OTTAWA (NEWS 1130) – Finance Minister Bill Morneau says the economy is doing so well, the federal deficit is being reduced to just below $20 billion this fiscal year, down from a previous projection of $29 billion.
The Trudeau government is dedicating about a third of the windfall it’s expecting from the surprisingly strong economy towards investments, tax relief and new spending on social programs to support children and the working poor.
Finance Minister Bill Morneau released a fall economic statement Tuesday that promises nearly $15 billion in fresh spending over the next five years – on top of what it had outlined in its March budget.
The new measures take advantage of this year’s unexpectedly robust economic performance, which is projected to provide an additional $47 billion for its bottom line over the same five-year period.
The remaining portion will be aimed at reducing annual deficits, which are projected to shrink each year starting in 2018-19.
The government, however, did not map out a timeline to balance the federal books, even though it had promised in its 2015 election platform to do so by 2019.
“450,000 jobs in just two years. The highest economic growth in a decade. More support for 350,000 students…”
— Bill Morneau (@Bill_Morneau) October 24, 2017
Morneau announced the government will introduce an enhancement to child-benefit payments so they start rising with the cost of living two years earlier than initially promised – at a cost to government of $5.6 billion over five years.
He will also bolster the working income tax benefit, a refundable credit aimed at providing relief for low-income Canadians who have jobs and encouraging those who don’t to join the workforce. The measure is projected to lower government revenues by $2.1 billion over five years, starting in 2018.
The New Democrats say the Trudeau government’s fall fiscal update contains no real new measures to help impoverished Canadians. New Democrat MP Guy Caron says the document was merely a diversion from the controversy surrounding Finance Minister Bill Morneau’s handling of his assets.
The Conservatives complain that the Liberals are increasing spending while the economy is strong, without offering a plan to balance the federal books. Conservative Leader Andrew Scheer calls the Liberal economic statement bad for taxpayers.
When Justin Trudeau gives with one hand he takes more with the other. His policies hurt the very people he claims to help, the middle class. pic.twitter.com/NdNSqY05ac
— Andrew Scheer (@AndrewScheer) October 24, 2017
Now’s the time to address the deficit: Canadian Taxpayers’ Federation
In the face of an economic windfall, Canadian Taxpayers’ Federation (CTF) federal director Aaron Wudrick would prefer to see the Trudeau government make moves towards a balanced budget.
Instead, finance minister Bill Morneau’s fiscal update contains nearly $15 billion in fresh spending and tax relief, and adds roughly $100 billion to the federal debt load over the next seven years.
“We always need to be looking for the next shock,” argues Wudrick. “If their whole plan is that they’re going to spend to boost the economy later, now’s the time to be saving it up, and they are not doing that. They’re sort of going on a spending spree.”
He says instead of honouring their promise to keep annual deficits under $10 billion, the Liberals are saddling future generations with billions in new debt.
“I’m not denying that they’re spending on some very good things, but the problem is they have to prioritize. They have refused to do that. We can’t spend on everything, and they seem very reluctant to take the high-priority areas and cut back spending elsewhere,” Wudrick adds.
As an example, he points to a $400 million dollar boost to child benefits, which he claims could have been paid for already if not for the huge subsidies the government handed to Ford and Bombardier earlier this year.
Hold off on increasing minimum wage: CFIB
Corinne Pohlmann with the Canadian Federation of Independent Business is suggesting BC and Alberta should slow down plans to boost the minimum wage to $15 an hour.
“If there’s going to be an increase in the low income tax credit/Canada Child Benefit, perhaps that will help offset issues that are being raised by folks that want to increase the minimum wage because, as we know, that’s lots of difficulties for smaller companies to absorb.”
She adds there’s still no clear plan for reducing the debt and CFIB members remain worried about revised rules for small business owners, including farmers, at risk of being taxed on income they share with family members.
Concerns about impact of NAFTA talks
Jock Finlayson with the Business Council of British Columbia says this is a sign Canada’s economy is performing much better than expected, but he’s worried about what happens if NAFTA trade talks fail and not enough money is dedicated to further reducing this country’s debt.
“Well, the next recession could be just around the corner. When the economy is doing quite well as we are at the moment, there’s an argument for moving more quickly to get back into a balanced budget –if not a surplus– and the Trudeau government is moving in that direction, but they’re doing it, really, with baby steps.”
He adds the danger with the government spending more is the Bank of Canada will feel pressure to keep raising interest rates, which is bad news for anyone trying to buy a home in BC.