The federal government has no more than one or two years to rein in the hundreds of billions of dollars in deficits it is wracking up through coronavirus spending, or risk the debt being “unsustainable.”
That’s according to parliamentary budget officer Yves Giroux, who spoke with The West Block‘s Mercedes Stephenson about the federal government’s spending ahead of a throne speech on Sept. 23, which Prime Minister Justin Trudeau has said will pitch “ambitious” new programs.
“It’s without a doubt that we cannot afford deficits of over $300 billion for more than just a few years,” said Giroux. “And when I say a few years, I really mean a year or two. Beyond that, it would become unsustainable.
“So if the government has plans for additional spending, it will clearly have to make difficult choices and either raise taxes or reduce other areas of spending. Because it’s clear that we cannot afford to have deficits of that magnitude for even the medium term.”
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Trudeau said in an interview with Global News last week that he plans to roll out an “ambitious green agenda” in the throne speech, which will come after he prorogued Parliament in the midst of the WE Charity scandal.
He said the country needs to focus on a green economic recovery to climb out from the effects of the COVID-19 pandemic and the worldwide economic shock waves the virus created.
But he has also touted the need for expanded employment supports, including new child care and social spending, and there have been recent reports of plans to increase spending, with CBC News citing one Liberal insider as saying the government plans on spending “on a scale we haven’t seen before.”
However, the throne speech and any new spending promises in it come as the country is bearing the load of a $343-billion deficit this fiscal year, with no clear plan presented by the government on how it plans to pay it down — or when it will rein in spending.
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That number came from a “fiscal snapshot” presented by former finance minister Bill Morneau in July.
It contained no clues as to whether Canadians can expect tax increases or service cuts down the road to pay off the cost of the deficit, though Trudeau has said the government is not currently eyeing tax hikes.
Giroux said that even if the government maintains the current deficit level but shifts the spending around, that won’t solve the problem — the amount, he said, needs to be brought under control.
“What’s concerning is the absence of a longer-term plan,” he said. “That is concerning to me and to most people who are concerned about public finances.”
He said it’s one thing to spend to support the country during a crisis, and does not believe anyone would argue that spending was not needed.
“But what people and credit rating agencies, financial markets and Canadians are waiting to see is what is the government’s plan to get out of that crisis and what are the public finances likely to look like in the next year? And in the next couple of years?” he said.
“As the crisis is evolving and we are in months three, four, five, six and seven of this crisis, I think it’s reasonable for Canadians to expect more from the government in terms of what’s the plan going forward.”
