This just in, Prime Minister Trudeau and Finance Minister Freeland have given Canada its latest financial status update. Unfortunately, it’s shaping up to be another failing grade for this government’s economic leadership.
While Trudeau insists that his government has always exercised “fiscal restraint,” his fall economic plan that just hiked up total government spending to $488.7 billion in this fiscal year, says otherwise.
With a deficit higher than last year’s, and more and more dollars piling up in national debt, many critics have criticized the plan for its dire effect on already struggling Canadians.
But at what point will their massive deficits and debt become too damaging to ignore? How many future generations will be left footing the bill for reckless overspending today?
On Tuesday afternoon, the federal government unveiled its 2023 fall economic statement.
In front of the House of Commons, Finance Minister Chrystia Freeland presented the plan, to the dismay of many opposition leaders.
As outlined in the statement, the federal government has committed to $20.8 billion in new spending since the release of the spring budget. This brings total projected federal spending for the fiscal year to $488.7 billion.
This is higher than originally projected, but is being portrayed as a relatively modest increase demonstrating fiscal restraint.
The majority of the new spending is targeted for housing initiatives, like providing low-cost loans for builders, as well as climate-related projects.
In the fiscal update, Freeland forecasted extremely slow economic growth, barely any, for Canada in 2024. The update predicts 0.4 per cent GDP growth next year, down from the 1.5 per cent growth predicted earlier this year. Though not technically a recession, this points to a significant weakening of the economy in 2024 compared to previous expectations
With interest rates at 20-year highs, the cost of servicing Canada’s debt has increased substantially. Debt service charges were $20.3 billion in 2020 to 2021, but have jumped to a projected $46.5 billion this fiscal year. These costs are expected to continue rising, reaching $60.7 billion by 2028 to 2029, whereas Trudeau’s government promised to have a balanced budget by 2028.
That means debt service charges are now among the most costly line items in the federal budget.
Ironically, the federal government’s debt servicing costs this year are $20 billion higher than its spending on the Canada Child Benefit program. While the government touts the Child Benefit as a signature policy, it is now spending far more on interest payments than on this social program aimed at helping families. This stark contrast shows how rising debt costs are squeezing out funding for key policy priorities.
The government’s debt service charges this year will also be more than double the cost of the employment insurance program.
Kevin Page, the former parliamentary budget officer, said it was “inevitable” that debt servicing costs would rise after the government decided to backstop the economy during the pandemic.
“There was an enormous increase in debt. There were really massive increases in debt. Now it’s going to come back to bite us,” he told CBC News.
The federal debt has doubled from $619.3 billion back in 2015, the first year of Trudeau’s government, to $1.2 trillion last year.
While the new spending in Freeland’s fiscal update is lower than past budgets under Trudeau, it still includes $20.8 billion more in additional measures over 6 years. The projected deficit for this fiscal year remains $40 billion, matching the spring budget amount.
However, there are economic concerns ahead. Despite the government’s prediction that Canada will avoid recession, economic growth is forecast to be near zero next year.
With interest rates rising under Trudeau, debt charges are projected to increase as deficits continue accumulating. This has led to the government to revise deficit projections upwards for coming years.
The 2024 to 2025 deficit is now forecast at $38.4 billion, and over $38 billion the following year and $27 billion in 2026 through 2027. These revised numbers are higher than the Liberal government’s forecasts.
According to the update, the government also does not anticipate balanced budgets in the foreseeable future.
And just when you think it couldn’t get any worse, Trudeau’s government literally tell you that it will.
The fiscal update outlines a possible recession scenario that would make the situation even worse, what they call a “downside scenario.”
Under this downside scenario, a possible recession would lead to higher deficits from reduced tax revenue and employment, under Trudeau’s leadership.
In her speech in the House of Commons, however, Freeland attempted to sound optimistic.
Freeland also addressed one of Pierre Poilievre’s favorite talking points.
In response to the fiscal update, opposition leaders showcased their fury and rejected the Liberal economic plan.
Poilievre blasted the fiscal update, deeming it a “disgusting scheme.”
Poilievre’s core criticism of the Liberals is founded on the notion that unchecked federal spending unleashes economic havoc, and is essentially the root of all evil within Trudeau’s government.
He contends runaway spending stoked inflation, forcing interest rate hikes that now threaten recession.
That being said, Poilievre was rightfully eager to pressure the Liberal government to provide a balanced budget plan that will protect Canadian livelihoods, in the House of Commons, an hour before the official announcement of the economic plan.
In response, Trudeau, in his typical fashion, dismissed Poilievre’s crticisms bragged and boasted about his so-called investment plans.
In a stark contrast to Poilievre, in response to the fiscal plan, NDP Leader Jagmeet Singh surprisingly criticized the government for not spending even more. He said the document is “not even a mini budget. It is a microbudget.”
Singh is referencing the fact that while the plan does include several initiatives to target the housing crisis, such as its plan to provide $15 billion in loan funding starting to build over 30,000 homes across Canada, as well as spending $1 billion over 3 years on an affordable housing fund beginning, these programs won’t actually roll out until the next fiscal year.
Even the Green Party wasn’t too happy with the plan, and expressed dismay with many of the “recycled” initiatives Freeland offered.
Robert Asselin of the Business Council of Canada said the fiscal update signals the government recognizes it must reduce its reckless spending.
“It’s a very challenging fiscal track going forward,” he said. “It’s almost like they are coming to this very late. They should have been more worried about this in 2021.”
He also doesn’t see the situation improving anytime soon.
“Things are only going to go south either with a recession or with inflation being more sticky,” he said. “I see more downside scenarios than upside scenarios.”
This raises the question of whether the Liberals will be able to recover, after so much pushback from opposing parties.
The Liberals hope this fiscal update tames inflation and interest rates, pleasing voters in the process. But controlling spending may only be half the battle.
Trudeau’s harshest critic, Poilievre, contends not only that his spending is excessive, but also ineffective. This long-standing criticism argues that his spending fails to deliver results proportional to their size.
The issue is not only what the government spends, but what it accomplishes. Despite large deficits, the Liberals struggle to demonstrate concrete achievements, beyond implementing the child care program.
And we all know that voters have short memories and are unlikely to reward a single success among an ocean of failures.
Nonetheless, deficits themselves won’t satisfy voters. They want to see real progress providing affordable housing.
The Liberals must actually listen to what Canada and Canadians are calling for, and demonstrate that their spending produces tangible outcomes and benefits. If not, Canada will find other receptive ears to vote for.
