Canada's Prime Minister Justin Trudeau and Finance Minister Chrystia Freeland hold the 2024-25 budget, on Parliament Hill in Ottawa, on April 16.Patrick Doyle/Reuters
By the time the government finally gets around to delivering its fall economic statement, it may no longer be fall. The statement is usually delivered in November, but it is already December and there is still no sign of it – and no Parliament to hear it as of Dec. 17. Perhaps the Finance Minister can read it out to her staff.
The government blames the Opposition for tying Parliament in knots, in protest at the government’s latest refusal to produce the documents Parliament has demanded, as legally it must. Leave aside the brazen gall on display: the lawless blaming the law enforcers for raining on their lawlessness. The suggestion is that, but for the protest, the statement would already have been delivered.
The more likely explanation is that the Minister is anxious to delay the statement for as long as possible. Never would be the ideal date. Because – don’t tell anybody – the government is fast losing control of the public finances.
It’s one thing to delay a fall economic statement, which in recent years has become a kind of mini-budget. Maybe you’ve got some big initiative in the works that took you longer than planned. Projections for future spending and revenues might also need tweaking. But the government doesn’t have to wait for the FES just to tell us what the deficit was last year – fiscal 2024, which ended in March. Yet here we are, eight months later, still no wiser.
Thankfully the Parliamentary Budget Officer has stepped in. The PBO now estimates last year’s deficit at, not the $40-billion the government claimed in last April’s budget, but nearer to $47-billion. For the current fiscal year it projects a deficit of only a little less, $46-billion, once again well in excess of the $40-billion budget forecast.
A $40-billion deficit was one of the not-very-stringent “anchors” to which the government committed itself in the budget. Another was a steady decline in the debt-to-GDP ratio, but that, too, is no longer operative: The PBO reckons debt-to-GDP increased last year, to 42.2 per cent, and is likely to be no better this year.
So far, so bad. But the PBO’s report was issued in October. A lot has – ahem – happened since then. There is, of course, the cost of the government’s abrupt decision to grant the populace a partial GST holiday, plus $250 cheques for (nearly) all: at least $6-billion and probably $8-billion.
Then there’s the economy. Not only did growth slow sharply in the third quarter, but it is likely to slow even more in the years to come, as the government slams the brakes on immigration. Economists at the Royal Bank calculate this will knock $10-billion a year off federal revenues over the next five years. Immigration was the only thing driving growth in recent years, as productivity sank through the floor. Now that engine’s gone, too.
But that’s just the start. Donald Trump’s threatened 25-per-cent tariff, if it goes ahead, will slam the economy into reverse – to the tune of 2.6 per cent of real GDP, according to the economist Trevor Tombe. But supposing that can be averted there is still the uncounted cost, likely in the billions, of all the new border security measures the government has pledged to mollify the president-elect.
And beyond that are the tens of billions annually in additional defence spending to which we are now pledged. Even to meet the 2-per-cent-of-GDP target that was our NATO commitment until now will require, according to the PBO, another $40-billion annually by fiscal 2033. But as the security situation deteriorates, neither the timetable nor the target are likely to be acceptable to our NATO allies for long – one of them in particular.
Add to that a number of catastrophic risks of varying but non-trivial likelihood: from a currency crisis in Europe (possible), to war involving NATO (quite possible), to another pandemic (likely), to a massive surge in refugees fleeing north from the internment camps Mr. Trump has planned for them (almost certain).
And add to that the relentless graveward march of the Baby Boomers, and the costs, mostly for health care, that that entails – a problem largely for the provinces, but ultimately a cost to the provinces is a cost to the feds.
A 42-per-cent debt-to-GDP ratio is hardly ruinous on its own. But we have been sailing too close to the wind for far too long, racking up debt when we ought to have been paying it down. That left us exposed to unforeseen but inevitable calamities. The pandemic blew the debt-to-GDP ratio from 30 per cent to over 40 per cent. God knows where it is headed next.