The massive provincial deficit announced in Tuesday’s budget shows why the province is cutting back on spending of all kinds, and seriously looking at curtailing projects such as the B.C. Place retractable roof.

It would be easy to label this as mismanagement of provincial finances, but the fact is that revenues were flowing freely into Victoria’s coffers just over a year ago. A massive deficit simply wasn’t on the horizon at that time.

Last fall, U.S. banks started to fail as falling real estate values revealed that many mortgages weren’t worth the paper they were written on. This began to affect all economies to a greater or lesser degree, because of the interdependence of finance and credit markets.

It also affected demand for resources, goods and services. Commodity prices play a major role in determining how much revenue the B.C. government gets.

The overall downturn also reduced corporate profits and individual incomes. This translates into a decline in income tax revenue, which is still the most important source of funds for both provincial and federal governments.

The government has no choice but to focus its spending in areas that it deems most essential, and while it had a choice in pursuing HST or not, it clearly has done so to gain more revenue — despite any political rhetoric to the contrary.

Where the government must be faulted is in its lowballing of the deficit during the spring election campaign. Despite evidence that the deficit would be much higher than the $495 million predicted by Finance Minister Colin Hansen in the spring legislative session, the B.C. Liberals scoffed at any such claims.

They were trying to pretend they were better fiscal stewards than they (or any other party) could possibly be in a worldwide recession. They were whistling past the graveyard, and enough voters believed them. There are many optimists among us — not such a bad thing, as part of any economic recovery involves having confidence that things will indeed get better.

The provincial government has a lot of work to do to get the provincial books back into the good shape they were in. Deficits are acceptable for brief periods in tough times, but they should never become entrenched, as was the case in Ottawa for so many years.

—Langley Times