This week is the federal government’s autumn fiscal update, and we’ve already seen a pre-emptive push by the Conservatives to try and set a narrative about the government’s deficit. Andrew Scheer took time out yesterday to hold a press conference to say that he plans to force a vote that would demand that the government set a date for a balanced budget. And yes, the shitposts over social media have already begun.
Reminder: There was a $70 billion hole in GDP when the Liberals took over thanks in part to the brief recession and oil price crash. https://t.co/TkQF0frRoN
— Dale Smith (@journo_dale) November 18, 2018
So, a few things to keep in mind this week about the narratives that will be spun:
- The Conservatives will insist that they left the Liberals with a surplus and a “strong economy.” That’s not entirely true – the “surplus” was on paper and it included a lot of “savings” that the Conservatives falsely booked that never came to pass (e.g. Shared Services Canada, Phoenix). The Liberals will also point to stagnant growth rates.
- There was a $70 billion hole between the fiscal situation that the Liberals found themselves in compared to the 2015 budget the Conservatives ran the election on. This would have been there regardless of who won the election. The Liberals had a choice to make – honour their spending promises, or honour their promise to balance the budget. They chose the former, and their spending has been largely in line with what was promised.
- There is no debt crisis looming. The debt-to-GDP ratio is declining, and is the best in the Western world. Government debt is not like credit card debt, so equating the two in shitposts like Scheer does only serves to sow confusion and is a dishonest attempt to look like the government is “bankrupt.” Also remember that much of the deficit spending under this government has been at a time when interest rates were at historic lows, which is not credit card interest rates.
https://twitter.com/kevinmilligan/status/1064271285511811072
1) A declining debt-to-GDP ratio doesn’t necessarily mean higher taxes tomorrow.
2) Government debt is not credit card debt. Trying to equate them is disingenuous.
3) He inherited books in $70 billion worse shape than advertised.Could we discuss finances using facts? https://t.co/txnFh53xcT
— Dale Smith (@journo_dale) November 19, 2018
I am an economist and I know both that sovereign debt is nothing like an unpaid credit card bill and credit card debt doesn't pass through an estate to heirs in Canada. But, while we're on the subject, would you describe the debt increase of 2008-2014 as intergenerational theft? https://t.co/5utQ1ZJttz
— Andrew Leach (@andrew_leach) November 19, 2018
You can also expect a bunch of calls this week to cut corporate taxes like they did in the US, citing competitiveness, but again, there are things to remember about those US tax cuts – namely that their deficit is currently around $1 trillion, that those cuts are the economic equivalent of a sugar rush for which there are few long-term gains being made, and most of those cuts resulted in larger corporate dividends and share buy-backs rather than re-investment in companies or workforces. There’s a reason why Bill Morneau hasn’t jumped on this, and we’ll see what his response will be.