One of my most piercing electoral memories is the 1993 federal election debate that featured then Prime Minister Kim Campbell, Jean Chretien, Audrey McLaughlin, Preston Manning and Lucien Bouchard. The part that always sticks in my mind is Lucien Bouchard’s persistent questioning of Campbell with respect to the size of the deficit in the 1993 budget. Campbell seemingly dodges the question as Bouchard intones: “What has been the real deficit?” “Its a simple question, yes or no”
While “Forecast that Deficit” is unlikely to make it as the next television reality series, it is nonetheless an interesting issue not only at the federal level but also at the provincial level – and particularly Ontario. Ontario recently announced that its final deficit figure for 2011-12 as reported in the public accounts was 13 billion dollars – 3.3 billion dollars less than the estimate in last year’s budget. While the spin on this could be that Ontario was doing better than expected in the war against the deficit, it could also lead to the question of how good is the Ontario government at forecasting its revenues and expenditures and ultimately its deficit?
The accompanying table presents a range of deficit estimates and forecasts starting from the 2009 Ontario budget and up to the 2012 Budget along with the 2009 update in the immediate wake of the worsening recession and the most recent update in this summer. At the dawn of the recession, in the 2009 budget, Ontario was forecasting a budget deficit of 14.1 billion dollars, which was quickly upgraded to an estimate of 24.7 billion and then settled in finally at 19.3 billion by the 2011 budget. The value of the 2009-10 deficit figures between 2009 and 2012 ranged from a high of 24.7 billion to a low of 14.1 billion with both off from the final figure by 5.4 and 5.2 billion dollars respectively. It does remind me a bit about the old joke about the three econometricians going out hunting in which one shoots left of the target, the other shoots right and the third says “We got it! We got it!”
If we look specifically at the deficit numbers for 2011-12, in the 2009 budget, the deficit was estimated two years down the road at 9.7 billion dollars. By the 2009 update it had jumped to an estimate of 19.4 billion. In the 2010 budget, it was down to 17.3 billion dollars while the 2011 budget had it down to16.3 billion dollars. The number continues to decline until the release of the public accounts. It is interesting that the 2012-13 first quarter update released in June puts the deficit at 15 billion while the public accounts released three months later then has it at 13 billion. For 2011-12, the deficit numbers between 2009 and the present ranged from a low of 9.7 billion dollars to a high of 19.4 billion settling in at 13 billion with the max off by 6.4 billion dollars and the minimum off by 3.3 billion dollars.
The 2010 to 2012 budgets also all had forecasts of where the Ontario deficit would be until 2017-18 – the target date set for its elimination. Note that all three budgets have practically identical forecasts for the deficit for the 2013-14 fiscal year and forward. It does seem somewhat amusing that the deficit estimates become more stable as you project into the future. Given how much the numbers change from year to year, why have these forecasts not varied?
Forecasting a deficit is a tough job especially when the economy is undergoing a recession - and Ontario was hit very hard - but this range of deficit figures and their iteration to a much lower final numbers than originally forecast suggests that Ontario’s deficit could actually be eliminated much sooner than you think. I would not be surprised to see it almost gone in the 2015-16 fiscal year – two years ahead of schedule.