Liberal MPs pressed Finance Minister Jim Flaherty Tuesday for more details about how he intends to eliminate the federal government's annual deficit once the recession ends as Conservatives and Liberals each tried to position themselves as responsible stewards of the public purse in a week which could end with a general election call.
The deficit this year will top $50 billion — a record — as the government tries to pump billions of stimulus dollars into the moribund economy.
Flaherty insists once normal growth resumes, tax revenues will naturally rise even as the extra spending required during a recession eases and that will let the government of the day balance the budget without tax increases or spending cuts. The government predicts a balanced budget by the end of 2014, a forecast Flaherty stuck to Tuesday.
“We have a plan. We're on target. The economy is actually looking better. Let's be positive about our country,” Flaherty said during a meeting of the House of Commons Standing Committee on Finance.
The argument is crucial because it will affect some key decisions governments could have to make as early as the next budget year.
If Flaherty's view prevails, governments need do little to change basic spending or taxation plans. But if the opposition and some private-sector forecasters are correct, tax hikes or spending cuts will be required to eliminate the deficit. And, given that only three finance ministers since 1983 have actually managed to cut spending in any given year, forecasters who disagree with Flaherty believe some sort of tax hike will be required to eliminate the deficit. [Read the rest]