't do anything right....
 
JLM
No Party Affiliation
#18
Quote: Originally Posted by PoliticalNick View Post

We can't pay off the debt. It is impossible. Our monetary system prevents this. If the govt wanted to print enough money to pay the debt they would have to sell bonds which bear interest thus creating more debt. It is unknown to most that the debt can never be paid down under the current system.

Good points Nick, but to be realistic the pork barreling is probably less than 5%. I know........it's far too much even at that. We know healthcare alone is over 40% and I bet education and welfare combined add up to close to another 40% and then there is a huge amount for justice. Of course even within these budgets is some waste........................a lot of it by bureaucrats doing work that should be farmed out the private sector.
 
PoliticalNick
Free Thinker
+1
#19
Quote: Originally Posted by JLM View Post

Good points Nick, but to be realistic the pork barreling is probably less than 5%. I know........it's far too much even at that. We know healthcare alone is over 40% and I bet education and welfare combined add up to close to another 40% and then there is a huge amount for justice. Of course even within these budgets is some waste........................a lot of it by bureaucrats doing work that should be farmed out the private sector.

You are right about trimming the fat from the essential services. Get rid of the lucrative govt union contract in favor of competitive private sector wages and ditch all the duplication in bureaucracy and we would save billions.
 
dumpthemonarchy
Free Thinker
#20
Quote: Originally Posted by JLM View Post

I bet if you got 10 different accountants to write up the financial statement, you'd get 10 different "bottom lines".

Govt spending is in cheques and if accountants could count, I would guess they could find a total they could agree on. I can never understand why right wing organisations like the Fraser Institute don't summarize this info for the public. They could do it for the fed and prov govts. But they don't because they are obviously in on the conspiracy of keeping up the mushroom strategy on us.
 
Tonington
#21
Quote: Originally Posted by JLM View Post

With annual spending at close to $280 billion, $10 billion doesn't really strike me as that big of a deal.

3.5% is a pretty big deal, when departments are trying to prune $5 Billion, and tens of thousands will be put out of work.

Quote:

If you split the difference it's only $5 billion.

What's the rationale for splitting the difference? If you have two estimates, and one is really far off, then splitting the difference is not an improvement at all...this is why Page has been asking for more transparency in how Finance Canada produces estimates. More eyes looking at the methods can lead to improved estimates.

Quote:

Is Flaherty perhaps erring on the safe side.

Erring on the safe side would be going with conservative estimates. Conservative estimates of growth would accept that we have a larger structural deficit.

Quote:

Isn't Flaherty the one we would assume knows the true picture?

Why? Flaherty is a politician. Politicians lie. Kevin Page is an economist that has worked as a civil servant for over 30 years now in many different departments.

Just because Flaherty is the Finance Minister doesn't mean he knows any better. Page has far more experience with government accounting.

Quote: Originally Posted by JLM View Post

I bet if you got 10 different accountants to write up the financial statement, you'd get 10 different "bottom lines".

Maybe, but that doesn't mean they are all equally valid estimates...
 
JLM
No Party Affiliation
#22
One of the problems with estimating costs are you are shooting at a moving target, so 3% doesn't strike me as being bad. If I get an estimate for repairs for $500 and the bill comes in at $515, I'm generally quite happy with that.
 
Tonington
#23
Quote: Originally Posted by JLM View Post

One of the problems with estimating costs are you are shooting at a moving target, so 3% doesn't strike me as being bad. If I get an estimate for repairs for $500 and the bill comes in at $515, I'm generally quite happy with that.

And if your pay check was 3% short? Relative. If the structural deficit is $10 billion, and not cyclical like the government is projecting, then that is a lot to cut. In 2010 the two estimates were actually off by $17 billion, which is even more ridiculous.

What's worse, is that if the government is choosing too optimistically it's assumptions, then that has greater consequences down the road.
 
JLM
No Party Affiliation
#24
Quote: Originally Posted by Tonington View Post

And if your pay check was 3% short? Relative. If the structural deficit is $10 billion, and not cyclical like the government is projecting, then that is a lot to cut. In 2010 the two estimates were actually off by $17 billion, which is even more ridiculous.

.

That happens to scads of people who miss as little as 6 days a year while sick!
 
Tonington
#25
Quote: Originally Posted by JLM View Post

That happens to scads of people who miss as little as 6 days a year while sick!

In which case it wasn't an estimate, they just didn't show up to work.

Imagine 3% shirked, pay check after pay check. That adds up. That's the difference. The PBO estimate has this as a structural deficit, which means 3% every budget unless it's corrected for. Not some one-off like being sick, analogous to the Finance Canada estimates of our deficit.
 
JLM
No Party Affiliation
#26
Quote: Originally Posted by Tonington View Post

In which case it wasn't an estimate, they just didn't show up to work.

Imagine 3% shirked, pay check after pay check. That adds up. That's the difference. The PBO estimate has this as a structural deficit, which means 3% every budget unless it's corrected for. Not some one-off like being sick, analogous to the Finance Canada estimates of our deficit.

You remember that trip the G.G. took to Finland with an entourage of 55 for a few weeks?, well, to balance things back up you just have to cancel one or two charades like that!
 
Tonington
#27
Quote: Originally Posted by JLM View Post

You remember that trip the G.G. took to Finland with an entourage of 55 for a few weeks?, well, to balance things back up you just have to cancel one or two charades like that!

I think not.
 
JLM
No Party Affiliation
#28
Quote: Originally Posted by Tonington View Post

I think not.

Well then, expect that crap to continue on the backs of the taxpayers!
 
Tonington
#29
Quote: Originally Posted by JLM View Post

Well then, expect that crap to continue on the backs of the taxpayers!

Oh, I do expect it to continue...No, you misunderstood. I think not, as to how much money you it would save. We don't have

I find it hilarious actually that you're so blasť about a figure like $10 billion deficit, but your blood pressure goes up because of a $5.3 million trip.

Are you a budget hawk or not? If so, a $10 billion structural deficit is far worse than a $5.3 million trip. Priorities...
 
JLM
No Party Affiliation
#30
Quote: Originally Posted by Tonington View Post

Oh, I do expect it to continue...No, you misunderstood. I think not, as to how much money you it would save. We don't have

I find it hilarious actually that you're so blasť about a figure like $10 billion deficit, but your blood pressure goes up because of a $5.3 million trip.

Are you a budget hawk or not? If so, a $10 billion structural deficit is far worse than a $5.3 million trip. Priorities...

Yep, I get my dander up when $5 million is squandered, but the $10 billion? Was it put to good use or was it squandered?
 

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