Hébert: Morneau’s fiscal update merely a sketch

Attention from deficit diverted in proposed infrastructure plan.

National Affairs by Chantal Hebert

11/3/2016

Morneau’s fiscal update merely a sketch

Chantal Hébert

For Halloween Prime Minister Justin Trudeau and his son stole a page from the classic French children’s book The Little Prince. They went trick-or-treating as the pilot and the little prince.

On the next day, Finance Minister Bill Morneau plagiarized a chapter of the same book for his fiscal update.

“Draw me a sheep,” asks the little prince in his very first encounter with the narrator.

After a few failed attempts at coming up with a satisfactory depiction of the animal, the pilot hands the child a picture of a box and tells him the sheep is in it.

Stranded in the desert of a sluggish economy, Morneau has come up with a box of his own in the shape of a federal bank to finance major infrastructure projects.

It is little more than a sketch, leaving critics and supporters alike free to ascribe to it whatever features best suit their arguments.

Minutes after Morneau delivered his statement, the Conservatives and the New Democrats were already depicting the infrastructure plan as either redundant in the case of the first, or as a disguised attempt to privatize Canada’s public infrastructures in the second.

It is a debate that will not be settled for years — to the probable delight of policy wonks.

The plan will not get off the ground until 2018. It will be a decade before Canadians can really assess the merits of the initiative. To rush to judgment this week is a mug’s game.

As it happens, Morneau’s announcement is also a political diversion.

For while Tuesday’s fiscal update was strong on charting a self-described virtuous course for a relatively distant future, it was eerily silent on some of the more immediate features of the fiscal landscape.

For instance, take the deficit.

The decision to embrace deficit financing so as to spend Canada out of a period of slow economic growth was the highlight of the first federal budget of the Justin Trudeau era.

In itself, a projected $29-billion budget shortfall last spring was not all that remarkable.

No party elected to office last Oct. would have balanced the books this year.

With his government’s political survival at stake and against the backdrop of a global economic crisis, Stephen Harper’s government ran a deficit that was almost twice as high in 2009.

A shift in attitude is what made budget 2016 a watershed Liberal document.

The Conservatives over their recent decade in power approached deficits as necessary evils — to be banished at the first opportunity.

In this they were very much in the mainstream.

From the early 1980s until the books were balanced in the late ’90s, the deficit issue was constantly on the radar of successive federal governments.

Brian Mulroney struggled with deficits his entire time in office.

Deficit fighting became the defining mission of Jean Chrétien’s first mandate.

By contrast, Trudeau’s government wears its deficit like a badge of honour that it is ready to wear well into a second, and possibly, a third mandate.

If pressed, Morneau will hazard a ballpark figure on how much the federal government of 2028 would spend on infrastructures.

For the record, the Liberals would have to secure a rare fourth consecutive majority mandate to still be in power by then.

But when it comes to a timeline to return to balanced budgets or to reap significant economic benefits from the Liberal deficit financing policy, the government’s crystal ball fogs up.

On Tuesday, the minister’s statement to the House was silent on the deficit.

This may be the first time since at least the late ’70s that a finance minister updates the country on the fiscal shape of a cash-short government without at least nodding in the direction of containing/reducing/eliminating the deficit.

And yet, the months since the spring budget have not been kind to its forecast.

The billions set aside to cushion against a further deterioration of the federal finances have been swallowed up.

An event like the Brexit vote, the decision of the United Kingdom to leave the European Union, has not helped.

A Donald Trump victory in the U.S. presidential election next week could similarly wreak havoc on Morneau’s projections.

For now, the Trudeau government is content to treat the budget deficit as a footnote.

Time will tell whether that is the equivalent of whistling past the fiscal graveyard.

Chantal Hébert is a national affairs writer. Her column appears Tuesday, Thursday and Saturday.

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