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federal budget 2016

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.

The Finance Minister unveiled billions of dollars annually in new spending: on the new Canada Child Benefit, infrastructure, services for indigenous Canadians, clean technology and other new environmental measures, arts and culture, help for students and veterans and seniors, and it just never ends.

To pay for this Just Society 2.0, Mr. Morneau and Prime Minister Justin Trudeau have opted for deficits that start out at $29-billion a year in the first two years and then taper to $14-billion by 2020-21. By then, the Liberals will have added $113-billion to the federal debt, taking it to $733-billion.

Even with record-low rates, interest payments on the debt by then will have grown by a whopping $9-billion a year. And if interest rates go up ….

Most important, nowhere in this budget do the Liberals promise to ever balance the books. The most they commit to is a minuscule reduction in the debt as a percentage of gross domestic product from 31 per cent in 2015, the last year the Conservatives were in power, to 30.9 per cent in 2021.

But even this tiny gesture of self-restraint is improbable; Mr. Trudeau of all prime ministers is bound to advance new spending priorities in the years ahead, and when, not if, the next recession arrives, deficits are bound to shoot sky-high. These likelihoods alone should annul any hopes that the cautious revenue expectations contained in the budget will allow deficits to come down more quickly.

Those who voted Liberal in the last election expecting modest deficits and a quick return to balance will feel betrayed; those who don't care, won't.

This is the kind of budget that Marc Lalonde or Allan MacEachen provided for Pierre Trudeau: The priority is to set and meet policy objectives, leaving the problem of paying for those commitments to another day, hoping that the budget will balance itself, as someone once said, through increased growth.

Not all previous dogmas are abandoned. Mr. Morneau and Mr. Trudeau could have paid for at least part of this social revolution by returning the GST to Chrétien-era levels. But even for this government, across-the-board tax increases remain a third rail.

And despite many commitments to new national agreements on pensions and on fighting climate change, there are no hints of any unilateral impositions on the provinces. Even Mr. Trudeau appears unwilling to go to war with the premiers to achieve his new national dream.

But in the main the budget is transformative, a tired word now given new life. Financial help for college students; expanded employment insurance; new subsidized housing, including for the homeless; 3,000 new or renovated spaces for women's shelters; a plethora of grants to goose research and innovation; the promise of new national parks; lots more money for the CBC and the Canada Council and museums; money for foreign aid; money for the space station.

This will energize both progressives and conservatives. The former will properly regard this as the most forward-looking budget in a generation. The latter will be galvanized by the casual disregard for deficits and debt. This is the first time since 1971 that a federal government has taken a balanced budget into deficit when there was no recession. Conservatives will also point out that there is little in this budget for fighting crime or terrorism, little emphasis on defence spending, little on expanding trade.

We live now in a Canada defined by two names: Harper and Trudeau. Stephen Harper ushered in a decade of truly conservative government by cutting taxes and spending, toughening the justice system and striking new trade deals.

Justin Trudeau, leaping over the cautious incrementalism of Paul Martin, Jean Chrétien and Brian Mulroney, has boldly reasserted the role of activist government in the life of the people.

The twain will find it ever harder to meet.