Conservative Leader Pierre Poilievre, left, and Liberal Leader Mark Carney shake hands following the English Federal Leaders Debate broadcast at CBC-Radio-Canada, in Montreal, on April 17.CHRISTOPHER KATSAROV/AFP/Getty Images
The fiscal frameworks from the Liberals and Conservatives have this much in common: both are built on sand, although in the case of the Tories, the footing is a little firmer.
The Liberals were first to release a costed platform, which would send deficits and debt much higher than Justin Trudeau’s government had contemplated and discards its fiscal anchors.
The party says the federal budget would reach an “operating surplus” of $222.4-million in fiscal 2028-29, but that assertion rests on a novel definition of expenses that excludes capital spending.
Using the standard yardstick of federal budgets, the deficit would rise sharply this year under a government led by Mark Carney, surging to $62.3-billion from the $46.8-billion baseline estimate from the Parliamentary Budget Officer in March. By fiscal 2028-29, the deficit would decline to $47.8-billion. All told, Mr. Carney’s Liberals would add $224.8-billion to the federal debt over four years – 71 per cent more than what the Trudeau government had proposed.
The result is a rise in the ratio of debt to gross domestic product in the first three years of the plan, dipping only slightly in the fourth year. University of Calgary economist Trevor Tombe has warned that the Liberal plan would mean Ottawa would be headed in a “potentially unsustainable direction.”
Mr. Carney made much of his break with the fiscal approach of the Trudeau government, but this plan might as well have been penned by the previous government.
The Liberals’ debt numbers, worrisome as they are, rest on shaky foundations. For a start, the Liberal plan projects big savings from increased government productivity, $13-billion annually by fiscal 2029. Not much of what’s described would add up to cost savings, with the exception of reducing the use of outside consultants. (Indeed, the Liberals specifically rule out reducing the size of the public service.)
Those hoped-for, unspecified savings account for about 90 cents of every dollar in deficit reduction in the Liberal plan.
And then there is the even bigger unstated risk of a downturn or even a recession due to a trade war. Those possible economic costs don’t figure in the Liberal framework – although $20-billion in tariff revenue does.
The same is true of the Conservative platform, which also books that $20-billion in revenue, and also does not fret over the possibility of tariffs eroding economic growth.
The Conservative plan maps out a reduction in the federal deficit, although the party does not aim to balance the budget by the end of four years. By fiscal 2029, the deficit under a government led by Pierre Poilievre would drop to $14.2-billion, less than half of the PBO’s baseline forecast.
The Conservatives, unlike their rivals, aim to shrink the number of public servants, through attrition, and would also slash funds spent on outside consultants. In fiscal 2029, those two measures would save $13.4-billion.
But as with the Liberals, the Conservative plan rests on rosy assumptions. There is the failure to account for the fallout from a trade war. Added to that are aggressive numbers on the hoped-for benefits of cutting capital gains taxes and in eliminating emissions-reduction regulations.
The Tories project that economic activity from reversing the increase in the capital gains inclusion rate and offering deferrals for capital gains will result in $13.1-billion in total revenue over four years, about half the cost of the tax cuts.
Similarly, the party projects that federal revenues will rise by a cumulative $58.6-billion from eliminating a swath of Liberal emissions-reduction regulations, new housing, cutting red tape and cracking down on tax evasion. None of those assumptions is outlandish, but it is unusual for such revenues to appear in a fiscal framework because of the inherent uncertainty involved. (The Liberals do not include revenue from an economic bounce in their forecast.)
One thing is certain: without those revenues, Tory projections of a sharply declining deficit would evaporate. Still, even if every one of the Conservative assumptions didn’t materialize – an unlikely scenario – the deficit would still be $4.8-billion lower in fiscal 2029 than under the Liberal plan.
Voters will need to decide which leap of faith they prefer: that the Liberals’ vague efficiency drive will keep the debt from soaring dangerously, or that the Conservatives will succeed in sparking economic growth to drive down the deficit.