Trudeau’s ‘Trading Places’ spending spree
Liberal leader Justin Trudeau operates a crane while touring a crane operator training facility Thursday, August 27, 2015 in Oakville, Ont. THE CANADIAN PRESS/Paul Chiasson
Pinch me, I must be dreaming. I thought growing the economy “from the heart outwards” was the nadir of the Justin Trudeau school of economics, a bit of gibberish poorly cribbed from US President Barack Obama, who once mused on growing the economy “outward from the heart of the middle class”.
Sadly, I would be wrong. This week, the Liberal leader treated Canadians to his version of Trading Places, the 1983 classic comedy where a petty con artist played by Eddie Murphy swaps lives with a self-important investment banker played by Dan Aykroyd. Except that in Trudeau’s version, he’s switching roles with NDP leader Thomas Mulcair: suddenly, the big-spending NDP is insisting on balanced budgets, while the deficit-slaying Liberals are ready to run the country into the red.
Trudeau announced that a Liberal government would spend $125 billion on infrastructure over the next five years, rather than the $65 billion already projected, to stimulate the economy. He would fund this spending by running deficits of “no more than $10 billion a year” over the next two years, with smaller deficits after that, until balance was achieved in 2019.
But wait – not necessarily. According to Trudeau, “If the fiscal situation deteriorates due to a further slowdown of the economy in the weeks ahead, Liberals will be honest with Canadians about the facts.” Hmm… what facts would those be, that we need to borrow more money?
The reason for this spending spree, Trudeau claims, is that “Mr. Harper has been unable to create the growth necessary to get beyond a structural deficit,” he said. “The key to creating strong economies is growth to get out of deficits, not cuts. Mr. Harper hasn’t understood that.”
So if Trudeau’s going to run “modest” deficits in this environment, what would he do if a real catastrophe hit? Run really immodest deficits?
It’s true that the Tories ran deficits from 2009 to 2014. But in 2008, the world plunged into global recession. The American sub-prime mortgage market collapsed, dragging major financial institutions with it. The bottom fell out of the US real estate market. World stock markets tanked. In response to this crisis, governments around the globe borrowed money to spend and “stimulate” their economies.
Canada was no different. Though the Conservatives’ stimulus package was less than that of many other nations, it was still more than some critics thought necessary. But Prime Minister Stephen Harper had only a minority government, and he made the calculation that short-term deficits were necessary not only to shore up the economy, but his own political fortunes as well. Luckily for him, a combination of factors, including high oil prices and a stable banking system, helped Canada avoid the fate of other OECD countries, some of which still labour under double digit unemployment.
In 2015, however, the luck’s run out – sort of. Oil prices are low, the dollar is down, and Canada appears to be in a “technical” recession. Nevertheless, our housing market rockets ever upward, unemployment has stayed steady at 6.8% since January, and recent GDP and retail sales numbers have nudged into the black. In other words, while there are clouds, the sun is peeping through, and it’s certainly nothing like the dark days of 2008.
So if Trudeau’s going to run “modest” deficits in this environment, what would he do if a real catastrophe hit? Run really immodest deficits? What would those look like? $20 billion a year? 30? 40?
In case Trudeau skipped Economics 101, borrowing money has a cost. It takes the form of interest payments today and higher taxes tomorrow, which limit the government’s ability to pay for programs, and dampen investment by taking private money out of the economy. And the examples of its failure are legion. Bob Rae thought deficit financing was a great way to get Ontario back on track in the 1990 recession; that didn’t work out too well. Neither did the continuous deficits racked up by Trudeau senior in the 1970’s. Nor those piled on by previous Quebec administrations, to the point that the province has the highest per capita debt in the country.
The only way to explain Trudeau’s embracing of deficits is that a) his brain trust has completely lost its marbles, or b) they’re so desperate to bring down Thomas Mulcair, that they have decided to go for the socialist vote. How the budget-balancing Paul Martin can bear to be seen on the same stage as this gong show is beyond me.
I never thought I’d see the day that the NDP seemed more fiscally responsible than the Liberals, but it has arrived. And if Mulcair plays his hand correctly, he could be trading places with someone far more important than Trudeau on election day.
Tasha Kheiriddin is a political writer and broadcaster who frequently comments in both English and French. After practising law and a stint in the government of Mike Harris, Tasha became the Ontario director of the Canadian Taxpayers Federation and co-wrote the 2005 bestseller, Rescuing Canada’s Right: Blueprint for a Conservative Revolution. Tasha moved back to Montreal in 2006 and served as vice-president of the Montreal Economic Institute, and later director for Quebec of the Fraser Institute, while also lecturing on conservative politics at McGill University. Tasha now lives in Whitby, Ontario with her daughter Zara, born in 2009.
The views, opinions and positions expressed by all iPolitics columnists and contributors are the author’s alone. They do not inherently or expressly reflect the views, opinions and/or positions of iPolitics.
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