Running a numbers racket

Hey, where'd my update go? No, not software. The Sept. 10 Update of Economic and Fiscal Projections. Jim Flaherty announced a catastrophic change in the federal government's fiscal situation, labelled it "staying the course", scurried off, and everyone went back to discussing Michael Ignatieff's electoral prospects. It would be more appropriate to recall Brian Mulroney's.

This budget update was a downdate, a trip a quarter century back into the dismal past of bad decisions defended by fantasy. The runaway spending and deficits are bad enough. But what really scared me about the Update was its return to the pattern of the Mulroney years in which, whatever could reasonably be foreseen was terrible but whatever lurked on the borders of Never-never-land was mysteriously going to be fine. People ignored this phenomenon until it was very nearly too late.

And now it's back.

In the 2009 Update shows that over the next three years or so, the lines denoting ballooning deficits and debt have the shape known technically among economists as "scarily steep" and then they suddenly relax and become "reassuringly flat." We have seen this before, and it was bad news. (In case you like charts more than my editors, I've posted a few here).

Federal deficit projections in the 1980s always had the shape of Vimy Ridge, dauntingly steep on our side but sloping gently away on theirs. Worse, the point where we were magically saved moved inexorably away as we approached, exactly as though it was a mirage and exactly the way it receded by a year between the September 2009 Update and the budget just eight months earlier.

And with finance ministers peddling such snake oil, instead of a refreshing drink of solvency, all we ever got was an oily brew of self-satisfaction.

So I invite you to savour Flaherty's "Foreword" and the "Introduction" to the Budget Update. They ooze reassuring phrases like "will stay the course ... committed to its plan ... Although the timing of this return to balanced budgets has changed, our commitment ... has not. When the time is right... additional spending restraint is necessary.... staying the course ... return to a balanced budget as the economy recovers.... stay the course... committed to returning to balanced budgets.... continue to follow a disciplined approach to fiscal planning... a return to budgetary balance without endangering the... recovery."

Reading this guff, you wouldn't guess the actual numbers in the crucial "Summary Statement of Transactions" show spending up $13.9 billion dollars this year alone, would you? No. That would require the finance minister to say "My hair is on fire and my projections are out the window ha ha I have no idea what nasty surprise I'll pass on next!" Which they never do even when they're quietly admitting in the Summary Statement of Transactions that next year's deficit is also now predicted to be fifteen and a half billion dollars more than they expected eight months ago.

I call that pretty ugly. A deficit for this year and next of $101.2 billion, $37.7 billion higher than they said just eight months earlier, strikes me as a bit of an "Ooopsie." But not for these guys an admission of past error or a confession that current projections are as worthless as the last batch. Instead they say on the one hand the recession made them do it, and boast on the other that Canada is singularly well placed to weather the recession, apparently unaware of the glaring contradiction. And they never get to the third hand where this incredible surge in spending makes any sense. As for the fact that they're planning to add $76.1 billion more to the debt in the next five years than they were as recently as January, it's just not something to discuss in polite company.

Yup, $76.1 billion. That's $2,200 per Canadian. And that's just the difference between the $83.1 billion they planned to add to the debt over five years back in January, and the $159.2 billion they now intend to add over five years. The total debt is now meant to reach $622.9 billion by 2013-14, or $18,500 for each of us including little babies. And that's assuming that the swell downturn in catastrophically runaway spending happens magically three years from now exactly the way it persistently didn't in the 1980s.

Then we have the government's cackling about a "disciplined approach to fiscal planning," a phrase that means "not cutting anything that buys votes." Even before the recession hit, the Tories -- between bouts of yapping about those awful big spending Liberals and socialists-- were hiking spending seven per cent a year.

So never mind Michael Ignatieff's risible electoral prospects or budgetary fantasies. It's Brian Mulroney's that matter now.

[First published in the Ottawa Citizen]

ColumnsJohn Robson