Conservative Leader Erin O’Toole promised Tuesday to restore the federal government’s fiscal balance over the next decade and eliminate the gargantuan federal deficit “without cuts” to public services.
Conservative Leader Erin O’Toole promised Tuesday to restore the federal government’s fiscal balance over the next decade and eliminate the gargantuan federal deficit “without cuts” to public services.
Asked how we could rein in the eye-popping deficit the government has racked up during the COVID-19 pandemic — the federal deficit for this fiscal year alone is expected to be $381.6 billion — O’Toole said economic growth will bring more money to Ottawa in the coming years, and the fiscal house will be brought in order through the resulting new tax revenue.
“We will grow the economy so that we can get back to balance in a responsible and equitable way without cuts. That is our plan,” O’Toole said at a campaign event in Ottawa.
The comment is similar to one made by Liberal Leader Justin Trudeau years ago when, as the then third party leader, he was asked just how committed he was to balancing the budget.
“The commitment needs to be a commitment to grow the economy, and the budget will balance itself,” Trudeau said in a 2014 CPAC interview — a comment that has been routinely mocked by his Conservative opponents ever since.
In a recent report, the Parliamentary Budget Officer (PBO) said that, without policy changes like a tax hike or cuts to existing programs, Canada will not post a surplus for almost 50 years — research that calls into question O’Toole’s suggestion that economic growth will erase budget deficits.
In a media statement, the Canada Taxpayers’ Federation panned the Conservative fiscal plan.
“Federal government spending is at all-time highs, but the Conservatives can’t seem to find any fat on the budget to cut,” said Franco Terrazzano, the group’s federal director. “The Conservatives hope the economy will balance the budget. But what happens if reality isn’t as rosy? Will the Conservatives find savings or let the debt balloon?”
“It sounds like O’Toole thinks the budget will balance itself, but taxpayers know that’s not how it works,” Terrazzano said. “Next time the Conservatives release a plan to balance the budget, they should remember to include a plan to balance the budget.”
O’Toole said that while the Conservatives supported emergency spending to prop an economy on the ropes during “extraordinary times,” that sort of government largesse “can’t go on forever.”
“What’s prudent in an emergency is reckless out of one. For Justin Trudeau and Jagmeet Singh, the spending of the past six years is just the beginning. For Canada’s Conservatives, it must be brought back under control while maintaining the essential services on which so many depend,” he said.
O’Toole said Trudeau has recklessly managed the federal books during his six years in office, borrowing large sums of money to cover new programs.
And with Canada’s unemployment rate stubbornly stuck at 7.5 per cent — two points higher than where it was in February 2020 — there’s little to show for that spending, O’Toole said.
“When you run endless and reckless deficits, when you rack up that much debt, when you don’t have a plan to balance the budget, inflation goes up. The cost of everything including gas and groceries goes up. You also put our social safety net at risk. You saddled future generations with that debt. Our children and their children, and Canada is left more vulnerable to future emergencies,” O’Toole said.
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However, O’Toole’s campaign platform also proposes billions in new spending.
While the Liberal government pushed through enormous COVID-19 spending, most of that is temporary and will, according to the PBO, “not have a material impact on long-term fiscal sustainability.”
Some of O’Toole’s promises, such as a ‘GST holiday’ on retail sales in December, are also temporary and therefore fiscally immaterial over the medium and long term.
But O’Toole’s promise to boost the Canada health transfer by six per cent a year for 10 years — three points higher than the current growth rate — will cost the federal treasury some $60 billion more over the next decade, according to Conservative party estimates.
There are also Liberal promises, such as increasing Old Age Security (OAS) payments and new funding for a national child care program, that are long-term spending commitments, and which will result in new permanent program spending for years to come.
In its 2021 fiscal sustainability report, the PBO said the federal government’s current fiscal policy is “sustainable over the long term,” but new programs such as Canada-wide early learning and child care program, enhancements to OAS, the Canada workers benefit and the public transit fund would limit Ottawa’s ability to transfer more money to the provinces, some of which are in much worse financial shape.
In fact, the PBO found that only Nova Scotia, Ontario and Quebec were on fiscally sustainable paths with others, like Newfoundland and Labrador, facing uncertain financial futures.