A Conservative government would balance the budget “without cuts” within 10 years, leader Erin O’Toole said Tuesday, elaborating on a plan that hinges on a decade of juiced-up economic growth.
At a campaign event from the party’s broadcast centre at an Ottawa hotel, the Tory leader said Canada effectively borrows more than $400 million each day, resulting in last year’s $354-billion deficit amid emergency spending measures prompted by the COVID-19 pandemic.
O’Toole said that, if elected, he will roll out more stimulus spending but end much of it after the first year and wind it down completely over five years.
“We will help highly affected sectors caught by the pandemic so that those jobs are preserved. We will grow the economy so that we can get back to balance in a responsible and equitable way without cuts,” he told reporters.
The Conservative platform says the robust economic recovery on which the Tory plan rests assumes annual GDP growth of roughly three per cent, a target reached only once since 2011.
Neither the Liberal budget nor the NDP platform specifies a horizon for fiscal balance, with both parties saying investment in economic and social programs can rev the economy and generate revenue more effectively than slashed budgets.
Earlier Tuesday, Statistics Canada released numbers showing the country’s economy had its worst quarterly stretch since the start of the pandemic, contracting by 1.1 per cent at an annualized rate between April and June and possibly dropping further in July.
“Under Justin Trudeau, we are heading further down the road of recession, not the road to recovery,” O’Toole said of the Liberal leader.
O’Toole, whose platform is not costed, also pointed to a report from the Organization for Economic Co-operation and Development that shows Canada trailing the United States in its economic rebound.
The Liberal budget in April unveiled major spending on social programs and vowed a return to small deficits by 2025.
Like the Conservative plan, a Trudeau-guided recovery hinges on strong growth in gross domestic product this year and next.
The Liberal government has stressed two metrics as key clues to Canada’s fiscal health: the net debt-to-GDP ratio and the annual budget deficit as a percentage of GDP. Trudeau has noted repeatedly that Canada boasts the lowest debt-to-GDP ratio of the G7 countries.
The debt-to-GDP ratio is expected to breach 51 per cent this year, up from 23.4 per cent in 2019, according to the Finance Department. Federal projections predict it will edge down to 49 per cent by 2025.
The government forecasts that the current deficit-to-GDP ratio of 8.2 per cent will dive back down to about one per cent within five years.
The Conservative goal of eventual fiscal balance sits surprisingly close to the medium-term Liberal aim of a deficit of one per cent of GDP, said Michael Smart, an economist at the University of Toronto and co-director of the Finances of the Nation website.
“It’s not much different than what the Trudeau government said that they want to do in the last budget,” he said.
“But making a promise about what the budget will look like 10 years from now is pretty easy to do, pretty hard to follow through on,” he added.
Nonetheless, moving toward a balanced budget requires limiting spending growth, though not spending cuts, Smart said.
The federal government is still in a “relatively good fiscal position” as it emerges from pandemic lows, he said. Yet a firm fiscal anchor for measuring accountability remains aloof, he added.
The Tory commitment to a balanced budget by 2031 offers a nod to Tory leanings under Stephen Harper, who pledged a balanced budget as prime minister but ran a deficit for six consecutive years following the 2008 financial crisis.
“They’re referring to a Conservative rhetoric, but it’s meaningless from an economic point of view,” said Serge Coulombe, emeritus professor of economics at the University of Ottawa, pointing to the drawn-out timeline.
With the low cost of borrowing, spending ad nauseum marks a “big temptation” for Ottawa, he said. “Governments that spend and don’t tax are extremely popular _ up to the point where inflation comes.”
The immense influx of cash into the economy via federal stimulus and relief spending over the past 18 months, combined with initially slowed production and snarled supply chains, has helped to boost demand for various consumer products and trigger higher prices amid a dearth of items.
“The danger of the mechanism of inflation is that it will push interest rates up. That will be bad for all Canadians who have borrowed to buy houses at very high prices recently,” Coulombe said.
The Liberals took aim at the lack of costing in the Conservative platform and said O’Toole has yet to provide a “meaningful explanation” of how he will deliver his plan.
“Erin O’Toole has not been transparent with Canadians about how he’s going achieve his goals,” Liberal party spokesman Alex Deslongchamps said in an email.
The Conservatives say the parliamentary budget officer is currently costing their platform. The Liberals have not yet released a platform.
NDP Leader Jagmeet Singh said Monday that measures to raise revenue such as cracking down on wealthy tax dodgers and hiking the tax rate for corporations and the highest income bracket can help pay for big-ticket programs like universal pharmacare, a guaranteed livable income and affordable housing.
“In all cases, we will manage debt and deficits responsibly, borrowing when required to defend the services that Canadians and their families rely on, and moving towards balance in the future when it’s prudent to do so,” the NDP platform reads.
© 2021 The Canadian Press
