24 December 2008

Flaherty vows short-lived deficit

The following article is extracted from the 24 December 2008 edition of “globeandmail.com”.

Finance Minister Jim Flaherty promised yesterday that his January budget will chart a clear course back to balanced books despite plans for massive stimulus spending and fresh evidence of the federal government's rapidly deteriorating fiscal position.

The Finance Minister held his inaugural meeting in Toronto yesterday with his high-powered economic advisory council, chaired by former British Columbia finance minister Carole Taylor, at the same time as the Finance Department reported that Ottawa posted a $600-million deficit in October, the third month in a row of red ink.

The meeting came as Mr. Flaherty sought to assert the Conservatives' fiscal discipline, vowing that deficits - which began to appear this fall - will be temporary and targeted.,,,

Mr. Flaherty created the economic council last week amid criticism the government wasn't acting with a sense of urgency on the deteriorating economy.

Among the key messages of the council from yesterday's meeting: Ensure the government seizes the opportunities presented by the crisis so that the country can rebound smartly when the recovery takes hold….

The federal government is already starting to bleed red ink, ending the year with a report that showed three consecutive monthly deficits. And it is facing the increasing likelihood that it will post an annual deficit this fiscal year, even before a stimulus package that could be as large as $20-billion a year.

The $600-million deficit in October brought the surplus for the first seven months of the fiscal year to a mere $200-million, compared to a $6.1-billion surplus for the corresponding period of 2007-08.,,,

Prior to his meeting with advisers yesterday, Mr. Flaherty acknowledged the need for Ottawa to prop up the economy with stimulus, but said business and consumers should not get too dependent on government largesse.

In prebudget papers released last week, the Finance Department conceded that private-sector forecasts say it is likely Ottawa will post deficits for at least two years.

In the worst-case scenario, private forecasters anticipate that the federal government could see six years of deficits, starting