Federal Budget 2016: $29B Deficit

[Enoch Root]

Originally Posted by Red

I read and I get the difference in timing. But it was still for the purpose of fulfilling the election promise. And again these are not my opinions, this was brought up by media. Were they all wrong?

It's called spin.

And it's fine if he balanced the budget by making policy etc, but it's clear that these shares were used to boost revenues. Most people don't know what happened, but for me selling assets to cover budget holes is not exactly balancing a budget.

Actually, people do know what happened. And yes, it is balancing the budget. Maybe an example will help.

You're the PM. Your largest industry, and largest employer, Redbank, is close to failing and if it does, 100,000 people lose their jobs.

Even though, as a responsible PM, you were going to have a balanced budget, you decide to bail out Redbank to the tune of $10B and now you have a $10B deficit.

Next year, things are a little better. You are going to have a $5B deficit. However, Redbank is doing better and you can actually get out of the deal and get $8B of the $10B you put in back.

That now leaves you with a $3B surplus.

Yes, you lost $2B on the bailout deal, but you also saved 100,000 jobs (and all those people are still paying taxes) and you saved Redbank, and they too are still paying corporate taxes.

The result: a deficit in the first year, then a surplus in the 2nd. And even though you (the government) lost money on the deal, it was well worth it because it did what it was intended to do, which was to save the company and therefore save all those jobs.

Make sense yet?

[Slava]

Originally Posted by Enoch Root

For a while, Canada was running surpluses and actually reducing the debt burden. In the 90s, the US was also running surpluses. It is possible.

And if it were to continue for a period of time (yeah I know, lol right?), real debt reduction could occur.

But with Mr Trudeau in power, we can put those discussions away for a while. He, like his daddy, believes deficits are a good thing.

Yeah they did that in the 90's because they had to. Its not even political at this point, it's the way things are. We aren't suddenly going to come up with $619billion and be in the black. If anyone actually proposed that they would get destroyed in an election.

[Enoch Root]

Originally Posted by Slava

Yeah they did that in the 90's because they had to. Its not even political at this point, it's the way things are. We aren't suddenly going to come up with $619billion and be in the black. If anyone actually proposed that they would get destroyed in an election.

Obviously, but again, you can pay it back over time.

When you take out a mtge, you are completely incapable of cutting a cheque to pay it all off. But that doesn't mean you can't pay it off over time.

I get your point, that there is little to no appetite to pay it back, but there was in the 90s, and there can/will be again.

[heep223]

Originally Posted by Slava

Yeah they did that in the 90's because they had to. Its not even political at this point, it's the way things are. We aren't suddenly going to come up with $619billion and be in the black. If anyone actually proposed that they would get destroyed in an election.

What do you mean? It's not "the way things are" and it certainly is political. Populist politicians who make big promises like Trudeau are almost always big deficit spenders, and will just pile the debt bomb onto the next administration/generation.

Plenty of politicians campaign on running a surplus and paying down debt and they don't get destroyed.

[Enoch Root]

Some items not currently being discussed:

Eliminating 'switch funds'. Switch funds are multiple asset classes of a fund family that allow you to switch between them without incurring capital gains. These have been eliminated. I don't mind that because I believe in a level playing field. Switching from one fund to another should trigger a gain/loss, and normally does. So these funds have an unfair advantage. (Note: this change does NOT include changing within a fund for fee reasons, i.e. changing from A class to F class, for example).

Linked notes: linked notes are a structured product that will typically give you an interest rate return with equity 'upside'. Currently, if you sell the notes before maturity, you effectively turn interest income (which is taxed at full income rates) into capital gains, which are tax-advantaged. They are eliminating that loop hole. I like this change too, for the same 'level playing field' argument.

[FlamesAddiction]

Originally Posted by heep223

What do you mean? It's not "the way things are" and it certainly is political. Populist politicians who make big promises like Trudeau are almost always big deficit spenders, and will just pile the debt bomb onto the next administration/generation.

Plenty of politicians campaign on running a surplus and paying down debt and they don't get destroyed.

Being a populist just means that they are trying to help and look out for the interests of "ordinary people". Whether that means deficit spending or paying off the debt, really just depends on the current economic and political climate.

There is a time and place for deficit spending, and IMO we are well into it. Heck, Reagan made deficit spending a big part of modern conservative economics. Borrow when interest rates and labour are cheap, then pay it off as interest rates go up. Corporations and rich people do it all the time.

