Canadian Governments Cautioned To "Rein In Spending" Or Risk Financial Ruin:

CFIB .Wednesday, 16 March 2011 08:08

A report released today by the Canadian Federation of Independent Business (CFIB) warns Canadian governments that continuing their current spending habits is risking following in the footsteps of countries like Greece & Ireland that have found themselves in dire financial circumstances in the last 12 months.


"The good news is that many governments appear to be putting the brakes on spending growth, but the margin of error is razor thin - any backsliding could push the debt balance in the wrong direction," said CFIB's chief economist, Ted Mallett. "Even tying government spending to the rate of growth in the economy would push today's $1 trillion in government debt to $1.8 trillion in the next 10 years."

To capture the varied picture at provincial level, CFIB has created three categories to group the provincial governments: the 'good', the 'bad', and the 'ugly'.

Saskatchewan and Newfoundland & Labrador, both with balanced budgets and stavle spending-to-GDP ratios, are carrying the distinction of being in a 'good' financial position, whilst BC, Alberta, and Manitoba are all falling into the 'bad' category. All are currently running deficits that may be overcome with the aid of economic growth. For the rest, a huge effort will be required in order to post surpluses by decade's end, without even look at making progress on debt.

Regardless of current status, CFIB recommends that all governments embrace the following principles to demonstrate good "fiscal fitness" in their own backyard:

1. Implement legislation that focuses on controlling expenditures, not just balancing budgets;
2. Be specific enough to ensure the spirit of the legislation is followed without creating loopholes; and
3. Ensure the legislation focus on the long-term sustainability of government finances.

"If we think we're fiscally infallible, we're actually being fiscally delusional. The sooner we act, the sooner we can take the necessary steps to ensure we live within our means and avoid having to make dire choices later," concluded CFIB vice president, Satinder Chera