The Trudeau government announced Tuesday that due to an unexpected uptick in the economy, the government coffers will receive an extra $46.6 billion over the next five years.
While some of those funds will be earmarked toward trimming the deficit, Finance Minister Bill Morneau announced the Liberal government will be also spending roughly $14.9 billion of that money over the five-year period.
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While the Liberal government opted to use some of the unexpected windfall to aid social programs, some will wonder whether they should have used the entire budget against the deficit.
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Doug Porter, Chief Economist and Managing Director for BMO Financial Group, and Brian DePratto, Senior Economist with TD Bank are both reasonably pleased with how the Liberals handled the extra revenue.
“I’m glad to see that the bulk of the windfall was set aside,” Depratto said. “I think that was a fairly prudent choice.”
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Depratto says that while they could have tapped the entire keg of money toward the deficit, he was satisfied that roughly two-thirds went toward trimming the deficit.
“You could probably quibble over how much they would have kept back but certainly I don’t see a lot to complain about from that perspective,” he explained. “They are still getting the debt to GDP down through time.”
Porter believes it would have been out of character for the Trudeau government to put every cent toward trimming the deficit which may have also been a poor choice.
“It’s probably not usually a good idea for the government to take really abrupt turns in policy,” he explained. “As much as I’d like to see a much more aggressive attack on the deficit on this point given how strong the economy is, I don’t think that’s realistic.
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“It’s pretty hard for government policy to pull a quick 180 without causing economic disruption.”
The government is now expecting to run a shortfall of $18.4 billion in 2017-18, compared with a projection of $25.5 billion outlined in the budget. For 2018-19, Ottawa is predicting a $15.6-billion deficit, compared with the $24.4-billion projection last spring.
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While Porter was pleased with the Liberal government’s announcement, he would like to see them act more hawkish going forward.
“At this point, because the economy is still pretty healthy, I would like to see a bit more of a focus on trying to bring that deficit down over the next year or two,” he said.
— With files from Global News’ Rebecca Joseph and Canadian Press
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