ANALYSIS: Trudeau says forget about fiscal promises of 2015, look at the results in 2018
All week long in the House of Commons, the opposition Conservatives have been hectoring the governing Liberals about their 2015 election campaign promise to balance the federal budget by the time voters go to the polls in 2019.
And this afternoon, Finance Minister Bill Morneau confirmed what everyone all along knew: There will be no balanced budget by October 2019 and not only that, it’s deficits as far as the eye can see if the Liberals stay in government. So forget about what the Liberals put in writing in their 2015 platform about balancing the budget by next year. Things have changed.
“Every responsible leader knows that a good plan has to be flexible enough to absorb changes in circumstances because circumstances always change,” Morneau said in the House of Commons.
Liberals will continue to spend beyond the government’s means — and, they hope, continue to earn the trust of most voters — because, for them, the ends are justifying the means. The economy is cooking. Unemployment is at generational lows. Wage growth is on track to be the strongest in a decade. Business profits are up.
“We could have ignored the concerns of business leaders, decided not to make investments … and we would have a lower deficit as a result,” Morneau said. “To do so would be neither a rational response nor a responsible one.”
And so, for the current fiscal year, which ends on March 31, 2019, the federal deficit will $18.1 billion. The deficit will then grow the following year — the year the Liberals promised they’d balance the budget — to $19.1 billion.
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That means, that when voters get their next chance to pass their verdict on the Liberals’ fiscal stewardship, the Trudeau government will have added $75 billion to the national debt compared to their promise at the last election that they would add no more than $20 billion to the national debt.
Morneau argues that actual deficits and debt are not what is important. Instead, what is important is the size of the federal debt relative to the size of our national economy — the debt-to-GDP ratio. That ratio, it’s true, continues to decline and will be at 30.5 per cent at the next election. In 2015, Trudeau promised it would be 27 per cent, another broken campaign promise.
Here, again, Morneau wants Canadians not to focus on the specifics of a three-year-old promise but on the bigger picture.
“It’s worth remembering that we already have the best balance sheet among our key allies, and that our government has made an absolute commitment to maintaining that competitive advantage in a volatile world,” he said.
Morneau also says that, even if there are unexpected economic headwinds from, say, growing global uncertainty over free trade, the Liberal government will have enough fiscal capacity to respond.
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Finally, in anticipation of those Conservative demands that he at least show a path to balanced budgets — remember, it’s deficits as far as the eye can see from the Liberals — Morneau trotted out a theme you will almost certainly here over and over again as we get closer to election day.
“When the members opposite (the Conservatives) push for an aggressive elimination of the deficit, what they really mean are aggressive cuts in services, cuts that will make life harder for people and their families,” Morneau said.
For Liberals, they’ll be hewing hard to the old saw, “Tory Times are Tough Times.”
The Conservatives will be pushing back, making the case that you ought to save when times are good so you have some reserves for the bad times. Indeed, Conservative leader Andrew Scheer has already promised such a plank in his platform; he says a future Conservative government would provide a path to balanced budgets.
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In the meantime, Conservatives vow they will not let the Liberals off the hook for what they promised in 2015: A balanced budget, deficits that would total just $20 billion over their four years in power, and a national balance sheet which would get healthier every year because the debt-to-GDP ratio would decline to 27 per cent.
But, then, who cares about all that?
When he’s confronted with his record of broken promises on broad parameters of his fiscal policy, Trudeau responds this way, as he did in Question Period, Tuesday: “Under our watch, Canada has the lowest unemployment rate in 40 years, and it had the highest rate of growth in the G7 last year.”
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Add to that rising business profits and strong wage growth, both dutifully noted by Morneau in his House of Commons speech Wednesday afternoon.
Those are all wonderful benchmarks for any country and any government is right to be proud to be at the helm of any economy performing so well.
But, of course, there were no promises made by the Liberals in 2015 that they would ensure Canada would lead the G7 in growth, create 550,000 jobs, or see business profits boom.
And that’s why the Liberals are ready to spend the next year telling voters of the virtue of breaking promises, that they ought to be rewarded, not punished, for not keeping their word. Why, look at that economy, they will say. If not for our failure to abide by our commitments, Canada would not be doing so well.
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So there’s the fight leading up to election day in 2019. The Conservatives will argue the Liberals should be turfed for failing to deliver what they actually promised. And the Liberals will argue they should be re-elected for delivering what they never promised.
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