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It's worth remembering that during Canada's last recession, the federal government had no compunctions about running a deficit to spend the country back to recovery.

In 1993 alone, Ottawa raised spending by $8-billion, saw its revenues shrink by $2-billion and watched its deficit grow by $7-billion, reaching a record high $39-billion.

Fiscal policy has been overshadowed by that experience ever since. In the 1990s, policy-makers eradicated the deficit; in the 2000s, they avoided a repeat.

Now, though, Canada is flirting with recession once again. Deficit financing is not an option; memories are still too raw. But there is no room to manoeuvre; the surpluses are now hovering around zero.

How did it come to this? The Finance Department's fiscal tables show that Ottawa has been so busy cutting cheques and cutting taxes that it has wiped out about $60-billion a year in potential surpluses that could have been directed to tackle any number of problems.

While the Conservatives may be blaming the Liberals, and the Liberals blaming the Conservatives, the key to the disappearing surplus lies in the frequency of elections.

Since 2000, we have had four federal elections. We have also watched federal surpluses dwindle from a peak of $20-billion in 2000, to nothing at all this year - or perhaps even a deficit.

Where did it all go? Much of it went to pre-election or campaign attempts to woo voters with their own money - either through income-tax cuts and health-care transfers by the Liberals, or through cuts to the Goods and Services Tax, increased military spending and too-numerous-to-mention small but targeted programs and tax incentives by the Tories.

"There has been no master plan in how to deal with the surplus," says Peter Dungan, professor of economics at the University of Toronto.

If taxation policies were the same now as in 2000, and spending patterns had stayed the same too, Ottawa would be showing an enormous $60-billion operating surplus this year.

"We reduced the debt, we reduced the tax level, and spending was running at a pretty good clip. It looked like Christmas," said Dale Orr, chief economist at forecasting firm Global Insight Canada.

Spending has gone from 12.1 per cent of the size of Canada's economy in 2000, to above 13 per cent now. The climb is worth about $15-billion in extra annual spending, with the total bill officially forecast to surpass $208-billion this fiscal year.

Because of tax cuts, revenues have declined from 18.1 per cent of the economy in 2000, to just 15.1 per cent this year — the lowest since 1963. The decline means a loss of about $40-billion a year.

Add to that a few billion that would have been saved on debt charges if all that extra money had gone to paying down debt, and we're facing a $60-billion-a-year fund of forgone opportunities.

Instead, the 2008-09 surplus, according to Finance Minister Jim Flaherty, will come in around $3-billion - slightly above the $2.3-billion projected in the last budget.

Or, according to some economists, it will be close to zero or slightly less, especially if commodity prices continue to slide and the U.S. financial crisis strikes at Canadian corporate profits, which in turn hurts Ottawa's revenue stream. Others disagree and say our economy still has enough momentum to pay for the government's spending and tax plans, but warn that next year will be a close call.

It's too easy, however, to say the surplus has been squandered. Canadians do have something to show for their taxation money in the past eight years.

Substantial increases in transfers to the provinces have meant that provincial budgets are now far healthier, and federal-provincial bickering has dropped to a dull roar.

Much of the federal transfer money was earmarked for health care, and indeed, health care is not in as dire financial straits as in 2000. Ditto for education.

Provincial governments and users of the health care system may not be happy, but Ottawa's efforts were not futile. The money has prevented conditions from deteriorating further.

"Our schools and our hospitals are in better shape than they would have been otherwise," concedes Jim Stanford, economist for the Canadian Auto Workers.

The military is far stronger than it was a decade ago, and the public service has been revived.

As for taxes, they are much lower than in the 1990s. Corporate taxes are low enough to make Canada relatively competitive globally. Personal income taxes have come down steadily. And consumption taxes - namely the Goods and Services Tax - have fallen too.

The last round of tax cuts, announced last November, were particularly well timed to help stimulate a flagging economy.

