Hub Podcasts A plunge in federal revenues may mean soaring budget deficit
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Sep 19, 2025 This episode features Livio Di Matteo, a Professor of economics at Lakehead University and contributor to The Hub. He dives into a potential $12 billion drop in federal revenues and its implications for the budget deficit, highlighting how recent GDP changes impact fiscal stability. Additionally, he discusses Alberta's emerging role as a significant AI powerhouse, showcasing the province's unique advantages and the challenges ahead for harnessing AI technology. Tune in for keen insights into pressing economic issues!
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Revenue Sensitivity To GDP
- Federal revenues are highly sensitive to GDP and recent growth inflated tax receipts above historical trends.
- A modest GDP decline can produce multi-billion dollar revenue shortfalls and dramatically raise the deficit.
Recent Revenue Gains May Be Temporary
- Recent years saw above-average revenue growth due to inflation and post-pandemic stimulus boosting taxable activity.
- Those temporary factors make current revenue projections unusually optimistic and vulnerable to reversal.
Limit Cuts To Discretionary Spending
- When estimating deficit impacts, factor in realistic limits on where spending cuts can occur.
- Apply targeted reduction rates only to discretionary portions to avoid overstating savings.