Liberals will be forced to break election promises

Liberals will be forced to break election promises

Remember all those generous election promises the Liberals sprinkled around for voters of every kind just a couple of months ago?

Best forget all that now.

Monday’s fiscal update shows in black and white that the federal government can’t deliver on everything it promised, and will have to delay, water down or just not deliver some of the many things the campaigning Liberals said they would.

Only one election promise is accounted for in the government’s update on the state of its finances: the income-tax cut that will cost about $6 billion a year when it’s fully implemented in 2023-24.

That leaves $39.5 billion in promises made during the campaign that have not yet been budgeted for — promises like enhancing the Canada Child Benefit for new parents, pumping more money into health care and kick-starting pharmacare, increasing Old Age Security benefits for people over 75, and retrofitting homes.

Those are just the most expensive items left behind on the federal Liberals’ long list of promises, waiting for a spending line in budgets to come. Implementing those promises on the time line that Justin Trudeau campaigned on would quickly mean the Liberals would be knocked off track on their debt commitment.

Finance Minister Bill Morneau highlighted that commitment at his update when he promised to stick with the practice of ensuring that the federal debt burden (debt-to-GDP ratio) remains on a steady, downward track.

Since deficits year after year add up to a mounting debt, a declining debt burden means Ottawa’s deficits can’t be allowed to balloon any faster than the economy is growing.

It’s a way to make sure deficits remain reasonable. But it’s a formula for frustration.

Last year, the debt was $686 billion, or 30.8 per cent of GDP. That ratio actually rose a bit this year to 31 per cent, where it’s expected to stay before ever-so-slowly edging down.

And this year’s deficit is now expected to be $26.6 billion, almost double the $14 billion the government booked last year.

That’s despite revenues coming in from taxpayers being more plentiful than expected. Yes, the volatility in long-term interest rates is wreaking some havoc on the government’s math and pension liabilities, as Morneau pointed out.

But the Liberals are also entrenching their tradition of immediately spending every tax windfall that happens to come their way.

At this point, the Liberals are so close to the line on their debt-burden commitment that any major extra cost or unforeseen revenue issue or slowdown in economic growth will immediately undermine their debt-and-deficit targets.

It’s no coincidence that Morneau published his no-frills fiscal update just hours before meeting with provincial finance ministers, who come to Ottawa brandishing their wish list for billions more in fiscal stabilization payments and health care, backed by ominous talk of Alberta unrest and regional distress.

The limits contained in the fiscal update give Morneau a small bit of heft to push back against the provinces, who have had the run of the public sphere since Trudeau promised on election night to take regional gripes seriously and then went into relative seclusion.

But this is only Round 1 of the “maybe later” messages Morneau will have to deliver if he has any hope of sticking to his fiscal target and constraining the deficit financing that has become a hallmark of Trudeau’s fiscal policy.

The Liberals are already counting on trimming existing programs and closing tax loop holes to the tune of $1.5 billion a year, the update states. Further cuts would be painful and probably politically impossible given the configuration of the minority government.

So what will Morneau prioritize?

Faced with choosing between keeping the debt burden on a downward track and implementing election promises as laid out this fall during the campaign, Morneau says he’ll do both — with the help of economic growth.

“The prime minister gave me a mandate where he asked me to ensure we meet up to a couple of key conditions. One is that we do maintain that very strong balance sheet by reducing our debt as a function of our economy. We intend on doing that,” he said.

“Second is that we want to continue to invest in Canadians, which will help us with the growth side of that equation.”

That’s a convenient response and, basically, the only thing Morneau can say at this point to get him out of this conundrum of overcommitting during the campaign.

The only way for the Liberals to stick to their fiscal targets and keep their election promises at the same time is for the economy to grow faster and stronger than anyone foresees right now.

No one except the Conservatives is forecasting a recession, but neither is anyone forecasting growth above a measly two per cent a year either — despite the extra federal spending.

At this point, the Liberals’ best hope is for everyone’s campaign memories to slip away.

Heather Scoffield is a columnist with Torstar Syndication Services.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

A cleaner wipes a glass panel at Toronto's Eaton Centre Shopping mall on Saturday, March 21, 2020. The national statistics office will say this morning how much the domestic economy bounced back in the third quarter of the year. The Canadian economy suffered its worst three-month stretch on record in the second quarter as the economy came to a near halt in April before starting to recover in May and June. THE CANADIAN PRESS/Chris Young
Statistics Canada says economy grew at a record pace in third quarter of 2020

OTTAWA — Statistics Canada says the economy grew at a record annualized… Continue reading

Bill C-4 passed in the House of Commons to authorize new benefits for workers left jobless or underemployed by the COVID-19 pandemic. (File photo)
Tory MPs keep talking on assisted dying bill as clock ticks down to Dec. 18 deadline

OTTAWA — Conservative MPs are refusing to be rushed into a vote… Continue reading

Volcanic materials spew from the crater of Mount Semeru in Lumajang, East Java, Indonesia, Tuesday, Dec. 1, 2020. Indonesian authorities are closely monitoring several volcanoes after sensors picked up increased activity in recent weeks, prompting the evacuation of thousands of people. (AP Photo)
Thousands flee as activity in Indonesian volcanoes increases

