Over the past two years, the federal government has undergone an unfortunate fiscal transformation. After running budget surpluses for over a decade, the federal government is now projecting substantial budget deficits into the foreseeable future.

Like most governments in the developed world, Canada's federal government spent its way into deficit. While the spending increases were intended to help mitigate the impact of the collapse of financial markets and resulting economic recession, these measures turned away from Canada's recent sound fiscal management and set the nation back down the path of massive deficits and increased debt.

To stop the increases to Canada's debt burden and to improve the country's long-term competitiveness, the 2010 federal budget should swiftly improve the federal government's fiscal position. This Fraser Alert examines the source of current and future deficits, explains why the federal government should not continue its stimulus spending, and offers recommendations for a fiscally prudent 2010 federal budget.