Justin Trudeau claims to be a fiscal conservative. He’s not.

The PM’s statements in praise of fiscal responsibility are dubious, considering his government’s first budget

Canada's Prime Minister Justin Trudeau (L) and Finance Minister Bill Morneau walk to the House of Commons to deliver the budget on Parliament Hill in Ottawa, March 22, 2016. (Patrick Doyle/Reuters)

Justin Trudeau and Bill Morneau walk to the to deliver the budget, March 22, 2016. (Patrick Doyle, Reuters)

Prime Minister Justin Trudeau in March became the first leader in a generation to plunge the federal government into deficit without remorse. He would still like you to consider him a fiscal conservative. “One of the things that is important to me is fiscal responsibility,” Trudeau told Bloomberg a week before Finance Minister Bill Morneau tabled his first budget.

The Prime Minister will struggle to convince people of his concern for the sanctity of the public purse. His decision to drop the eligibility for collecting old age security benefits from 67 to 65 was foolish, not fiscally responsible. Almost every neutral expert who has considered how to save the public retirement system concludes that future generations should wait longer for their benefits. Few governments have managed to make such a change; Trudeau had it handed to him but opted to backtrack. It undermines his claim to being an “evidence-based” policy-maker.

Also working against Trudeau’s claims of fiscal prudence is the $29-billion deficit forecast for this year. That’s a big number for a country that has been conditioned to think that even the smallest budget deficit is automatically bad. It is entirely possible that there will still be a budget shortfall when Trudeau seeks re-election in five years.

Most of the people who voted for the Liberals last autumn probably don’t care about Trudeau’s credentials as a fiscal steward. That doesn’t mean Trudeau can do what he wants with his mandate to spend. The Conservatives will continue to criticize deficit spending, if only because they will be unable to admit they lost the debate over economic policy. Trudeau and Morneau also must keep in mind the buyers of Canada’s bonds. Bay Street is broadly supportive of the theory behind borrowing to spark economic growth. But there are limits. “An implicit, if not explicit, target of zero [deficit] would be welcome news,” Royal Bank of Canada economists said before the budget. They didn’t get that. The projected shortfall in 2021 is $14.3 billion.

Trudeau knows he will be watched closely. “Someone who actually believes that government has an important role to play, not in everything but in certain areas and conditions for growth, has a strong vested interest in being responsible, and demonstrating that governments can spend and invest and be responsible stewards of taxpayer monies,” Trudeau said during his Bloomberg interview.

The Prime Minister and the finance minister have done a good job of focusing the public’s attention on the debt-to-GDP ratio, a better gauge of a country’s ability to pay its bills than the annual budget balance. Canada’s debt is currently about 31 per cent of GDP. That is comfortably low, and it is why Trudeau is in a position to borrow to spend on infrastructure. Morneau aims to return the debt-to-GDP ratio to that level within five years, after a small increase. Those looking for an anchor on spending will have to live with that for now.

Does that make Trudeau a fiscal conservative? In a way, yes. Warren Lovely, head of public sector research at National Bank, wanted the government to chuck both balanced budgets and its campaign promise to reduce debt as a percentage of the economy. Trudeau and Morneau opted to keep a target—albeit a less restrictive one than Stephen Harper’s arbitrary goal of banishing deficits. The whole point of legislating budget surpluses was to reduce debt to manageable levels that would allow the government to borrow at lower interest rates, and that’s what happened. Balanced budgets became a political trope that falsely equated a clean balance sheet with economic success. A focus on the debt-to-GDP ratio puts attention on what matters (debt) while allowing politicians to adapt to changing economic conditions.

That won’t free Trudeau from accusations that he is a spendthrift. He plans to scrap the balanced-budget law, when he could have replaced it with a legislation enshrining a debt-to-GDP target. That would be the easiest way to change the definition of a fiscal conservative. The other way will be more difficult: He will have to win a second term.


Justin Trudeau claims to be a fiscal conservative. He’s not.

  1. I don’t think anyone seriously believed Justin Trudeau could manage an economy when they cast their ballot.

    They voted for immediate gratification; similar to a teen with daddy’s credit card…………….and will hope someone else pays the bills. At least, that is what the NDP supporters who voted Liberal believed.

