Heather Scoffield

Ottawa is rolling in dough, but don’t expect to hear the finance minister talk about reducing the deficit,

If he wanted to, Finance Minister Bill Morneau could take a serious chunk out of the deficit in his budget on Tuesday.

Government revenues are flowing in beyond all expectations. There are several billion dollars in unallocated funds lying around that could be diverted to reducing the deficit. And there seems to be a fair amount of money left unspent from previous budgets — funds that have lapsed in infrastructure spending and elsewhere.

Morneau won’t go there though. For him, running a deficit in the face of Conservative orthodoxy has become a point of pride.

The extra cash means the federal Liberals can afford to make a bold statement on Tuesday. Canadians will hear a lot about retraining for jobs of the future, and government help to make housing more affordable for first-time homebuyers, and pharmacare. There will be talk of a prudent and cautious approach to budgeting that will put the fiscal balance on a responsible track. But for Morneau, making a significant, long-term commitment to eliminating deficits would just be a concession to the Conservatives. Instead, he will undoubtedly argue that Conservative deficit zealotry implies cuts to government programs such as infrastructure or the Canada Child Benefit that has been so successful at reducing poverty.

The Conservatives are just as content to have that fight with the Liberals. They will argue vehemently until the day Canadians go to the polls: Justin Trudeau broke a 2015 election promise to balance the books by 2019. And because he won’t do that, your taxes will go up after the next election to pay for his profligacy.

Deficits have become an ideological battering ram rather than a fiscal-policy tool, and that’s only going to become more pronounced as the election approaches. What’s lacking is a nuanced discussion about when it’s appropriate to run a deficit, and when it’s best to scale back.

For context, the battering is over 0.8 per cent of the country’s gross domestic product.

In last fall’s fiscal update, the finance department projected a deficit of $18 billion for this fiscal year, an amount that includes a $3-billion contingency fund in case things went off the rails. It’s clear they won’t need the rainy-day fund, and with the extra revenue coming in, Scotiabank’s economics team figures Ottawa could cut that deficit in half without much effort. With the revenue surge continuing into the next fiscal year, a projected $19.6-billion deficit could be slashed by a third.

Traditional economics would suggest that now is certainly not the time to tighten the purse strings. The Canadian economy has been downright slow for the past few months. Prospects are expected to pick up a bit, but the Bank of Canada projects a measly 1.7 per cent expansion for 2019.

In Alberta, the hurting is more acute. The Conference Board of Canada sees just 1.3 per cent growth this year, as the province grapples with the cutback in oil production and energy investment.

But if there are calls for remedying any of this with deficitfinanced stimulus spending — cash-heavy, job-creation programs designed to immediately ease the pain — they are muted. Calgary-based Conservative MP Michelle Rempel, who has her ear to the ground, came armed this week to Parliament Hill with a petition to change the equalization formula and scrap bill C-69 which modifies the process for approving energy development.

She would like to see a clearly articulated vision on energy development that would give investors the certainty they need to pile back into Alberta. And, of course, progress on the pipeline. Morneau would use different words but come to a similar conclusion: stimulus is not what the Canadian economy, or even the Alberta economy, is calling for.

So why run years of deficits then? In calmer moments when not going toe to toe with political opponents, the Liberals say they are necessary to fix fundamental problems in the economy that are holding Canada back — crumbling infrastructure, child poverty, income inequality and a lack of solid footing to deal with the uncertainties of climate change and the rapidly changing digital economy. They also recognize that Canadians will need to see the dividends, and be persuaded that going into debt is for a good cause.

The implication is, however, that once those issues are under control, a balanced budget should be in the offing. And that’s not something Morneau is ready to discuss.