Slow economy could limit throne speech promises

Canadian Press

OTTAWA — Prime Minister Paul Martin set out a lot of expensive goals in Monday's throne speech, but a sluggish economy means down payments are all he can afford for now.

His pledges range from a $7-billion tax rebate for municipalities, spread over 10 years, to $3.5 billion for environmental cleanups, new military spending and improved student loan systems.

Initial spending will be limited to "down payments" on promises to be fulfilled over several years. And at its base is a continued commitment to balanced books.

"The government of Canada is unalterably committed to fiscal prudence as evidenced by annual balanced budgets and steady reduction in the debt relative to the size of the economy," said the speech, read by Gov. Gen. Adrienne Clarkson.

"This government will not spend itself into deficit."

But that didn't stop Martin from dreaming big.

"We want a strong economy for the 21st century, with well-paying and meaningful work; ready at the forefront of the next big technological revolution; and built on a solid fiscal foundation.

"The government is committed to making the down payments needed now and to build consistently on these steps as resources permit."

Even if growth isn't as strong as expected, analysts say Martin will still be able to scrape up more cash than he has said is available.

Predictions for this year's federal budget surplus range as high as more than $8 billion with some private-sector economists suggesting there could be $5 billion in excess cash for Martin to spend as he wishes.

That's at least double the $2.3-billion surplus federal Finance officials expect for fiscal 2003-2004, which ends March 31. But Finance Minister Ralph Goodale has seen a few financial windfalls lately, which make him more optimistic.

"Compared to a month ago or even a week ago, I have a slightly improved level of confidence," the minister said late last week.

A sign of that new optimism came Friday when Martin promised the provincial premiers $2 billion more for health care, even though fiscal 2003-2004 is barely half over.

Corporate tax revenues have been unexpectedly strong, mainly because Canada's big banks rang up record profits last year, while strong job creation in recent months should led to higher revenues from income tax.

At the same time, Ottawa could save more than $1 billion in equalization payments to the provinces this year because of a sluggish economy in Ontario. The health of that province is a key element in calculating the payments Ottawa makes to boost the living standards of have-not provinces.

Officials say Treasury Board President Reg Alcock has made solid progress in earmarking low priorities of the government that can be chopped in order to find new money for higher spending priorities.

Factor in Martin's time-honoured tendency to underestimate the size of the surplus and it's likely he'll have something around $5 billion in extra cash this year, said Rick Egelton, deputy chief economist with Bank of Montreal.

"I wouldn't say they're hiding things, but I think they're being deliberately cautious because they don't want to run a deficit," Egelton said.

The Canadian Centre for Policy Alternatives goes further, accusing Martin of "crying wolf" when he claims money is very tight.

Ellen Russell, economist with the think-tank, predicts a budget surplus of $8.3 billion for 2003-04 and said Martin's government has overestimated the cost of a series of crises that rocked the economy last year.