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Tuesday 21 May 2013

a watchdog with one eye on the sheep

There are a number of  "watchdog" institutions in Ottawa.The first was the Economic Council of Canada.It was a very gentle watchdog with rarely a harsh word to say.It was followed by the Conference Board and the C.D.Howe Institute.They kept a close eye on the government's economic forecasts and of course their budgets.They proved to be worthwhile when there was very little to watch.In effect, they were good at saving millions.But when the federal government was collecting G.S.T revenue and the deficit kept rising from $5 billion in 1991 to $42 billion in 2001 or 2002 the watch dogs were silent.Good at saving millions but not at saving billions.What can explain this lack of vigilance?

The most extreme situation was in 2009 when the department announced a forthcoming $13 billion surplus and Mr. Flaherty announced first a$25 billion deficit and finally a $56 billion deficit.This all within six weeks.The watchdogs should have been howling but were silent.It is possible that Mr. Flaherty was very clever and assembled these guys and explained that there was some crisis on the horizon.He needed the money to solve this crisis.He may have even increased their budgets a little bit.But how did he explain away a $40 to $46 billion deficit with the economy picking up and more G.S.T. revenue coming in?This is a mystery but Mr.Flaherty did a god job because we still have a deficit until 2015 and G.S.T revenues have increased every year.What can the watchdogs say about this?I don't know but soon there will be no more sheep left to watch.

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