Up is down. War is peace. And not spending billions of dollars you don’t have is reckless, according to Finance Minister Chrystia Freeland.
“Investments in our economic capacity are fiscally responsible. And failure to make the necessary investments in our economic capacity and our economic future, that is irresponsible, and that is reckless,” Ms. Freeland told an Oshawa, Ont., audience this week.
That should certainly put to rest any worry that the Liberals might match their rhetoric of fiscal prudence with any real spending restraint in next Tuesday’s budget. Last fall’s halfhearted projection of a surplus in fiscal 2027-28 is likely to be a distant memory. As the accompanying chart shows, the spurt of Liberal spending since last spring means Canada is more likely headed for wall-to-wall deficits over the next half-decade, despite an inflation-fuelled surge in revenues.
The government’s fall economic statement forecast cumulative deficits of $69.4-billion from the coming fiscal year through to fiscal 2028. According to the most recent projections from the Parliamentary Budget Officer, those cumulative deficits have nearly doubled, to $112.7-billion. And that is before Ms. Freeland tacks on extra billions of dollars of definitely-not-reckless spending in Tuesday’s budget.
The Finance Minister’s view on what is, or is not, reckless fiscal policy seems anchored in the world of two years past, when the prospect of a long stretch of low interest rates emboldened progressive governments to splash billions of dollars on pet projects, and to shrug at the arithmetic of higher deficits and debt.
According to the PBO, debt servicing costs are on course to nearly double between fiscal 2022 and fiscal 2028, rising to a projected $46-billion from $24.5-billion. Debt costs are, by far, the fastest growing expense line for Ottawa.
None of that seems to be discouraging new spending initiatives. In her prebudget stumping, Ms. Freeland hinted that she will focus new spending on limited cost-of-living assistance for poorer Canadians, higher health transfers and “aggressively” subsidizing – sorry, investing in – the green economy. And there is sure to be additional spending on the newly launched federal dental benefits.
Federal budget 2023
This is part of a series on the federal budget to be unveiled on March 28.
Seniors: Let’s close public spending’s generation gap
Child care: Ottawa must follow through on subsidized system
Health care: Provinces need more tax room, not blank cheques
Defence: Canada’s indefensible military spending
Those outlays will come on top of last year’s omnidirectional spending, also aimed at retooling Canada’s economy. Now, we do agree that much more needs to be done to reinvigorate this country’s economic performance. In the last budget, Ms. Freeland rightly flagged the persistent problem of poor productivity growth. That was a long overdue recognition that our future prosperity is imperilled.
But the government’s response to an increasingly sclerotic economy has been more intervention, more bureaucracy, more spending and more debt. There’s little to indicate that next week will mark any break from the Liberals’ enthusiasm for 1970s-style economic interventionism that pushes investment decisions into the hands of government.
Budgets are about making choices. In our prebudget coverage, we’ve laid out some of those choices: pruning benefits for wealthy, elderly Canadians; boosting child-care transfers to keep pace with inflation; avoiding a ruinous increase in health care transfers; boosting defence spending; and rolling back the size of government.
Budgets are about deciding where to spend, and just as important, where not to spend. The biggest fiscal failure of the Trudeau Liberals has been their insistence on ignoring this basic tenet of sound finance, and instead each year layering new spending on old, while blithely ignoring the mounting pressure of the national debt.
That deliberate, persistent failure can be summed up in just one word – reckless.