Federal Budget : such as the cicada, it has ” sung all the summer “

Photo Agence QMI, MATTHEW USHERWOOD

Mathieu Bédard

Monday, February 26, 2018 17:41

UPDATE
Monday, February 26, 2018 17:50

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While the federal government prepares to present his third budget since the elections that brought them to power, a balance sheet is required. And this report is not flattering, as the government has systematically betrayed its promises of tax since he came to power.

Given the threats to the canadian economy, the non-compliance of the commitments made during the election campaign put the government in a difficult financial situation, so that the growth of the copies of the canadian economy and the near full employment that we live should give us some leeway.

In campaign, the government had promised that the deficit would be “only” $ 10 billion the first two years. This promise does not respect the tradition of research of the fiscal balance that had prevailed in Canada since the governments of Jean Chrétien and Paul Martin was already a risk to the public finances. But the deficit has finally surpassed the $ 10 billion expected to reach nearly 18 and $ 20 billion dollars, almost double the number each time.

And despite the improvement in the canadian economy, and the economic statement last fall predicted another deficit of $ 17.3 billion $ next year, then that election promise was to achieve balance. Not only no target has been reached so far, but even if the deficits were lower than what has been announced, the government will remain far from its goals. No return to equilibrium is expected.

It would seem, moreover, that the government will not be able to meet its promise to reduce the debt at 27 % of GDP at the end of the term. Instead, it should reach 29.9 %, which means that it will be dug out of tens of billions of dollars more. Finally, the cost of debt will increase steadily, as more interests have to be paid.

The irony is that the canadian economy is growing, so much so that the international monetary Fund and the Bank of Canada should regularly review and revise their forecasts upwards. The job market impresses with a very low rate of unemployment. But as “the cicada, having sung all summer,” the government has not taken the opportunity to create a margin for manoeuvre. There is currently no reason to be in a situation as delicate. Yet, as is the fable, the government will now have to “dance” to maintain sound public finances.

Headwinds

Canada today faces a number of headwinds. In particular, the tax cuts in the United States, which undermine our tax competitiveness, but also to the uncertainty over the renegotiation of the NAFTA. Already, experts point out the low level of investment in the canadian economy, while the NAFTA has not yet been amended and that the tax reform in the united states is in effect since less than two months. This reform affects very concretely on whole sectors of the canadian economy. For example, the oil sector is already suffering since 2014 a decrease of 46 % of its investments owing to administrative delays or cancellations of projects.

Measures, which seem unfortunately to have been ruled out, should be seriously considered. It is, among other things, the reduction of business taxes in order to maintain our tax competitiveness greatly reduced, but also to tackle the deficit, which would reduce some government spending. A work of ant, less razzle-dazzle than extravagant expenditure, but necessary for the beautiful economic momentum that currently lives in Canada continues.