Ottawa not really trying to erase the deficit

An editorial from the Halifax Chronicle Herald:

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 long-term, 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 longterm budget numbers “scenarios” rather than forecasts because they “are subject to a fair degree of uncertainty.”

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, Morneau should keep that promise and not use the long-term scenario as an excuse to coast on fiscal management.

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. Morneau owes us more than that.