Finance Minister Jim Flaherty expects to budget a $3.7-billion federal surplus in 2015-16, he announced this week. He has spoken to the private sector economists and they don't see any recession coming. He has even provided an annual cushion of $3 billion in his spending plans in case something comes up that curtails the revenue or increases the expense -- and even with that he still expects a surplus.
This would be encouraging news except Mr. Flaherty has been singing this same song as long as he has been finance minister and the result has been a string of deficits. In his 2006 budget, as soon as the Conservatives took power, he announced measures to restore fiscal balance. Then something came up -- the 2008 credit crunch, which produced a recession in Europe and the United States. The current fiscal year is the sixth successive year in which Mr. Flaherty has borrowed the money to finance federal programs.
There is no reason to doubt the sincerity of Mr. Flaherty's intentions. He is fully aware of the need to keep federal debt under control. But he has already shown his reach exceeds his grasp. A finance minister is to some extent at the mercy of events -- floods in Alberta, train wrecks in Quebec, recessions of our trading partners, the ruling party's need to hand out election-time goodies.
The underlying assumption of Mr. Flaherty's plan is we are now living through the lean years in Canada and the fat years lie ahead. That may prove to be true. It may also turn out that these were the good years for Canada. Already, the world is losing interest in the natural resources that were supposed to make us rich. Oil is back below $100 a barrel, potash buyers have backed out of the market in expectation of further price declines and the price of coal is too low to sustain the Canadian coal-mining industry over the long haul.
Mr. Flaherty was able to support economic recovery from the 2008 downturn because the federal debt was then 28 per cent of gross domestic product and he had room to borrow more. Now the debt is 33.8 per cent of GDP. Mr. Flaherty's capacity to borrow has been narrowed accordingly. All Canadians must share his hope some fat years come along because we are in poor shape to face lean ones.
The Conservative party has already announced plans for income-splitting between spouses, tax credits for people who take fitness programs and a list of other goodies they plan to offer the public as soon as the budget is balanced. What chance has Mr. Flaherty of protecting the promised surplus against these party pressures?