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By Chris Hannay (@channay)
If a week is a long time in politics, six months must be an eternity. The Liberals won last year’s election on a platform that committed to running “modest short-term deficits of less than $10-billion in each of the next two fiscal years” to provide for extra infrastructure spending. The platform then committed to return to a balanced budget in 2019, the end of the Liberals’ four-year mandate. That’s not quite how it turned out. As the economy softened over the last six months, so too did Finance Minister Bill Morneau’s commitment. Here he is, in his own words, over the last six months.
Nov. 20, 2015: “Without considering the investments laid out in our platform, the projected budgetary balances have been reduced by about $6-billion per year on average relative to Budget 2015. We now face a deficit of $3-billion in 2015-2016 and $3.9-billion in 2016-2017, improving to surpluses starting in 2019-2020. ... Canadians have given our government a strong mandate to take a new approach to securing our prosperity. I intend to use the fiscal and budgetary tools at my disposal to do just that. That includes striking a balance between fiscal discipline and our promises to Canadians, including keeping our debt-to-GDP ratio on a downward track throughout our mandate and working towards a return to budget surpluses in 2019-2020.”
Dec. 7, 2015: Mr. Morneau is asked specifically if he will keep deficits to under $10-billion. “We’re facing a level of economic growth that is lower than we expected during the course of the campaign. We made commitments to make investments in the Canadian economy, recognizing that we’re facing a low growth era. This reinforces our level of commitment against those promises. We also promised to lower our net debt-to-GDP during the course of our mandate. We intend on keeping that commitment. We also promised we would get to a balanced budget situation during the course of our mandate. We intend on keeping that commitment.”
Feb. 16, 2016: Mr. Morneau is asked if he is still planning to balance the budget by 2019. “You know, we – we are focussed on a plan that can help to grow the economy. Canadians elected us on a goal to make real investments that would improve their lives, that would help middle class Canadians, those most vulnerable. It would also put us on a path to a higher growth trajectory over time. Our goal is to make sure that we make these investments, that we do it prudently, and that we focus on a way to get to a balanced budget over time, recognizing that in this economic environment that will be more challenging.”
March 22, 2016: The budget is released, with a 2016-17 deficit of $29.4-billion, drifting to a $14.3-billion deficit in 2020-21. The debt-to-GDP ratio is projected to remain above this year’s 31.2 per cent until 2020. Mr. Morneau is asked when he expects the budget to again be balanced. “You know, I want to take us back to our objectives. As I said, Canadians told us two things. They said help me and my family and make investments for the future. So we believe that this budget is making important investments for the future of Canada. We know that it’s the right time to make those investments. We have low interest rates. We have a situation with our debt that is the best in the G-7. We’re moving forward with our plans to grow the economy. What we also are going to do is be prudent along the way. We’ve – we’ve said that we will reduce our net debt-to-GDP over the term of our mandate. And as you can see, as you look in our budget, with the growth that we hope to achieve, we believe that we can get to a balanced budget over time. That said, our priority is to make investments for Canadians, for the people who are asking us to help them in their day to day lives.”
WHAT YOU SHOULD KNOW THIS MORNING
> The Liberals tabled their first budget yesterday, which gave major new funding to indigenous people, extended unemployment benefits for areas suffering extra job losses, made some infrastructure investments (with more to come) and pledged to study foreign ownership in the housing market. Banks are being warned not to expect future bailouts from taxpayers, and the business community didn’t get the small-business tax rate cut it expected – but also didn’t face more taxes on stock options. Veterans got more support, but not everything they were promised. More money will be spent on social housing and shelters. CBC got $675-million. Defence procurement is delayed. And always a popular feature, personal finance columnist Rob Carrick explains how the budget hits your pocketbook.
> Ottawa bureau chief Robert Fife talked to a senior official in the Prime Minister’s Office about how the budget came together. “[Canada] went through a long period of supply-side economics, which is this view that the best way to grow the economy was to make wealthier people wealthier. The signal we are sending is that the growth rates are better when the middle class are doing well.”
> Justin Trudeau will get to appoint his first Supreme Court justice later this year.
> And Rob Ford, the street politician who turned Toronto’s city hall on its ear, died yesterday.
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WHAT EVERYONE’S TALKING ABOUT
John Ibbitson (Globe and Mail): “Bill Morneau’s polarizing first budget launches the federal government on a bold new social-engineering experiment financed by deficits that stretch beyond the far horizon. We haven’t seen anything like this since the days of Pierre Trudeau. It is a budget to go to war over, for both progressives and conservatives.” (for subscribers)
Campbell Clark (Globe and Mail): “There’s something else underneath this budget: Justin Trudeau’s Liberals are banking on the economy improving more than their budget projects. Otherwise that narrative about hope and promise isn’t going to be fulfilled.” (for subscribers)
Erin Anderssen (Globe and Mail): “A summer windfall is on its way for the vast majority of Canadian families, who will get fatter child benefit cheques from Ottawa starting in July.And what they see is what they get – no tax strings attached.”
Kate Taylor (Globe and Mail): “Nobody wants to be caught looking a gift horse in the mouth, but if the optimism is to prove justified [in Canada’s cultural community], the money will need to be accompanied by smart decisions on tough issues, both by the government and by the recipients.”
Barrie McKenna (Globe and Mail): “It’s not clear this [infrastructure] plan comes anywhere close to matching the grandiose projects that reshaped Canada’s physical and economic landscape in the decades after the Great Depression and the Second World War. Or that it will bring the prosperity promised by Mr. Morneau.” (for subscribers)
Adam Radwanski (Globe and Mail): “In section after section, this is a budget that offers relatively straightforward and easy-to-deliver spending for now (most of it drawn from the Liberals’ election platform), then hints that much of that spending is stop-gap while an inexperienced cabinet settles on more transformative stuff aimed at increasing prosperity and economic fairness.”
Jeffrey Simpson (Globe and Mail): “There cannot be many groups in Canada unhappy about Tuesday’s federal budget, if happiness is defined by receiving new or increased government spending.” (for subscribers)
Craig Alexander (Globe and Mail): “The government is like a consumer charging through the mall with a no-limit credit card. The debt-financed spending will put more money into the tills of retailers, adding to economic growth. However, the bill always arrives, and many Canadians have had the experience of scratching their heads and asking ‘How did it get so big so fast?’”
Paul Wells (Maclean’s): “What is more of a surprise is the abandonment of any pretense of restraint in the box-ticking. The spending taps are wide open, and what’s your problem?”
Susan Delacourt (iPolitics): “With its first budget, Prime Minister Justin Trudeau’s government is telling Canadians that it wants to stick around for a good time and a long time.”
Tim Harper (Toronto Star): “[The Liberals] have, however, demonstrated what can be done if there is a willingness to go into the red, and even then they have not gone as far as some economists had suggested they could.”
Neil Macdonald (CBC): “But most of the gain in this budget, most of the new dosh, isn’t going to the neediest. It’s going to people that this government deems are most deserving.”
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