so, the deficit.

a lot of people think it's what gave trudeau a boost. and, it's likely to be a big factor in passing a budget if we end up with a liberal minority that needs ndp support. so, what's the deal with this, anyways?

the conservatives made a big stink about balancing the budget, and they're within a sort of error point. a budget is an estimate. it has a margin of error. so, you're up a billion, down a billion - it doesn't matter.

what allowed them to pull this off this year was a large sell-off of automotive shares. that goes back to the bailouts. canada actually had a substantial interest in some auto companies for a while. selling those shares brought in a lot of cash, which got them just over the hump.

but, there's another side of this: oil revenues. had oil not crashed early this year, they would have posted a substantial surplus on the back of the sell-off. but, oil crashed, and it's pulled them down to the margin of error.

now, a big part of the conservative party's messaging to it's own base is about balancing budgets. i'm very to the left on this; i don't think money is real, i'm ok with printing it, and i don't care. but, it's a big thing for conservatives that naively understand the government as needing to follow a family-style budget. there's been much written about this, i won't bother. but it doesn't really matter, so long as interest rates are at reasonable levels.

but, the fact that oil has crashed, and probably isn't coming back for a while, means that the conservatives are not going to be able to balance the budget next year, because they won't have the auto sell-off. they'll say otherwise. but, it's pretty clear.

enter the ndp. a few weeks ago, it seemed like the most likely outcome of the election was going to be a conservative minority with an ndp opposition. that would create a parliament where the ndp is waiting to pull the plug on the conservatives - and the usual way to do this would be to vote against the budget. so, they came up with this strategy of being staunchly opposed to deficits. the plan was that they could vote down the budget because of the deficit, then hopefully convince conservatives to vote for them.

so, the liberals decided that they would run deficits. now, you can analyze this a few different ways. the conventional analysis is that it was to position themselves left of the ndp, and it may have some truth to it - i'm certainly more in favour of that. but, it may have also been because they realized there was going to be a deficit due to oil sales, and they wanted to give themselves a little bit of room to not automatically vote against the budget. last month, it would have been reasonable to conclude that a snap election on the ndp rejecting the budget could have hurt them pretty badly.

so, the key thing to understand is that this is all about the next budget. the ndp are trying to create a situation where they can vote against it on terms favourable to conservative voters that they'd like to swing, and the liberals are trying to position themselves in a way that they're not forced into a second election that, relative to polling last month, could have been a disaster for them.

which is not to say that the liberals are being disingenuous, it's more to point out that the logic is something along the lines of "if we're going to run a deficit anyways, let's not set ourselves up to get nailed when we do, and let's get some infrastructure done that needs to be built anyways.". the liberals are very pragmatic, always have been.

so, now, weeks later, the polls have changed dramatically, with the ndp falling to a distant third and the liberals in possible reach of a majority. the most likely scenario at this point appears to be a liberal minority that will need ndp support to survive.

we're going to have a deficit anyways because of the oil; it's not just because of the spending, this is unpreventable - even if you think it matters. but, the ndp have painted themselves into a corner, where it's going to be very hard for them to support the liberals, even if they want to - or, indeed, feel they need to. the situation may even be reversed - trudeau could see himself want to push for an election to try and get a majority.

there's a twist: mulcair is actually probably going to lose his seat. he's actually running in pierre trudeau's old riding. when liberal support in montreal goes up, outremont goes liberal. it's like gravity. he's just in the wrong riding.

if he loses, the situation changes.

but, if he wins then prepare yourself for this.

the media is pushing this idea that the ndp and liberals are the same, and they'll have a "coalition" and it's all rosy and they'll get along just fine. the reality is almost the exact opposite: the ndp have set this up on purpose, and unless the leadership changes you should not expect the liberals to be able to pass a budget. we will have another election within a year.

the way out is a liberal majority. but, it's hard to see how that might be possible without some kind of a tectonic shift in quebec, or very extreme strategic voting in edmonton and calgary.

so, that's what is with the deficit. oil prices make a surplus impossible. the conservatives will run a deficit next year. the liberals will run a deficit next year. and, if the ndp somehow manages to win, they're going to run a deficit, too. but, if the liberals do not get a majority, and mulcair remains leader of the ndp until that point, you can bet a hefty sum that the budget will be unable to pass, because of that deficit.