Trudeau hasn’t earned any benefit of doubt on deficits

Prime Minister Justin Trudeau makes it hard to give him the benefit of the doubt on fiscal matters. The same man who once said the budget will balance itself is now telling the country that the government “took on debt so Canadians didn’t have to.” Sigh.

As revealed by the government’s “snapshot” update, the country is going to run at least a $343-billion deficit this year. That’s even higher than the $300 billion or so (also a gigantic sum) that was expected. It’s the biggest deficit since the Second World War.

Here’s the thing: for the most part, this is defensible. The prime minister’s legions of defenders are quick to claim that the choice was between deficits and either tens of thousands more dead Canadians or a cratered economy, or both. These boosters often get a bit carried away in their overenthusiastic defence of the PM, but there is some truth to what they say — the emergency was serious enough to warrant major spending. Even deficit hawks agree that deficits are acceptable during times of war or emergency; a major reason they are deficit hawks in times of peace and plenty is to ensure there’s fiscal capacity to spend during those emergencies.

This is one of those emergencies. Given the scale of the global crisis, reasonable Canadians understand that we were going to go into deficit, hugely so. True, there’s a decent chance that the seeds of the PM’s eventual political undoing were sowed by the deficit — with that much money gushing out of the federal coffer, there’s a very real possibility that there’s a fatal glass of orange juice in there somewhere. Still, those reasonable Canadians are likely prepared to accept some degree of waste as unavoidable under the circumstances.

There’s no way to actually measure what the limit of that tolerance is. (It will probably be more about the optics of any future scandalous expenditures more than the dollar figure — again, recall the infamous juice.) But people will want to feel good about Canada’s response, and the obvious examples of other comparable countries that performed worse than us will buttress the Liberals, especially since one of those struggling countries is the U.S., and we all know how much Canadians love feeling superior to our southern siblings.

But if the prime minister wants Canadians to give him and his government the benefit of the doubt, it would help if he didn’t say such silly things. Why make it harder for people to cut you a break?

And the prime minister’s comment on Wednesday absolutely makes it harder. It’s embarrassing. It’s one thing to make the case (a fair one!) that the pandemic made huge deficit spending necessary. It’s another thing to say that the government did it so that Canadians didn’t have to.

Because either some other country is going to pick up the tab for the debt (in which case, we should, to channel Trudeau, thank them for their donation), or Canadians are going to pay for it. Sure, it’s not on our credit cards, or tacked onto our mortgages. But it’s still on us. Canadians will pay for it in tax dollars that aren’t available for other purposes, or through services and purchases that future governments (including maybe even some Liberal ones!) will conclude cannot be afforded.

Discussions about deficits and debt always eventually veer into debates about debt-to-GDP ratios and historically low interest rates and the ability of central banks to finance their own spending, but what these debates overlook or obscure is a simple but unavoidable truth: even sovereign federal governments, even those of rich countries like Canada, and even those who look good compared to their G7 peers, must contend with reality. And the reality is that there are effective limits to borrowing and that debt has costs. It is Canadians who are constrained by those limits and who will pay those costs.

The debts accumulated during this pandemic almost certainly are worth paying for. The ones accumulated by Trudeau — deficits of choice, not necessity — before the pandemic were almost certainly not worth paying for, at least not with debt. If the money was worth spending, it was worth taxing the public to sustain, or worth diverting funds away from other priorities.

But that’s politically hard; borrowing was much easier. Too easy, it turned out. A government that spent tens of billions in borrowed cash before an emergency, hoping to grow the economy from the heart outward while waiting for the budget to balance itself, will now have to tell Canadians that the hundreds of billions they’re now borrowing were worth it.

They probably were. But the prime minister would have an easier time making that case today if he’d done a better job before the crisis, and didn’t say such strange stuff during it. Credibility matters, particularly when delivering hard truths. On this file, the PM doesn’t have much.

CANADIANS WILL PAY FOR IT IN TAX DOLLARS THAT AREN’T AVAILABLE FOR OTHER

PURPOSES.