Stephen "No Recession" Harper and Jim "No Deficit" Flaherty post a whopping 1.7 billion deficit in August. What will September record?

Source - The Fiscal Monitor, August 2008:

There was a budgetary deficit of $1.7 billion in August 2008, compared to a deficit of $0.1 billion in August 2007. Budgetary revenues were up $0.1 billion, or 0.5 per cent, from August 2007, as higher personal income tax and other revenues were largely offset by lower corporate income tax, goods and services tax (GST) and sales and excise tax revenues. Program expenses increased by $1.5 billion, or 10.1 per cent, compared to August 2007, reflecting higher transfer payments and operating expenses of departments and agencies. Public debt charges increased by $0.2 billion compared to August 2007.

This builds on what I noted during the election as Canada's growing cash flow deficit. Only post-election has the subject of debt, deficit, and recession gained traction in the popular media.

In my previous article on the issue I had made the distinction between budgetary surplus and deficit, and operational surplus or deficit. Semantics allows Harper's Conservative government to claim Canada is still enjoying a surplus even while Canada has been taking on new debt at a furious pace this year.

As of August - operational surplus or (debt)

From April to the end of August the Conservative government has racked up $17.6 billion in new debt and reduced Canada's cash balance by $2 billion, leaving about $9 billion left in the kitty. Interest charges on this new debt (less loans to crown corporations) so far total around $60 million. The fiscal year is far from over.

Plainly put, the government is already living beyond its means. Canada has taken on much more debt (and the interest charges this implies) this year than is normal for the year to date period, and cash balances are lower. Were the economy still expanding robustly, we could afford less concern, yet this is not the case.

In August 2007 Canada, and the world, was not on the brink of economic recession. This year we are. Last year Canada had huge surpluses throughout the entire year, while this year the cash flow picture has been negative all year to date, a situation not seen since 2002/2003. There is every expectation this fiscal year will be the worst Canada has faced in decades. Previous governments have retained sufficient reserves to deal with economic turmoil, but the Harper government is not so prepared.

It will be tempting for the opposition to merely claim the Harper government are bad managers. Don't make that mistake. Focussing on the amount of red ink alone will cause many to miss the more important point which is the Harper government, in the final analysis, doesn't care if it runs some red ink. Why? Harper's primary mission is to keep shovelling out tax cuts and transfers to provinces in order to reach its final objective: a permanent weakening of the power of the federal government.

Surpluses and deficits are ephemeral. Whatever fleeting angst one feels on review of the latest federal government balance sheet will not compare to the pain we shall experience in the future thanks to a weakened Canada and its dismantled federal government, one Harper wishes to design using the 1867 era as his pattern.

Was Canada better off in 1867 than it is today?