Flaherty's surplus somewhat less than advertised

Of course Jim Flaherty's mid-year budget report is as much a political document as it is a financial one. When the news is generally good, when has it ever been otherwise?

That doesn't mean you should discount what Canada's finance minister said when he made his update in front of the Edmonton Chamber of Commerce Tuesday. But neither does it mean the federal budget is actually on track for a budget surplus in time for the 2015 federal election.

An election, by the way, for which Flaherty announced his intention to run.

After all, as the opposition NDP were quick to remind us, last year's updates were inaccurate to the outcome, by a full one-third.

Rather, let's take it as read that finance minister Flaherty and prime minister Stephen Harper actually believe they can deliver a real cash surplus in 2015, which they will use to buy votes in that year's federal election.

So instead of carping on the methods — which the NDP and Liberals have done — I'd rather carp about the plan.

Let's just quickly dispense with the methods by which Flaherty promises that this year's $17.9-billion deficit will become a $3.7-billion surplus in just two years. With an economy growing at best by an average 2.5 per cent over the next 36 months, you don't get there without cooking the books.

The Liberal Party knows this quite well. A whole whack of that number will come from overcharging on EI premiums. In fact, employment insurance (which is actually more of a tax-and-spend program than insurance plan) provided the billions Liberal Paul Martin needed for his miracle surplus budgets, back in the Chretien days.

But even with a gold mine like EI, you don't create a $22-billion turnaround in two years. A freeze on federal hiring (eliminating more than 20,000 well-paid jobs) and selling a few government-owned assets — like shares in General Motors and a couple of coal mining properties — won't get you there, either.

Flaherty must really be counting on major job growth over the next two years to provide income tax and GST revenues to make up the balance. Well, maybe he'll be right. Maybe we'll build a couple big pipelines or something.

But I'd rather think about what Canadians would rather think about, such as: what's he going to do with the money?

Family income-splitting seems to be Priority One for the Tories right now.

The question is frequently asked: why should a family (with children under 18) where one spouse earns $65,000 and the other $35,000 pay more income taxes than a family where both earn $50,000?

That's the sort of thing income-splitting is proposed to cure. It's estimated engaging this plan would put $2.7 billion more after-tax dollars into the hands of Canadian families a year. Kids are expensive, you know, and the money would surely help.

Personally, I don't believe a word of it. Unless the government caps the plan severely, income-splitting looks more designed to buy the votes of families where one member earns $100,000 a year, so the other can stay home and look after the kids.

On the face of it, that's not such a bad idea. It's just not good public policy. In this scenario, income-splitting will mostly end up allowing rich families to simply buy a bigger house.

About 28 per cent of Canada's children live in single-parent families. Very few of these single wage-earners make $100,000 a year. Quite the opposite — they earn far less than the median family income, and they get no break from income splitting.

If we're going to spend $2.7 making life better for families with children, why not build a national child-care plan? Sorry, not on the priority list.

Doubling the levels of allowable savings into a Tax Free Savings Plan is a good incentive for people who already know how to save, but again, the benefits will not go to the highly-indebted middle class.

The cost of this is only $600 million a year, so it's a pretty minor interference in the economy. But it's a heck of an election plank, so this is a no-brainer.

Nowhere is there anything for unemployed and underemployed young workers. Flaherty is counting on that 2.5-per-cent growth curve to solve that for him. Nor is there even a nod to growing income inequality. The 90 per cent must not vote.

In sum, Flaherty's announcement adds up to much less than advertised.

The revenue growth curve looks pretty unlikely, and the spending cuts aren't enough to make a $22-billion difference in two years.

Worse, the feel-good pre-election goodies don't do all that much for most of us.

Any good news is appreciated, but did you expect something really astounding?

Nope, just something astounding enough to get the government re-elected.