Dipping into deficit could hurt Liberals over time
Not since the mid-1990s — a time when our deficit represented nine per cent of GDP, a time of credit downgrades, when the Wall Street Journal called Canada an “honorary member of the Third World” — have Canadians identified the deficit and government spending as one of the most important issues in the country.
In the wake of a federal budget notable for running deficits until 2023, the Conservative party has decried the Liberals, which resonates with voters in ways that have been politically damaging to the governing party. In Ontario, the outrage in many corners has been amplified after Kathleen Wynne’s Liberal government decided to stake its re-election chances on more than $30 billion in deficit spending over the next six years.
Federally, the Trudeau government was given a green light to run deficits by the electorate not so long ago. In 2015, Trudeau campaigned on a plan of “modest” deficits for three years, spending on infrastructure and social programs. Stephen Harper memorably mocked them as “teeny tiny ... so small you won’t see them” but proved correct in his prediction that they would be bigger and run longer than promised.
Still, after years of hearing the Conservatives bang on about austerity and prudence, Canadians wanted something else. Nearly three-quarters, including half of Tory voters, said the federal government should spend on jobs and growth, even if it meant deficits in the short term.
It turned the campaign in Trudeau’s favour. As Tom Mulcair vowed to balance the budget, left-of-centre voters abandoned the NDP for the Liberals.
So is the Trudeau government’s current problem really the deficit, or is there a deficit in how it is perceived to be managing the file?
Over the next five years, federal deficits aren’t projected to exceed one per cent of Canada’s gross domestic product. Given this, the Liberals might be persuaded to brush off opposition charges of recklessness — save for the fact the issue is now top of mind among uneasy Canadians in a way it hasn’t been for 20 years.
But top of mind among whom? Those prudence-fatigued 2015 Conservative voters are now tired of the spending. To them, the federal deficit ranks as the No. 1 issue in the country by a margin of more than two to one over 2015 Liberal and NDP voters. This would likely elicit a giant shrug among Liberal strategists, quick to point out those concerned Conservatives were never the Liberal base, and don’t represent a threat.
It still means, however, one-fifth of past Liberal voters have deficit spending on the brain. The Trudeau government must keep these people on side, especially in the face of ebbing approval numbers.
Trudeau promised to spend on infrastructure, but inherently long timelines for big projects means they’re years away from the kind of ribbon-cutting photo-ops that remind voters what all the expenditures were for.
The Liberals’ other reason to run deficits was about raising the personal economic prospects of Canadians. And whatever empirical economic indicators may signal, Canadians themselves aren’t necessarily feeling it: Over the last 18 months, the number indicating their personal standard of living is better off than it was the year previous has remained stubbornly flat.
Do the federal Liberals need to worry? At minimum, they should pay careful attention. Absent a plan to get back to black before the next election, on the defensive with an issue the opposition can effectively exploit, they must do a better job explaining why red doesn’t necessarily have to signal trouble ahead.