Finance Minister François-Philippe Champagne arrives to table the federal budget in the House of Commons on Tuesday.Blair Gable/Reuters
The Liberals aim to convince Canadians that they are reining in the fiscal excesses of the Trudeau era, while making “generational investments” that will allow this country to face the challenges posed by the rising threat of U.S. protectionism.
In his budget speech, Finance Minister François-Philippe Champagne struck heroic intonations that it is a time for “bold and swift action.”
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Sounds great. Too bad that the Liberals’ actions come nowhere near matching Mr. Champagne’s soaring rhetoric, or the picture painted in the budget of a drive to restore fiscal balance.
Exhibit A is the claim that the Liberals will spend less to invest more. The claim of spending less rests on, ahem, innovative accounting that splits federal expenditures into day-to-day operating expenses and capital investment. By fiscal 2029, three years hence, the Liberals say they will eliminate the deficit in those day-to-day expenses. The deficit that remains will come from what the Liberals describe as capital investments that drive economic growth.
Again, it’s a pleasant picture. But it’s not real. Those so-called capital investments include spending and tax breaks for companies and other private entities. Such costs are not a capital investment by any remotely conventional standard.
And the deficit is not disappearing. It’s getting bigger, much bigger, compared with the Liberals’ fiscal framework in last December’s fall economic statement: The cumulative deficit from the current fiscal year through to fiscal 2030 has doubled, rising to $321.7-billion from $154.4-billion.
So much for spending less. And as for investing more: Speaking to reporters, Mr. Champagne claimed that the investments in his budget, aimed at third parties, will “enable” $1-trillion in private-sector investment. That does sound like a worthy response to a generational challenge.
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Mr. Champagne’s claim is true, in the very narrowest sense, but misleading in the extreme. The hundreds of billions of dollars in investments that the minister touts include all existing measures in the entire federal budget, not just the new ones announced on Tuesday.
The new dollars for capital investments in the budget are a relative pittance: just $1.2-billion in the current fiscal year, plus another $1-billion announced since last December. By fiscal 2030, that total hits $9.6-billion. In the most generous interpretation, that is an incremental amount, bordering on the economically invisible.
There is similar puffery at work with Mr. Champagne’s boast about a “new productivity super-deduction.” The reality is far less impressive: the Liberals are reheating a $17.2-billion policy from former finance minister Chrystia Freeland. All her successor has done is expand the scope somewhat, at an additional incremental cost of $1.2-billion over five years. And come up with a snappy name.
The sleight of hand goes on, and on. The Liberals talk up their reduction in the size of the public service, but their plan will only roll back the ranks of civil servants to 2022 levels. The structure of the budget makes it impossible to determine the timing of the $60-billion in savings over five years from the government’s expenditure review.
Most tellingly, the Carney Liberals have adopted far looser fiscal rules than the Trudeau government, even while flaunting their fiscal sobriety. Ms. Freeland targeted a decline in the ratio of debt to gross domestic product (a fiscal anchor that also popped up in Mr. Carney’s election platform).
Now, the Liberals predict a rise in the debt burden through to fiscal 2029, with nary a word about why the fiscal anchor promised in April has been tossed overboard. Instead, the government says it will aim to decrease the size of the deficit relative to GDP.
There is a case to be made for abandoning those fiscal restraints, particularly given rapidly rising defence spending. But the Liberals choose not to make that case and instead to seek shelter in rhetorical fog.
Mr. Champagne is correct in describing the magnitude of the challenge that Canadians face, as U.S. President Donald Trump continues to prosecute his trade war against this country. It is precisely because the stakes are so high that the government’s prevarication is so damaging. The Liberals cannot expect to enjoy the trust of Canadians in the current crisis if it refuses to trust them in turn with a forthright explanation of their plans.