Liberals' maiden 'sunny ways' budget showers spending, deficits

The Canadian Press
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OTTAWA - The new Liberal government delivered a sunny ways budget Tuesday brimming with optimism and billion-dollar spending increases spread across a wide spectrum of Canadian society.

But the bold effort to spur economic growth after almost a decade of fiscal restraint will add more than $100 billion to the federal debt over the next five years as Finance Minister Bill Morneau plunges Ottawa back into the red.


And like March sunshine in the frozen national capital, there's concern that Prime Minister Justin Trudeau's bright budget may not heat up the economy quite as much as the Liberals promised it would.


“We act for the years and decades to come,'' Morneau said in his maiden budget speech in the House of Commons.

“We act for our children and our children's children.''


There's billions in new spending on infrastructure, Aboriginal Peoples, and transfers to middle and lower income Canadians in a budget blueprint framed by Morneau in terms of Canada's great post-war expansion of the last century.

“Confidence inspired investment,'' Morneau said of those high-growth, post-war decades. “Investment inspired confidence.''

The Liberals claim their budget will create 100,000 jobs and boost national economic growth, as measured by gross domestic product, by half a percentage point per year _ a huge increase on a $2 trillion economy.

The promised sunny future comes with an immediate fiscal chill.

The Liberals are projecting a $29.4-billion deficit in 2016-17, followed by a $29-billion shortfall the following year and almost $23 billion in 2018-19. Over the next five years, Tuesday's budget shows $113.2 billion in red ink, including a $14.3 billion shortfall for 2020-21 _ after the next scheduled federal election.

During last year's campaign, the Liberals promised “modest deficits'' of no more than $10 billion over the course of their mandate and to balance the books by 2019-20.

Times, it seems, have changed: The word “deficit'' appeared nowhere in Morneau's budget speech, nor did “spending.'' “Investment,'' on the other hand, registered 22 times.

The relatively slim, 269-page document is packed with spending promises for all and sundry on every page. The final Conservative budget of April 2015, by contrast, weighed in at 518 pages while ratcheting down spending in a government-wide effort to show an election-year surplus.

“I think budget 2016 runs the risk of over-reaching,'' said Craig Alexander, vice-president of economic affairs at the C.D. Howe Institute.

“The reality is the amount of money they have to make an impact is relatively limited.''

It's the central paradox of the first Liberal budget: while plunging the country back into deficit, Liberal spending is constrained by a worse-than-anticipated economy that forced the government to spread its election promises over a longer time frame.

Put another way, the federal deficit balloons by almost $25 billion in 2016-17, yet new budgetary measures are costed at only $11.57 billion. New spending the following year is forecast at $14.9 billion.

“The challenge the government has faced is how do you actually deliver on as many of your election promises as you can, but with a binding fiscal constraint?'' said Alexander.

Over the last three years, federal spending was held to an average 0.4 per cent increase per year, said Mary Webb, senior economist at Scotiabank. The next three years show average increases of 6.3 per cent.

“How do you close this gap here?'' Webb wondered, short of tax increases or sharp cuts down the road.

The budget promises a slew of studies and commissions to develop more innovative economic policy, presumably with future price tags on top of the many funding announcements in the current budget.

These include:

_ $8.4 billion over five years to help indigenous communities, including $2 billion on water and wastewater systems in First Nations and $2.6 billion over five years for primary and secondary education on reserves.

_ $10 billion more over two years for a new Canada child benefit, absorbing and replacing both the Canada child tax benefit and the universal child care benefit.

_ $6.6 billion over two years for infrastructure, less than the $10 billion promised in the Liberal election platform.

_ $3.4 billion over five years to increase the guaranteed income supplement top-up benefit for single seniors, and restore the old age security eligibility age to 65 from 67.

_ $2 billion over three years for a new strategic investment fund for infrastructure improvements at colleges and universities.

_ $2 billion over two years for a low-carbon economy fund, beginning in 2017-18.

Jean-Francois Perrault, chief economist at Scotiabank who served as a deputy minister at Finance Canada until the end of 2015, said the Liberals are over-confident in their projections of the budget's impact on Canada's economic growth.

But he repeatedly praised the budget's many specifics.

“There's a lot of interesting stuff in there,'' said Perrault. “It's a smartly designed piece of policy, no question about that.''


Organizations: House of Commons, Scotiabank, C.D. Howe Institute First Nations Finance Canada

Geographic location: Canada, OTTAWA

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Recent comments

  • Regular Joe
    Regular Joe
    March 23, 2016 - 17:31

    Ring around the Rossie pocket full of posies Just another liberal fairy tale

  • Ray Fortier
    March 23, 2016 - 15:52

    The budget does recognize all the things that needed immediate attention but it is the getting there and managing it that has always been the problem. Aboriginal issues aren't so much caused by under funding as opposed to getting it done right. Firstly taxpayers monies must be managed at every level of application. We've spent billions on sewer and water and housing but if there is no operational and maintenance management installed, it is money down the drain. This country is full of poorly maintained residential and administrative buildings as the residents can't or won't tool up to repair and fixed small problems before they become major repairs. If you look at landscaping on reserves it is as though lawn mowers are yet to be invented. The infrastructure and the tools are available it is just the aboriginal mindset that either doesn't know how to maintain or repair anything. This now leads to education, how can we ever hope to have these people up and running educationally when they refuse to progress beyond grade 6 generally. It doesn't matter whether the services are available on reserve, residential schools or big city segregated training centers they just can't get there as the will just doesn't exist. Forking over billions again and again without obligations and management is just more billions down the drain. The environment gets billion for what, to provide energy at lower costs and cleaner outputs, this will never happen, oil is now $40 per barrel even when it was $140 a barrel wind and solar energy costed out at 400% more and that margin has grown. It is consumers that provide the cash and pay for inflated energy costs. The difference is proven in the US, Obama gave $5 billion to clean energy and $1 billion to big oil, the result was clean energy spent it all on research and development not one kilowatt more produced, oil found 1 Million barrels of new oil which is a benefit to all Americans unlike the net zero affect from clean energy. The Liberal syndrome of ignoring our military is still a blight on their reputation. Nothing was learned from the Chretien NO HELICOPTERS FIASCO, that ignorance costed taxpayers $500 in contract penalties and a ten year delay on getting suitable replacements back into inventory, the issue is still not resolved. Cancelling the aircraft and ship need just defers the effort to future governments again. After the Liberals are through with their spend and destroy policy they'll be thrown out with their 3 million pothead supporters. They won't be able to blame Harper on that will they? What this country needs is a prior years net revenue geared budgetary process for the following year and so on with minimal inflationary grow inclusions. A steadfast military contribution with those who know the needs and wants providing the expertise instead of some ignorant clerk telling the military experts what the requirements should be. To set laws and obligations on industry compliance with environmental minimum expectation that are enforceable is how it should be administered and regulated not the frivolous throw of billions of dollars that get us no where as BCs Carbon Tax can attest. Taxpayers and consumers are the grunts of all these rookie spending follies. Canadians are the most overtaxed and over governed peoples in the world we couldn't afford it 25 years ago and we certainly can't now. $120 billion deficits over 5 years with a 4 year mandate is criminal. Budgets should be limited to the guaranteed term of power with no projection into future mandates. This is unfair and smacks of Liberal crassness especially when they infer that an independent audit about the $2 billion surplus wasn't a surplus, I'd say the auditor was correct and the Libs are liars.

  • ajakall
    March 22, 2016 - 17:29

    Justine Trudeau, a national disgrace.