Dated budget numbers put political promises in peril

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The three main party leaders attempted to build momentum for their visions to boost Canada's ailing economy amid growing concern that party promises are based on budget numbers that are outdated and overly optimistic.

The day after squaring off in Calgary for a debate on the economy, Conservative Leader Stephen Harper remained in his home city to emphasize his low tax plan. Liberal Leader Justin Trudeau was in Montreal promoting his promises to spend billions on transit and other infrastructure, and NDP Leader Thomas Mulcair was in Regina pledging to improve health care while still balancing the books.

But a technical recession in the first half of 2015 and persistently low oil prices have led to further downward revisions for economic growth in both the short and medium term, a development that could erase billions in revenue that Ottawa had been expecting to collect.

As the first major party leader to release a costing plan, Mr. Mulcair was on the defensive Friday over his decision to base his platform on the Conservatives' April budget. The NDP's projected bottom-line numbers were released on the eve of the debate, but Mr. Mulcair had not made himself available for questions on Wednesday.

"Our approach is prudent. It's sustainable and it's transparent," he said Friday. "Unlike the other two parties, we've actually put our numbers out there."

The NDP plan forecasts four straight years of surpluses, ranging from a low of $3-billion to a high of $4.1-billion. But those figures are based on an April budget that incorporated a survey of private-sector economists conducted in March. That forecast is now widely considered to be out of date, posing a problem not only for the NDP but also for the Conservatives and Liberals, who have not yet released similar costing documents that explain their assumptions for future revenues.

The budget projected that the Canadian economy would grow by 2 per cent in 2015 and 2.2 per cent in 2016. It also forecast that the price of North American crude would average $54 (U.S.) a barrel in 2015, $67 in 2016 and $75 in 2017.

This week, the Organization for Economic Co-operation and Development lowered its forecasts, projecting that the Canadian economy will grow by 1.1 per cent this year and 2.1 per cent next year.

Meanwhile, a report released this month by National Bank projected growth of just 1.6 per cent in the 2016-17 fiscal year and estimated this would shave $4.3-billion from the budget's revenue forecasts. That would be enough to turn the surplus projected by both the Conservatives and NDP into a deficit that year.

National Bank chief economist Stéfane Marion said that the Canadian economy is quickly entering a period of structural change due to demographics, and that the budget's forecast of at least 2-per-cent growth each year for the remainder of the decade is now too rosy.

"Fiscal plans should probably be built around a much lower potential GDP than what is currently assumed," he said in an interview. "That's the reality for every party, and obviously you can make your own conclusions on what it means for the different platforms."

Former parliamentary budget officer Kevin Page agreed things have changed since April, but he said it is reasonable for parties to rely on the budget. "What alternative do you really have? And I would say almost none unfortunately," he said. "Is the forecast out of date? Obviously."

Mr. Page spoke with Mr. Mulcair privately Thursday prior to the debate. Mr. Page said he speaks to any political leader when asked and is not advising any party in particular.

The Liberals have said their short-term forecasts are based on July numbers from the current Parliamentary Budget Officer, while the longer-term forecasts are based on Finance Canada. However, they have not released specific bottom-line projections for their platform. The Conservative campaign has been focused on the April budget, and a spokesperson said further specifics on forecasts would be released in the party platform.

"We are the only party that is going forward with a plan that preserves our economic fundamentals," Mr. Harper said Friday. "Including being able to guarantee to the the public that we're making effective investments in our economy and our people while not raising their taxes in any way."

Mr. Trudeau said he is the only leader promising immediate action to spur growth. "After 10 years of Stephen Harper, we need growth," Mr. Trudeau said.