Tuesday, February 7, 2023
No Result
View All Result
  • Media
Support Us
Macdonald-Laurier Institute
  • Home
  • About
    • Who We Are
    • Who Makes MLI Work
    • Tenth Anniversary
    • Jobs
  • Experts
    • Experts Directory
    • In Memoriam
  • Issues
    • Domestic Policy Program
      • Agriculture and Agri-Food
      • Canada’s Political Tradition
      • Economic policy
      • Energy
      • Health Care
      • Innovation
      • Justice
      • Social issues
      • Telecoms
    • Foreign Policy Program
      • Foreign Affairs
      • National Defence
      • National Security
    • Indigenous Affairs Program
  • Projects
    • COVID and after: A mandate for recovery
    • COVID Misery Index
      • Beyond Lockdown
    • Provincial COVID Misery Index
    • Centre for Advancing Canada’s Interests Abroad
      • Dragon at the Door
      • The Eavesdropping Dragon: Huawei
    • An Intellectual Property Strategy for Canada
    • Speak for Ourselves
    • Canada and the Indo-Pacific Initiative
    • DisInfoWatch.org
    • The Transatlantic Program
    • Indigenous Prosperity at a Crossroads
      • Aboriginal Canada and Natural Resources
    • Talkin’ in the Free World with Mariam Memarsadeghi
    • Past Projects
      • Justice Report Card
      • Munk Senior Fellows
      • A Mandate for Canada
      • Confederation Series
      • Fiscal Reform
      • The Canadian Century project
      • Fixing Canadian health care
      • Internal trade
      • From a mandate for change
      • Size of government in Canada
  • Events
    • Upcoming Events
    • Past Events
      • MLI Dinners
      • Great Canadian Debates
  • Latest News
  • Libraries
    • Inside Policy Magazine
      • Inside Policy Back Issues
      • Inside Policy Blog
    • Papers
    • Columns
    • Books
    • Commentary
    • Straight Talk
    • Video
    • Multimedia
    • Podcasts
    • Leading Economic Indicator
    • Labour Market Report
    • MLI in the Media
  • Home
  • About
    • Who We Are
    • Who Makes MLI Work
    • Tenth Anniversary
    • Jobs
  • Experts
    • Experts Directory
    • In Memoriam
  • Issues
    • Domestic Policy Program
      • Agriculture and Agri-Food
      • Canada’s Political Tradition
      • Economic policy
      • Energy
      • Health Care
      • Innovation
      • Justice
      • Social issues
      • Telecoms
    • Foreign Policy Program
      • Foreign Affairs
      • National Defence
      • National Security
    • Indigenous Affairs Program
  • Projects
    • COVID and after: A mandate for recovery
    • COVID Misery Index
      • Beyond Lockdown
    • Provincial COVID Misery Index
    • Centre for Advancing Canada’s Interests Abroad
      • Dragon at the Door
      • The Eavesdropping Dragon: Huawei
    • An Intellectual Property Strategy for Canada
    • Speak for Ourselves
    • Canada and the Indo-Pacific Initiative
    • DisInfoWatch.org
    • The Transatlantic Program
    • Indigenous Prosperity at a Crossroads
      • Aboriginal Canada and Natural Resources
    • Talkin’ in the Free World with Mariam Memarsadeghi
    • Past Projects
      • Justice Report Card
      • Munk Senior Fellows
      • A Mandate for Canada
      • Confederation Series
      • Fiscal Reform
      • The Canadian Century project
      • Fixing Canadian health care
      • Internal trade
      • From a mandate for change
      • Size of government in Canada
  • Events
    • Upcoming Events
    • Past Events
      • MLI Dinners
      • Great Canadian Debates
  • Latest News
  • Libraries
    • Inside Policy Magazine
      • Inside Policy Back Issues
      • Inside Policy Blog
    • Papers
    • Columns
    • Books
    • Commentary
    • Straight Talk
    • Video
    • Multimedia
    • Podcasts
    • Leading Economic Indicator
    • Labour Market Report
    • MLI in the Media
No Result
View All Result
Macdonald-Laurier Institute

