PBO says there’s ‘quite a difference’ between estimated deficit and Liberals’ $40B cap

Canada’s parliamentary budget officer says higher expenditures offset higher revenues, leading to a projection that the deficit exceeded the federal Liberal government’s promise to keep the deficit under $40 billion.

On Thursday, Canada’s budget watchdog estimated in its latest economic and fiscal outlook that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year. However, the exact figure will be confirmed when the government publishes its annual public accounts. For the 2024-25 fiscal year, the PBO forecasted the federal deficit to come in at $46.4 billion, assuming no new measures.

In an interview with BNN Bloomberg Thursday, Yves Giroux said there was “quite a difference” between the estimate for 2024-25 and the promised $40 billion cap.

“Looking at the current fiscal year, $46.4 we think is the likely scenario before the government introduces additional measures, for example, in an upcoming fall update or as one-off announcements, and that’s due mostly to higher expenditures that more than offset obviously higher revenues,” he said.

“Higher revenues due to pleasant surprises on the corporate income tax front, but also slightly higher than expected revenues on the personal income tax side.”

Source - https://www.bnnbloomberg.ca/business/economics/2024/10/18/pbo-says-theres-quite-a-difference-between-estimated-deficit-and-liberals-40b-cap/

Source - Office of the Parliamentary Budget Officer and BNN Bloomberg

This excellent work by PBO. I will expand on the challenges related to closing the fiscal gap

Assumptions

1. The above was based on the latest fiscal monitor including the run-rates. Spending tends to be back-ended as part of rolling out the program spending to various programs.
2. When Justin Trudeau took office in November 2015 there was approximately $1B budget surplus and that was turned into approximately 1B budget deficit within three months of Trudeau taking power.
3. Expenses have been growing faster than GDP, taxation, and overall inflation growth
4. Trudeau has no plan to balanced the budget
5. Trudeau promised small deficits in 2015 that were neither small nor effective in terms of addressing issues like skills gap, low productivity, low innovation spending, lack of focus on the goods-producing sector, policies that are driven by votes and not value for money, etc.

Here is additional challenges with closing the fiscal gap:

1. Capital gain tax change - https://www.mnp.ca/en/insights/directory/the-hidden-costs-of-uncertainty-in-canadas-tax-system
2. Canada productivity gap - https://www.thebusinesscouncil.ca/publication/productivity-booster-leveraging-innovation-offering-canadian-workers-a-path-to-prosperity-on-their-terms/
3. Capital is fluid and will go where it gets the best return - https://www.fraserinstitute.org/studies/boosting-canadas-competitiveness-by-reforming-business-taxation or https://www.thebusinesscouncil.ca/publication/canada-slips-in-latest-competitiveness-ranking/
4. There are risks with GDP growth as 40% of Canada GDP growth has been tied to Public Sector Spending and Real Estate. Blog – GDP and Productivity – Canada – TD Analysis - https://www.dhirubhai.net/posts/paul-young-055632b_what-is-causing-low-productivity-in-canada-activity-7245437493842436096-tShZ?utm_source=share&utm_medium=member_desktop
5. Election is coming in 2025 and that will also lead to pivoting on the fiscal management cycle
6. Government waste should be focus like failed SDTC program - https://www.cbc.ca/news/politics/sdtc-explainer-1.7347506
7. Employment market faces many challenges - Blog – Labor and Employment – Canada – September 2024? - https://www.dhirubhai.net/pulse/employment-labor-market-canada-september-2024-paul-young-jipjc/
8. Canada needs to focus on fair trade. I estimate Trudeau's policies have cost GDP a cumulative of 150B since 2015. I estimate the revenue loss between $18B to $25B per year - Threat of Tariffs and Inflation – United States - https://www.dhirubhai.net/posts/paul-young-055632b_treasury-secretary-janet-yellen-warns-sweeping-activity-7253072913971458048-7Fnq?utm_source=share&utm_medium=member_desktop or Canada and Asia – Trade? - https://www.dhirubhai.net/pulse/canada-asia-trade-paul-young-efvqc/
9. Attracting FDI is also very important - Blog – Governance – FDI (Abroad vs Domestic) – Canada – 2023 - https://medium.com/@paulyoung_81567/what-is-next-for-fdi-foreign-direct-investment-canada-domestic-and-abroad-a7c1bc878a45
10. More money is required to expand the work of PBO, Auditor-General, ethics commissioner, Ombudsman, and other groups. The governance model needs to change to bring more accountability and oversight to government - Blog – Public Policy – Public Finance and CGA Canada - https://www.dhirubhai.net/posts/paul-young-055632b_some-of-you-may-or-may-not-know-that-i-used-activity-7233531988287045633-29se?utm_source=share&utm_medium=member_desktop

Paul is a former IBM Customer Success Manager who has deployed over 300 data and AI solutions across industries and geographies for the past 8 years. Paul is a Financial Planning, Analysis, and Reporting SME working with data including integration of macro and micro indicators as part of the integrated business planning and reporting cycle.

[email protected]

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Seeking employment - https://www.dhirubhai.net/posts/paul-young-055632b_hi-all-linked-in-followers-and-contacts-activity-7199365291288506369-qGVf?utm_source=share&utm_medium=member_desktop

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Stock Market – Canada – October 18, 2024 - https://www.dhirubhai.net/pulse/stock-market-canada-october-18-2024-paul-young-e98ac/

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Australia Stock Market - https://www.dhirubhai.net/pulse/stock-market-australia-october-18-2024-paul-young-dfdfc/

Canada and United States – Stock Market – October 11, 2024 - https://www.dhirubhai.net/pulse/stock-market-usa-canada-october-11-2024-paul-young-tcrrc/

Stock Market – Australia – WE October 11, 2024 - https://www.dhirubhai.net/pulse/stock-market-australia-paul-young-mmghc/

Stock Market – Australia – October 4, 2024 - https://www.dhirubhai.net/pulse/stock-market-australia-october-4-2024-paul-young-ibghc/

GDP growth by State – September 2024 - https://www.dhirubhai.net/pulse/economic-growth-state-united-states-paul-young-z3cgc/

Stock Market – Canada – October 4, 2024 - https://www.dhirubhai.net/pulse/stock-market-canada-october-4-2024-paul-young-yoy3c/

Stock Market – United States – October 4, 2024 - https://www.dhirubhai.net/pulse/stock-market-united-states-october-4-2024-paul-young-ibj1c/

Monthly Report – United States – September 2024 -? https://www.dhirubhai.net/pulse/monthly-report-united-states-september-2024-paul-young-1ktmc/

Monthly Report – Canada – September 2024 - https://www.dhirubhai.net/pulse/monthly-report-canada-september-2024-paul-young-atqnc/

Monthly Report – Australia – August 2024 - https://www.dhirubhai.net/pulse/monthly-report-australia-september-2024-paul-young-92soc/

Monthly Report – Ontario – September 2024 - https://www.dhirubhai.net/pulse/monthly-report-ontario-september-2024-paul-young-emxcc/

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