In the Globe and Mail Economy Lab, Stephen Gordon thinks he can accurately predict the overall shape and content of the next budget:
The main features of the expenditure side of next year’s 2013-14 federal budget should be fairly easy to predict:
- Transfers to persons will be about 4 per cent of GDP, and future projections will be consistent with this share.
- Transfers to other levels of government will be about 3.2 per cent of GDP, and future projections will also be consistent with this share.
- Direct program spending will be at or just above 6 per cent of GDP, and this share will be projected to decline throughout the forecast horizon.
The reason we can make these predictions with a certain amount of confidence is that these paths were set out by the Conservative government several years ago, and they have shown little sign of wanting to deviate from them.
Even if they wanted to — and it can be fairly imagined that they do — cutting transfer programs would generate a certain amount of political blowback from the people and provinces that are on the receiving end. The Conservatives have doubtlessly concluded that limiting the rate of growth of transfer payments to that of the economy — which is the same as keeping them at a constant share of GDP — is probably the most restraint they can impose without incurring lasting political damage.
