Finance Minister Joe Oliver rises during Question Period in the House of Commons on Parliament Hill in Ottawa, Thursday April 30, 2015. Oliver says the government's budget fulfills its promise to balance the books while cutting the tax burden for Canadians.Adrian Wyld/The Canadian Press
Given how the Conservative government made balancing the budget by 2015 the cornerstone of its record and the centrepiece of its platform – ministers and MPs consistently recite talking points about keeping the economy strong by balancing the budget – you can't exactly blame the opposition for jumping all over the most recent news from the Parliamentary Budget Officer.
The oil price collapse caused a pullback in the economy. The pullback is leading to a drop in tax revenue. And that means the balanced budget the Harper government has since the last election been confidently promising in time for the upcoming election, and which it announced in this spring's budget, and which it made the condition for much of that budget's new spending, is instead likely be a deficit. According to the PBO, a weaker economic outlook means Ottawa will be in the red this year, to the tune of about $1-billion. And next year, it will be on the razor's edge between deficit and surplus.
Politically, this is a rather large problem, and one entirely of the Conservative government's own making. But other than for the purpose of keeping political score, there's no reason to care about whether Ottawa precisely balances this year, or runs a small surplus or deficit. It's all political theatre, ironically taking place on a stage purpose-built by the Harper government. That the show isn't going as planned doesn't change the fact it's a show.
Leaving politics aside – not an easy thing to do, three months before an election – the show isn't about the health of the Canadian economy or the solvency of the federal government. Keeping Canada's debt-to-GDP ratio moving down, at least in good economic times, matters. But doing that doesn't require budget balance, just an economy growing faster than the debt. Canada can normally run a deficit of $20-billion or so and still watch its debt-to-GDP ratio fall. Even with small deficits it's been dropping steadily, and will again this year.
And if the country really is in recession, as it appears to have been in the first half of this year, then a deficit isn't an economic problem. It's actually part of the solution. If the government were to impose a few billion dollars in last minute cuts, in an attempt to avoid a politically inconvenient deficit, that would be bad for the economy. Even the Conservatives' new balanced-budget law admits as much, allowing deficits during an economic downturn.
So enjoy today's screening of "Who Lost The Surplus?" Just don't mistake it for one of the key issues of this election.