The lead story in yesterday's paper was "Ottawa Awash with Surplus Cash." Five months into this fiscal year, the Federal government is $6.7 billion into the black and they only forecast a surplus for the year of $3.6 billion. The Globe & Mail leads us to believe that this creates a "political dilemma" for [Finance Minister] Flaherty.
I have always found this kind of talk to be both amusing and off-putting. A decade ago the Federal government moved into a surplus position after years of substantial deficits, and for the first time since the Trudeau era, we were going to get through a year without increasing the public debt load. As soon as we popped our head above water, however, the debate began as to how we should spend our newfound wealth. The three variables in the equation were (1) debt reduction, (2) tax cuts, and (3) increased program spending. To the Liberals credit, they seemed to find an acceptable balance between the three.
We're in a different situation today. Canada is a model other countries are looking to emulate. We've had 9 consecutive surpluses. Our debt is still large and hasn't decreased much in absolute dollars, but as a percentage of our economy it is much more manageable. Canadians are now quite used to surpluses and we expect the Conservatives to keep the budget in the black. So this time around, Minister Flaherty has a fourth variable he has to consider - building a cushion for a tougher environment ahead.
I contend that we're going to look back in a few years and marvel at how good we had it. Right now everything is clicking for Canada and this is reflected in the country's income statement. We've had the "Paul Martin tailwind" pushing us along - falling interest rates, an undervalued dollar and a perpetually strong U.S. economy. Furthermore, the Conservatives have had "the resource cycle of all resource cycles" as topping on the cake.
I would love it if the Minister responded to the headlines by saying: "This is only a 5 month number. We're running a $220 billion dollar enterprise here and a few billion plus or minus is not something we should react to at this stage. With signs of a slower economy ahead, we also have some concerns as to how sustainable the revenue side of the equation is. It's a good time to be cautious. So we're going to stick to our fiscal plan."
Twelve hours later...
Guess what. While I read this morning's paper and get ready to post this item, the Minister said just that. Right on.