Liberal deficits to pay for ‘overwhelming force’ in a trade war

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Well, that’s a Liberal fiscal plan. Liberal, in the sense of liberally increasing the deficit, the debt, and the interest paid on the debt. It proposes to liberally pour money into a lot of things.

Altogether, the economic upshot of the platform the Liberals released on Saturday is that Mark Carney would take a big swing at pumping money into the economy – notably to build homes and infrastructure and build up the military – in a bid to pull the whole economy up.

That’s what Mr. Carney wants people to remember, not the bottom line.

The bottom line, after all, comes with big numbers in red ink: a deficit of $62.3-billion this year that will only be reduced to $47.8-billion in 2028-29. In rough terms, the Liberals would raise the annual deficit by about half.

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In the past few months, there have been several occasions when Mr. Carney made the same promises as Conservative Leader Pierre Poilievre, starting with eliminating the consumer carbon levy. But the Liberals’ fiscal plan is very different.

The Liberals want to emphasize that they would pump government money into the economy to counter a crisis – U.S. President Donald Trump’s trade war and the economic dislocation it will cause in Canada – while the Conservatives would take it out.

“To succeed in a crisis, you have to act with overwhelming force,” Mr. Carney said in a speech Saturday.

He painted Mr. Poilievre as a laissez-faire politician who wouldn’t have the government lift a finger to help in tough times.

“It’s said there are no atheists in foxholes,” Mr. Carney said. “There should be no libertarians in crisis.”

Still, the ways that the Liberal Party platform contrives to make the spending numbers add up to even those big deficit figures are a little disconcerting.

The Liberal platform counts on Ottawa bringing in $20-billion this year in revenues from tariffs on U.S. goods but doesn’t account for the lost revenues that would come with a recession. Apparently, Ottawa will turn a profit on a trade war.

Mr. Carney’s oft-repeated promise to “spend less and invest more” relies heavily on saving large sums – $6-billion next year and $13-billion by 2027-28 – through still-vague plans to restructure government grants, cut consultants, digitize services and sundry other things.

There’s certainly ample room to cut costs in the federal government, but in this platform the Liberals did little more than make a promise to get on that, and then put a number beside the promise. Mr. Carney suggested voters should trust him.

Politically, the Liberals might just be able to skate through with such fuzzy cost-saving plans because the Conservatives – who have yet to release their full platform – have so far offered even less credible plans to reduce costs. But the truth is that spending control is based on notions on a white board.

Mr. Carney argued that the platform doesn’t spell out the same old Liberal fiscal policy because he would concentrate on capital investments to purchase assets rather than day-to-day operational spending. Much of that capital spending, including a huge injection of cash into housing, would spur private investment and economic growth, the Liberals say.

That shift is reflected in the platform figures. But there is still a Liberal sprinkling of spending on things that count as operational spending, from the CBC budget to subsidizing in vitro fertilization.

It’s still a program of Liberal interventionist economics, albeit one more focused on using public investment to spur private investment.

Mr. Poilievre has his own plan to encourage private investment with tax cuts, including a plan to defer capital-gains taxes for investors who reinvest their capital in Canada. But Mr. Carney argued that in a crisis, the private sector retreats, and the government has to step up.

The Liberal Leader has talked about “overwhelming force” in the past, long before he entered electoral politics this year.

It’s the crisis philosophy he developed in tackling the 2008-09 financial crisis as governor of the Bank of Canada, and it’s why as governor of the Bank of England he prepared to pump vast sums into stabilizing the markets after Britons voted to leave the European Union.

Now, as a politician, his proposal for using overwhelming force to respond to Mr. Trump’s trade war doesn’t just mean public investment. The controls he promised on day-to-day operational spending won’t be enough to pay for the investment he pledged to spur the economy. To muster his kind of economic force, he would make Liberal use of public debt.