PM bets on growth to ease budget fears
Trudeau says books could still be balanced within five years, despite concerns about Liberals’ fiscal plan
OTTAWA— Prime Minister Justin Trudeau dismissed criticisms that Tuesday’s freespending budget risks out-of-control deficits, insisting economic growth will lead to balanced books within five years.
But the budget itself doesn’t say that. Instead, Trudeau and his cabinet team hit the road and the airwaves Wednesday to sell Canadians on a five-year spending plan that projects deficits will slide from $29.4 billion this year to $14.3 billion in 2021.
They sought to allay concerns, expressed privately even by some Liberal supporters, that, with no clear plan to return to a balance, the budget is “a fast car on an icy road,” in the words of one.
The morning after, the prime minister and Finance Minister Bill Morneau said investments in infrastructure, innovation, universities and people are critical for economic growth.
“We’re hoping to increase the growth rates of the country and when we look at what happens with greater growth in our economy is . . . (that) we get to balance in the coming five years,” Trudeau told the CBC Radio show Ottawa Morning on Wednesday.
The budget’s spending promises come at the cost of the Liberals’ broken election commitments to contain the deficit to a “modest” level of $10 billion and to balance the books by the end of their mandate.
Instead, the budget forecasts a deficit of $29.4 billion in the coming fiscal year, dropping to $17.7 billion in 2019-20 — the time of the next election — with another deficit projected for the year after that, presumably during the mandate of the next gov- ernment. The document cautions that uncertain economic conditions make it impossible to predict when Ottawa’s books will be balanced.
Trudeau said his government built in a $6-billion “margin of error” each year because private sector economists have been overly optimistic in the past few years. This time, the government is erring on the side of caution, and he flatly rejected suggestions it was a deliberate move in order to announce balanced books down the road for electoral purposes.
Morneau said the budget’s spending measures will grow the economy 1 per cent next year, creating “100,000 new jobs.”
“So what we’re trying to do with Canadians is say we’re being very prudent in our estimates today and with the appropriate investments, we can have an improved situation tomorrow,” Morneau told reporters after a breakfast speech to a business audience in Ottawa.
Morneau didn’t say what would happen if the hoped-for growth doesn’t materialize and the government is left with a rising deficit.
“We’ll focus on budget 2017 in 2017,” Morneau said.
Trudeau disputed the $29.4-billion deficit projected for the coming year was a broken promise. “That’s not true.” He said the Liberals promised during the campaign to invest in infrastructure and put more money in people’s pockets to grow the economy “and that’s exactly what we’ve done.”
He said the budget commits to about $11 billion in new spending, in line with the platform’s vow to hit a $10-billion deficit.
“The fact that it’s on top of an economy that’s gotten significantly worse than it was during the election period, for me, I think reinforces the need to spend on infrastructure and to create the kinds of opportunities that Canadians need to grow the economy.”