Austerity is as dead as disco
Finance Minister Chrystia Freeland’s Monday economic update was a triumph for Prime Minister Justin Trudeau.
In committing Canada to unprecedented levels of debt- financed spending, now and in the future, Trudeau fixes the agenda not only for his government but those to come later. No future prime minister can credibly pledge to balance the budget when Ottawa has committed to hundreds of billions in spending for which it lacks the money, much less whittle down a debt pegged to hit $ 1.4 trillion by March. Austerity, the Liberals favourite curse word, is as dead as disco. You can’t austere yourself out of $1.4 trillion. You’d have to fire the entire civil service and shutter Ottawa for a year or two to even make a credible dent in the pile.
To ensure that can’t happen, the prime minister has dramatically raised expectations of what government is supposed to do for Canadians. Pandemic spending is just the start. Freeland hinted broadly that her first budget next year will continue the process, with big new debt- financed federal commitments for national daycare, extended care and pharmacare plans, any one of which would previously have been deemed ambitiously expensive. Now we’re to get all three.
Plus, remember, we’re also to get the Trudeau government’s green economic revolution. That’s on top of all Monday’s offerings. The Liberals are reinventing the country as a debt-dependent Scandinavian welfare state, without the oil income or the crushing taxes to pay for it. Guess which of those we’re most likely to get.
In pushing his own party so far left, Trudeau is forcing New Democrats and Greens even farther towards the fringes, redefining what constitutes “moderation.” Annamie Paul, the new Green party leader, made that clear in dismissing Freeland’s wonderland of good tidings as barely worthy of comment.
Yes, said Paul, Freeland included money for retrofitting, money for zero- emission vehicles, money for “nature-based climate adaptation,” money for infrastructure, money for studies, strategies and secretariats, “but that is no substitute for an ambitious plan.”
“This is the time for ambition, this is the time to believe in people in Canada … and that’s really going to require completing our social safety net,” she said. Everything Freeland said Monday suggests she will be more than happy to comply.
The Liberal plan can’t go ahead without opposition approval, but neither the Greens nor NDP will ever get a more prodigal regime to consider and would need some pretty fanciful arguments for bringing it down. The game will be in cheering it on to more and greater expenditures, bigger commitments, broader benefits, backed by additional borrowings. NDP Leader Jagmeet Singh professed concern not at the level of Trudeau’s deficits, but at the absence of a crushing wealth tax to offset some of the cost. ( The government did boast of a plan to apply sales tax to firms like Netflix and Amazon, as if the money would come from the tech giants rather than subscribers).
Even Liberals used to have limits on profligacy beyond which they wouldn’t go, until now. The numbers unveiled in Freeland’s update are otherworldly compared to everything Canadians have come to consider normal. This year’s deficit, at up to $ 399 billion, is more than Ottawa’s entire program spending in 2019. It’s more than seven times what any previous government borrowed. In just one year Trudeau has more than doubled a national debt that took all 153 years of Canada’s previous existence as a country to amass.
The debt as a percentage of GDP level will approach 60 per cent by 2024, about double the benchmark former finance minister Bill Morneau liked to herald as a red line not to be crossed. Cross it? Freeland can’t even see it from where she stands. At least now we know why Morneau was in such a rush to be somewhere else when the financial situation hit the fan. Who wouldn’t rather be in Paris boning up for a new job with a big expense account rather than in Ottawa informing Canadians someone had emptied the savings, maxed out the credit cards and slapped a third mortgage on the family home?
Ranked against these forces, Conservative Leader Erin O’toole finds himself on ground dictated by others. He represents one party arguing for caution against three that have thrown it to the wind. Spending programs, once in place, are never repealed. Public outrage engulfs even minor economies. The Tories can’t credibly claim they’d find a way to balance the budget short of an economic miracle no one sees in the offing.
Should O’toole become prime minister, his challenge, as with future leaders, would be managing the liabilities left behind by Trudeau to prevent them overwhelming other needs. Before any future program could be launched, or future crisis met, the governing party would have to ensure the bills for Trudeau’s binge can be covered first.
There’s a chance Canadians may not back the Liberal game plan, should they ponder the costs enough to grow alarmed. But that seems slim. Voters don’t worry enough about national finances to look a gift horse in the mouth. If the government says we can afford it they’re generally willing to play along unless a crisis develops, which they can then blame on the government, not themselves for egging it on.
For Trudeau it’s a legacy of which he’ll no doubt be proud. He’s not just left his mark on history, he’s carved it into the Rockies, across the Prairies, all the way to the Atlantic bubble.
If there’s a silver lining, at least we shouldn’t have to listen to any more talk about the danger of a “great reset.”
It’s here, buddy. Done and dusted. Get used to it.
it’s a legacy of which he’ll no doubt be proud.