Today in the House of Commons, Finance Minister Jim Flaherty announced that he will present the government’s annual economic update at 4 pm Ottawa time tomorrow. The fact that he is presenting this update after the markets closed has not gone unnoticed.
The federal budget, for example, is announced after markets close because there is information in the budget that could affect the markets and so, in the interests of making sure buyers and sellers of stocks, bonds, and other securities are all trading with the same information at their disposal, budget announcements happen when markets have shut down for the day. It was the same with the income trust announcement which — coincidence of coincidences — was made one year minus a day ago.
But the economic update is not normally a market moving event. Last year, for example, the Finance Minister used his economic update to talk about his “Advantage Canada” plan, which included the goal of bringing the ‘net debt’ of Canadian governments to zero by 2021. This was all interesting stuff but there were no new announcements about the government spending money or introducing new taxes and, as a result, Flaherty announced all this in the middle of the day at a meeting of the House of Commons Standing Committee on Finance.
So now we have this year and an “update” at 4 pm. It would seem to be a reasonable conclusion that the Finance Minister is waiting until 4 pm because he will indeed announce something about spending money or — more likely — adjusting taxes. But which taxes? Here’s the scrum with the Finance Minister after Question Period this afternoon:
Flaherty: I hope I'll be able to deliver the fall economic statement in the House of Commons but we require unanimous consent to do that at four o'clock after the markets are closed and two of the parties have consented, I understand, but the NDP have refused to give their consent. So if I can't do it in the House of Commons because of the NDP then I'll do it somewhere else.
Question: Why not wait to do it at the Finance Committee? [The standing committees of the House of Commons, including the Finance Committee, have not yet been struck for this parliamentary session so, as a result there is no Finance Committee and, hence, no meetings of the Finance Committee. It’s not yet clear when committees will be formed up but it will likely be after a break week early next month – ed..]
Question: If you're doing it at four o'clock there must be tax measures in there. Good news for Canadians?
Flaherty: I'm doing it after the markets are closed.
Flaherty: It's a fall economic statement and we generally do that after the markets are closed.
Let’s break from the scrum for a minute to challenge that last assertion. Here’s a note from the NDP researchers, who remind us that the last four fall economic updates were all made while markets were open:
2003: The Standing Committee on Finance met in a televised session at 10:34 a.m. to receive Manley's Economic and Fiscal Update
2004: Minister of Finance Ralph Goodale will appear before the House of Commons Standing Committee on Finance on Tuesday, November 16 at 3:30 p.m. to present the Government of Canada's annual Economic and Fiscal Update. The presentation will take place in the Railway Committee Room, 253-D, Centre Block, House of Commons, Ottawa.
2005: Minister of Finance Ralph Goodale will appear before the House of Commons Standing Committee on Finance on Monday, November 14 at 3:30 p.m. to present the Government of Canada’s annual Economic and Fiscal Update
2006: The Honourable Jim Flaherty, Minister of Finance, will appear before the House of Commons Standing Committee on Finance on November 23, 2006, at 3:30 p.m. to present the Government of Canada’s annual Economic and Fiscal Update.
So now back to the scrum with Flaherty:
Question: It's often done before the Finance Committee often. Why not do it at Finance Committee when they get the committees back up and running?
Flaherty: Well, I really want to do it in the House of Commons but we may not be able to because of the opposition of the NDP.
Question: It sounds like a mini budget.
Flaherty: No, it's the fall economic statement and — It's a fall economic statement. We're going to do it tomorrow at four o'clock.
Question: What about a GST cut? Would you like to get that over with a little sooner like maybe after four tomorrow?
Flaherty: Well, we certainly feel that Canadians pay too much tax. Okay, see you tomorrow.
Some economists believe that, if he wants to, Flaherty as the means, motive, and opportunity to bring in a whole raft of tax cuts tomorrow. Don Drummond, chief economist at the TD Bank and a former top official with the Department of Finance, just published his latest analysis today of the federal government’s fiscal capacity.
Drummond believes the federal government will finish the current fiscal year on March 31, 2008 with a surplus of $14.5–billion. For the next fiscal year, Drummond says the surplus could grow to $16–billion and to $16.5–billion the year after that. And Drummond’s surplus numbers are crunched after the federal government makes an annual $3–billion payment on the national debt.
A GST cut would cost the federal treasury about $5.5–billion in lost revenue. So even if a GST cut comes in, it is the view of Drummond and many other professional economists that there is still plenty of room — $9–billion and then some — for other kinds of tax cuts. In fact, in a phone call discussion I had with him this afternoon, Drummond believes Flaherty could cut the GST by one point, cut personal income taxes by one point and accelerate promised corporate tax cuts and likely still have money left over. And, he says, no lockup would be needed to do that and it would take the bureaucrats in Finance about three minutes to make all that happen.
And what about this lockup issue? Drummond remembers times when the update was done after the markets had closed and he remembers tax measures being announced without a formal lockup for journalists and financial analysts.
In other words — anything’s possible!