On March 29, Canada's federal minister of finance will table the budget for the upcoming fiscal year. As always, in the weeks leading to "budget day", Canadians will be bombarded by commentaries from reporters, economists and politicians about the (supposedly) worrisome size of the federal budget deficit.
Just to put things in perspective, I thought it might be useful to include the following chart showing federal income and outlays as a percentage of GDP since 1990. As you can see, federal government expenditures cannot be characterized as being out of control. In fact, the chart shows that current federal spending is at one of the lowest levels in decades.
Rather, it would be more accurate to say that the budget deficit is being caused by the considerable decline in government tax revenues and the increase in federal transfers to persons (mostly employment insurance benefits) since the start of the downturn in 2008. The Harper government's decision to lower the federal sales tax by two percent between mid-2006 and late
2007 is another important cause of the recent decline in federal tax revenues.