The federal government does not actually have a surplus, you understand. In the most recent year for which we have complete data, 1995-96, it posted a deficit, to the tune of $29-billion. With luck, the final figure for the 1996-97 deficit may come in as low as $14-billion or so, while for the current fiscal year, if you believe some private forecasters, it could be $5-billion. Which is still $5-billion short of zero, which is the amount of surplus dollars we would have to spend if we had no surplus at all, but only managed to balance the budget, which we haven't yet done. But next year -- ah, now that's a politician's favourite year.

In any case, how do you "spend" a surplus? A surplus is not a quantity, but a contingency. It is a relationship between two independent variables, taxes and spending, and cannot be known with certainty until after both have been reported. So either the surplus is merely projected, i.e. at the start of the fiscal year -- in which case you are spending money you don't yet have, which used to be known as deficit spending -- or else it has already been recorded on the public books, i.e. at the end of the fiscal year, in which case it's too late: the taxes have all been collected, the budgets allocated, and the books are closed.

Nonetheless, every party has its own plan to "spend the surplus," whether by explicitly increasing spending, as the Liberals and NDP propose, or by cutting taxes, as Reform and the Tories demand. What they really mean, of course, is to reduce the surplus. One only wishes they had been so quick with plans to reduce the deficit, when that first hoved into view.

Certainly we should be wary of the Liberals' plan, as contained in their election platform -- though any resemblance to actual Grit intentions is purely coincidental -- to assign one-half of any surplus to higher spending, leaving the rest to be divided beteen tax cuts and paying down the debt. I assume the Liberals mean they will start each year budgeting for an increase in spending of this amount over the base-line spending forecast for that year, which I will take to be the previous year's spending marked up for inflation and population growth.

What that means is that instead of merely increasing program spending by about 3 per cent per year (2 per cent inflation plus 1 per cent population growth), the Grits will award themselves a "bonus" of one-half the difference between projected revenues -- again, using a base-line forecast that assumes no change in tax rates -- and projected spending, including interest costs (assumed here to be constant).

Base-line revenues, on reasonable economic forecasts, can be expected to grow at about five per cent per year, or 2 percentage points faster than the base-line growth rate assumed for spending. Given that revenues now exceed program spending by roughly 50 per cent -- not quite enough yet to fully offset the cost of interest on the debt, but close -- that means he government's fiscal machinery, left undisturbed, would spin off a surplus equal to 3 per cent of spending each year, leaving the Liberals free to increase spending by another 1.5 per centage points per year, or 4.5 per cent per year in total.

All told, that means that from a low of $103.5-billion in fiscal 1999, when the budget should finally be balanced, the Liberals plan to increase spending by at least $15-billion over the following three years. By itself, that's hardly going to bankrupt us. But it leaves precious little in the way of a genuine surplus, especially after any tax cuts are taken out. The most that the debt would be allowed to decline in any given year under the Liberal plan would be about $3-billion, or one-half of one per cent of the total outstanding federal debt.

The Liberals may no longer believe that you can grow your way out of the deficit, but it seems they still think you can grow your way out of debt. It's true that the size of the debt, like the deficit, is meaningful only in relation to our ability to carry it, i.e. as a proportion of the economy. But it is blind folly to think we can just leave the debt permanently fixed in the neighbourhood of $600-billion, and hope we never face another recession. As if you needed another reminder, there's a secession crisis brewing.

The only sound way to "spend" the surpluses is to pay down the debt -- while our good fortune lasts.