  2. Very pleased with the way the economy is going…..oil won’t be back, but we’ll live nicely without it.

    • The economy has turned around already? Trudeau’s first budget only came down a month ago.

      • Walid, the direction of the country has changed. We are no longer aiming for the bottom of the heap, as in primary resources.

        We are moving to free education, and places like the perimeter institute and quantum computing.

        Away from oil, lumber, fish, etc. and on to the knowledge economy where we should be.

  3. ” His decision to drop the eligibility for collecting old age security benefits from 67 to 65 was foolish, not fiscally responsible. ”

    Actually, Trudeau’s decision not to punish the poor was more than paid for by his decision to stop the gifting of billions to rich retirees by rolling back the absurd TFSA limit. Especially since the TFSA is doing more to help the rich shelter money they take out of their RRSPs than it is to encourage new investment and savings.

    The foolish and fiscally irresponsible measure we’ve seen recently has been the TFSA which even now will be costing the treasury many more billions than it will to allow the poor to retire at 65.

    • The TFSA does not cost billions, and even in 20 years time, will not cost the 11 billion per annum that moving the OAS back to 65 will. You should try to stop making things up. Your arguments are weak enough already.

      • You claim I’m making things up and my “arguments are weak” but you present no facts and make no arguments to substantiate your claims.

        Meanwhile I have the PBO report from 2015 that puts the cost of the TFSA to the federal and provincial governments in just 14 years time (2030) at $13.5 billion and in 24 years time (2040) at $26.9 billion. Well above the $11 billion you claim it will never reach.

        • Fairytale projections based on estimated investment returns which bear no resemblance to reality. Time series models are used to project the investment returns. We’ve seen 7 years of insane and unsustainable stock market increases. Projecting this into the future via time series is guaranteed to produce ridiculous TFSA tax expenditure projections. OAS costs, on the other hand, are based on cold hard demographics.

          • Too funny. Apparently, the TFSA costs nothing then? Or do you believe they used some astronomical number as you imply but don’t show to get these projections?

            How about this: of course these projections are based on way too conservative numbers and the true cost of the TFSA will be much higher”.

            There I did the same thing as you: claim without showing why that the numbers are completely wrong and the TFSA will cost much more than the analysis I obtained those figures from. Fun, eh?

    • J.Edwards wrote:

      “Especially since the TFSA is doing more to help the rich shelter money they take out of their RRSPs than it is to encourage new investment and savings”

      J.Edwards, I am going to assume you wrote this in error. People do not take money from their RRSP’s and put them in TFSAs. If so, they are defeating the purpose. The losses on taxes would be pretty high. You had better be getting a good return if you do that. I suspect you meant people putting money in TFSA’s INSTEAD of RRSP’s.

      Either way, the Government is not LOSING money by allowing TFSA’s. Taxpayers are just being allowed to keep what is already theirs.

  4. But you don’t talk about the difference is a single mother with 3 children roughly 56 dollars a day.
    but a single Syrian gets 71 dollars for food a day.
    The person who lived here there whole life paying taxes receives less from government then a immigrant does so how is that fair?
    The lower class and middle class suffer from immigrants it makes it harder for them such as cost of food,rent,utility’s and jobs will pay less and minimum wage will take longer to go up based on supply and demand.
    But government and upper class benefit from immigrants because they pay more taxes on food,rent,utility’s. {PERFECT EXAMPLE VANCOUVER}

    There also is numerous negative side effects such as abuse of the services of Canada,illegal immigration,trafficking drugs,identity and financial fraud,corruption of the government.

    Especially the Asians they should be any true Canadians enemy.They are coming to Vancouver with fraudulent money,bringing heroin,take student loans get degree and just leave and never pay them back,have illegal immigrants brought over,financial bearings,extreme corruption in(VPD,government,and social services),slumlords, and they gangbang 17 year old girls(seen with my own eyes)and with all of these facts why the fuck do they have there own month in Vancouver……where is aboriginal,English,french,Italian ,Ukraine,Indian,black month WTF is this favoritism……….welcome to japanada……i been told numerous times Canada doesn’t believe in there own people but i think its the people who don’t believe a future treachery country.




    there sould be no money for immigrants till we fix disability,old age pension,orphans,welfare,disasters

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