Franco Terrazzano: Nothing prudent in the budgeting of the Trudeau government

Ottawa’s profligacy makes living in Canada less affordable

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There was great irony recently when Finance Minister Chrystia Freeland touted her government’s ‘budget cuts’ on the same day taxpayers discovered the Governor General and his entourage had racked up an $80,000 bill. for in-flight catering.

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“I know my fiscal prudence surprised many,” Freeland told his Toronto audience last month, referring to his April budget. “This budget restriction was very intentional.” In fact, it is more mystified Canadians whom the minister believes she has exercised restraint. There is nothing prudent about government budgeting.

Rookie as prime minister, Justin Trudeau initially said he would run a few “modest” deficits before returning to balanced budgets in 2019. He was expected to miss that balanced budget by $20 billion even before the pandemic hit. Now the only mention of a balanced budget from the government comes from the Parliamentary Budget Officer, whose data shows that the federal government will not return to black ink until 2070. While the Liberal Party has promised to spend $78 billion more in the last election, taxpayers have even less reason to believe that a balanced budget will be achieved sooner.

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It is true that this year’s $53 billion deficit is lower than last year’s $114 billion deficit and the $328 billion deficit in 2020. But bragging about a $53 billion deficit dollars is like bragging about being the most sober person in the drunken tank. It’s especially ridiculous when this slightly less elephantine deficit occurs even as a windfall of $30 billion falls into your lap.

With debt exceeding $1.2 trillion this year, the Trudeau government will have nearly doubled it since taking office. The federal debt-to-GDP ratio is 45%, 15 percentage points above pre-pandemic levels. Once you add Canada’s total public debt, the ratio exceeds 100%, which “is among the worst in the industrialized world,” according to the Fraser Institute. In fact, 23 industrialized countries covered by the International Monetary Fund have lower levels of total public debt relative to their economies. Only seven have more.

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The problem is the spending spree. Ottawa plans to spend $452 billion this year. That’s nearly $90 billion more than pre-pandemic spending, which was already at record highs even after adjusting for population and inflation. This means the federal government spent more money before the pandemic than in any year. during the Second World War. And now he intends to spend another $90 billion.

Federal interest charges on the national debt will cost $27 billion this year, more than the Alberta government spends on health care in a year. The Parliamentary Budget Officer expects interest charges to top $40 billion a year by 2025, more than double what they were at the start of the pandemic.

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Minister Freeland clings to S&P’s triple-A credit rating as proof of her prudence, but does she really want to rest on the laurels earned by previous governments that effectively eliminated deficits? And it’s funny how she ignores Fitch’s 2020 credit downgrade that was due to “Canada’s deteriorating public finances.”

Ottawa’s prodigality makes life in Canada less affordable.

Politicians are already turning over the couch cushions in search of more money to pay off their debts. Despite the promise not to tax their way out of deficit, the government’s pandemic budgets contain a series of tax hikes: a tax on luxury goods, a tax on foreign owners of vacant homes, an anti-rollover tax, higher taxes on banks and insurance companies, and more. The federal carbon tax, along with liquor taxes and payroll taxes, were recently increased. The Prime Minister’s Office also requested an analysis of a possible wealth tax, while staff met twice with a group that received taxpayers’ money to lobby for new property taxes.

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Then there is the inflation tax. The Bank of Canada’s total assets have grown by more than $300 billion during the pandemic, largely through purchases of federal government debt securities. It would have been difficult for the government to finance its extraordinary deficits without the central bank reducing the value of Canadians’ money through such aggressive bond purchases.

Fiscal austerity is not just about repeating the phrase several times during a speech. To show true restraint, Minister Freeland must get overspending under control and establish a timeline and plan to balance the budget.

Franco Terrazzano is Federal Director of the Canadian Taxpayers Federation.

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