Fraser Forum

2018 budget—another nail in the coffin of Trudeau’s balanced budget promise

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While campaigning for the 2015 election, then-candidate Justin Trudeau made a commitment to Canadians, pledging three years of modest budget deficits of no more than $10 billion, with a balanced budget by the end of his first mandate in 2019/20.

In its first budget, the Trudeau government signalled it would break this promise, planning much larger deficits with no return to a balanced budget. In fact, the Department of Finance recently projected that federal deficits may persist for the next 30 years.

The 2018 federal budget, released earlier this week, puts another nail in the coffin of Trudeau’s balanced budget promise.

The budget proposes deficits of $18.1 billion for 2018/19, $17.5 billion for 2019/20, and cumulative deficits totalling $72.8 billion over the government’s first mandate. This is much larger than the $24.1 billion in cumulative deficits pledged in the Liberal platform.

Moreover, the budget proposes deficits well past the government’s first mandate, up to at least 2022/23, the latest year in the fiscal plan.

These persistent and larger-than-promised deficits are partly driven by marked increases in spending in earlier budgets. For the first half of the government’s mandate, program spending grew by an average annual rate of 6.3 per cent. By recent standards, that’s significant annual growth in spending. For the preceding decade, program spending grew by an average 2.2 per cent (excluding the unique post-recession spending increase of 17.1 per cent in 2009/10). That’s nearly one-third the current rate of annual spending growth.

From 2015/16 to 2017/18, federal program spending growth (6.3 per cent) dwarfed growth in revenue (3.2 per cent), inflation-plus-population (2.5 per cent), and nominal GDP (2.5 per cent). While the government proposes to moderate the program spending growth in 2018/19 to 2.5 per cent, it’s still not enough to balance the budget in 2019/20, as promised.

It didn’t have to be this way. As a recent study found, the government could have delivered on its modest promise to balance the budget by the end of its first mandate by simply reducing program spending from its current level of $304.6 in 2017/18 billion to $301.5 billion—only a $3.1 billion reduction, compared to the $51 billion increase since taking office. The reduction translates into a reduction of just 1 per cent over two years.

For perspective, Jean Chretien’s Liberal government reduced program spending by 9.7 per cent from 1994/95 to 1996/97 by finding savings through a comprehensive review of programs. A similar review by the Trudeau government would certainly have found at least $3.1 billion in savings, especially given low-hanging fruit such as eliminating ineffective subsidies to businesses.

Instead, the Trudeau government signalled again that it will break its balanced budget promise to Canadians.


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