Finance Minister Jim Flaherty has made it clear. With a deficit that is projected to top $55.9 billion in the current fiscal year, the Conservative government has no appetite for putting new spending programs or new tax cuts in the upcoming budget.

Instead, he says people should look for the March 4 budget to be all about "restraining" spending.

How could spending be restrained? Well, Flaherty has pledged that he will not cut transfers to individuals (like benefits for the elderly, children or employment insurance) or transfers to the provinces that help pay for health and education.

Finance Minister Jim Flaherty promises a 'stay-the-course' budget this time around. (Canadian Press)

Those two areas together account for a huge chunk of the government's spending.

According to the finance department's September 2009 fiscal outlook, which updated the figures in the 2009 budget, transfers to individuals and other levels of government will total $121.2 billion in the 2009/10 fiscal year.

That's half of what the government will spend in the current year, excluding the cost of servicing the national debt.

So any attempt to curtail, restrain or even cut overall spending would have to come in the other big area of budget expenditures, direct program expenses.

Direct program expenses is a very broad category that includes wages and benefits for federal public servants, capital spending, transfers administered by departments and the cost of running Crown corporations. Those categories together account for $102 billion in underlying spending, $35 billion of which goes to public sector wages and benefits.

Spending had been growing 7% yearly

In its first years in office, the Conservative government didn't have a lot of success in capping or otherwise restraining program spending. Until the recession hit in 2008, that spending was rising by seven per cent a year. The government hopes to limit that in the future to 3.3 per cent.

Even a freeze on public sector wages would save only $500 million a year, by some estimates.

The week before the budget was brought down, a senior government official briefed a group of Parliament Hill journalists.

There will be a debt reduction plan in the budget, the official said. He also reiterated Flaherty's pledge of no tax increases, no cuts in transfers to the provinces and no new spending beyond the $19 billion in stimulus outlined in the last budget's economic action plan.

As far as spending restraint goes, the official said, the government will be looking at "slowing the rate of spending." There will be no reduction in spending on pensions, health care or education transfers. Spending in all other departments will face restraint, the official said.

"We will not balance the budget on the backs of Canadians," he said.

Choices, choices

So how will the budget be balanced? Will it be accomplished down the road through big layoffs in the federal public service, or by implementing a hiring freeze that would leave vacant positions unfilled? Will major capital spending programs be deferred? Will the military face cutbacks after the Afghan mission ends in 2011? Will the government abandon its "no tax increase" pledge? Will publicly owned assets be sold off? Or will the economy eventually grow enough to generate the new personal and corporate tax revenue needed to do the job? That's what the government has fervently maintained will happen.

In the mid-1990s, Liberal Finance Minister Paul Martin chose to tackle the country's large deficit through huge cuts in public spending. Some of the measures were not popular, but that government enjoyed a majority in Parliament.

When Flaherty was Ontario's finance minister in 2001 and 2002, he balanced the province's books by reining in spending — a key plank in the Common Sense Revolution of the Mike Harris Tories.

This time around, many observers have noted how politically and economically difficult it is to slash the deficit.

"Current deficits will be difficult to unwind, with spending cutbacks tough to implement and the revenue rebound constrained by relatively subdued economic growth," wrote Scotiabank's chief economist, Warren Jestin, in the weeks leading up to the March 4 budget.

Deficit could rise to $18.9 billion

With 1.5 million unemployed, no minority government would want to be portrayed as unsympathetic to a vulnerable constituency. A job creation plan will be a big part of the March 4 budget, according to the official who delivered the budget briefing.

Canada's parliamentary budget officer, Kevin Page, warned last month that the country risks having a large and persistent deficit, even after the economy bounces back in a few years' time. That deficit could be $18.9 billion in 2013/14, he says, and could grow even larger in the years that follow if the problem isn't tackled soon.

But in the absence of tax increases, and with only moderate spending cutbacks in this budget, tough action on deficit reduction doesn't appear to be imminent.

Look for a safe budget that provides a road map for the long term. That map, not this budget, will detail how and when the country travels the bumpy road back to a deficit-free state.