Description: Running federal deficits in good times may hurt Canadians in the long run according to HEC Montreal’s Centre for Productivity and Prosperity. Our Canadian government ran deficits from 2015 through 2018, and this may have lead to economic growth. Now, with no recession in sight, the latest financial update from the government indicated that the current deficit would be in the range of $27 billion, $7 billion higher than that projected in the budget. As the authors of the study say regarding current economic conditions, “If these aren’t the conditions for achieving a balanced budget, what will it take?”
Date: January 15, 2020
1) What is your opinion of the government deficit situation?
2) Where would the annual deficit show up on the Government of Canada financial statements?
3) On pages 381-2 of Wiley’s Financial Accounting: Tools for Business Decision-Making, we read about the principles of cash management. When our government is running a deficit, what do you think would be some of the challenges in managing cash flow?