It’s amazing how government finances are often portrayed. In advance of today’s fall economic update, for example, I read a headline that said the Liberals had extra cash to spend. The story said the government had an unexpected windfall of $10 billion because the deficit this year would be $17 billion instead of about $26 billion. Leaving aside that even the smaller deficit will be $7 billion more than what the Liberals promised in the last federal election, the language doesn’t match reality.
Digging a slightly smaller hole than you originally planned doesn’t mean you’re now standing on top of a mountain. When you say you’re going to borrow $10 billion, then you revise that forecast to $26 billion and then you find out you only borrowed $17 billion, that doesn’t mean you have a windfall. You’re not sitting on a pile of cash. It just means you are spending less of the cash you don’t have in the first place.
When we consider a $17 billion deficit a bonanza, it’s no wonder we’ve ended up with billions of dollars of debt. The government should be happy the economy is doing well, but it shouldn’t spend a windfall that doesn’t exist.