Ottawa will run its biggest-ever budget deficit this year. "We will run a substantial short-term deficit this year which I would estimate at more than $50 billion," Jim Flaherty (pictured), the federal finance minister, told the Commons yesterday.
That's a whopping 50 per cent jump over the Tories' previous deficit estimate just four months ago. The culprits? Higher than expected EI payouts, a bigger than forecast drop in tax revenues, an auto-industry bailout that could end up costing more than $10 billion, and unplanned stimulus initiatives.
But that projected deficit amounts to a little over 3 per cent of GDP. Federal deficits of the 1980s equalled 8 per cent of GDP. And the record deficit inherited by the new Chretien government in 1984 equalled 5 per cent of the economy. Obvious reason: the economy has grown a lot since then. Meanwhile, the U.S. deficit this year is expected to equal a stunning 12 per cent of the American economy.
The big worry is "structural deficits" - continued budgetary red ink even after an economic recovery. There's a sharp difference of opinion here about the likelihood of a permanent deficit.
Don Drummond, influential chief economist at TD, and a former federal finance official, believes Canada was already heading into structural deficit before the recession. Why? Ten years of excessive growth in government spending; the biggest-ever federal tax cut, by then finance minister Paul Martin; and the 2 per cut in the GST by the Harper government.
But Dale Orr of Dale Orr Economic Insight believes Ottawa's long-term spending commitments will not exceed the rebound in tax revenues when the economy revives. A reversal of surging EI payouts and of slackening tax receipts come the economic recovery should keep Canada out of structural deficit, Orr says, provided Ottawa is disciplined in new spending initatives.
Tastes like chicken
Okay, what the GG actually said was that her first taste of seal heart Monday reminded her of sushi. Gotta say we're with Michaelle Jean on this one - the imbibing, that is, and the honouring of Far North traditions in her Nunavut tour. Especially when your loudest critic is the mis-named People for the Ethical Treatment of Animals, the "ethics" of whose conduct has been highly suspect on more than one occasion.
The GG's main job, it's always seemed to us, is celebrate the country - all 6.1 million sq. kilometres of it - empathize with residents over tough regional conditions, and share in local rituals. To give folks a sense of pride:
"For [Michaelle Jean] to go to an Inuit community and get involved, not just making speeches in support of our traditional hunt of the seal, but actually participating in the skinning and eating of the animal ... it was a very, very strong statement of support."
– Mary Simon, Inuit Tapiriit Kanatami president
Indeed. 'Course, if you're not on the side of the sealers, and their way of life for centuries, as I am, we'll have to agree to disagree. Meanwhile, if you're feeling a bit peckish, here are some culinary tips about seal-heart preparation - a.k.a. the "caviar of the north."
Pictured above: Governor General Michaelle Jean stands for an honour guard yesterday in Kugluktuk, Nunavut, celebrating the territory's 10th anniversary.
* Roy MacGregor: In relishing seal heart, Jean showed grace.
Today's leading indicators
* Poll of U.S. biz economists finds recession ending this summer. GR on encouraging recovery prospects here.
* Oil hits $63 (U.S.) on belief in imminent economic recovery. See our forecast for $100 - $200 (U.S.) crude here.
Read it here first
* G&M: Ottawa promises research scientists that R&D funds will flow again. See our rant on Canada's R&D deficiencies here.
Note: For the purposes of this blog, the inception of the Great Recession in the U.S., the epicentre of the crisis, is taken as the start date for the global slump. The U.S. has been in recession since December 2007.