During the campaigning period in 2015, the Trudeau team put forward that they will post modest deficits of around $10 billion dollars, and that they will balance the budget by 2019.
In that same campaign, they stated that the “budget will balance itself”.
Today’s report (Editors Note: originally published October 24th, 2018) from Canada’s budget watchdog shows that the promise made by the Trudeau government has not been met and that they likely hope the budget will somehow balance itself.
The watchdog interestingly states that the government is expected to maintain deficits above $10 billion past 2022, and that the odds of removing the deficit by then remain at around 10%.
With such low numbers and 2019 rapidly approaching, one has to ask, can the budget actually balance itself at this rate?
I highly expect the answer is, in reality, a plain and clear, NO!
Especially given the rate at which the Liberal government continues to add new expenditures and wade into new problems.
For the last few years, Canada’s economy has grown exceptionally fast, producing all-time lows in the national jobless rate.
At this time you would expect the government to reduce its spending in order to provide a cushion for the next large-scale recession or national problem.
The Trudeau government did the opposite, investing massive amounts into what it considers “job-boosting” investments, which in turn drastically increased the deficit.
In what century will the Liberals balance the budget?
Moving forward, the Liberals have no timeline on actually balancing the budget, with some early finance numbers predicting no balance until 2045.
The massive problem here is that the nation could very well head straight back into a recession at any point in time.
Firstly, real GDP could contract by 0.5 percent in 2019 “if U.S. tariffs on steel, aluminum and other products — and Canada’s retaliatory levies” become permanent.
Secondly, recessions typically occur once every decade, meaning we are rapidly approaching the typical business cycle end.
Lastly, many economists predict the U.S. economy to slump as a result of the massive increases it has had recently.
If these three forces act at once, Canada could also see itself facing a recession, following years of massive spending, once again adding onto the debt we and our children will be expected to eventually pay back.
This cycle of bad economic management is truly something to worry about.
A family of four already contributes an average of $7000 a year in taxes just to service government debt.
According to the Fraser Institute, the total spent to service (paying back interest alone) Canada’s debt in 2015/16 is $63 billion — approximately equal to the $64 billion Canada spent on public primary and secondary education in 2013/14.
Those numbers are both far higher now, given the continued onboarding of provincial and federal debt since then, and could get far-far worse in a possible recession.
In that scenario, a Liberal government would likely raise taxes on Canada’s already overtaxed population in order to boost government spending, something that is hard to swallow.
The average Canadian family earned $83,105 in income and paid $35,283 in total taxes in 2016.
That’s 42.5 percent of gross income going to taxes.
While paying so much, Canadians take home so little that 30% are worried about being pushed into bankruptcy if the interest rate were to rise.
Perhaps even worse, households that are still making ends meet have around $630 left at the end of the month, down nearly 30 per cent from over $890 in July.
While this data makes it seem like Canada is broke, the simple truth is that Canada is an unbelievably wealthy nation that has squandered its wealth.
We are a nation with one fourth the population of Russia but maintain roughly the same GDP.
The Canadian government, through poor management, has allowed that wealth to be squandered on a multi-billion dollar purchase in the Trans Mountain pipeline which could have been free, and competition killing policies such as a poorly formed carbon tax.
With so much on the line for the average Canadian, perhaps it is time the nation took debt and competitive economic policy seriously and ask Trudeau just when the budget will begin to balance itself.
What do you think about Canadian economic policy and budgets balancing themselves over time? Are we heading towards a global and/or Canadian economic recession in the next few years? Let us know your thoughts in the comments below.