JAKARTA, Indonesia — Indonesian authorities are closely monitoring several volcanoes after sensors… Continue reading

Men who fled the conflict in Ethiopia's Tigray region, listen to a priest speak at a nearby church for Mass at Umm Rakouba refugee camp in Qadarif, eastern Sudan, Sunday, Nov. 29, 2020. (AP Photo/Nariman El-Mofty)
UN: Food has run out for nearly 100,000 refugees in Ethiopia

NAIROBI, Kenya — The United Nations says food has now run out… Continue reading

Alberta’s chief medical officer of health, Dr. Deena Hinshaw, confirmed eight additional virus-deaths Monday afternoon including one in central zone. (Photo by Chris Schwarz/Government of Alberta)
New record: Red Deer at 236 active COVID cases

One more death in central zone reported

Idyllic winter scenes are part of the atmosphere of the holiday season, and are depicted in many seasonal movies. How much do you know about holiday movies? Put your knowledge to the test. (Pixabay.com)
QUIZ: Test your knowledge of holiday movies and television specials

The festive season is a time for relaxing and enjoying some seasonal favourites

Mike Miltimore, seen in Kamloops, B.C., in an undated handout photo, says the Gretsch electric guitar that a woman brought into his store is from 1955 and similar to one played by country music legend Chet Atkins before he developed his signature series of guitars. THE CANADIAN PRESS/HO-Mike Miltimore
Guitar made in 1950s worth more than B.C. family imagined

KAMLOOPS, B.C. — When Renee Latheur decided to take an old guitar… Continue reading

Lewis Hamilton won the German Grand Prix after Sebastian Vettel crashed while leading near the end. (Photo by THE ASSOCIATED PRESS)
Hamilton positive for COVID-19, will miss F1’s Sakhir GP

SAKHIR, Bahrain — Seven-time Formula One champion Lewis Hamilton has tested positive… Continue reading

In this Dec. 19, 2019 file photo, the advertising label of the Organization of the Petroleum Exporting Countries, OPEC, shines at their headquarters in Vienna, Austria. Leaders of the OPEC cartel are meeting virtually to decide how much oil their countries should produce as the coronavirus stifles demand for fuel. They’re expected to extend production cuts into the new year in an effort to boost prices. (AP Photo/Ronald Zak, File)
OPEC talks on production hit snag as pandemic clouds outlook

FRANKFURT — The OPEC oil producers’ cartel was to push ahead with… Continue reading

Vancouver Whitecaps forward Fredy Montero celebrates after scoring a goal against the Los Angeles Galaxy during the second half of an MLS soccer match in Portland, Ore., Sunday, Nov. 8, 2020. The Vancouver Whitecaps are hanging on to several of their young players and continuing contract talks with two veterans, including Montero. THE CANADIAN PRESS/AP-Steve Dipaola
Whitecaps exercise options on seven players, ‘continuing discussions’ with Montero

Whitecaps exercise options on seven players, ‘continuing discussions’ with Montero

Toronto FC forward Pablo Piatti (7) cuts past Vancouver Whitecaps defender Ali Adnan (53) during first half MLS Canadian Championship soccer action in Toronto on Friday, August 21, 2020. Barring a new agreement, Toronto FC is parting ways with designated player Pablo Piatti. THE CANADIAN PRESS/Nathan Denette
Toronto FC looks for new designated player, opts not to pick up Piatti option

Toronto FC looks for new designated player, opts not to pick up Piatti option

Hamilton Forge FC players celebrate their win over CD Olimpia's during Scotiabank CONCACAF League 2019 action in Hamilton, Ont., Thursday, Aug. 22, 2019. After a season that has taken it from Hamilton to Charlottetown, El Salvador and Panama, Forge FC hopes the Dominican Republic is the last stop on the way to the Scotiabank CONCACAF Champions League. THE CANADIAN PRESS/Peter Power
Forge FC just one win away from booking ticket to CONCACAF Champions League

Forge FC just one win away from booking ticket to CONCACAF Champions League

A police officer patrols near the Olympic Symbol being transported on a barge in the Odaiba section Tuesday, Dec. 1, 2020, in Tokyo. The five Olympic rings are back in Tokyo Bay. They were removed for maintenance four months ago shortly after the Tokyo Olympics were postponed until next year because of the COVID-19 pandemic. (AP Photo/Eugene Hoshiko)
Olympic rings back in Tokyo Bay; a sign of hope in pandemic

Olympic rings back in Tokyo Bay; a sign of hope in pandemic

Ottawa Redblacks player Brad Sinopoli speaks to reporters as the team clears out of the locker room, in Ottawa on Tuesday, Nov. 27, 2018. Sinopoli fully understands the challenge Kendall Hinton faced Sunday with the Denver Broncos. The Broncos activated Hinton, a receiver, from the practice roster to become the starting quarterback in Sunday's 31-3 loss to the New Orleans Saints. THE CANADIAN PRESS/Justin Tang
Former quarterback Brad Sinopoli can appreciate challenges Hinton faced with Broncos

Former quarterback Brad Sinopoli can appreciate challenges Hinton faced with Broncos

Most Read