The budget is keeping the Conservatives on the ropes this week.
Justin Trudeau and the Liberals have proposed an infrastructure fund that will result in a budget deficit until 2019. The problem Mr. Harper has is that he cannot attack Mr. Trudeau’s proposal in any way that is respectful of the intelligence of Canadian voters without exposing a dirty little secret. Recent history shows that the Liberals are better at managing the federal budget than the Conservatives.
Jean Chretien and the Liberals took office in November of 1993. At that time the deficit stood at $38.5 billion. By 1997 the Liberals had turned that around to a surplus of $2.9 billion in 1997, growing to a high of $19.9 billion in 2003. When Mr. Chretien left office at the end of 2003 the surplus still stood at $9.1 billion.
Paul Martin, also Liberal, then took office and kept the budget in the black, ending his term at the end of 2005 with a surplus that stood at $13.2 billion.
Stephen Harper and the Conservatives inherited that surplus from Mr. Martin and in two short years transformed a $13.2 billion surplus into a $5.8 billion deficit. A year after that the deficit stood at $55.6 billion, mismanagement or a decline in fiscal fortune (depending on whose sorry excuses you believe) of a whopping $68.8 billion dollars.
Since 2009 the Conservatives have carried deficits between $33.3 billion in 2010 to $16.6 billion at the end of 2104. Given the cuts to military spending and other government services I am almost afraid to ask where all that money went.
The Conservatives will argue that only they can bring the budget out of deficit. However, the recovery between 2009 and 2014 has been underwhelming compared to the pace of recovery under the Liberals between 1993 and 1997. Worse, the rate at which the Conservatives are hauling the budget out of deficit is slowing.
The deficit numbers referred to above are cumulative, not annual. In 2014 Canada’s accumulated debt stood at $5.2 billion on a budget of $2 trillion. That means that the cumulative effect of multiple years of deficit spending stood at eight tenths of one per cent of the total annual budget for a single year! Given that the national budget will generally run a slight surplus or a slight deficit, a deficit of eight tenths of one per cent of a single year’s revenue is as good as break even.
Montreal and Toronto need help with their streets and British Columbia badly needs to expand rapid transit in the Lower Mainland. Mr. Trudeau proposes infrastructure spending that would result in the budget deficit remaining at $10 billion for 2016 and 2017, before shrinking in 2018 and disappearing in 2019.
Mr. Harper mocked Trudeau’s “tiny” deficit. There is no evidence that Mr. Trudeau actually referred to the deficit as tiny, although if he had he would not have been wrong. The deficit proposed by Mr. Trudeau would remain relatively insignificant, staying at about 1.6 per cent of a single year’s budget before adjustment downwards for the fact that the economy will expand.
Mr. Harper is in the unenviable position of a rusted and dented pot calling a new non-stick kettle black. If we are judging fiscal management by the ability to turn a deficit into a surplus and then maintain a surplus, the Liberals have a better track record than the Conservatives. If Mr. Trudeau and the Liberals say they can spend money on infrastructure and still have the budget back to a surplus by 2019, history says that is more likely than thinking the Conservatives will have the budget back in black before 2019.
And the real snake in the grass? The Liberals want to spend $125 billion. The Conservatives already have an infrastructure fund of $10 billion that is largely unspent. Expect them to use it to buy votes in coming weeks.