A reasonable argument can be made that Canadians were overtaxed in the 1990s, and the logical thing for Ottawa to do with its newfound surpluses of the new century was to cut taxes and give some of its extra money back. Mr. Flaherty makes that very argument.

But both tax cuts and spending increases have come about so haphazardly, driven mainly by calculations of election timing and vote-getting, that fiscal policy has become visionless.

Large spending initiatives come mostly in the form of cutting bigger cheques for provinces or income-support programs. Tax-cutting exercises mainly involve cutting tax rates, or introducing small, targeted measures here and there, rather than overall reform and re-evaluation of how people and economic activity are taxed.

At the heart of the problem is a lack of a firm goal or anchor to rein in fiscal policy. In the 1990s, Canada was obsessed with abolishing the deficit - an obsession that kept spending under control, determined the burden of taxation and forced government initiatives to be organized behind one goal.

Now, with the bounty of surpluses, the only firm discipline on a finance minister is a collective bad memory from the 1990s: Canadians are so allergic to deficits that any politician who incurs one knows he will pay a steep price.

On the surface, this fear may resemble a discipline of sorts on spending and tax cuts. But in practice, it has led both Conservative and Liberal governments into less than ideal spending patterns.

Since the unwritten rule of budgeting in Ottawa is that a deficit must always be avoided, the bias in the Finance Department's calculations always favours a surplus.

So at the end of the fiscal year, the federal government - under both the Liberals and the Conservatives - has frequently found itself with more money than it counted on. So instead of saving the money somehow, or putting it toward the debt, the government frantically spends it in the last couple of months of the fiscal year.

The Liberals were chastised frequently - by the opposition parties and by the auditor-general - for their trust funds and end-of-year transfers that diminished the surplus.

But the Conservatives have set up their own versions of the Liberals' infamous trusts, which show up on the books as one-time expenses or one-time transfers to the provinces. In the 2006-07 fiscal year, they had about $9-billion in such spending, falling to $2.4-billion in 2007-08.

The beauty of these one-time expenses is that they don't hamper the country's fiscal capacity in future years - and that's important nowadays, when the cupboard is looking increasingly bare. But the year-end spending is often the result of a back-of-the-envelope strategy meant only to meet short-term goals. It sucks fiscal energy away from focusing on the larger, longer-term needs of the country.

Don Drummond, the chief economist at Toronto-Dominion Bank and a former top Finance bureaucrat, feels fiscal policy has lost its way, and nothing proves that more than the year-end bonanzas.

"The necessity in the 1990s to eliminate the deficit and lower the debt burden gave fiscal policy in Canada an anchor that was pursued with almost singular focus. But once surpluses were recorded, that anchor was lost," he says. "The focus on short-term budgeting, and particularly the habit of blowing money out the door at the last minute to avoid large surpluses, has killed any sort of rational fiscal planning."

Now, as the economy stagnates and the government's revenue flows are no longer as dependable, the vote-buying fiscal policy approach of the past eight years is constrained.

But constraint is not what the people look for in government at a time of major financial upheaval and economic slowdown. It's notable that in an election campaign where economic angst figures prominently, neither of the two leading parties have staked their fortunes on pitching a rescue plan for Canada's economy. They can't afford to. Instead, they talk about their records of fiscal management.

Parts of Canada may need fiscal support more now than at any time since the last recession in the early 1990s. But the directionless fiscal policy of this politically charged decade has curtailed Ottawa's effectiveness.

One solution, offers Mr. Stanford, would be to depoliticize fiscal policy, as the Netherlands has done. There, he says, an independent bureau of the legislature puts together the fiscal forecast, makes recommendations and seeks multiparty support to implement the recommendations.

He marvels at how quickly Canada has gone from slaying a deficit and recording large surpluses to being on the edge of falling into the red again.

"It's a symptom of how short-term and politicized our fiscal system has become, that we're come close to deficit so quickly."