Harper Index: Budget warning signs raise doubts that announced money will get spent

Leaks over-hype stimulus spending - economists.

by Ish Theilheimer

OTTAWA, January 26, 2009 – a special report from HarperIndex.ca: Economists say the Harper Conservatives could announce plans to spend half as much on economic stimulus as he promised the world – and possibly spend even less.

Over the past several weeks, there have been a series of budget leaks and spending announcements from federal cabinet ministers in advance of today's crucial federal budget speech. News reports have featured a shockingly high $64 billion deficit projection, but that projection is over two years, so it's really $32 billion annually.

That number, however, also includes the deficit the government would have even without any extra spending – a deficit due strictly to lost tax revenue because of the economic slowdown and previous tax-cuts. Economists interviewed by HarperIndex.ca estimate this "structural" deficit to be between $15 and $20 billion.

This would put new stimulus spending in the range of $12-15 billion, about one percent of Canada's gross domestic product (GDP). The figure comes to about half of what governments, including Canada's, committed to at the G20 in November.

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