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Liberal leader Justin Trudeau juggles bocce balls during campaign stop in Fred Hamilton Park in Toronto, Monday, Sept. 14, 2015. THE CANADIAN PRESS/Jonathan Hayward

JONATHAN HAYWARD/THE CANADIAN PRESS

On the question of budget deficits, two of the major parties stand on one side of the line, promising balanced budgets, and one party stands on the other side. In terms of ideology, there's a wide divide between the anti-deficit Conservatives and New Democrats, and the small-deficits-are-good Liberals. In terms of actual policy, or real economic consequences, the differences are less stark. But they are real.

The Conservatives have made balancing the budget a touchstone of governmental competency. On Monday, they announced that, in the fiscal year ended March 31, the country moved out of deficit a year ahead of their own schedule, to a surplus of $1.9-billion.

The New Democrats, who promise to be as fiscally conservative as the Conservatives when it comes to the bottom line, applauded. This is not surprising: A budget already in surplus may give the NDP more wiggle room to fulfill its promises without running a deficit. The NDP will be releasing a costing of its platform, and its plans to deliver it while maintaining a balanced budget, later this week.

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And then there are the Liberals – the outlier on this issue. Justin Trudeau's party is promising to run deficits of up to $10-billion a year for the next three years. They greeted Monday's surplus by accusing the Conservatives of having achieved it early, thanks to "stealth" budget cuts, which they argue further weakened an already weak economy.

Should Canada aim to run balanced budgets for years to come? That's the NDP position. Should it run increasing surpluses, as per the Conservative plan? Or should it aim to run small but not insignificant deficits, which is the Liberal plan? Which of these approaches is the right one? An easy question to ask, but not so simple to answer.

If the country is facing weak economic times, then the Liberals are right that it was a mistake for the Conservatives to have moved the country from a small deficit two years ago to a small surplus last year. More government spending and less taxation are stimulative, at least in the short term. But in the context of a nearly $2-trillion economy, the impact, positive or negative, of a couple of billion dollars spent or forgone is going to be small. It's a rounding error.

The measure of fiscal health that matters for Canada is the debt-to-GDP ratio, which measures the size of the national debt relative to the size of the economy. Last year, it fell from 32.3 per cent to 31 per cent, the lowest in the G7. Even if Canada runs small deficits, up to about $20-billion or so in a year of normal economic growth, the debt-to-GDP ratio will continue to drop. In good economic times, it's reasonable to reduce it, or even just hold it stable if it's already low. In a time of recession, it's appropriate to run deficits and let the debt-to-GDP ratio rise.

Under the NDP and Conservative plans, the debt-to-GDP ratio will fall sharply in coming years. Under the Liberal deficit plan, it will also fall, but less quickly. No matter who is in charge, the debt-to-GDP ratio is starting low, and each of the three parties plans for it to go lower.

On the deficit/surplus divide, the parties look like polar opposites. But on the more useful measure of debt-to-GDP ratio, the differences are a matter of degree.

A classic Keynesian stimulus, which is what the Harper Conservative government did when it ran up huge deficits during the Great Recession of 2008-09, is about pumping money into a depressed economy. It is about taking advantage of a government's solid fiscal position and the low debt-to-GDP ratio built up in good times, in order to spend that insurance policy in bad times. In a deep recession, the point is for a government to get cash out there, quickly, to counterbalance a collapse in private spending and investment. Even misspent money can have a positive economic impact in that kind of an environment.

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But that's not the situation Canada finds itself in today, in 2015. No party is proposing to run large deficits or run up the debt-to-GDP ratio. Given that we're not in Great Recession II, there's no reason any party should.

The Liberal plan for three years of $10-billion deficits is mostly not about fighting a recession. Instead, the Liberals believe they can improve Canada's long-term economic growth prospects by borrowing to invest in infrastructure. Many economists see wisdom in this approach, at least in theory. Interest rates are, after all, at record lows. If government invests those extra billions well – no sure thing – then it is possible that a few years from now, the economy will be in slightly better shape than it would have been if that infrastructure had not been built, and the budget instead been balanced.

For a generation, voters have been told that deficits are a kind of sickness – and when Canada faced a budget that threatened to spiral out of control in the 1980s and early 90s, they were. But times and circumstances can change. The parties have five weeks left to make their case.

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