Trudeau re­spon­si­ble for $28.5B bal­loon­ing deficit

Lib­er­als should ac­cept re­spon­si­bil­ity for their spend­thrift ways — not pass the buck

The Hamilton Spectator - - COMMENT - CHARLES LAMMAM AND BEN EISEN Charles Lammam and Ben Eisen are an­a­lysts at the Fraser In­sti­tute (www.fraserin­sti­

On the cam­paign trail in 2015, Justin Trudeau’s Lib­er­als promised to hold fed­eral deficits to $10 bil­lion or less dur­ing their first few years in of­fice, be­fore re­turn­ing to a bal­anced bud­get in 2019-20. Un­for­tu­nately, that’s not how things turned out.

The Lib­eral gov­ern­ment’s deficit this year is ex­pected to reach $28.5 bil­lion. And the gov­ern­ment won’t com­mit to a spe­cific time­line to bal­ance the books.

In a re­cent news con­fer­ence, the prime min­is­ter blamed the de­te­ri­o­rat­ing con­di­tion of fed­eral fi­nances on the pre­vi­ous gov­ern­ment, claim­ing he in­her­ited an $18-bil­lion “base­line deficit” in his first year in gov­ern­ment.

This is a re­mark­able and un­jus­ti­fied ex­er­cise in blame-shift­ing. In re­al­ity, the Lib­eral gov­ern­ment’s spend­thrift ways are a key rea­son for the larger-than-promised bud­get deficits.

In the 2015-16 fis­cal year, when the Lib­er­als were elected, fed­eral pro­gram spend­ing to­talled $270.9 bil­lion — a 6.7 per cent in­crease over the pre­vi­ous year. This in­crease was a func­tion of the Con­ser­va­tives in the first half of the year and the newly-elected Lib­er­als in the sec­ond half.

The Con­ser­va­tives, led by Stephen Harper, planned to spend $263.2 bil­lion in their 2015 bud­get. The Lib­er­als as­sumed power in Oc­to­ber 2015 and pro­gram spend­ing ul­ti­mately in­creased by $7.7 bil­lion to $270.9 bil­lion. Since rev­enues ended up $5.2 bil­lion higher than planned in the 2015 bud­get, the gov­ern­ment recorded a small deficit of $987 mil­lion, equiv­a­lent to 0.3 per cent of to­tal fed­eral spend­ing.

The next year, with the Lib­eral gov­ern­ment fully in charge of fi­nances, spend­ing in­creased by 7.4 per cent. Ex­cept for the post-re­ces­sion spend­ing in 2009-10, that’s the high­est year-over-year in­crease by Ot­tawa since 2006-07. That dwarfed the av­er­age an­nual in­crease in fed­eral spend­ing over the pre­ced­ing six years (1.5 per cent).

Fast-for­ward to the cur­rent fis­cal year. The gov­ern­ment plans an­other sig­nif­i­cant boost in fed­eral pro­gram spend­ing — five per cent. All told, the Lib­er­als will have added $34.6 bil­lion in new pro­gram spend­ing over the past two years (not count­ing any ex­tra spend­ing from 2015-16), a 12.8 per cent jump.

While it’s true the econ­omy has slowed since the Lib­er­als as­sumed power, damp­en­ing rev­enue growth, these marked spend­ing in­creases have no doubt con­trib­uted to the larger-than-promised deficits we see to­day.

De­spite a weaker econ­omy, the Lib­er­als could have kept the deficit to $10 bil­lion this year (2017-18) by ex­er­cis­ing some spend­ing re­straint and lim­it­ing the to­tal in­crease in pro­gram spend­ing over the past two years to $19.1 bil­lion (or seven per cent). This level of spend­ing growth, in­ci­den­tally, would have more than off­set cost pres­sures from ris­ing over­all prices (in­fla­tion) and a grow­ing pop­u­la­tion.

In short, if the Lib­eral gov­ern­ment in­creased spend­ing more mod­estly, it would have kept its prom­ise of a $10-bil­lion deficit this year and been on track to achieve a bal­anced bud­get on sched­ule.

To gov­ern is to choose, as the say­ing goes, and it was the Lib­er­als who cut the rope on sev­eral short-lived fis­cal an­chors in order to fa­cil­i­tate a spend­thrift ap­proach to gov­er­nance. They should ac­cept re­spon­si­bil­ity for the con­se­quences rather than shift­ing blame to a de­feated gov­ern­ment that has been out of of­fice for more than a year and a half.

None of this is to praise the Con­ser­va­tives’ man­age­ment of fed­eral fi­nances. At var­i­ous points, they, too, in­creased spend­ing markedly, which con­trib­uted to large deficits.

The de­ci­sion-mak­ers of the day are re­spon­si­ble for their choices, and clearly Trudeau and his gov­ern­ment bear re­spon­si­bil­ity for the larger-than-promised deficits fac­ing the coun­try to­day.

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