It seems almost trivial to say the world changed on September 11th. Yet, given the fiscal response form our government to date, it is unclear whether the full economic ramifications from September 11th have penetrated all the walls down at Finance or over at the Prime Minister's office.

While it appears that the feds are now "50/50" in their thinking for a fall budget - as one official put it - an actual budget statement date still has not been set. So what Ottawa won't do, yours truly will. Circle November 20th or 27th on your calendar as the most likely dates for a full-blown fall budget.

This allows the government another six weeks to gather all relevant economic data, ensures that the expenditure re-profiling exercises will be completed within the federal bureaucracy and will also facilitate and expeditious completion of the Finance Committee's pre-budget hearings. Indeed the House of Commons Finance Committee is fast tracking its hearings: my presentation on behalf of the CTF originally scheduled for November 6th here in Ottawa has been moved forward to next Wednesday in Montreal.

This six-week window also allows the government more time to massage its message after so blatantly refusing to table a budget as late as two weeks ago. Even before last month's murderous acts south of the border, there were plenty of warning signs that necessitated a full Budget document.

According to Statistics Canada, economic growth had slowed to its lowest level in six years.
Unemployment had risen, for the third month in a row, to 7.2 per cent. South of the border, the Federal Open Markets Committee (FOMC) of the U.S. Federal Reserve Board had already dropped its "target rate" for federal funds (a.k.a. the U.S. prime rate) on seven separate occasions since the beginning of 2001 for total reduction of 300 basis points in eight months. Closer to home, the Bank of Canada had already lowered the Bank Rate on six separate occasions since the beginning of 2001 for a total reduction of 175 basis points over the same period.

Worse still, the U.S. Department of Labor released statistics showing U.S. worker productivity rose by over 2.1% during the 2nd quarter of 2001 whereas estimates derived from Statistics Canada figures revealed a worrying decline of 0.6% for Canada during the same timeframe. Finally, the average total CPI inflation for the five-month period from April to August inclusive was 3.2% per month while it was estimated that the federal government had authorized between $3 billion and $4 billion of new and unbudgeted expenditures for the current fiscal year.

>From this data, it was evidently clear that the U.S.-led global economic slowdown was having a measurable impact on our own economy.

In the aftermath of September 11th, the FOMC dropped its "target rate" further, first on September 17th by 50 basis points, and then on October 2nd by another 50 points. This brings the total reduction to 400 basis points over nine months (more than half of its starting value of 6.50 per cent on January 3rd). The Bank of Canada has followed suit by dropping our bank rate by 50 basis points (from 4.25 per cent to 3.75 per cent) bringing the total reduction to 225 basis points since January 1st.

Moreover, the Bank has also pushed back its Canadian economy recovery projections to the final two quarters of 2002, at the earliest and at least two Canadian banks now predict a recession for the remainder of this year and early next year. If you're not depressed yet, this past Thursday the Conference Board noted that we would record four successive quarters of zero growth through to the spring of 2002. Real GDP growth for this year is forecast at 1.5% down from a stellar 4.7% in 2000. The outlook for 2002 is equally dim with growth forecast at only 1.2%. While the Conference Board stopped short of using the "r" word, it has noted that our economy has stagnated.

All these factors will no doubt substantively decrease projected personal and corporate tax collections. Meanwhile, public indications from various cabinet ministers point to increased public security (RCMP, CSIS, etc.) measures, more vigourous border and customs efforts, a ramp up of defence capabilities and a probably multi-billion dollar bailout of Canada's airlines, above and beyond the $160 million already given.

This list is by no means exhaustive but in and of itself could easily total upwards of $5 billion. Combine this amount with the unbudgeted spending by Ottawa already of at least $3 billion and simple math yields an $8 billion figure which wipes out the projected $7.2 billion surplus for the current fiscal year.

Given these extraordinary circumstances, Paul Martin's reported plan to table an Economic Update on October 29th is patently insufficient. Canadians should not accept his usual glitzy, dog-and-pony, PowerPoint driven, public relations autumn appearance before the Finance Committee as a substitute for a budget.

A budget document is a signal of a government's fiscal and political direction laying out priorities for action that delineates how and from whom taxes will be raised to meet these priorities. Canada's priorities have changed dramatically and taxpayers are crying out for fiscal leadership and a budget to signify what these new priorities are, how they will be funded and equally important, which programs will be shelved or delayed. In this sense, actions designed to bolster national security must not abandon the principles of fiscal security.

To be fair, it looks as though the brain trust at the Department of Finance is on the side of reality and understands that a budget is necessary. The only obstacle that remains is for the Prime Minister's Office to acquiesce. Perhaps they understand as well and are only stuck for a date. If so, they need only look at the second paragraph of this column for some options in November.