CFIB Warns Of Financial Ruin

Risk Following Countries Like Greece or Ireland

Toronto March 16, 2011 - The Canadian Federation of Independent Business (CFIB) has released a report warning that Canadian governments need to either rein in their spending or risk following in the footsteps of countries like Greece, Ireland or several US states that find themselves in dire circumstances.

"The good news is that many governments appear to be putting the brakes on spending growth, but the margin of error is razor thin - any backsliding could push the debt balance in the wrong direction," said CFIB's chief economist, Ted Mallett. "Even tying government spending to the rate of growth in the economy would push today's $1 trillion in government debt to $1.8 trillion in the next 10 years."

And while the picture in Ottawa shows a return to balanced budgets within five years, assuming spending can indeed be controlled, the projections paint a much more varied picture at the provincial level. To capture this variance, CFIB has categorized provincial governments into three groups: the 'good', the 'bad', and the 'ugly'.

Saskatchewan and Newfoundland & Labrador carry the distinction of being in a 'good' financial position; both currently have balanced budgets and stable or declining spending-to-GDP ratios. BC, Alberta, and Manitoba are all classed as the 'bad' actors; all currently running deficits that may be overcome with the aid of economic growth. For the rest, nothing short of Herculean effort will be required to post surpluses by decade's end-never mind making any progress on debt levels.

Regardless of current status, CFIB recommends that all governments embrace the following principles to demonstrate good "fiscal fitness" in their own backyard:

• 1. Implement legislation that focuses on controlling expenditures, not just balancing budgets;
• 2. Be specific enough to ensure the spirit of the legislation is followed without creating loopholes; and
• 3. Ensure the legislation focus on the long-term sustainability of government finances.

"If we think we're fiscally infallible, we're actually being fiscally delusional. The sooner we act, the sooner we can take the necessary steps to ensure we live within our means and avoid having to make dire choices later," concluded CFIB vice president, Satinder Chera.

To view the report in full, please visit www.cfib.ca