It turns out that Prime Minister Justin Trudeau doesn’t think now is the time for a fiscal anchor to set some limits on government spending.
That shouldn’t really surprise anyone, because he also didn’t think his first four years in office were the right time for one either.
Most Canadians will recall Trudeau’s 2015 election promise to balance the budget in 2019 and keep the debt to GDP ratio on a downward track.
He proceeded to break both of those promises in spectacular fashion, at a time when the Canadian economy was growing. Spending still leapt by 20 per cent over five years, and the federal debt ballooned by $127 billion.
And all before the word “COVID-19” became a dreaded part of everyone’s vocabulary.
Before, Trudeau’s position has always been that when times are good governments should spend because they can. Now, he says when times are bad they should spend because they must.
To his mind, there’s never a right time to worry about spending.
Now, some will point out that the pandemic is a unique situation.
It certainly is. But that’s precisely why there need to be some limits placed on spending. It’s where the cliffs are most treacherous that you most need the guardrails.
That wouldn’t prevent the government from spending to help families and businesses getting crushed by pandemic-related economic upheaval. But it would at least provide some assurance to the majority of Canadians who worry the size of the deficit is getting out of control.
Invoking the pandemic as an excuse to permit unlimited spending is also disingenuous. As the Throne Speech made clear, Trudeau is considering many new, breathtakingly expensive programs, such as government pharmacare and government daycare, that have absolutely nothing to do with the pandemic. A cynic might even suggest he’s using the crisis as a pretext to spend on whatever he feels like spending on.
Trudeau’s cavalier attitude towards debt is also troubling. Yes, low interest rates have been a lucky break and kept borrowing costs manageable – for now. But it is a reckless gamble to simply assume they will stay low indefinitely. The consequences of higher rates are significant: a recent C.D. Howe report concluded that a one-point increase in the effective interest rate will mean an additional ten billion dollars a year in interest payments.
Trudeau’s refusal to even include a fiscal anchor in the fiscal update expected next month is a mistake, especially after not producing a budget this year. Virtually everyone accepted the spring budget had to be postponed as the country was shut down and the pandemic was changing so rapidly that a budget made no sense. But this is no longer true and the country needs a proper fiscal framework. The pandemic, while not over, has become a new normal everyone trying to carry on life as best they can.
Canadians’ patience is being tested. The prime minister should reconsider his decision to not to anchor Canada’s drifting fiscal ship – or he runs the risk of Canadians deciding he’s actually the one that needs to go overboard.
Aaron Wudrick is national director of the Canadian Taxpayers Federation.