Monday, July 15, 2024
ADVT 
National

Federal budget shows no end in sight for deficits

Darpan News Desk The Canadian Press, 29 Mar, 2023 04:34 PM
  • Federal budget shows no end in sight for deficits

OTTAWA - Even as the Liberals keep a tight focus on new clean-tech and health-care spending, the federal budget released Tuesday still projects deficits for the next five years.

Many economists are expressing disappointment in those fiscal projections, noting the government could be in trouble if the economy slows more than it is expected to — and saying the Liberals could've saved themselves headaches with better planning in previous years.

Finance Minister Chrystia Freeland promised that Tuesday's budget would be fiscally restrained in light of a slowing economy that could weigh on government coffers.

And Prime Minister Justin Trudeau insisted on Wednesday that the government remains "fiscally responsible."

But the fiscal projections in the budget show the deficit has been revised upward since the fall, showing no end in sight for deficits despite the fall budget update in November projecting a balanced budget in 2027-28.

"The idea that you're not even getting to a balanced budget within this budget horizon, is, in my mind, not fiscally responsible," said James Orlando, TD's director of economics.

Tuesday's budget forecast a $14 billion deficit in 2027-28, and higher deficits each year than had previously been projected.

As to whether the budget stayed true to Freeland's promise of fiscal restraint, former parliamentary budget officer Kevin Page likened restraint to beauty.

"It's in the eye of the beholder," he said.

Page, who heads the Institute of Fiscal Studies and Democracy, said it's not surprising that the deficit is higher than what was forecast in the fall, given that the economic outlook has since worsened.

The budget's economic projections, which are based on a survey of private-sector economists, show the economy slowing more than what was anticipated in the fall. The federal government is now expecting a shallow recession this year as high interest rates weigh on growth.

That means less tax revenue to finance the federal government's spending priorities. And if the economy slows more than expected, the federal government is at risk of running even larger deficits.

In a news conference on Wednesday, both Freeland and Trudeau defended their handling of federal finances.

"We remain fiscally responsible, even as we're investing for a better tomorrow," Trudeau said.

Freeland cited a new report by former Bank of Canada governor Stephen Poloz, which says the budget could take pressure off of the inflation situation by increasing the economy's capacity.

"Given that the demand side of the economy is already slowing sharply and most of the effects of last year’s increases in interest rates have yet to appear, it is even possible that Budget 2023 will help improve the odds of a soft landing in the economy, by buffering demand and boosting supply," Poloz wrote.

"Given the complexity of the situation, and the uncertainty around the outlook, it is simply too close to call."

While the budget announced nearly $60 billion in new spending, much of it went toward investing in clean energy and technology, as well as health care.

Page said it's "hard to criticize the government's priorities."

The Liberals were facing pressure to match U.S. incentives for clean energy and technology, while also on the hook for health-care spending and creating a federal dental plan promised in the supply-and-confidence agreement with the NDP.

But looking back, the federal government had the opportunity to better position itself by pulling back on spending in previous budgets, he said.

"We could have saved a little bit," Page said. "So yeah, we find ourselves in a situation where there's not a lot of money in the till right now."

Canada is not the only country that has allowed serial deficits in recent years. The United States has run a deficit for 20 years in a row. In the U.K., the last time a government ran a surplus was in 2000-01.

Orlando said that in recent years, governments running deficits were able to benefit from low interest rates. But as interest rates now rise, the tides are turning on the costliness of debt.

And continuing to increase spending without being able to finance it with higher revenue can build bad habits, Orlando said.

It's like with a "regular person," he said, who gets used to spending on something every year without consequence. "It's hard for them to rein that in, once they realize that their incomes aren't able to match up," he said.

MORE National ARTICLES

A 40-year-old woman struck Tuesday night in East Vancouver, suffering life-threatening injuries: VPD

A 40-year-old woman struck Tuesday night in East Vancouver, suffering life-threatening injuries: VPD
A 40-year-old pedestrian was struck at 9:30 p.m. while crossing East 1st Avenue at Woodland Drive, suffering life-threatening injuries. She remains at hospital in critical condition. The driver remained at the collision scene, and neither speed nor alcohol are considered factors.

A 40-year-old woman struck Tuesday night in East Vancouver, suffering life-threatening injuries: VPD

What to know about Canada's electricity overhaul

What to know about Canada's electricity overhaul
That includes a new tax credit worth 15 per cent of investments made to build new renewable energy infrastructure, including wind and solar plants, nuclear reactors, emissions-trapping natural gas plants, new transmission lines between provinces and territories and stationary electricity storage, such as batteries.

What to know about Canada's electricity overhaul

Vancouver block shaken as stabbing court date set

Vancouver block shaken as stabbing court date set
The accused, Inderdeep Singh Gosal, was arrested at the scene moments later when bystanders flagged down a constable patrolling the area, police said. The 32-year-old has been charged with second-degree murder and a hearing has been scheduled in Vancouver provincial court on April 11.

Vancouver block shaken as stabbing court date set

Surrey RCMP need the public's help in identifying a suspect who broke into a Whalley construction site

Surrey RCMP need the public's help in identifying a suspect who broke into a Whalley construction site
The suspect was observed on CCTV and is described as a Caucasian male wearing a black hoody with white designs, a blue jacket, dark pants, Nike runners and a black baseball cap.

Surrey RCMP need the public's help in identifying a suspect who broke into a Whalley construction site

Clock ticking as pharmacare left out of budget

Clock ticking as pharmacare left out of budget
The confidence-and-supply agreement requires the government to table legislation on pharmacare by the end of the calendar year in exchange for the NDP's support on key votes in the House of Commons.

Clock ticking as pharmacare left out of budget

Lululemon reports Q4 revenue up 30%, shares soar

Lululemon reports Q4 revenue up 30%, shares soar
Lululemon, which keeps its books in U.S. dollars, reported after the close of markets Tuesday that it earned net income of US$119.8 million or 94 cents per diluted share for the quarter ended Jan. 29 as it recorded post-tax impairment and other charges related to its Mirror business totalling US$442.7 million.

Lululemon reports Q4 revenue up 30%, shares soar

PrevNext