AND THE FIS­CAL UP­DATE IS ... $8.9B

MORE FOR THE LIB­ER­ALS TO SPEND, SPEND, SPEND

National Post (Latest Edition) - - FRONT PAGE - Brian Platt

Surg­ing eco­nomic growth has Canada’s govern­ment on track to lower its deficits, but it’s also com­mit­ting bil­lions of dol­lars in new spend­ing, in­clud­ing an ex­tra $ 5.6 bil­lion pumped into the Canada Child Ben­e­fit pro­gram over five years.

The fall fis­cal up­date, re­leased on Tues­day, shows the govern­ment ex­pects an ex­tra $ 8.9 bil­lion in rev­enue this year, com­pared with the es­ti­mate in the spring bud­get. The pro­jected deficit has dropped from $28.5 bil­lion to $19.9 bil­lion (in­clud­ing $ 1.5 bil­lion set aside as a risk cush­ion).

About $33 bil­lion in to­tal has been shaved off the deficits pro­jected over five years, but there is still no timetable for re­turn­ing to bal­ance. The debt-to- GDP ra­tio is fore­cast to drop un­der 31 per cent this year and reach 28.5 per cent by 2022-23, when the deficit is fore­cast to be $12.5 bil­lion.

In­stead of plow­ing all of the in- creased rev­enues into re­duc­ing the deficit, the fis­cal up­date shows the govern­ment flex­ing its spend­ing mus­cles — or in the words of Fi­nance Min­is­ter Bill Morneau, “dou­bling down” on its strat­egy of stim­u­lat­ing the econ­omy.

An ex­tra $ 1.8 bil­lion is al­ready booked this year in new spend­ing since the spring bud­get, and start­ing next year, hun­dreds of mil­lions will be spent on boost­ing two ben­e­fit pro­grams: the Canada Child Ben­e­fit and the Work­ing In­come Tax Ben­e­fit.

Asked why he isn’t fo­cus­ing more on get­ting to a bal­anced bud­get, Morneau told re­porters the govern­ment’s strat­egy of boost­ing the econ­omy through new spend­ing has clearly been shown to work, given the buoy­ant growth.

“We’re very pleased with our eco­nomic sit­u­a­tion, it’s what we would have hoped for,” he said.

“We now are able to show a very pos­i­tive fis­cal track … We’re able to do that by dou­bling down on what we’ve done for Cana­dian fam­i­lies, im­prov­ing the Canada Child Ben­e­fit so peo­ple have more money in their pock­ets, and help­ing those who are strug­gling to get by.”

The child ben­e­fit, which pro­vides tax- free monthly pay­ments up to a max­i­mum of $ 6,400 a year for a child un­der six, started in July 2016 and has been cred­ited by many — in­clud­ing Bank of Canada Gover­nor Stephen Poloz — with boost­ing con­sumer spend­ing. The pro­gram paid out $ 23 bil­lion to 3.3 mil­lion fam­i­lies in its first year.

The govern­ment now says it will in­dex the child ben­e­fit to in­fla­tion two years faster than planned. In one ex­am­ple out­lined, in­dex­a­tion would give $ 560 more in a year to a sin­gle par­ent mak­ing $ 35,000 who has two chil­dren. The move is ex­pected to cost the govern­ment $400 mil­lion next year, and about $ 1.4 bil­lion each year af­ter.

Mean­while, an ex­tra $500 mil­lion an­nu­ally will start go­ing into the Work­ing In­come Tax Ben­e­fit, a tax credit cl ai med by l ow- i ncome work­ers. De­tails will be an­nounced in the 2018 spring bud­get.

In ad­di­tion, last week the govern­ment an­nounced a low­er­ing of the small- busi­ness tax rate from 10.5 per cent to nine per cent by 2019, which will de­crease rev­enues by $2.9 bil­lion over five years.

Some econ­o­mists have wor­ried that the new spend­ing dur­ing a time of ro­bust growth will fuel in­fla­tion, and in turn, in­ter­est- rate hikes from the Bank of Canada to com­bat it. The next rate an­nounce­ment comes out on Wed­nes­day, and fol­lows two hikes in a row.

Con­ser­va­tive Leader An­drew Scheer used the oc­ca­sion to re­mind peo­ple of bro­ken Lib­eral cam­paign prom­ises on the bud­get.

“Justin Trudeau promised to bal­ance the bud­get by 2019,” he said. “Today the bud­get is of­fi­cially pro­jected to never re­turn to bal­ance un­der this Lib­eral govern­ment, and debt is be­ing added at twice the rate promised.”

The Cana­dian Tax­pay­ers Fed­er­a­tion was also unim­pressed with the lack of a plan to elim­i­nate the deficit. “If they can’t bal­ance the bud­get when the econ­omy is do­ing well, when can they?” the fed­er­a­tion said.

The fall up­date out­lines for the first time a se­ries of new spend­ing com­mit­ments since the spring bud­get — in to­tal, about $ 1.8 bil­lion for this fis­cal year, plus bil­lions more in fu­ture years.

This in­cludes $ 546 mil­lion over five years in new spend­ing f or t he “l egal frame­work to strictly reg­u­late and re­strict ac­cess to cannabis” and $ 150 mil­lion over six years for en­forc­ing drug-im­paired driv­ing.

It also out­lines $ 760 mil­lion over six years in new spend­ing for se­cu­rity at Canada’s em­bassies and con­sulates, and $1.2 bil­lion over six years in new ser­vice fund­ing for the coast guard and other fish­eries op­er­a­tions.

DEBT IS BE­ING ADDED AT TWICE THE RATE PROMISED.

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