Not really trying

Canada will run a budget surplus by 2045, the federal finance department projected on the Friday before Christmas. Finance says this is better than last year’s long-term forecast, when the deficit was to be eliminated in 2055.

Was this some kind of bad joke? No balanced budget for 28 years — or seven government four-year lifespans?

That’s the low bar of budget management the current government is setting for itself and its successors?

We certainly hope not. For what this forecast represents is a longterm, do-nothing scenario.

It’s the department’s best guess of where public finances will trend over the next three decades, given: 1. the known demographic trends (the population is getting older, a smaller percentage will be working-age and the slower growth in the labour force will also reduce the rate of growth of the economy) 2. a consensus of current opinion on future economic growth rates and inflation 3. no policy changes by governments.

In other words, it’s based on pretty reliable population trends, economic forecasts that are sure to change and a long period of suspended-animation government that is neither likely nor desirable.

For good reason, the department calls these long-term budget numbers “scenarios” rather than forecasts because they “are subject to a fair degree of uncertainty.” In particular, differences of opinion on future economic growth can change them dramatically.

This year, for example, the projection of a balanced budget in 2045 instead of 2055, was based on improved assumptions of the average rate of growth in Canada’s gross domestic product (GDP) over the next 40 years.

In 2016, the average projection of private-sector economists was 1.7 per cent annual long-term GDP growth. In 2017, it was 1.8 per cent.

The December report also noted the budget would be balanced (with a $3.9-billion surplus) as early as 2023- 24 if GDP growth matched the average of the four most optimistic forecasters. Or we could have a $19.8-billion deficit if growth reflected the average of the four most pessimistic forecasts.

In his fall update, Finance Minister Bill Morneau forecast a deficit of $19.9 billion this year, falling to $12.5 billion in 2022-23. Keeping to this scenario would break the government’s election promise to balance the budget by 2019-20.

Given the current robust economy, Mr. Morneau should keep that promise and not use the long-term scenario as an excuse to coast on fiscal management. In any case, the federal debt is trending down as a percentage of GDP, so the case for more stimulus and loose budgets is not strong.

The best way for the Trudeau government to use the long-term data is to show it can do better. For the long scenario is a best guess of what to expect if government isn’t really trying. Mr. Morneau owes us more than that.