Fiscal and Tax Policy - Op Eds

There are good arguments for running a deficit this year. Beyond the case for particular programs is the context of low interest rates, due to international financial market conditions and to Canada’s history of fiscal rectitude over the past two decades.

So far, so good. But last week’s federal budget projects a cumulative $100-billion deficit over the life of this Parliament, and no date for a balanced budget. That is not so good. Among those with a memory of the wrenching fiscal austerity of the mid-1990s, it raises the misgiving that Prime Minister Justin Trudeau’s government is returning to the lax fiscal attitudes of governments led by his father, Pierre Trudeau, and by Brian Mulroney. Under their leadership, Canada became…

The first budget of a new government is particularly important. It not only spells out the financial commitments of the coming fiscal year, but also provides strong guidance on the government’s priorities. The 2016 budget delivers on the Liberal election platform, but it comes with fiscal risks.

The budget provides near-term support to economic growth, aims to boost future competitiveness through investment in infrastructure and other priorities, and helps those who are disadvantaged – particularly low- and middle-income Canadians; aboriginals and First Nations people; and youths. These are all worthy goals.

The main criticism of the budget delivered Tuesday is that it is “overreaching.” It paints a bleak picture of the…

With historically low economic growth projections in the backdrop, Bill Morneau's first budget as finance minister opted for big spending over restraint, compromising the return to a balanced budget within the first mandate of the new government.

The accumulation of deficits will add over $100 billion to Canada's gross debt over the new government's mandate. Despite budget projections showing the debt-to-GDP ratio stabilizing over the long term, this relative stability is contingent on indefinitely low interest rates and economic stability.

As widely expected, the budget implements a series of campaign commitments, including reforming the child tax benefit system, increasing federal cash transfers to seniors and veterans,…

Last fall’s federal election campaign, and the new government’s announcements since, have left little doubt about the overall shape of next week’s federal budget. The Liberal platform promised billions of new spending, and Finance Minister Bill Morneau’s fiscal update last month prefigured billions in deficits. So we will see a major attempt to spend, and borrow, the country richer.

Maybe it will work. The government, and plenty of pundits, say it will. But what if a fresh splurge of credit-financed consumption fails to boost growth? The key question then will be whether this is a one-time mistake – whether the government will realize that saving and investing, not borrowing and consuming, are what Canadians need to achieve…

By Craig Alexander

Canada faces a deep long-term fiscal challenge. Economies grow because they either have more workers or employ their workers more productively. Canada is aging and labour force growth is slowing. Meanwhile, Canada’s productivity track record is poor. As a result, income growth in the economy in the coming decades is likely to be a third less than policymakers were counting on when they made their fiscal promises in the past. Since income is the basis for tax revenues, how will governments generate the revenues to pay for key priorities?

One approach is to reduce future commitments and fight over the fair distribution of slow growing income. In a new C.D. Howe Institute report, we argue that a…