This is the sixteenth edition of How Ottawa Spends. Our objective in producing this annual series is to provide timely and constructive analysis offederal government spending and public policy, and to stimulate debate about policy options. This year's edition assesses how the Liberals are doing at mid-life. To what extent have they been able to live up to their election promises made in the Red Book? What are the possibilities that they will be able to meet these commitments, given the serious economic and political constraints on governing?