Finance Minister Bill Morneau won’t put a dollar limit on how far he’s willing to push the federal deficit.
In an interview with The West Block‘s Mercedes Stephenson, Morneau was asked about the ballooning deficit outlined last week in a fiscal update provided by him about the state of the economy amid concerns about a potential downturn.
That fiscal update showed the deficit is on track to deepen by billions of dollars, with the deficit for this fiscal year projected to be $7 billion higher than Morneau had promised in the budget earlier this past spring: $26.6 billion compared to $19.8 billion.
All the while, the Liberals are promising to keep spending more money.
Host Stephenson asked Morneau: “Is there a red line for you on how deep into deficit your government is willing to go?”
“I think you’ve seen our fiscal update,” Morneau responded.
“So our projection is: we will have a declining amount of deficit and a declining amount of debt as a function of our economy. We’ve also said there’s a need for us to continue investing.
“So that projection is probably the frame that you should use as you think about what we are going to try to achieve.”
When asked to clarify whether that means the Liberals are willing to push Canada past projections which currently have the government adding about $35 billion to the expected deficits between 2019 and 2024, Morneau didn’t rule it out.
“Our government’s approach is exactly what we’ve laid out. The hypotheticals about what might or might not happen in the future are very dependent on where we go in the economy,” he said.
“Those are the important fiscal anchors that we’ve maintained and we’re going to continue to maintain them.”
That comes after Trudeau instructed Morneau in his mandate letter two weeks ago to “preserve fiscal firepower,” in case the government had to act in an economic downturn.
Forecasts remain mixed, with some economists predicting Canada will avoid a recession.
Others, however, are warning one could arrive next year amid weakness in the oil and gas sector, high consumer debt levels, an inverted bond yield curve and data for the month of November showing the greatest monthly job loss numbers since the Great Recession.
If that happens, the government would face questions about whether it will deploy fiscal stimulus as was done in the last recession.
But that costs money — a lot of it. With the deficit continuing to rise and no clear plan to get back to balanced budgets, the Liberals have faced criticism from the Conservatives that they are putting Canada in a situation where they could have little wiggle room to spend even more than they already are.
“So what fiscal anchor is now left for this government?” said Poilievre last week.
“They are squandering our country’s good fortune that they inherited. They are putting our economy on a dangerous track to the future and … as Conservatives, we need to stand up, fight back and win.”
Morneau says none of the 14 private sector economists the government consulted with in doing its fiscal forecasts are predicting a recession, and that the government expects overall job growth and economic growth more broadly to continue.