OTTAWA—Rushing to balance the federal books would drive the country into recession, Finance Minister Bill Morneau cautioned Tuesday, Feb. 23—one day after admitting that he’s digging a fiscal hole that’s even deeper than originally planned.
Morneau was at the centre of several heated partisan exchanges that highlighted the stark philosophical difference between the Liberals and Conservatives on the importance of a balanced federal budget.
He appeared before an all-party parliamentary committee to answer questions about Monday’s projections, which said next year’s deficit could turn out to be more than five times bigger than was forecast just three months ago.
And if anyone had doubts about how committed Morneau is to the idea of running a deficit, he erased them Tuesday when he said that a balanced budget is the last thing the Canadian economy needs right now.
“Was he really serious when he said that running a balanced budget is going to put us in a recession?” Conservative finance critic Lisa Raitt asked, incredulous, during question period.
“I was deadly serious,” an animated Morneau shot back.
The Liberals made a counter-intuitive decision during last year’s election campaign when they promised to run deficits over the next three years in order to pay for infrastructure projects as a way to stimulate the flagging economy.
The Tory and NDP vows to balance the budget “at all costs” would have forced Ottawa to either significantly raise taxes or introduce tens of billions of dollars of cuts, Morneau said.
On Monday, Morneau said Ottawa is now predicting a shortfall of at least $18.4 billion next year—a shortfall that’s nearly twice the $10-billion limit promised by the Liberals, and one that’s widely expected to grow even more before the March 22 budget.
The Liberals, who have largely blamed the weak economy for wreaking havoc on their campaign promises, have also signalled they won’t be able to live up to a key commitment to balance the books in four years.
The Liberals have many spending promises still to implement, Raitt—also a member of the finance committee—noted during Morneau’s testimony.
“Do you have those numbers right, minister?” she asked. “Because so far we have not seen any kind of consistency in terms of getting the predictions correct.”
Raitt also accused the Liberals of blowing through a projected surplus left behind by the former Harper government. Not so, insisted Morneau, who claimed the Tories left behind a deficit.
During the hearing, Morneau was also pressed by NDP MP Guy Caron to explain why his department included a bigger-than-usual contingency reserve of $6 billion a year in its calculations.
Caron wanted to know whether it was a political move designed to lower expectations among Canadians. No, just a cushion against economic uncertainty, Morneau explained.
The federal government also confirmed Tuesday that it will provide $251.4 million to Alberta under a program designed to help provinces hit by sudden revenue downturns. Newfoundland and Labrador and Saskatchewan may also qualify under the program.
From The Canadian Press