Dip­ping into deficit could hurt Lib­er­als over time

The Delhi News-Record - - OPINION - SHACHI KURL Shachi Kurl is ex­ec­u­tive di­rec­tor of the An­gus Reid In­sti­tute.

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.

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