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Economy Lab

Why the parties' federal budget projections are less than credible Add to ...

The federal deficit is going to be one of the most important challenges facing the next government, and the platforms of the three major parties all claim that their programs are consistent with balancing the budget in the medium term. None of these claims are credible.



All parties are using the March 22 budget as a baseline for their scenarios; their platforms enumerate tax and spending plans in terms of deviations from the budget scenario. So the first problem to point out is that the budget’s scenario of freezing nominal expenditures for five years without cutting services or programs is at best implausibly optimistic.



The Liberal platform discussed here builds on that implausible baseline by overestimating anticipated revenues from an increase in the corporate income tax (CIT) by a factor of 2.5.



The Conservative platform’s variation on its own budget is a promise to identify and implement savings worth $4-billion a year within the next three years without cutting programs or reducing services. No other explanation is offered, but then again, neither do they seem to be able to explain the cuts that were announced in the budget.



But the prize for budgetary opacity must surely go to the New Democrats’ “costing document” (pdf). Firstly, their estimate of $9-billion a year from increasing the CIT rate is even more implausible than that of the Liberals: an overestimate by a factor of at least three. The next largest source of revenue -- “Tax Haven Crackdown” -- is supposed to produce more than $3-billion in 2014-15. I cannot offer you any more in the way of explanation behind that number, because the NDP platform is completely silent on the matter. No measures are announced, no reasoning is offered to explain why those measures might be sensible, and no research is offered to justify the $3-billion estimate. The same goes for the “Ending Fossil Fuel Subsidies” entry: $2-billion a year in extra revenues, again with no explanation, discussion or research.



In the United States, proposals aren’t taken seriously until they are examined by the Congressional Budget Office. We should be thinking seriously about giving the Parliamentary Budget Office -- or some other independent source of professional expertise -- the resources necessary to perform the same service. The current state of affairs is simply unacceptable. Voters shouldn’t be reduced to guessing what lies behind parties’ thinking.

 

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