OTTAWA, June 4, 2013 /CNW/ - Hillwatch today released a policy brief discussing why the Federal Government has been on the debt track for most of the last 50 years attributing it to the willful blindness built into the budget-making process.
This paper identifies 'blind-spots' in the Federal budget process.
- A persistent trend of over-estimating economic growth and consequently government revenues;
- Never planning and preparing for recessions despite their inevitability;
- Tolerating large deficits while finding only small surpluses politically acceptable;
- Having no actual plan or commitment to reducing the National Debt; and
- Unrealistic expectations about Government's ability to protect us from downside economic risks.
These 'blind spots' place our public finance on a fiscally unsustainable path. This path can veer from risky to dangerous and damaging by future developments over which we have little control: too-short recovery periods between recessions; higher interest or inflation rates; or a prolonged period of low growth.
The prescription proposed includes:
- A practical plan to pay-down the principal of our National Debt over time;
- A conservative and transparent forecasting methodology for economic growth; and
- Budget rules to recognize, accommodate, and channel political pressures to spend surpluses.
"Governments are always chasing the tail of economic growth. They never catch up and match their spending patterns to the actual patterns of growth in the economy. The by-products of this inability to sequence spending and economic growth are deficits and accumulating debt. Governments then try to compensate by making questionable bets about the future that exacerbate the underlying problems." states Mr. Proudfoot.
This paper argues that the Federal Government needs to stop chasing the growth tail and organize its finances to deal with probable risk. It has been playing a game it is bound to lose most of the time. To reverse the odds, it needs to change the rules of the game!
SOURCE: Hillwatch Inc.
For further information:
Full Policy brief available at: www.hillwatch.com; for more information, please contact
Scott Proudfoot, (613)238-8700 [email protected]