Steady growth masking the provinces’ structural deficits: Cross in the Post

April 16, 2015
in Columns, Domestic Policy Program, Economic policy, In the Media, Latest News
Reading Time: 3 mins read
A A

Writing in the Financial Post, Macdonald-Laurier Institute Senior Fellow Philip Cross says don’t let the federal government’s impending balanced budget fool you – the provinces are still dealing with long-term fiscal problems and structural deficits.Philip Cross

By Philip Cross, April 15, 2015

The release of the jobs numbers last Friday confirmed that the economy is doing better than anyone forecast in the wake of slumping oil prices. The net result of the usual noisy monthly movements was that jobs grew by 63,000 in the first quarter, nearly twice their gain in the fourth quarter. The increase was no fluke, as the leading indicators show weakness in the economy largely confined to the oil sector. Excluding commodity prices, the leading index continues to increase steadily, as manufacturers slowly begin to respond to an improving U.S. economy.

All of this contradicts Bank of Canada Governor Steve Poloz’s characterization of the economy’s performance in the first quarter as “atrocious.” Since it is hard to believe the Bank is susceptible to panic, this reinforces the suspicion that January’s surprise cut in interest rates was designed to engineer more weakness in the Canadian dollar. Poloz’s denials about trying to manipulate the currency mean nothing: In an interview on Bloomberg radio last Friday, former Bank of England Monetary Policy Council member David Blanchflower admitted Council members regularly talked down the exchange rate, although “publicly we always denied” that was their strategy.

Recall when the November jobs report showed a decline driven by losses in Alberta’s oilpatch, the whole statistical media complex confidently assured Canadians that the world was unfolding as it should. The Conference Board quickly forecast Alberta already was in recession, and worries grew that Canada could follow. Once again, this demonstrates the futility of reading too much into volatile monthly data. Four months later, job growth has accelerated nationally, with even Alberta posting a small gain to start the year. Economists and journalists struggle to find a convincing narrative to fit these facts, throwing out bromides like jobs are a lagging indicator or we forgot how large was the share of services in total employment.

The broader implication is that the federal government will run a surplus for several reasons. The economy is performing better than expected, especially taking account of the record cold in Eastern North America and a dock strike in the U.S. The sale of General Motors stock is a windfall for the treasury. And you can be sure the Harper government takes great pleasure in disproving the forecast of Kevin Page, the first gadfly Parliamentary Budget Officer, that the deficit created by the recession in 2009 would prove structural. Adopting a balanced budget law reinforces its message that structural deficits did not return. However, the fact that the Ontario government currently borrows about $20 billion a year despite its own balanced budget law shows how easily such rules are flouted. The federal budget will remain balanced not because of this law, but because the government has capped its future liability for health care transfers and pension obligations and begun the long, arduous process of reining in the compensation of its employees.

Structural deficits exist in Canada, but at the provincial not the federal level. The provinces already are mired in large debts and deficits, even before the real tsunami hits from soaring health care spending for an aging population. The token restraint offered by Alberta and Quebec in their recent budgets shows that the provinces are not yet willing to tackle the fundamental reforms needed to how they deliver education and health care and the outrageous compensation their employees receive. The provinces’ desperate need for revenues is why none even bother pretending that the various carbon tax proposals currently circulating will be revenue neutral, as intended by their naïve academic proponents, leaving us with a more burdensome and not a more efficient tax regime.

The fiscal position of the provinces is a lot like Canada’s in the 1970s, when government debt first began to mount. The actual increase in the underlying structural deficit at that time was even worse, but was hidden by artificially low interest rates and high nominal growth. The full extent of the underlying deficit was revealed when interest rates soared and growth slowed in the early 1980s. The same is playing out now for the provinces; as bad as their fiscal position looks, their larger structural deficits are being masked by record low interest rates and steady growth in most of the country.

