Canada's Housing Bubble

Canadian Finance Minister Jim Flaherty said the country is studying the sale of government assets in a bid to fill a budget shortfall.

Mar 11, 2010 David Akin nationalpost.com

Ottawa -- The Parliamentary Budget Office concludes that the forecasts presented by Finance Minister Jim Flaherty in last week's federal budget do not form "a prudent basis for fiscal planning."

In a report published Thursday, Parliamentary Budget Officer Kevin Page says that, by 2014, the federal deficit will be $12.3-billion while Flaherty predicted it would be $1.8-billion.

Anticipating that Mr. Page would criticize the budget, Mr. Flaherty's office dismissed the report even before he released it.

"Our forecasts are developed by taking an average of those developed by the private sector," Mr. Flaherty's press secretary Chisholm Pothier said in a statement emailed to reporters hours before Mr. Page released his report. "Private sector economists widely agree that these are a prudent basis for fiscal planning, even if Kevin Page doesn't agree. He's in the minority."

The argument is more than an academic one between economic forecasters.

The government's plan to eliminate the smaller deficit Mr. Flaherty is predicting is based solely on controlling the rate of growth of government spending and the natural rise in government tax revenue as the economy improves. So far, the government has said that the spending controls could be achieved largely by making government more efficient and without the wholesale reduction of government programs or any increase in taxes.

If Mr. Page is right, though, the government will be required to do more to balance the budget in five years and that could involve either more drastic cuts to government programs or increases in taxes or user fees.

"Achieving budgetary balance would require: the economy operating significantly above its potential; actions to increase revenues or reduce spending relative to their projected paths; or, some combination thereof," the report from the PBOsays.

The Parliamentary Budget Office was created by the Harper government in 2006 to provide an independent assessment of the federal budget and other fiscal issues of interest to parliamentarians.