Nothing to see here

Exactly as expected, Finance Minister Jim Flaherty's Federal Budget statement contained almost nothing new.  The government is staying on its chosen course of deficit reduction, with a clear aim of hitting a budget surplus in 2015, just in time to finance all kinds of giveaways in advance of the Federal election scheduled for October of that year.

There are no new taxes (although the government is continuing to target loopholes and accelerate revenue collection) and no significant new spending programs.  There are further cuts to the public service, together with signs that the government is about to crack down on the perverse* practice of allowing public servants to "bank" sick day allowances and cash them in when the quit or retire. That'll play well at the bargaining table.

There are a number of populist initiatives aimed at making consumers feel better, though in truth they amount to almost nothing.  The most eye-catching is a pledge to end the practice whereby Canadians pay more than their American neighbours for identical goods, but: (a) there are no details of how this will work; (b) the Competition Bureau has already disavowed any interest in policing this; (c) the marketing boards that keep Canadian prices for things like eggs and dairy products at multiples of US levels are politically sacrosanct; and (d) with the Canadian dollar about 15% below its recent highs, the price differentials are rapidly becoming a non-issue anyway.

Much of the supposed reduction in spending under this government is illusory.  As many commentators have noted, huge military procurement programs (new fighter jets, new helicopters, replacement destroyers, ice-breakers and more) have been delayed and bogged down for years and even decades, thanks to the staggering incompetence of successive governments and the military top brass.  All these plans are still on the drawing board, so there stands to be a huge explosion in spending once they finally come to fulfillment.

All told, the government is projecting a deficit of C$2.9 billion for the year -- but that's only after allowing a $3 billion contingency.  This is the same accounting trick that Paul Martin patented in the early to mid 1990s, and for the same reason: to disguise the speed with which the fiscal situation is improving, and thereby deflect pressure for higher spending, at least until it suits the government to deliver it.

The contingency did, however, produce an enlightening moment at Flaherty's post budget press conference.  When a reporter pointed out that the government could project a surplus in the current year if it did not include the contingency fund, Flaherty agreed, but then said that the resulting surplus, that is, the difference between $2.9 billion (the deficit) and $3 billion (the contingency) would be only $100,000!  You wouldn't trust this guy to give you the correct change when you buy your morning coffee at Timmy's, but apparently it's OK for him to be in charge of the nation's finances.


* Why do I say it's perverse?  In principle it's a good thing that employees don't have to worry too much about taking a reasonable number of sick days each year.  But because they can be "banked" and cashed in later, the current system actually provides an incentive for people to turn up at work even when they're sick, and pass their ailments on to their co-workers.