Tuesday, June 2, 2009

What Happens When TD Economists Have Their Facts Wrong?

On a day when many economists and banks are pointing to a somewhat sunnier economic outlook on the horizon, one bank's economist's has a cloudier view.


One thing immediately caught my eye in this article as being factually wrong:

"Since the late 1990s, after the federal government successfully steered the country out of deficit, annual program spending has increased at a rate of between 6% and 8%"

As soon as I read that I knew something was wrong, so I checked the Fiscal Monitor for the past number of years, and sure enough, these TD economist's had their numbers wrong. Here are the numbers starting with the most recent.

'08-'09- Program expenses were up $6.8 billion, or 3.5 per cent.
'07-'08- Program expenses were up $12.5 billion, or 6.8 per cent
'06-'07- Program expenses were up $9.2 billion, or 5.2 per cent
'05-'06- Program expenses were up $4.3 billion, or 2.8 per cent
'04-'05- Program expenses were up $13.7 billion or 9.9 per cent
'03-'04 Program expenses were up $10 billion, or 7.8 per cent
'02'-03- Program expenses were up $6.5 billion, or 5.3 per cent

The '07-'08 is an anomaly, in that it reflects increased federal transfer payments to the provinces. But even using that figure shows that only one of the past four years has seen program expenses increasing in the 6%-8% range the TD economists have used in their forecasting. In fact if one looks at this line in the article, you realize their figures are pretty much useless, as they have used a forecast of the 6% to 8% as the basis for their deficit projections:

"The TD analysis indicates the only way the budget gets close to balance in 2013-14, as anticipated, is if Ottawa freezes program spending growth after fiscal 2012-13, which is when TD expects the economy to fully rebound from the current downturn. If that were to happen, it would record a small deficit of $1.7-billion in 2013-14, followed by a $12-billion surplus in the next fiscal year.
Otherwise, spending growth could be held at 2% following 2012-13, which would lead to a $5.7-billion surplus in 2015-16".

So i have to ask, how much credibility can you give a report that uses improper data for program expense projections 3-4 years in the future? Perhaps they meant something else, like total government spending. But even if that is the case, how do they know what will be included in next years budget, let alone a budget 4 years from now? How can they take into account the sale of assets not yet determined, as well as their value.

H/T to Joanne, where I came across the link.


maryT said...

Liberal/msm plan:
Make things sound as bad as possible. Elect iggy, and things are not that bad, so iggy good.
I put as much faith in these TD expert numbers as I do in what the temp will be in 2108. If I had money in TD it would be coming out tomorrow.
Those predicions will be great to repost when the recession is over and things are rosy again.
If things are going to get that bad, why would the liberals want to be in charge.

Anonymous said...

I'm tempted to change banks Paul. I was with Canada Trust which the TD took over.

If they can make an error like that how many more that we don't know about???

Joanne (True Blue) said...

Fascinating. I would love to hear Don Drummond and Derek Burleton's response to this.

Or better yet, why not Paul Vieira at the Financial Post?

They have a comments section at that link too.

JDot said...

Great post Paul, but the MSM will run with the TD banks numbers, libs are in trouble.

What a great post..

paulsstuff said...

"I'm tempted to change banks Paul. I was with Canada Trust which the TD took over."

I'm thinking the same thing. I liked Canada Trust but my TD branch is always understaffed for any in-bank transactions you want to do.

Joanne (True Blue) said...

Yeah, Canada Trust was great. Who allowed that merger anyway?

Anonymous said...

The media should be honest when they have Don Drummond on as an "expert".

They should label him as "Liberal Party financial policy advisor" since that is what he is.

Or, former Liberal government/Paul Martin Deputy Minister of Finance.

Strange - Drummond states some kind of opinion and the next thing you know Ignatieff and McCullum are quoting him during Question Period.

Who is running the Liberal party anyways? The TD Bank?

Joanne (True Blue) said...

Good points, Anon.

Is there any other bank in Canada that's so closely affiliated with a political party?

The whole thing seems rather disconcerting.

paulsstuff said...

What bothered me the most Joanne is that I was with TD, and switched to Canada Trust after TD had made a mistake on my account by taking someone else's mortgage payments from it. When I asked about it they said it was my TD mortgage. I quickly pointed out I never had a mortgage with them, and they went on to tell me it would be a few weeks before the figured it out and put the $4000 back into my account.

I promptly opened an account with Canada Trust, loved the hours and service, and a year later TD scooped it up.

paulsstuff said...

"Yeah, Canada Trust was great. Who allowed that merger anyway".

