For Canada's federal budget, last year was the year everything changed. The Liberals replaced the Conservatives, endless deficits replaced a dream of perpetual surpluses, a party whose tendency was to see government as the problem was replaced by one whose inclination was to see it as the solution, a host of new programs were announced, a new way of supporting parents of young children was brought in, a decade-long infrastructure plan was rolled out, and the middle class got an income-tax cut while the highest earners were hit with a tax increase.
But Ottawa is like a supertanker. You can't change course very often, and you probably shouldn't. In 2016, the Liberals grabbed the wheel of the $300-billion vessel and set the ship sailing off in a new direction. This year, with the same captain, the same crew and the same destination, it's steady as she goes – which is reassuring for the government's supporters and ominous for its critics.
The news out of Budget 2017 is what didn't happen.
Since last week, Bay Street had been working itself into a lather, fearful that Finance Minister Bill Morneau was about to whack investors with higher capital gains taxes. The government has been talking about "closing loopholes" and "eliminating inefficient tax measures," and there was widespread speculation that the budget might make big moves on that front. Nope.
The Liberals are dumping one Harper-era boutique tax break, which saw Ottawa subsidizing the cost of a monthly transit pass. Beyond that, a wider review of the tax code has been put off to another day.
Are there new measures to cool hot housing markets in Vancouver and Toronto? Not yet.
An increase in military spending, to head off criticism from U.S. President Donald Trump? Not in 2017.
More detail on the decade-long infrastructure program? Not really. The fine print on the new national infrastructure bank? Coming soon.
Budget 2017's hundreds of thin pages are filled with buzzwords and buzzy ideas; beyond that, it exhausts itself enumerating what the government did last year, and teasing out what it might do next. There are a couple of reasons for that.
Given a four-year electoral cycle, governments want big announcements in Year One, fulfilling recently-made electoral promises, and Years Three and Four – teeing up the next date with voters. There are no Christmas presents in Year Two.
And what's more, the Trudeau government's cupboard seems to be almost bare. The Liberals changed Canadian politics by winning an election on a promise of (small, limited) deficits. A few months later, they pushed the envelope again, bringing in considerably larger deficits, offering no timeline for return to balance, and arguing – not incorrectly – that the measure of fiscal success is not budget balance, but a declining or stable debt-to-GDP ratio.
That gave the Liberals a lot more spending room than their Tory predecessors, without having to raise taxes. Deficits of more than $20-billion a year, as far as the eye can see, gave the Liberals an extra $20-billion-plus a year worth of spending. But those extra dollars are almost all spoken for, for years to come.
The Liberals have not broken the bank. Ottawa really can run deficits of about 1 per cent of gross domestic product, year after year, without damaging the country's fiscal position. As long as deficits remain roughly where they are – $23-billion in 2016-17, a planned $25.5 billion in 2017-18 – and as long as economic growth remains mildly healthy, Canada's low debt-to-GDP ratio won't budge. This new math is a sea change from the Harper Conservative world-view.
And the Liberal math adds up, for now. In theory, it can continue to add up. But in a stay-the-course budget, with nothing much new to announce, the same concerns we raised about Budget 2016 apply to Budget 2017.
The Trudeau Liberals ran on a promise of deficits to fund infrastructure. They leaned on a respectable economic theory that said borrowing to invest in needed assets – roads, bridges, transit and so on – would pay long-term dividends in the form of higher economic productivity.
But the bulk of Liberal deficit spending has not been about infrastructure. It's borrowing for groceries more than for the mortgage. And yes, as long Ottawa stays within the roughly 1 per cent of GDP limit, it is sustainable. The question is whether the Liberals, who have repeatedly moved the goalposts, will be able to live within this hard constraint.
If they can, they can call it fiscal probity, albeit of a different variety than the Conservatives and the NDP offered last election. But push even a little beyond where they are now, and we're back to the early 1990s, with out-of-control deficits, exploding debt, and alarm bells clanging. Stay tuned.