Prime Minister Justin Trudeau isn’t saying whether the ambitious new spending plan he has promised to lay out in the throne speech later this month will include any sort of targets for limiting the deficit.
That comes just days after the parliamentary budget officer warned that the current level of deficit incurred by the Liberals in their coronavirus emergency spending runs the risk of becoming “unsustainable” without a plan to shrink it back down within one to two years.
During a press conference on Wednesday, Trudeau was asked by a reporter whether the throne speech scheduled for Sept. 23 will include any kind of fiscal anchor.
“I know people are eager to see what’s going to be in the throne speech and I’ve been very clear it’s going to be an ambitious, responsible plan for helping Canadians right now and building a stronger future for us all into the coming years,” Trudeau responded.
“The values and principles that underpin it should be obvious to everyone because they are the things this government has remained focused on from the beginning.”
The reporter pressed again: “I guess I’m just wondering though whether it will have any sort of tethering.”
“Our principle from the very, very beginning has been we will be there for Canadians,” Trudeau said. “Every step of the way we will continue to be there for Canadians.”
The term fiscal anchor references key benchmarks such as a balanced budget or a debt-to-GDP ratio that governments use to set parameters for the level of spending or deficit they are willing to incur.
Under the last five years of Liberal governance, that fiscal anchor has been a pledge to decrease debt as a proportion of the country’s GDP, rather than pledging to hit a specific dollar amount, for example.
The federal deficit was sitting at $28 billion in December 2019 but has now increased to a projected $343 billion, and the government has given no indication that it sees a need to rein in spending or outline a plan for reducing the deficit.
The lack of a plan led one credit rating agency to issue a warning last month.
“Failure to place consolidated gross general government debt/GDP on a downward path over the medium term could lead to negative rating action,” wrote FitchRatings, which earlier this year downgraded its credit rating for Canada over the spending.
Yves Giroux, the parliamentary budget officer, told The West Block on Sunday that it’s one thing to spend to support the country during a crisis, and does not believe anyone would argue that spending was not needed.
But he said without a plan to get the deficit under control, the government will have to make “difficult choices and either raise taxes or reduce other areas of spending.”
“Because it’s clear that we cannot afford to have deficits of that magnitude for even the medium term,” Giroux said.
“As the crisis is evolving and we are in months three, four, five, six and seven of this crisis, I think it’s reasonable for Canadians to expect more from the government in terms of what’s the plan going forward.”
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