Let's play a game of budget what-ifs.
What if Ottawa were to run a deficit this year, after promising time and again to achieve a balanced budget in the run-up to the 2015 election: How big of an economic problem would that be?
No problem at all.
Canada ran a $5.2-billion deficit last year, and on an economy of nearly $2-trillion, that's a (small) rounding error. It makes no difference whether Ottawa runs a surplus of a few billion or a similarly sized deficit. In fact, if the economy were to slow, a short-term deficit would be an economic positive. The extra billions in public spending would stimulate the national economy, counterbalancing a drop in private-sector demand. All three major parties agreed on as much during the 2008 global crisis, when the government introduced temporary new spending and jacked up the deficit. It was the right move.
And if Ottawa were to run a deficit this year, how much of a fiscal problem would that be?
Canada's debt-to-GDP ratio – debt relative to the size of the economy – is already lower than most of our peers'. It's also marching steadily down. Last year's $5.2-billion deficit was so small that even in a time of only modest economic growth, the net debt-to-GDP ratio still fell from 33.3 per cent to 32.2 per cent. That's only slightly above the record low of 28 per cent hit before the 2008 recession, and it's half the level the country was at in 1996, before then finance minister Paul Martin wrestled the nation's finances into submission. What's more, the current trajectory is for a debt-to-GDP ratio that continues falling. The only way to change that story would be with repeated annual deficits into the tens of billions of dollars, or a recession, or some mix of the two.
The Conservative government has made balancing the budget by 2015 Job No. 1. And if it fails to achieve balance, it could find itself facing a problem, within its ranks and among some of its base.
But that problem will be purely a political matter. A small deficit or surplus in 2015 would be an economic and fiscal non-story.
It's a good thing the next federal budget is on hold until the spring. It will give the government a chance to decide whether it wants to fight the next election on a platform of dealing with real economic problems, or shadow-boxing with straw men.