Harper touts federal budget surplus, but local economists have cool reaction

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This article was published 14/09/2015 (3688 days ago), so information in it may no longer be current.

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OTTAWA – A Department of Finance report showing Canada’s books were actually balanced last year breathed some energy and positivity into Prime Minister Stephen Harper’s campaign for re-election Monday.

The report, approved for release during an election by Harper, is the annual fiscal report for the 2014-15 fiscal year. Last April, Finance Minister Joe Oliver projected that year would see a $2 billion shortfall — but once the numbers were all tallied, the result was a $1.9 billion surplus.

Harper has tried all campaign long to frame his party as the only one that is good for the economy, and the only one that will balance the budget, but it has been a tenuous claim to make since his government hadn’t actually balanced a budget since 2007.

Harper was clearly charged up by the report.

“This is incredibly good news,” he said at a press conference in Kamloops-Thompson-Cariboo, B.C., where incumbent MP Cathy McLeod is trying to hold off a strong push by the NDP Balwinder Sundhu.

‘Not really a huge impact’

The good news comes after several rough weeks on the campaign trail and just a few days before Harper will face off with NDP Leader Tom Mulcair and Liberal Leader Justin Trudeau in an debate on the economy.

But several Manitoba economists were unfazed by the news, noting the emphasis on whether a budget is in the red or in the black is almost entirely a political affair.

“You’re not going to see business going out and saying everything is great now.”

-Chuck Davidson, Manitoba Chambers of Commerce

“From a political perspective it’s welcome news for the government,” said Fletcher Baragar, associate head of the department of economics at the University of Manitoba. “But from an economic point of view, given the size of the Canadian economy, plus or minus a couple of billion is not really a huge economic impact.”

He said the same is true for the recession data released by Statistics Canada earlier this month. Whether the economy grew by 0.1 or shrank by 0.1 is almost immaterial because either way the economy is stagnant. And economic growth is an easier path to a balanced budget than cuts, which can hurt the economy and therefore make it harder to balance the budget down the road.

“The economy as a whole is really not moving forward right now,” he said. “When the economy is humming along, your budget numbers are going to look great.”

Chuck Davidson, president of the Manitoba Chambers of Commerce, said from a business perspective a balanced budget is good news because it can provide some stability and confidence in the country’s finances. But he said one particular number isn’t going to suddenly change much.

“You’re not going to see business going out and saying everything is great now,” he said.

Over a period of time, he said, if government finances continue to look good, that will improve business confidence, resulting in expansion and new investments.

‘Political obsession’

Opposition parties want Canadians to believe the unexpected surplus is an anomaly that won’t be seen again this year because the economy ended up shrinking slightly in the first half of the year.

Liberal Leader Justin Trudeau went a step further and said the only way Harper got the budget to balance was by massively underspending in several departments through cuts to programs that directly affect people and contributed to pushing the economy into recession.

“It was a political goal that actually has helped us slide into the recession that Canada is the only G7 country in right now,” said Trudeau.

The Liberals took a gamble in saying they will run deficits of less than $10 billion in the first two years and not balance until year four, in order to invest in the economy with things such as infrastructure and education.

Harper says the budget balance is proof the Conservative plan – which includes dozens of boutique tax cuts and spending discipline – is working, but a new poll suggests the majority of Canadians don’t agree with him. A Forum Research poll released this week said 52 per cent of Canadians don’t think the Economic Action Plan has been successful. As well, 29 per cent prefer the Liberal plan to kick-start the economy compared to 24 per cent who think the Conservatives have the best plan and 21 per cent who picked the NDP’s plan.

Lynne Mackenzie, a economist with the Canadian Centre for Policy Alternatives Manitoba office, said to her budget balances have become a “political obsession” and it means we’re not having the more important conversation about how government spends its money, what cuts were made to achieve the balance, and what role government should have in running programs.

mia.rabson@freepress.mb.ca