Trudeau touts red ink as road to prosperity
Aversion to running deficits flipped on head as Liberals vow infrastructure spending spree
OTTAWA— It’s the political hot potato, a no-go zone.
In the heat of this campaign, deficits — or more specifically the deep political aversion to red ink — is shaping the ambition of the election promises and has been framed as the standard by which a party’s economic performance should be judged.
But Thursday, Liberal Leader Justin Trudeau tacked against his rivals with the promise of record infrastructure investment over the next decade, with spending earmarked in areas such as public transit, social housing and clean energy.
The price tag? An extra $60 billion over and above the $65 billion already committed. The consequence? A lingering deficit, likely to 2019.
The Liberals say the deficits will be “modest, short term” — less than $10 billion in each of the next two fiscal years.
“We are committed to balancing the budget in 2019,” Trudeau said. “We know the economy will improve when the Canadian government starts investing once again in the kinds of things that will create growth.”
And if the economy doesn’t improve and the fiscal picture gets worse, Trudeau said his party would be “honest” with Canadians about the numbers.
Approaching the midpoint of this campaign, it seems Canada’s political universe has been knocked off kilter. It’s the Liberals, fond of boasting about their party’s economic DNA and record of balanced budgets, who are now vowing big-ticket infrastructure spending, even if means deficits.
The New Democrats, painted by their rivals as spendthrifts, are taking a hard line by promising to balance the budget within a year — but haven’t outlined the potential cuts or costs of such a move. That stance prompted one reporter to ask NDP Leader Thomas Mulcair Thursday, “Why do you feel the need to be even a greater deficit hawk than the prime minister?”
And the Conservatives, having rung up a series of deficits while in power, paint their political opponents as unable to manage Ottawa’s books.
Indeed, Harper wasted little time Thursday taking aim at the Liberal plan, mocking Trudeau’s pledge that deficits will only be “modest.”
“Trudeau’s deficits will not be small. Mr. Trudeau has made tens of billions of dollars of spending promises . . . He has no idea what he is talking about when it comes to these things,” the Conservative leader said.
“That’s why you could be sure that his small deficits will become large deficits and would get Canada into the same pickle of high taxes and program cuts that we had under the last Liberal government,” Harper said. Yet Trudeau was unrepentant about the deficit, portraying the infrastructure spending as the necessary price to kick-start growth in a Canadian economy that he said was stuck in recession.
“We’re in a recession and growth has stalled so now is the time to invest in the projects that our country needs and the people who can build them,” Trudeau said during a campaign event in Oakville.
The Liberal plan found immediate favour among municipal leaders. Toronto Mayor John Tory said he welcomed the promise of extra cash.
“This long-term, stable funding, like what we’ve seen with the gas tax, is critical as we focus on building transit, cutting congestion and making badly needed repairs to affordable housing,” Tory said in a statement.
While the Liberals have not commented about specific projects, Tory said he’s been assured that cities would decide themselves which projects they want funded.
The mayor also noted that the Conservatives have earmarked $2.6 billion for his SmartTrack transit proposal and that Mulcair has promised a transit fund that could help invest in the city’s planned expansions.
Raymond Louie, president of the Federation of Canadian Municipalities, also praised the news, saying it has the potential to improve the quality of life in towns and cities.
“It also recognizes municipalities need to be at the centre of any plan to build a stronger economy,” Louie said in a statement.
The Liberals are betting that Canadians, especially those living in cities, instinctively understand the need for extra investments — and the consequences if that spending is delayed, be it packed subways, crowded roads and crumbling social housing.
“We’ve had underinvestment in the things that support economic growth for a very long time,” a senior Liberal strategist told the Star later Thursday.
“Anybody who lives in Toronto knows that we need urban infrastructure in order to have the city grow.
“For us, that’s just basic economics 101 and we think the public gets that because they spend every day stuck in traffic.”
With turbulent stock markets pushing the economy into the spotlight, leaders have tussled in recent days over their economic visions for Canada, each trying to convince voters that their party alone should be trusted to steer the country during uncertain times.
Mulcair vowed Thursday that if elected, his government’s first budget would be balanced, even as he said that Ottawa is already “billions” of dollars in the red.
“I’m tired of watching governments put that debt on the backs of future generations,” Mulcair said.
With his deficit talk, Trudeau may have handed his rivals a club. But the Liberals are confident that the promise of community investments resonates more with voters than tough talk on balancing books.