Reality checks in – austerity plan based on exaggerated deficits

In February we attended a forum hosted by the Centre for Policy Alternatives looking at the manufactured crisis the Liberals are using to bring in a far-reaching austerity agenda.

At the time, we noted that Finance Minister Dwight Duncan has a consistent history of grossly exaggerating the forecast deficit. In 2010-11 Duncan was off by 43 per cent with his forecast. Progressive economists were forecasting the actual deficit for 2011-12 would not be $16.3 billion, but come in closer to $12 billion.

They weren’t far off.

There was little attention last Thursday when Finance Minister Dwight Duncan revealed last year’s deficit was in fact $3.3 billion lower than forecast, coming in at $13 billion.

Duncan is still maintaining the provincial budget will not come into balance until 2017-18 despite being well ahead of his long term target. Duncan is up to his old tricks again by maintaining 2012-13 will still finish with a $14.8 billion deficit. That’s a higher deficit figure than last year, even with more and more public sector collective agreements piling up zeros, funding increases for health care cut by nearly two-thirds, and a new NDP-brokered surtax on the wealthy.

In February we pointed out how these exaggerated figures got compounded to make public services look less sustainable. That included some pretty unique forecasts on future interest rates.

It’s a little over five months since the provincial budget. Look for a better deficit number in the fall update, and next year at this time, a surprise announcement about the deficit being again much less than forecast.

RBC is already forecasting provincial economic growth to be slightly higher than last year, at 2.2 per cent real GDP. Housing starts are up considerably over last year. So why the sour deficit forecast, unless there are other agendas at work?

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