Liberals blow another fiscal promise
The update on federal finances delivered by Finance Minister Bill Morneau this week was a happy-talk document intended, no doubt, to leave Canadians feeling warm, cosy and secure as they settled into the holiday season.
The economy is “sound and growing.” Jobs — “good, well- paying” ones — are being created. Wages are growing and business profits are “solid.” Better yet, there’s nothing but good news on the debt front. Canada’s “budgetary deficit reflects investments that help keep the economy strong and growing, with the deficit projected to be $ 26.6 billion in 2019-20, improving to $ 11.6 billion by 2024-25.”
So good cheer all ’round. The kiddies can tear into their presents safe in the knowledge the government of Canada has their future in mind. That is, just as long as no one sneaks a peek past the smiley-face depiction offered up by the finance minister. Less partisan figures looking at the numbers reached an altogether different conclusion than the one Morneau peddled in a series of post-review interviews. “I don’t think it’s fair to say that the government has a strong fiscal plan right now,” former parliamentary budget officer Kevin Page, who regularly unsettled Conservatives and Liberals alike by shining a light on the huge holes in their rosy forecasts, told Bloomberg News: “The investments that they’re talking about are really modest tax cuts. From an economic perspective, are we going to get a lot of growth from a modest tax cut at this stage of the cycle? Probably not so much. I think we need to be concerned right now. We just sort of have this weak fiscal plan.”
Analysts pointed out that Morneau’s forecast made no allowance for billions of dollars of Liberal campaign promises. It sloughed off any possibility of a downturn or recession, and promised to find $ 1.5 billion a year in spending cuts, even while ramping up borrowing well beyond predictions made just a few months ago.
Indeed, the Liberal plan on deficits once again blew past the sincere pledges offered by Morneau and Prime Minister Justin Trudeau. Since the Liberal victory in 2015, the finance minister has changed his tune on deficits so often he must have difficulty recalling which promise he’s breaking at any given moment. The original vow — three years of deficits maxing out at $ 10 billion a year, followed by a balanced budget — quickly gave way to annual shortfalls in the range of $ 20 billion. During the fall election Trudeau revealed plans for another $ 93 billion in borrowing over four years, yet Morneau couldn’t stay even within that generous parameter: the figure in Morneau’s update is $7 billion higher than he forecast just nine months ago in his spring budget.
As the red ink piles up, the Liberals have abandoned previous guidelines as each in turn has been exceeded. The one figure that mattered, we were told, was the debt- to- GDP ratio, which measures debt against the size of the economy. As long as it kept going down, Liberals said, all was well, and they were determined to ensure it did indeed decrease every year. Until now: according to the update, the figure will increase slightly this year.
Yes, the finance minister says it’s a one- time thing, and next year the figure will be better. But he’s been saying that about the deficit every year since 2015, and so far he’s been solidly wrong. Given the credibility issues that did such damage to the Liberals’ re- election bid, is there any reason to believe their forecasting is about to improve now, when they’ve been reduced to a minority and have every reason to fudge the figures in hopes of gulling voters into a sense of security?
It might be different if Morneau was able to present a strong, credible case for optimism, but he fails on that front as well. A decade after the Great Recession of 2008- 09, a slowdown is well past due. Consumer debt, already at worrying levels, rose another 31.4 per cent in the second and third quarters of this year. Morneau told one interviewer it was essential to keep borrowing because the Liberals had promised a tax cut, and want to keep consumers’ spirits up. “We’re trying to deal with economic anxiety,” he said. But borrowing money to finance lower revenue is hardly a sound long- term strategy. Nor would most financial advisers agree that spiralling debt is a good antidote to financial stress.
“Nobody said it was going to be easy,” Morneau shrugged when confronted with doubts about his plan. No, indeed. But the least Canadians should expect is an honest presentation of the situation so they can make realistic plans for the future, even if the federal government and its finance minister aren’t inclined to do the same.
SLOUGHED OFF ANY POSSIBILITY OF A DOWNTURN OR RECESSION.