The department and the Minister of Finance

In the days of Donald MacDonald and even Paul Martin, as the Minister of Finance, the tradition was that the Minister would give his forecast of the budget deficit or surplus a little before the actual numbers came out.Next the department of Finance would come out(before television) with the almost solid numbers that would be the budget numbers.I have had some experience with the department of finance and know that these numbers were indeed rock solid numbers.However the minister(especially Paul Martin) had a habit of adding $500 million or a billion onto the department's numbers.No one in Ottawa minded because it was probably a pet project of Paul Martin's and for sure it would be worthwhile.However this set the trend for the Minister's forecast being different from the Department.Nevertheless the watch dogs made a big noise over this procedure for a small amount of money.

Jim Flaherty,the present Minister of Finance, obviously saw this trend and Jim Flaherty embellished on it.In 2009 the Department of Finance made their forecast about a month before the actual budget figures would be released.The department said there would be a $13 billion surplus.The economy was picking up and the G.S.T tax was bringing it  in as usual.Mr. Flaherty made his presentation inside parliament which were not privy to but (I believe) it was not going to be accepted.He came outside of parliament and stated there would likely be a $25 billion deficit.He explained that 2008 had been a year of recession and so a deficit was likely.Another two or three weeks later he revised his deficit figures upwards to $40 billion.The department was silent on this revision.Mr.Flaherty's final deficit figure was a whopping $56 billion.It is very hard to imagine that the department of Finance with their very accurate forecasting models could have been so inaccurate.However it is clear now that Jim Flaherty made very different assumptions about spending government deficits than he gave to the department of Finance.Amazingly both the department and the watch dogs(such as The Conference Board) were at first silent and then in complete agreement with the Minister.So then Jim Flaherty completely changed the dynamic between himself and the department of Finance.And I believe between himself and parliament although that is for others to say.One thing is clear that Jim Flaherty has been very persuasive in convincing the Department of Finance to see that their models and their experts are wrong.