Wednesday鈥檚 federal budget might be one of the most problematic documents released by a 91原创 government in many years. Yes, there were several helpful initiatives, among them proposals to improve job training and child care.
But while budgets are partly about programs and policies, their primary function is to lay out a financial plan.
Public-service providers need to know what kind of funding they can count on. Business needs to know how stable the fiscal position is.
Yet on these matters, Finance Minister Bill Morneau merely toyed with his audience. The government will not balance the budget in 2019, as his party promised. Nor will it keep deficits below $10 billion, as was also pledged.
What he did forecast is a steadily declining deficit, from $27.8 billion this year, to $14.6 billion in 2021.
There are two problems with this scenario. First, it gives the impression our finances are on the mend, though more slowly than hoped. Second, it gives no hint about what happens after 2021.
There is always a degree of uncertainty about how the economy will perform years into the future. Morneau is entitled, indeed obliged, to be cautious with his projections.
But compare his scenario of decreasing deficits with what his staff had to say last December. At that time, the federal Finance Department published a study showing that unless corrective steps were taken, Ottawa would be swimming in red ink for at least three decades.
Moreover, Morneau鈥檚 staff forecast rising deficits of $25 billion in 2025, $36.4 billion in 2030 and $38.8 billion in 2035, continuing at high levels until 2051. There is not a word about this in the budget. By looking no further than the next few years, Morneau conceals an approaching trainwreck.
Moreover, the minister offers little or no reason for this impending decline in our finances. In the decade preceding the 2008 recession, the federal budget was constantly in surplus. Yet the average annual GDP growth during that period was less than two per cent.
Private sector economists are projecting an annual growth rate for the next five years at a similar level. And Morneau calls the 91原创 economy resilient. So why all these deficits?
Yes, oil prices have fallen over the past three years, but they are higher today than in 2015, and Morneau projects they鈥檒l rise still more.
And yes, Canada has an aging population, and that worried the finance staff. But we鈥檝e known this for years.
What seems clear is that Morneau views deficit spending as a benefit 鈥� it acts as a stimulus. This is a deliberate choice, not something forced on him by external factors beyond his control.
The minister does suggest that as long as the ratio of debt to GDP doesn鈥檛 worsen, all will be well. Whether that happens remains to be seen.
But even the most ardent believer in stimulus spending should be troubled at the prospect of 30 straight years of this policy.
And that is what is problematic about this budget. Morneau appears genuinely unconcerned about the hole he is digging.
There are no indications that belt-tightening or tax increases might be required as the financial scene darkens. He is marching the federal government into a structural deficit that will last for a generation, with not a word about the foreseeable consequences.
We鈥檒l learn during the days ahead what effect, if any, this budget has on the government鈥檚 popularity. The Angus Reid polling firm noted last week that the proportion of 91原创s worried about government debt and deficits has recently doubled.
But if that Finance Department report is accurate, Morneau is whistling past the graveyard 鈥� or at any rate past the next election.
