By Charles Lammam
and Ben Eisen
The Fraser Institute
On the campaign trail in 2015, Justin Trudeau’s Liberals promised to hold federal deficits to $10 billion or less during their first few years in office before returning to a balanced budget in 2019-20. Unfortunately, that’s not how things turned out.
The Liberal government’s deficit this year is expected to reach $28.5 billion. And the government won’t commit to a specific timeline to balance the books.
Charles Lammam
In a recent press conference, Prime Minister Trudeau blamed the deteriorating condition of federal finances on the previous government, claiming he inherited an $18-billion “baseline deficit” in his first year in government. This is a remarkable and unjustified exercise in blame shifting. In reality, the Liberal government’s spendthrift ways are a key reason for the larger-than-promised budget deficits.
In the 2015-16 fiscal year, when the Liberals were elected, federal program spending totalled $270.9 billion – a 6.7 per cent increase over the previous year. This increase was a function of the Conservatives in the first half of the year and the newly-elected Liberals in the second half.
The Conservatives, led by Stephen Harper, planned to spend $263.2 billion in their 2015 budget. The Liberals assumed power in October 2015 and program spending ultimately increased by $7.7 billion to $270.9 billion. Since revenues ended up $5.2 billion higher than planned in the 2015 budget, the government recorded a small deficit of $987 million, equivalent to 0.3 per cent of total federal spending.
Ben
Eisen
The next year, with the Liberal government fully in charge of finances, spending increased by 7.4 per cent. Except for the post-recession spending in 2009-10, that’s the highest year-over-year increase by Ottawa since 2006-07. That dwarfed the average annual increase in federal spending over the preceding six years (1.5 per cent).
Fast-forward to the current fiscal year. The government plans another significant boost in federal program spending – 5.0 per cent. All told, the Liberals will have added $34.6 billion in new program spending over the past two years (not counting any extra spending from 2015-16), a 12.8 per cent jump.
While it’s true the economy has slowed since the Liberals assumed power, dampening revenue growth, these marked spending increases have no doubt contributed to the larger-than-promised deficits we see today.
Despite a weaker economy, the Liberals could have kept the deficit to $10 billion this year (2017-18) by exercising some spending restraint and limiting the total increase in program spending over the past two years to $19.1 billion (or 7.0 per cent). This level of spending growth, incidentally, would have more than offset cost pressures from rising overall prices (inflation) and a growing population.
In short, if the Liberal government increased spending more modestly, it would have kept its promise of a $10-billion deficit this year and been on track to achieve a balanced budget on schedule.
To govern is to choose, as the old saying goes, and it was the Liberals who cut the rope on several short-lived fiscal anchors in order to facilitate a spendthrift approach to governance. They should accept responsibility for the consequences rather than shifting blame to a defeated government that has been out of office for more than a year and a half.
None of this is to praise the Conservatives’ management of federal finances. At various points, they too increased spending markedly, which contributed to large deficits.
The decision-makers of the day are responsible for their choices, and clearly Trudeau and his government bear responsibility for the larger-than-promised deficits facing the country today.
Charles Lammam and Ben Eisen are analysts at the Fraser Institute.
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