[Enoch Root]

Originally Posted by FlamesAddiction

Being a populist just means that they are trying to help and look out for the interests of "ordinary people". Whether that means deficit spending or paying off the debt, really just depends on the current economic and political climate.

There is a time and place for deficit spending, and IMO we are well into it. Heck, Reagan made deficit spending a big part of modern conservative economics. Borrow when interest rates and labour is cheap, then pay it off as interest rates go up. Corporations and rich people do it all the time.

Yes, but Trudeaus aren't interested in the second half of the equation.

This isn't a 'run a deficit while things are tight' budget, this is a 'spend, spend, SPEND!' budget.

The boost to EI definitely fits your narrative, as do a couple of the smaller items, but mostly, this is a 'spend to buy votes and make everybody like me' budget.

[Red]

Originally Posted by Enoch Root

It's called spin.


Actually, people do know what happened. And yes, it is balancing the budget. Maybe an example will help.

You're the PM. Your largest industry, and largest employer, Redbank, is close to failing and if it does, 100,000 people lose their jobs.

Even though, as a responsible PM, you were going to have a balanced budget, you decide to bail out Redbank to the tune of $10B and now you have a $10B deficit.

Next year, things are a little better. You are going to have a $5B deficit. However, Redbank is doing better and you can actually get out of the deal and get $8B of the $10B you put in back.

That now leaves you with a $3B surplus.

Yes, you lost $2B on the bailout deal, but you also saved 100,000 jobs (and all those people are still paying taxes) and you saved Redbank, and they too are still paying corporate taxes.

The result: a deficit in the first year, then a surplus in the 2nd. And even though you (the government) lost money on the deal, it was well worth it because it did what it was intended to do, which was to save the company and therefore save all those jobs.

Make sense yet?

Really? Can you beat it already with your condescending tone? Makes you look like a know it all. Although seeing you argue in just about every thread on CP does a pretty good job of it.

You have a different view on how to balance a budget. Selling your car to pay rent is not balancing it in my opinion. But that just me.

and done...

[saillias]

Originally Posted by polak

As a young middle class single white dude, I couldn't care less about your tax credits.

Hear hear! Where's our tax credit huh?

(Yes that's sarcastic no I don't think I actually deserve a tax credit)

[Jacks]

Originally Posted by MattyC

I was referring to DURING the election, when people have concrete platforms they need to run on, and when they made the promises you are saying they are breaking now. From April-July 2015, oil was seeing a rise back to around $60/bbl after the big crash in late 2014. Oil began to fall steadily through the fall and by the end of the election was pushing below $40/bbl. By December we were into $30/bbl and some days showing under that.

I realize you have already answered to this. The price of oil was fluctuating before, during and after the election, besides the fact that they should be taking that into account it still doesn't even come close to accounting for the extra 20 billion this year alone. There is no rational way to try and explain how much extra debt we are taking on by blaming the price of oil. Same as the provincial NDP they have a problem with out of control spending, difference is that the feds don't have nearly the same revenue problem.

[Coach]

Originally Posted by Jacks

I realize you have already answered to this. The price of oil was fluctuating before, during and after the election, besides the fact that they should be taking that into account it still doesn't even come close to accounting for the extra 20 billion this year alone. There is no rational way to try and explain how much extra debt we are taking on by blaming the price of oil. Same as the provincial NDP they have a problem with out of control spending, difference is that the feds don't have nearly the same revenue problem.

Yeah I don't disagree that the increase isn't proportional. At the same time, I don't think any of the three parties could reasonably project their budget during the election with the volatility that was happening. I think no matter who got into power, you would see some pretty big changes between what they campaigned on, and what ended up actually going through.

Regardless, my point was never that the high deficit is all good, but that them changing their budget from what they campaigned on doesn't really bother me that much. I'd rather see them change it for something more realistic (in accordance with what their plans were), vs hold steady on campaign promises that ended up being unrealistic just to save face with voters. And I'd think that way regardless of who got it. I think one of the reasons that the Cons were defeated was their inability to have any liquidity in their policies in face of changing social landscapes (War on drugs being a big one IMO).

I dunno, we'll see what's happened in 4 years.

[heep223]

Originally Posted by MattyC

Yeah I don't disagree that the increase isn't proportional. At the same time, I don't think any of the three parties could reasonably project their budget during the election with the volatility that was happening. I think no matter who got into power, you would see some pretty big changes between what they campaigned on, and what ended up actually going through.

