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Conservative Leader Erin O'Toole walks off the stage after speaking to the media on Aug. 31, 2021 in Ottawa. Canadians will vote in the federal election on Sept. 20.Frank Gunn/The Canadian Press

Erin O’Toole said a Conservative government would balance the federal budget within 10 years “without cuts,” reiterating the party’s notion that it can shrink the deficit by growing the economy instead of trimming government spending.

At a campaign event in Ottawa, the Conservative Leader blasted what he called the Liberal government’s “reckless deficits” and said federal spending “must be brought back under control.” He added, however, that his party has no plans to curtail spending on existing government programs.

“We will grow the economy so that we can get back to balance in a responsible and equitable way without cuts,” Mr. O’Toole said. He added that a Conservative government would increase spending in areas like health care and wellness while “keeping it under control everywhere else.”

O’Toole, Singh denounce aggressive protesters dogging Trudeau campaign

Canadian voters will get a clearer sense of the Liberal Party’s policy plans on Wednesday, when the party releases its campaign platform. The Conservatives and the NDP have already released their platforms, but are waiting until their numbers have been reviewed by the Parliamentary Budget Officer to release the related costing information.

The Sept. 20 election will happen in the shadow of a mountain of new debt. In response to the pandemic, the Liberal government ran a record $334.7-billion deficit last fiscal year, and is on pace to run another deficit of around $138.2-billion this year, according to recent projections from the Parliamentary Budget Office. The April budget projected federal debt would hit $1.08-trillion in the 2020-21 fiscal year, which is 49 per cent of gross domestic product. That is up from $721-billion – or 31.3 per cent of GDP – before the pandemic.

Despite this, there has been little discussion on the campaign trail of fiscal restraint. Party leaders are promising major new spending on a near-daily basis, often with price tags in the billions of dollars. Most of the discussion of debt revolves around growth-enhancing initiatives that party leaders hope will shrink the debt-to-GDP ratio over time without the necessity of tax hikes or spending cuts.

At a campaign stop in Kanata, Ont., on Tuesday, a reporter asked Liberal Leader Justin Trudeau when he would move toward a more balanced budget. Mr. Trudeau responded by talking about the Liberal child-care program, saying it would be “a significant driver of growth in our economy, as women are able to enter the work force in greater numbers.”

The most recent Liberal budget projects a $30.7-billion deficit by 2025-26.

Liberal campaign spokesperson Alex Deslongchamps said in a statement that Mr. O’Toole is “misleading Canadians” by saying a Conservative government would not cut spending.

“He’s already confirmed that he would cut our child care plan and rip up the eight child care deals signed with provinces and territories,” Mr. Deslongchamps said in an e-mail.

In lieu of new taxes or spending cuts, the math behind the Conservative plan to balance the budget relies on particularly optimistic economic growth projections. The party platform says that “restoring Canada’s finances requires getting back to robust economic growth of 3 per cent or more per year.”

That is considerably higher than Canada’s average GDP growth over the past decade. The PBO predicts real GDP growth will average around 1.7 per cent annually between 2023 and 2025.

Don Drummond, an economics professor at Queen’s University and senior fellow at the C.D. Howe Institute, said the 3-per-cent growth number was unrealistic.

“We’ve been locked in just under 1-per-cent productivity growth output since 2000 ... We’ve had a very long-term decline in the number of hours worked, and if you combine that with the slowing of the labour force growth, I don’t see how you get growth of more than 1.5 per cent as a longer-term potential growth rate,” Prof. Drummond said.

Michael Smart, a professor of economics at the University of Toronto and co-director of the website Finances of the Nation, had a more optimistic view. He said Canada can expect 2.5 per cent to 3 per cent average real GDP growth over the next 10 years. Nonetheless, he said, it would be hard to balance the budget without spending cuts – although he added that federal deficits are not necessarily a major issue.

“Whether we control debt-to-GDP or go further and eventually balance the budget is not that big a deal. Both parties’ fiscal tracks will look pretty similar over the next mandate,” he said in an e-mail, speaking of the Liberals and Conservatives.

“Federal finances will remain in pretty good shape. It’s the provinces we should worry about. We need a shift of fiscal room towards the provinces. That will be harder, the longer Ottawa waits to act on the problem,” he added.

Mr. Trudeau’s main announcement on Tuesday was a pledge to create a new, permanent health transfer to provinces and territories for mental health care, at an initial cost of $4.5-billion over five years.

Mr. O’Toole has also released a mental health action plan, which centres on boosting health transfers to the provinces by 6 per cent annually. He said this would allow the provinces to spend more on mental health services.

In the Vancouver-region community of Coquitlam, federal NDP Leader Jagmeet Singh talked Tuesday about his plan to enhance access to housing.

He said the NDP would target wealthy speculators who buy affordable homes to renovate and resell. He committed to closing what he described as a loophole used by these investors to avoid capital gains taxes, and he promised to increase the taxable amount of capital gains profits from 50 per cent to 75 per cent.

The NDP election platform says the party, in government, would place a 20-per-cent foreign buyer’s tax on the sale of homes to individuals who aren’t Canadian citizens or permanent residents. Also, the NDP says it would fight money laundering, which it identifies as a cause of increased housing prices.

“One of the problems we’re seeing is, very wealthy investors are using the housing market like a stock market,” Mr. Singh said during his news conference. “We want to tackle that. We want to get big money out of housing.”

With reports from Menaka Raman-Wilms, Campbell Clark and Ian Bailey

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