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Canada’s Deficit Projections

Posted on 07 July 2009

Surprise, surprise! Steve Harper and Jimbo (almost rhymes with dumbo, eh?) Flaherty’s deficit projections seem to be at odds with the House of Commons finance committee.

As usual it seems the government has decided to tell us that things aren’t as bad as they seem so as to not look totally incompetent. In November of 2008 they were projecting a small surplus. In February of 2009 they admitted they were wrong about the surplus amd projected a $33.7 billion dollar deficit. Now they are projecting a $50.2 billion dollar deficit for this year alone with more deficits to come. Last fall they didn’t even see this recession (depression?), coming or they flat out lied to us about it so why would we believe their figures now.

All that aside, what about the debt? Using the government’s figures they are going to be borrowing almost 100 billion dollars over the next 5 years to cover these deficits. If we can believe the government and the it is back to bringing in more than it puts out in 2014, when is the 100 billion going to be paid back?

It’s like saying, I borrowed $100 billion for gambling but I can pay for it so it’s not a problem while ignoring the fact that I still owe the money.

And what about the interest on all this money they are borrowing? If they are borrowing the money then there must be some interest payable somewhere. Interest payments are quantifiable and relatively fixed.

If they are not borrowing the money and simply printing it, then they are devaluing our dollar. Devaluing the dollar makes imported items more expensive and erodes its buying power which could cost more in the end than the interest would cost. Devaluation of the dollar leads to inflation which not only affects government spending but all spending by everyone using Canadian dollars.

Normally one would expect the government to take all this into account but remember these guys didn’t even see these deficits coming 6 months ago!