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Trudeau betting most Canadians don't really care about deficits

Anyone watching closely was able to roughly guess the size of the $29.4-billion deficit before the government unveiled it in Tuesday's federal budget. But when it was there in black and white, it was still a shock for the policy wonks and pundits reading it. And there was no zero further along in the tables – no reassuring projection that in four or five years, the books will be balanced again.

Prime Minister Justin Trudeau's Liberals, it seems, are trying to undo 20 years of political conditioning against deficits.

Stephen Harper ran deficits after the 2008 financial crisis, but he was careful to show that he would quickly dig out of the red. After all, running deficits has been the third rail of federal politics ever since the mid-1990s, when Paul Martin, as finance minister, used fears of a debt crunch as justification to revamp federal spending with tough cuts, slay the deficit beast, and turn red ink into political poison.

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Or so we thought.

In fact, Canadians' deficit-aversion is only a millimetre thick.

Ask pollster Greg Lyle of Innovative Research Group. He agrees that there is a consensus among pundits that deficits are taboo, but his polls have never shown any sign of that among the Canadian public. Look at Ontario's Liberal governments under Dalton McGuinty and Kathleen Wynne, he says. "They ran deficits from the beginning, and nobody cared."

Mr. Trudeau's government is chockablock with advisers who came from those Ontario governments and it appears that they have brought that political lesson to Ottawa.

Mr. Lyle didn't really mean nobody cares. But the proportion of people who typically register serious concern about deficits is 20 or 25 per cent of the population. It's a fairly stable figure. And it's almost all Conservative voters. Some of them are livid. But Liberal governments don't depend on their votes.

Typically, when Canadians are asked if government should spend within its means or according to needs, about 30 to 35 per cent say they should spend within its means, and more than 50 per cent say they should spend according to its needs, Mr. Lyle said. Even so-called blue Liberals, who say they are believers in free enterprise, tend to say government should spend according to its needs.

The deficit can become more controversial. But it's not because of the difference between $10-billion or $30-billion, but whether people think the deficit spending was worth it. The narrative has more impact than the number.

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Right now, there's some sticker shock in news headlines and on social media. We're not used to seeing a deficit of almost $30-billion, with red ink continuing for the foreseeable future. But it's nowhere near unprecedented.

Mr. Harper's biggest deficit was $56-billion. The Liberals' $29.4-billion deficit is about 1.5 per cent of gross domestic product, less than half the size of the deficits run by the United States, France, Britain, Japan and many other countries. It's much smaller than the deficits Ottawa ran from 1977 to 1995, which ranged from 4.5 to 8 per cent of GDP. It's not a massive deficit, just bigger than we're used to.

But the Liberals certainly once worried that a big number would create a nasty political narrative. That's why Mr. Trudeau pledged during the election campaign that the deficits would not exceed $10-billion. He has broken that promise, using a softer economy as justification. He might pay a political price for the broken promise, but by itself, the size of the deficit usually doesn't shift public opinion.

"This is really about fundamental values," Mr. Lyle said.

What most people care about is whether the money is going to things they deem important. Jobs top public concerns, so if people think deficit spending will create jobs, they will support it, Mr. Lyle said. They will probably be more mixed about funding for indigenous communities, with some saying it's good and some expressing skepticism about whether it will be well spent.

But that value-for-money judgment is where the size of the deficit could come back to haunt Mr. Trudeau's Liberals, especially down the road – if voters start to think that the big deficit didn't deliver much of the jobs, the benefits and the things they wanted.

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In the meantime, it seems Mr. Trudeau's Liberals have figured out how to deal with Canadians' deep-seated aversion to deficits: Ignore it, because it's a myth.

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