After warning about austerity measures, Carney delivers a 'spending' budget
OTTAWA — In early September, Prime Minister Mark Carney warned Canadians that his first federal budget would include austerity measures.
The former economist pointed to what he described, not for the last time, as “unsustainable” government spending hikes over the last decade.
Six weeks later, during what was billed as a pre-budget speech at the University of Ottawa, Carney warned that his government would turn back the annual spending increases that averaged more than 7 per cent a year during the Trudeau years.
“Our new government is changing that,” he told the audience of mostly students, while adding that Canadians should be prepared for upcoming sacrifices.
Tuesday’s budget, however, seemed to sing a different tune.
Spending during this fiscal year, which overlaps almost completely with the start of the Carney government, is expected to jump by $37.6 billion, or 6.9 per cent, just a hair off the 7 per cent increases that the prime minister had seemed to abhor.
The one notable exception was cuts to the public service, both programs and jobs. The Liberals say they’ll trim $59.6-billion over the next five years, mostly from an expenditure review where each department was tasked with finding 15 per cent in savings over the next three years.
Don Drummond, a former high-ranking executive at the Department of Finance and chief economist at TD Bank, said the Carney government’s first budget showed a commitment to large spending increases and deficits for the next few years, despite Canada’s trade woes and other looming threats.
“It’s definitely not an austerity budget,” he said.
With the government’s various spending plans that are being described as “investments” and annual increases to debt interest, overall spending will still jump significantly this year and over the next half-decade. The government’s projections call for a spending jump of $101.1 billion between 2024-25 and 2029-30, an annual increase of $20.2-billion or 3.5 per cent.
Spending levels — and the notion of austerity — are of course highly charged in political circles.
With the addition in recent hours of former Tory MP Chris d’Entremont to the Liberal caucus, Carney’s budget will need only two non-Liberal votes — or abstentions and absences — later this month to pass, and to therefore avoid triggering an election.
But the NDP, seen as perhaps the Liberals’ best hope for support for the budget, have insisted they won’t support an “austerity” budget. Economists say the NDP has nothing to fear on that front.
“I don’t call this austerity at all,” said Emmanuelle Faubert, economist at the Montreal Economic Institute, of the budget. “I call this spending.”
According to the budget, the government expects to post a deficit this fiscal year of $78.3-billion, the third-highest in Canadian history and the largest ever in a non-pandemic year. The Carney government’s forecast calls for modest dips in the annual deficit over each of the next four years, although the cumulative effect will be another $320-million of new debt before the end of the decade.
The federal government has now accumulated $1.27 trillion in debt, almost half of which has been added over the last five years. With the budget’s updated forecast for this fiscal year, Ottawa is now on pace to amass $593.1-billion in debt over that five-year span, or 46.7 per cent of the total debt accumulated since Confederation.
Many of the new budget’s measures are linked to efforts to make the Canadian economy better able to export beyond the United States. The big pots of spending include allocations for new infrastructure, defence, housing, and skills upgrades.
While the forecasted annual increases over the next four years may be within screaming distance of expected inflation, at least compared to the spending hikes of the last decade, they don’t include any new spending ideas that have yet to be put in the plans, or responses to future crises.
National Post
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