Finance Minister Bill Morneau says balancing the books is now a "long-term" goal, providing further evidence that the Liberal government is backing away from its pledge to erase the deficit before the next election.
Faced with slower-than-expected economic growth, the Liberals are signalling that delivering on promises will take priority over the state of Ottawa's bottom line.
Prime Minister Justin Trudeau had hinted last week that the deficit target may be moved. As MPs returned to Parliament Hill Tuesday, Mr. Morneau said he still hopes to balance the books but that it will be more difficult because of the economy.
"Our goal is to make sure that as we make investments that are going to make a real difference for Canadians, that we do so in a way that's prudent and that we maintain a goal of getting to a balanced budget over the long term. We recognize that's challenging but that is our goal and we maintain that as an important objective," he said.
The party's election platform promised three specific limits when it came to the size of deficits under a Liberal government. It promised to run deficits of "less than $10-billion" in each of the first two years, that the deficit would be erased before the next election and that the government's debt-to-GDP ratio would continue to fall every year.
Throughout December, Mr. Morneau backed away from the $10-billion limit but stressed the government's intention to follow through on the other two markers. A spokesperson for Mr. Morneau Tuesday restated the government's commitment to shrink the debt in relation to the size of economic growth.
However, problems have been raised with that third promise. National Bank economist Warren Lovely recently noted that slower economic growth makes that target more restrictive. For instance, if the economy grew at an average nominal rate (which includes inflation) of five per cent, Ottawa could run deficits of $30-billion or more and still reduce its debt-to-GDP ratio. But, Mr. Lovely said, if nominal growth comes in as expected at about three per cent, then the size of deficits would need to be capped at less than $20-billion.
Conservative MP and finance critic Lisa Raitt said the situation should force the Liberals to make tough decisions about some of their spending promises rather than run up larger deficits. "He's giving himself permission to fail at the end of four years. Who knows what's going to happen in four years?" said Ms. Raitt. "No CEO in this country would do that at this point in time. They would continue to try."
NDP Leader Tom Mulcair said the Liberals should be looking to raise additional revenue by collecting billions more through higher corporate tax rates.
"The Liberals have been backing off on any number of clear, unambiguous promises," said Mr. Mulcair. "Today we find out that the promise to bring back balanced budgets in the fourth year of a Liberal government has been thrown in the garbage like so many of their other promises."