President Bush`s latest budget

President Bush has presented his latest budget to Congress. Budget documents are always revealing of the direction a Government wants to go in and of their value system. The chief budget officer also makes the case of down playing the size and significance of the latest deficit, some 423 billion $,   by urging journalists to measure it as a percentage of the GDP. If one does so the result is a reassuring modest fraction that proves the case that the deficit is not the earth shattering threat that some critics argue it is. in fact, if one measures the general Government deficit and debt in relation to the GDP (federal, state and municipal) by the OECD methodology the American statistic is below the OECD average.(See William Buiter, US Budget deficit reduction:Don`t overdue it reproduced on the Centre for economic policy research Web site)

There is also a methodological question in measuring the deficit as opposed to the debt as a proportion of the GDP involving comparing stocks and flows but this is an esoteric point of interest only to economists.

What is also interesting and a point that Democratic members of Congress have taken up as well as a few Republicans is that program cuts in social, educational and   and health programs are not a welcome direction for the Government to be taking while it is increasing defense spending by 6.9 %.

Mr. Bush was correct in my view shortly after coming to office in resorting to a deficit to stimulate the economy but is wrong to use that deficit as any sort of excuse for cutting back on the social side of Government expenditures.

That being said,   it will be interesting to see whether Prime Minister Harper and his new Conservative minority Government in Canada will   present a budget which cuts back funding on the social side, for example day care funding in terms of operating funds to help the Provinces as agreed to by the previous Liberal minority Government as opposed to adding transfer payments to families to help with child care.

Maureen McTeer in an op ed in the Globe and Mail I think got it right. Why not have both programs ? A good pragmatic compromise in a minority Parliament and good comprehensive policy to boot.Given the size of the federal surplus and the current declining debt to GDP ratio of less than 40 % it is also quite affordable.