Balanced budget? A look at why federal leaders aren’t in a rush

Copies of the 2019 budget booklet are stacked at a lockup session with experts and reporters in Ottawa on March 19, 2019. Fred Chartrand/CP

OTTAWA — Canada’s election campaign is barely underway and, fiscally speaking, it’s already unlike any in recent history: none of the major political parties is promising to balance the government’s books in the next four years.

The lack of balanced-budget urgency is particularly eye-catching when one considers the country’s solid economic run lately.

Canada is on track to post multibillion-dollar shortfalls over the next six years, in large part because of the Liberals’ investments in social programs and infrastructure.

The deficit path was a choice. The economy’s strong performance, increasing tax revenues and reducing demands on government programs, means any party determined to achieve budgetary balance within a four-year term could conceivably pull it off.

Story continues below advertisement

This time around, however, none of the old-guard parties is in a rush to eliminate the deficit. That’s a shift from the balance-or-bust attitude in many political platforms dating back to the 1990s.

Justin Trudeau’s Liberals projected annual shortfalls across the outlook in their spring budget. They broke 2015 promises to return to balanced budgets by the end of their mandate and to run annual deficits of no more than $10 billion. Their deficits ultimately swelled to almost double that size.

WATCH: Scheer says he will ratify CUSMA if elected prime minister

Click to play video: 'Scheer says he will ratify CUSMA if elected prime minister'
Scheer says he will ratify CUSMA if elected prime minister

Conservative Leader Andrew Scheer, whose party has long been a strict proponent of balanced-budget commitments, is now promising to pull Canada out of the red in about five years.

Jagmeet Singh’s NDP, which promised balanced books in each of the last several election campaigns, is now offering a Liberal-like vow of fiscal responsibility that entails lowering Canada’s debt burden — as measured by the ratio of federal debt to the country’s gross domestic product, a measure of Canada’s economy as a whole — each year.

Story continues below advertisement

Green Leader Elizabeth May has committed to returning Canada to budgetary balance in five years as a “matter of credibility” for the public.

The only political party laying out a speedy path to balanced books is Maxime Bernier’s new People’s Party of Canada. Bernier, whose party is entering its first general election, argues he would get Canada back into the black in two years by eliminating billions worth of government spending in areas like foreign development and corporate welfare.

The fiscal course-change by political parties raises questions — what happened to the balanced-budget mindset and do Canadians care?

Christopher Ragan, director of McGill University’s Max Bell School of Public Policy, says that in the 1980s and 1990s Canada had big public debates about the need to reduce government deficits.

By the early 2000s, he says, it had become a consensus across federal political parties that Canada needed to have balanced budgets.

Deficits came back for a period following the 2008 financial crisis and subsequent recession as a part of efforts to stimulate the struggling economy.

WATCH: Justin Trudeau says unemployment down, job creation up

Click to play video: 'Federal Election 2019: Justin Trudeau says unemployment down, job creation up'
Federal Election 2019: Justin Trudeau says unemployment down, job creation up

In 2015, the balanced-budget doctrine returned — except in the case of the Liberals. Trudeau surprised his opponents by pledging “modest” deficits as a way to finance investments in areas like infrastructure, and the idea has been credited for helping him win the election.

Story continues below advertisement

The other parties seem to be following suit in 2019, to different degrees.

“No political party now is really talking about balancing the budget right away … They have deemed small deficits to be OK,” Ragan says.

“It’s almost as if they’ve looked at this and they’ve said, ‘Well, the Liberals seem to have got away with it.’ ”

There’s been relatively little public outrage about Trudeau’s broken fiscal vows. Polls have suggested deficits are no longer a major concern for Canadians.

“For most Canadians, this is not an important issue — other things are more important than balancing the books,” says Genevieve Tellier, a University of Ottawa expert in budgetary policies and public finance.

In the 1990s, she says, Canada’s fiscal footing was far grimmer. About 38 per cent of the federal budget was spent on servicing the national debt and now it’s down to 12 per cent, Tellier says.

“The finances are in a good order now and I would say, yes, Canadians, up to a point, have changed their attitude towards that,” she says. “But I would say mostly parties have changed their attitude because it is not as serious as it was in the 1980s, 1990s as it is now.”

Story continues below advertisement

A couple of years ago, Scheer pledged that a Conservative government would balance the federal books within two years of taking office. Last May, however, he announced it would take him about five years to return to balance because of the magnitude of the Liberals’ “deficit spree.”

Scheer’s new approach even drew reaction from one of his party’s old allies: the Canadian Taxpayers Federation. It demanded he stick to his initial two-year promise to avoid saddling future generations with more debt.

WATCH: Singh puts spotlight on rich, poor divide

Click to play video: 'Federal Election 2019: Singh puts spotlight on rich, poor divide'
Federal Election 2019: Singh puts spotlight on rich, poor divide

Trudeau has tried to blame the “cuts and austerity” of his Conservative predecessor for Canada’s flatter economy in 2015, when his Liberals first took office. Even with Scheer saying he will take longer than one mandate to balance the books, the Liberals have been warning voters he would have to make significant cutbacks to get there.

Story continues below advertisement

The NDP’s Singh says he decided not to follow the balanced-budget commitments of other recent NDP leaders. He wants to ensure that, if elected, he can invest in areas like health care, post-secondary education and making Canada competitive in clean, renewable energy.

“What I have promised is to use the taxpayer dollars responsibly,” Singh said in an interview in late summer.

“I understand the seriousness that goes with using the precious dollars that people contribute to building our country up.”

The Green party has no intention to balance the budgets “on the backs of deep cuts into Canadian services,” May said in an interview.

In fact, she said her party intends to eliminate the deficit in five years while boosting spending in areas like health care and post-secondary education.

To get there, in broad strokes, May said the Greens would raise revenues by increasing the tax rate on large corporations, pursuing offshore tax havens and imposing taxes on foreign data giants like Facebook, Google and Amazon.

“As a party we believe that we should live within our means, ecologically and economically,” May said.

Story continues below advertisement

For Canadians who want to see an end to federal deficits, Bernier’s new party is promising to get there quickly.

Bernier argues that, under his plan, he can achieve balance in two years while maintaining social programs.

He estimates Canada could save about $16 billion a year by abolishing corporate welfare, while billions more could be found by eliminating boutique tax credits, development agencies and financial support for foreign projects, like fighting climate change in Africa.

“It’s unfair for the future generations,” Bernier says when asked about the need to balance in two years. “It won’t be so difficult … It is a strong commitment.”

Sponsored content