THE BUDGETS TABLED in March by federal Finance Minister Jim Flaherty and his Ontario counterpart, Dwight Duncan, were remarkable for their similarity.

Although Messrs. Flaherty and Duncan adhere to different parts of the political spectrum, they both came down with budgets that deal similarly with record deficits that have been run up to deal with the worst economic downturn since the 1930s.

In both cases, the governments have promised to wipe out their deficits gradually. Mr. Flaherty suggests Ottawa will be out of red ink in five years and Mr. Duncan promises to cut the current $21.3 billion deficit in half in that period and take another three years for Ontario’s books to be balanced.

However, both finance ministers are basing their assurances on a list of assumptions that may well prove wholly unreliable.

As we see it, both budgets ought to be taken with more than one grain of salt and be seen as primarily reflections of political reality rather than any credible projection of what is likely to happen down the road.

After all, both governments are about to face the electorate in the not-too-distant future, with most pundits expecting a federal election by next fall and Ontario scheduled to have its next election in October 2011.

Faced with that prospect, neither Mr. Flaherty nor Mr. Duncan wants to upset the electorate which, provincially, is already angered at the prospect of having to pay eight per cent more for a wide range of consumer goods in July thanks to harmonization of the provincial and federal sales taxes.

Ideally, both levels of government should stand committed to doing something similar to what the federal government and some of the provinces did following the recession of the early 1990s.

With Paul Martin as the federal finance minister and the Liberals enjoying a majority of seats in the House of Commons, our federal government swung from huge deficits to modest surpluses by reneging on promises to cut the Goods and Sales Tax (GST) it had inherited from the Conservatives while slashing both its own programs and transfers to the provinces.

In Ontario, the Mike Harris and Ernie Eves Conservatives reduced the deficits from levels reached by the New Democrats but found it impossible to eliminate them, despite massive downloading of programs to the municipalities, because of lost revenue from cuts in income tax rates. The McGuinty Liberals finally achieved some tiny surpluses only by reneging on a promise not to raise taxes by imposing a new health-care tax labelled a “premium.”

A fundamental problem faced by all governments is the public’s hostility to taxes in general and income taxes in particular. Although historians will no doubt see imposition of the GST and the Ontario health tax as appropriate moves by governments of the day and the tax cuts by the Harper and Harris regimes as wholly inappropriate, there’s no doubt that cutting taxes is politically popular.

However, there’s precious little doubt that either the federal or provincial deficits can be eliminated in the current decade in the absence of either some tax increases or an economic boom that few if any experts see coming.

The main reason is the lack of any credible plan to restrain the growth of health-case costs, which are projected to rise to $46.1-billion in Ontario in the 2010-11 fiscal year (which began today). That’s a 6 per cent jump, slightly lower than the annual increases in recent years.

However, the Duncan budget projects that health spending will go up only 4.1 per cent in 2011-12, and 3.1 per cent in 2012-13. Although that may not sound like much, it has never been achieved elsewhere and would come at a time when an aging population and more expensive technologies and treatments will be pushing costs ever higher.

Yet it’s on flattening the health-care cost curve, and keeping it flat well beyond 2012-13, that the McGuinty Liberals are pinning their hopes for fiscal sustainability.

They and the Harper Conservatives are no doubt hoping that the economy will improve a lot more than the experts expect, and political considerations prevent both from levelling with the electorate as to what really should happen if instead of that we have a “double-dip” recession of the sort some economists are predicting for the United Kingdom.

Ideally, both levels of government should abandon their unrealistic deficitreduction projections in favour of a commitment not to repeat the policies of the Bush administration in the United States, which cut taxes and ran huge deficits in boom times.

Instead of projecting gradual reductions in deficits over the next five or 10 years, we should have a commitment to achieve balanced budgets as soon as we have a healthy economy, even if that requires raising taxes.

In the mean time, the current huge deficits could be used as an excuse for creation of a federal-provincial royal commission on taxation that would recommend the fairest means for governments to raise the money needed to provide the programs the public wants.