On Feb. 27, Canada’s finance minister Bill Morneau outlined the 2018 federal budget. The most impactful, albeit least surprising, aspect of this budget is the projected $18-billion deficit. This figure is three times greater than the no-more-than $10-billion per year deficit laid out in the Liberals’ 2015 election platform. That platform also stated that the government would be balancing the budget in 2019, however, they have now stated that they have no intention of balancing the budget for another 25 years.
The following budget critique can be summarized in a single common phrase: there is no such thing as a free lunch.
All of the money that a government borrows today must be paid back at some point in the future. Not only that, but they must pay interest on this debt as well. Making things worse, when a government racks up too much debt, the international community will start to require a higher rate of interest on this debt.
What all of this means is that larger deficits today will mean disproportionately larger tax increases down the line. While there is a legitimate case to be made for running deficits during economic downturns such as that experienced across the world from 2007-09, there is no justification for doing so when the Canadian economy is prospering the way it is today. Unemployment is low and oil prices are recovering to sustainable levels—if ever there was a time to run a surplus, it would be now. With NAFTA negotiations up in the air, and U.S. President Donald Trump recently announcing he would be imposing tariffs on steel and aluminum, the argument for fiscal responsibility has never been stronger.
What’s worse is that, even with a deficit larger than promised, the 2018 budget did not include the infrastructure investment promised during the election campaign. The projected $2.67 billion in infrastructure spending this year, as well as the $2.1 billion projected for next year have both been “delayed” indefinitely, according to an article from the Financial Post. This serves as yet another policy from the Liberal election platform that can be added to the list of broken promises.
The Liberal government made some minor adjustments to the small business tax changes after receiving a tremendous amount of backlash late last year, but the impact of these changes is still overwhelmingly negative. Small businesses with a passive income over $50,000 will now be paying more in taxes, plain and simple.
At a time when the United States is lowering taxes, making the prospect of starting and running businesses more attractive to citizens, Canada is doing the exact opposite.
This discourages entrepreneurs from launching their next business venture here in Canada. And, even if they do decide to start a business they will have a harder time raising funds as venture capitalists and angel investors are discouraged from investing in them and providing the money they need to maintain and grow their businesses.
To quote the late, great, Milton Friedman: “One of the great mistakes is to judge policies and programs by their intentions rather than their results.”
The Liberal government seems to think that because the government is spending a lot of money, it must be doing a good job. In reality, this could not be farther from the truth.
Photo by Meagan Casalino