Philip Cross is a Senior Fellow at the Macdonald-Laurier Institute and the former Chief Economic Analyst at Statistics Canada

Tags: Macdonald-LaurierMLIPhilip Crossprovinces
Previous Post

Canada’s tax and transfer system more progressive than people think: MLI Report by Philip Cross

Next Post

Balanced-budget legislation would help tame arbitrary spending: Crowley in the Globe

Related Posts

It’s time to leverage Canada’s energy advantage into a geopolitical one, too: Shuvaloy Majumdar in Maclean’s
Columns

For the oil patch, ‘just transition’ is buzzword legislation, not sound economics: Heather Exner-Pirot in the Globe

February 7, 2023
Prioritizing gender identity over sex in prisons endangers female prisoners
Releases

Prioritizing gender identity over sex in prisons endangers female prisoners

February 6, 2023
Greedflation? It’s a government thing: Philip Cross in the Financial Post
Columns

Jagmeet Singh uses confusion about private care to support the status quo: Shawn Whatley in the National Post

February 6, 2023
Next Post
Brian Lee Crowley

Balanced-budget legislation would help tame arbitrary spending: Crowley in the Globe

Macdonald-Laurier Institute

323 Chapel Street, Suite #300
Ottawa, Ontario
K1N 7Z2 Canada

613.482.8327

info@macdonaldlaurier.ca
MLI directory

Follow us on

Newsletter Signup

First Name
Last Name
Email Address

Support Us

Support the Macdonald-Laurier Institute to help ensure that Canada is one of the best governed countries in the world. Click below to learn more or become a sponsor.

Support Us

Inside Policy Magazine

  • Current Issue
  • Back Issues
  • Advertising
  • Inside Policy Blog
  • Privacy Policy

© 2021 Macdonald-Laurier Institute. All Rights reserved.

No Result
View All Result
  • Home
  • About
    • Who We Are
    • Who Makes MLI Work
    • Tenth Anniversary
    • Jobs
  • Experts
    • Experts Directory
    • In Memoriam
  • Issues
    • Domestic Policy Program
      • Agriculture and Agri-Food
      • Canada’s Political Tradition
      • Economic policy
      • Energy
      • Health Care
      • Innovation
      • Justice
      • Social issues
      • Telecoms
    • Foreign Policy Program
      • Foreign Affairs
      • National Defence
      • National Security
    • Indigenous Affairs Program
  • Projects
    • COVID and after: A mandate for recovery
    • COVID Misery Index
      • Beyond Lockdown
    • Provincial COVID Misery Index
    • Centre for Advancing Canada’s Interests Abroad
      • Dragon at the Door
      • The Eavesdropping Dragon: Huawei
    • An Intellectual Property Strategy for Canada
    • Speak for Ourselves
    • Canada and the Indo-Pacific Initiative
    • DisInfoWatch.org
    • The Transatlantic Program
    • Indigenous Prosperity at a Crossroads
      • Aboriginal Canada and Natural Resources
    • Talkin’ in the Free World with Mariam Memarsadeghi
    • Past Projects
      • Justice Report Card
      • Munk Senior Fellows
      • A Mandate for Canada
      • Confederation Series
      • Fiscal Reform
      • The Canadian Century project
      • Fixing Canadian health care
      • Internal trade
      • From a mandate for change
      • Size of government in Canada
  • Events
    • Upcoming Events
    • Past Events
      • MLI Dinners
      • Great Canadian Debates
  • Latest News
  • Libraries
    • Inside Policy Magazine
      • Inside Policy Back Issues
      • Inside Policy Blog
    • Papers
    • Columns
    • Books
    • Commentary
    • Straight Talk
    • Video
    • Multimedia
    • Podcasts
    • Leading Economic Indicator
    • Labour Market Report
    • MLI in the Media

© 2021 Macdonald-Laurier Institute. All Rights reserved.

IDEAS CHANGE THE WORLD!Have the latest Canadian thought leadership delivered straight to your inbox.
First Name
Last Name
Email address

No thanks, I’m not interested.