"Perhaps somewhat anomalously, in January, 2000, before the promised policy framework was completed, minister Paul Martin approved the acquisition by TD Bank of the largest Canadian trust company, Canada Trust. This was a merger of two deposit-taking institutions, large financial institutions each carrying on banking activities (except perhaps in name in the case of Canada Trust). "

Joanne (True Blue) said...

Ah hah... Thanks for the info.

The more digging you do, the more connections seem to come up between the banks and the Liberals.

Bec said...

Oh ya, that came out when the 'horn tooters' were blowing Liberal accolades, while the Prime Minister was building up confidence for the CDN banking system.

These guys are beyond belief! Absolutely the self annointed, 'Rulers of the Country'!

hunter said...

We were with Canada Trust until they joined TD, we moved our mortgage to a Credit Union and have never looked back.

Three months after we had moved our mortgage TD phoned to give us a good rate on our renewal, they didn't even know we had moved our mortgage!

Ted said...

I think your second guess at their meaning is correct Paul, i.e. that it is total government spending, because that is what gets factored into the budget, not just program spending.

And as for projections, aren't they just using Flaherty and Harper's projected program spending numbers? The ones Harper used to try to claim that his deficit would just magically disappear as a result of greater revenues from economic recovery.

What I would like to know, even if you bought Harper's line that economic recovery would be all that was necessary to eliminate the Harper deficit, not cuts, not taxes, not government decisions, just recovery... if you bought that, what is Harper saying now when it turns out so soon that his numbers were way off?

Harper's numbers are way way off, he told us this, but he has not revised any of his projections or come up with any plan for dealing with the deficit... other than to say 'don't worry, be happy'.

What is the government's plan to eliminate the Harper deficit?

paulsstuff said...

Actually Ted, they used some of their own projected data:

"TD's prediction is based on its own economic forecast, which it acknowledges is "substantially" weaker than what is envisaged by the Department of Finance and other Bay Street economists."

Everybody is all over the place with their predictions. TD and Drummond have been no better with their numbers than anybody else.

From what I'm hearing through people I know in the auto industry, it's starting to rebound. Sales for May were down year over year for May, but May sales figures wiill be the best month this year, and much of last year. Housing market is picking up nicely. TSX still upward, with many economists saying the stock market is usually six months ahead of the rest of the economy.

Here in Ajax the trades are all booming because of the Home Reno Tax Credit. I'd say by september things will be a lot more rosy.

Kelly said...

Everyone knows you need to take TD's forecasts with a grain of salt. If you want balanced research, take an average other the major banks.

The reason? The other banks all run full service brokerage houses. TD runs a discount brokerage. They make their money on trades and it matters not if they are wildly optimistic or deeply pessimistic, only that the market is volatile.

When RBC zigs, TD zags. Its good business. And right now that means talking down the economy to destabilize the competition. Why am i not surprised it is full of Liberals?

Anonymous said...

Are we looking at the same numbers here?

From here:


(Table 2, about halfway down gives numbers for 97-98 through 04-05)

You have: '04-'05- Program expenses were up $13.7 billion

The chart shows Program Expenses in 03/04 to be $141.4B, and Proigram Expenses in 04/05 to be $162.7B, a difference of $21.3B, not the $13.7B you claim.

You have: '03-'04 Program expenses were up $10 billion

The chart shows Program expenses in 02/03 to be $133.6B, for a difference of $7.8B, not the $10B you claim.


Joanne (True Blue) said...

Three months after we had moved our mortgage TD phoned to give us a good rate on our renewal, they didn't even know we had moved our mortgage!


paulsstuff said...


All figures come from the Fiscal Monitor.

Joanne (True Blue) said...

I think it would be really helpful if Don Drummond responded to your analysis, Paul.

The discrepancies need to be addressed.

Ted said...


Somewhere you said the auto industry is rebounding and sales are up.

I'm not questioning you on that personally, but as someone in the industry, how does that jive with the announcement today that sales are the worst they have been since 1999? Down 16.5%.

Honestly, I'm not even trying to poke at you, but if there is some good news out there for the auto industry that's great, but to me it does not seem so. So I'm just trying to get an understanding of the facts.

paulsstuff said...

That article references Canadian sales Ted. U.S. sales are picking up, though you won't see it in sales figures for a few months. The automakers have managed to get rid of a lot of excess inventory, so people are now starting to order cars in the colors and options they want. Dealer ordered cars generally take 6-8 weeks from the time the order is placed until the sale is completed.

It's also important to note that the auotmakers have been holding back some releases of new models, both because of finances, and the fact you never want to release a new model in an economic downturn. New models generaly see their best sales numbers in the first 1-2 years, and then the fad wears off.

Joanne (True Blue) said...

Tom Clark announced that he would be discussing TD's report on PP.

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