Deficit report leaves Trudeau tough choice

On the scale of the deficits that have been sprung on rookie governments across Canada over the past decades, the one uncovered on Friday by federal finance minister Bill Morneau is little more than a molehill.

Using assumptions at the pessimistic end of the forecast spectrum, the incoming Liberal government says it is inheriting a $3-billion deficit in lieu of the almost equivalent surplus projected for this year by the previous Conservative government.

For the sake of comparison, when Jean Chrétien first came to office in 1993, he found a crippling $39billion deficit on his government’s doorstep. In 2015 dollars, that would add up to a $55-billion shortfall.

And if Michael Ignatieff had won the 2011 election, he would have started off with a $26-billion deficit.

At the end of the day it is not the modest deficit left behind by the Conservatives but the more-sluggish-than-expected economic conditions that caused the shortfall that could force the Liberals to face unpalatable choices.

They will not be able to count — at least at the outset of their mandate — on economic growth to generate extra revenues to finance their agenda. A decade of Conservative cuts has also taken its toll on the revenue-generating capacity of the federal government.

At some point between now and the spring budget, Justin Trudeau could have to decide whether to delay or set aside some of his spending promises or set out to break the $10-billion deficit ceiling he talked about during the campaign.

He will have to weigh, on the one hand, the possibility of a return to runaway deficits and, on the other, the risk that by reining in his government’s ambitions early in his mandate, he could miss out on an exceptionally constructive alignment of the federal-provincial stars.

That alignment was on evidence this week as the country’s political class took stock of the aftermath of the Paris terrorist attacks.

While a number of premiers and mayors questioned the tight timetable that currently attends the resettlement in Canada of an initial batch of 25,000 Syrian refugees, the principle of the plan was never in question. There is not a single premier or a single mayor of a major city who is contemplating sitting on his or her hands in protest over Trudeau’s policy. Concerns, for the most part, stem from the fear that a botched refugee operation could shatter the public’s already fragile confidence in the process.

While a majority of Canadians have reservations about Trudeau’s plans, none of the country’s govern- ment leaders is looking to jump in front of an anti-refugee parade. That stands in sharp contrast with the kind of debate American politicians are having over the same issue.

Then there is the climate change file and, in this case, majority support for a more activist agenda.

For a long time, the balance between the country’s energy interests and its approach to climate change ranked close to the top of the divisive issues facing the federation. But at the dawn of Trudeau’s four-year mandate, Alberta — under an NDP government — has never been closer to being on the same page as the other larger provinces.

That being said, provincial and municipal goodwill in Canada rarely comes free to a federal government for very long.

Minutes before Morneau delivered his first state-of-the budget presentation on Friday, Quebec and Ontario premiers Philippe Couillard and Kathleen Wynne were dis- cussing climate change at the Canada 2020 conference.

Here is how Couillard summed up what it would take for Canada to succeed in coming up and meeting more ambitious carbon emissions reduction targets. “At the end of the day it’s only going to be about money”, the premier bluntly stated.

On Monday, Canada’s premiers will be in the federal capital for formal talks on climate change. It will be the first time the environment is the main item on the agenda of a full-fledged first ministers conference.

Given the timing of Morneau’s fiscal update — delivered a mere 72 hours before Trudeau opens the meeting — his provincial counterparts will likely want to be reassured that the prime minister is still willing to put money where his mouth is. Chantal Hébert is a national affairs writer. Her column appears Tuesday, Thursday and Saturday.