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OTTAWA — Crusaders from the Canadian Taxpayers Federation parked their debt clock in front of Parliament Hill Thursday to drive home a simple message to the Conservative government before it delivers its budget on Tuesday: Stop the spending madness.

With the Peace Tower in the background, the debt clock was set to reach $562.88-billion by Friday — surpassing the old peak set in 1997 and setting a new record for federal debt. Once reached, 11 years of debt repayments, thanks to stiff spending cuts in the mid-1990s and a fortuitous commodity boom, would be wiped away.

The 2011 federal budget is emerging as an acid test of how serious the Conservatives are about wrestling the deficit, which is set to come in this fiscal year at a better-than-expected $39-billion, according to economists at Toronto-Dominion Bank and Royal Bank of Canada.

The CTF event adds to the pressure Finance Minister Jim Flaherty faces to pony up details on getting that $39-billion shortfall to zero by 2015 as promised.

Mr. Flaherty says deficits totalling roughly $100-billion over a three-year period were necessary to deal with the financial crisis, and would prove only temporary, but many analysts say deficits are rarely temporary.

“The last time the federal government ran a temporary deficit it lasted for 27 years,” warns Derek Fildebrandt, national research director for the taxpayers’ watchdog. “The Finance Minister has an opportunity in the budget to turn the corner.”

The worry among fiscal hawks and finance watchers is the minority government won’t veer far from its present course for fear of giving its political opponents ammunition during a possible election campaign.

As detailed last year, the Conservatives’ road to surplus involves winding down the $48-billion stimulus plan and obtaining savings of $17.6-billion from freezing department spending and foreign aid, holding back growth in defence expenditures, and finding a more efficient way to deliver services through a “strategic review.”

On paper, it sounds good. But Parliament’s budget watchdog, Kevin Page, has repeatedly warned MPs the government’s deficit-cutting plans are vague, and officials have yet to hand over information on how certain savings within the public service will be achieved.

“One of the big pressing problems we are looking at is that the governments are leaving Canadians in the lurch in terms of how they are going to achieve their spending targets,” says Derek Burleton, deputy chief economist at Toronto-Dominion Bank.

Those spending targets are aggressive. The Conservatives plan to limit annual spending growth to an average 1.1% per year until 2015 — or one of the most prolonged periods of fiscal restraint in decades, Mr. Burleton says.

In comparison, for the three fiscal years under Conservative watch before the stimulus spending kicked in, annual program expenditures grew an average 6%.

Recent spending estimates released by the Treasury Board suggested total government expenditures are scheduled to fall $10-billion in 2011-12, or 4%. Those numbers are subject to change in Tuesday’s budget.

“This is a government that has not been able to constrain spending — nowhere near what they are proposing over the next four years,” said Niels Veldhuis, an economist at the Fraser Institute, a Vancouver think-tank.

His concern is that politicians will reacquaint themselves with the bad habits their predecessors exhibited in 1970s and 1980s, with promises to keep spending down and count on robust growth in tax revenue to keep the books in decent shape. That type of budget planning, coupled with recessions in the early 1980s and 1990s, allowed the deficit and debt to balloon to levels that forced the Liberal government of Jean Chrétien to implement deep cuts to restore confidence with financial markets.

In the lead-up to the budget this week, the government has said little about spending cut plans. But on Thursday, Prime Minister Stephen Harper said in a campaign-like stop in Brampton, Ont., the budget would include tax breaks for families whose children are enrolled in “artistic” activities. There is also an expectation the government will, in an effort to win NDP support, boost the guaranteed income supplement available to seniors at an estimated cost of $700-million.

“A myriad of small new spending initiatives is possible, given the likelihood of a near-term election, though we expect — and hope — that the main focus of the 2011 federal budget will be to provide an update on eliminating the sizeable deficit,” said Craig Wright, chief economist at Royal Bank.

But other economists aren’t holding their breath.

Instead of spending-cut details, the budget may lean heavily toward highlighting what Ottawa’s two-year $48-billion stimulus accomplished and how the country is set to reap the benefits from Conservative decisions of years past — especially corporate tax cuts, which the Liberal Party has turned into a wedge issue.

“The Conservatives want to focus on the necessity of deficit reduction and how well the country is doing, because there is simply no political upside to them being more specific on their restraint,” said Dale Orr, head of Dale Orr Economic Insight.

http://www.nationalpost.com/Debt+clock+ ... story.html