Wednesday, October 08, 2008

Are we in a deficit now? Questions for Deficit Jim

Is Canada in a deficit situation now? It certainly appears that we are. These numbers from the Finance Department's Fiscal Monitor of September 26, 2008 were noticed yesterday by readers at the CBC website as a commenter had pointed them out and they were brought to my attention by a reader yesterday:
Financial requirement of $20.3 billion for April to July 2008

With a budgetary surplus of $2.9 billion and a requirement of $23.2 billion from non-budgetary transactions, there was a financial requirement of $20.3 billion in the April to July 2008 period, compared to a financial source of $6.8 billion in the same period last year. This difference reflects the financial requirement associated with loans to major Crown corporations which were announced in Budget 2007, as well as higher refunds related to the 2007 tax year.

Net financing activities up $14.2 billion

The Government financed this financial requirement of $20.3 billion by increasing market debt by $14.2 billion and reducing cash balances by $6.1 billion. The increase in market debt was achieved largely through the issuance of treasury bills. The level of cash balances varies from month to month based on a number of factors including periodic large debt maturities, which can be quite volatile on a monthly basis. Cash balances at the end of July 2008 stood at $5.2 billion, $1.8 billion above their level at the end of July 2007. (emphasis added)
If you read the wording from the Department of Finance, they are careful to maintain there is a difference between budgetary and non-budgetary transactions. The distinction seems moot to me if the non-budgetary transactions require the government to essentially finance their operations. Perhaps some media and political types might find out from Deficit Jim just exactly what all this means and whether we are indeed into deficit spending. After all, the PM and Deficit Jim maintain that we are running a surplus.

If it's not a deficit situation, I'd sure as heck like to know what one is then.

Make sure you read Mikewatkins as well.