Regardless, my point was never that the high deficit is all good, but that them changing their budget from what they campaigned on doesn't really bother me that much. I'd rather see them change it for something more realistic (in accordance with what their plans were), vs hold steady on campaign promises that ended up being unrealistic just to save face with voters. And I'd think that way regardless of who got it. I think one of the reasons that the Cons were defeated was their inability to have any liquidity in their policies in face of changing social landscapes (War on drugs being a big one IMO).

I dunno, we'll see what's happened in 4 years.

The Cons lost me completely when they were going to start a hotline where you could "report your neighbour's barbaric cultural practices". WTF is that. I was shocked by that. It reminded me of Nazi Germany.

[mrkajz44]

While the $30B deficit number is a bit of a surprise to me, I'm not that concerned overall. Personally, I think the Debt to GDP ratio is much more important than just a deficit / surplus number. Here is a Debt to GDP ratio chart for Canada:



We've come a long way from the mid-90s and even with these deficit numbers projected, we are actually still looking to be in good shape going forward. Couple that with the fact that GDP growth was very conservative in the budget and could actually grow much more than anticipated, I'd say the deficit is not as bad as everyone thinks.

I think people have to remember that a government budget is very different that a personal budget. If I am personally spending more than I earn, I'm doing something wrong. But a government can effectively run deficit budgets and have it be a good thing. Government earnings will continue to increase over time, while personal earnings plateau and then drop off. That's a key fact that is often overlooked.

If Canada's economy continues to grow, then it doesn't seem unreasonable to have debt grow at a similar rate as well, especially when times are tougher. It's sort of like a corporation. Notice that some of the biggest company's have large amounts of debt on their balance sheets. As the company gets bigger, their debt loads tend to grow as well. The banks are fine loaning the money so long as debt ratios are met, similar to debt vs GDP ratio for the government.

[Fuzz]

Also interesting to comapre to other countries, like the US:

We don't look like we are doing so bad.
Some other countries:

[GirlySports]

Originally Posted by MattyC

Yeah I don't disagree that the increase isn't proportional. At the same time, I don't think any of the three parties could reasonably project their budget during the election with the volatility that was happening. I think no matter who got into power, you would see some pretty big changes between what they campaigned on, and what ended up actually going through.

Regardless, my point was never that the high deficit is all good, but that them changing their budget from what they campaigned on doesn't really bother me that much. I'd rather see them change it for something more realistic (in accordance with what their plans were), vs hold steady on campaign promises that ended up being unrealistic just to save face with voters. And I'd think that way regardless of who got it. I think one of the reasons that the Cons were defeated was their inability to have any liquidity in their policies in face of changing social landscapes (War on drugs being a big one IMO).

I dunno, we'll see what's happened in 4 years.

Yup.

I would have liked to see how a Conservative government would have balanced the budget yesterday.

An NDP government balancing the budget yesterday would have been funnier.

[OMG!WTF!]

Originally Posted by GirlySports

Yup.

I would have liked to see how a Conservative government would have balanced the budget yesterday.

An NDP government balancing the budget yesterday would have been funnier.

It's not about balancing tho budget. Having some control on spending and a vague notion of the consequences of borrowing is all people are asking for. Perhaps a little trimming of governmental fat would have also been appreciated. At least some recognition that public sector jobs doesn't equal job creation.

[NuclearFart]

Anybody else upset getting bent over the barrel with their PC?

Bunch of godless communists running the show here.

[Resolute 14]

The Financial Post thinks Trudeau's promises in support of "the middle class" is all just smoke and mirrors.

http://business.financialpost.com/fp...o-equal-misery

[bizaro86]

Originally Posted by Fuzz

Also interesting to comapre to other countries, like the US:

We don't look like we are doing so bad.
Some other countries:

I think I'd rather have the economy of Luxemberg, Norway, Switzerland etc than Japan/Greece/Italy/Ireland.

Having too much public debt means the government will be competing with the private sector for capital, which will hurt the ability of the economy to grow in the long term. I'm not sure where the sweet spot is on that, but I do know that what is affordable right now may not be as affordable if interest rates ever go up again.

I'm not opposed to deficits when times are tough, but it seems like this is more likely to be a structural deficit. If it was a $10B deficit with an extra $20B of one-time spending on infrastructure projects, that would be much more palatable, imo.

[polak]

Luxemberg, Norway and Switzerland are tiny countries that could fit in Alberta. It's unrealistic for people to expect Canada to be able to provide the standard of living we have come to expect, to it's tiny population over such a massive area of land and such a harsh climate without accumulating debt.

Do you think infrastructure grows on trees?