It's the incredible disappearing surplus. It didn't exist mere months ago. Then for a blink of an eye, it did. Now it's gone again.This magic trick is being performed because an election is coming. Stephen Harper wants credit for getting the public finances back into the black, sure, but the last thing he wants is for opposition parties to use multibillion-dollar surpluses to make election promises. So he's using them up with his own goodies before they get the chance.
By the time that election comes, those (projected) surpluses will be long gone. We hardly knew ye.
Finance Minister Joe Oliver did some magic even before he delivered his fall fiscal update Wednesday. He made the deficit for the current fiscal year, 2014-15, come out to the same $2.9-billion figure the government projected in February – even though Mr. Harper has since announced $3.2-billion in additional spending and tax cuts.
In other words, when economic conditions improved and the government realized it would have an extra $3.2-billion, and go into surplus, it quickly acted so it could still project a deficit.
Without that action, the projected surplus for next year, 2015-16, would have been $6.9-billion. Now it will be only $1.9-billion, because most of it was claimed in the government's move to expand payouts to parents – a $60-per-month increase for parents of kids under 6 and new $60 cheques for parents of older kids – and a big tax cut for single-income couples with kids.
For perspective, think way back to the late finance minister Jim Flaherty's last budget, when he warned that we didn't have a surplus yet, so new spending or tax-cut commitments would be reckless. That was a different era, all of nine months ago. Now, the government found enough money to go into surplus, but already shovelled it out the door. And Mr. Oliver is still warning "we're not out of hot water yet."
There are bigger surpluses projected for the following three years. But the government's new plans have already slashed them in half. You can bet the rest, or the lion's share, anyway, will be eaten up with more pre-election goodies in the next budget.
There's a political point to all this. The government doesn't want the public thinking much about big surpluses in the near future, because it doesn't want a lot of what-if debate on what can be done with the money. It wants people thinking about what they're already doing with the money.
With no projected surpluses, the NDP or the Liberals will face a challenge when they make big campaign promises. The Conservatives can say, "with what money?" How will you pay for it? Will you raise taxes? Cut existing programs like the $60 payouts to parents? Or go into deficit?
Liberal Leader Justin Trudeau has made one choice: He's promised to undo the income-splitting tax cut, which would cost $2-billion a year and benefit few families. Mr. Oliver portrayed that as a general intention to "repeal" Conservative tax cuts for families.
NDP Leader Thomas Mulcair has been cagey to avoid being a target. He said he'll fight the income-splitting plan in opposition, but hasn't said definitively whether he'd roll it back if he takes office. He promised not to increase income taxes, but would instead increase corporate taxes. The problem is that doesn't bring in a lot of money, and he's talked about a national daycare plan, ensuring health-care transfers aren't cut and undoing cuts to veterans services.
In truth, there's a very good chance surpluses will be much bigger than projected. There's a $3-billion-per-year "contingency." And the government has now slashed $2.5-billion a year from future projections by predicting prices for Canadian oil will remain at current lows. If oil prices bounce back, and there's no unforeseen hit, there'll be a lot more money.
But the Conservatives want to keep those projected surpluses small. They don't want a debate about the how to spend available money in the future. They want their opponents to be forced to admit they can't fund their promises unless they take away something Canadians already have. For Mr. Harper, the trick is to make surpluses disappear quickly – so they don't fall into the wrong hands.