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Nice charts Stephen, thank you for the update.

You wrote that "the fact that the deficit has turned around doesn't mean it will disappear anytime soon." I wonder if you would like to reflect upon Jamie Galbraith's argument that once the economy recovers, that revenues will exceed forecasts. The corollary of this argument is that the gov't should still focus on growth over eliminating the deficit.

Reflecting back upon both the US experience in the late 1990s and Canada in the early 2000s, Galbraith may have a point. In both cases, gov't revenues did exceed forecasted levels and deficits turned into surpluses quicker than expected.

Perhaps Canada can expect a similar outcome in the next few years.

Commodities are still sweet. The global economy is growing. Canada is in a sweet spot for now. So does this mean the Harper Conservative budget stance is now contractionary?

Stephen: On vacation? Carry your cell! Field all kinds of interviews! You know the implicit contract. :-) Thanks again for carrying the charge, BTW.

Wow. I hadn't realized just how much the growth rate of federal expenditures increased with the arrival of the Harper Conservative government in 2006. And why the hell aren't the old Reformers grinding their teeth and pulling out their hair? Or was the fiscal conservatism of yesteryear one big charade?

westslope: That's an insightful observation about the jump in the growth rate of spending. In Harper's defence, spending increases largely mirored thr growth in revenue, but I think you're right to point out that Harper's Conservatives missed an opportunity to ring up some big surpluses (unlike the Liberals in 2000-2002), and this missed opportunity propably relates to the lack of fiscal discipline.

I think part of Harper's difficulty in being fiscally disciplined lies in the fact that his party base is already on the right. As such, being fiscally conservative will not win Harper many more votes. On the other hand, additional spending on this special interest group, or that sector of society might draw some more moderates to vote Conservative.

For parties on the right, additional electoral gains are obtainable through spending and/or tax cuts, with little fear of losing the base. This problem probably plagued Mulroney's PCs when they were in power as well, and ultimately, they did lose the base.

Centre/Left parties, on the other hand, have the luxury of cutting spending, because their base is captive (i.e. Cuts won't lead to the base voting for the conservatives). Fiscal conservativeness by the centre/left can also win over right-leaning moderates.

The above dynamic can also help account for how Clinton's Democrats in the US were able to balance their budget, while the Republicans just increase their deficits.

"On vacation? Carry your cell! Field all kinds of interviews! You know the implicit contract. :-)"

If anyone's deserved a vacation this week, it's Stephen. I'll be pinch hitting for him on the blog RE: the census issue and I'm sure the media can find someone else to discuss this issue with (Kevin Milligan?)

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