If Bill Morneau were an Olympian on the track, he would now be:
(a) directed to start the race 20 metres back from the anticipated starting blocks;
(b) reminded he is carrying an extra 20 pounds on his frame;
(c) warned that everyone believes he will run slower as a result; and
(d) expected nevertheless to win gold.
Through no fault of anyone but seemingly the seven billion people on the planet comprising global markets, the federal finance minister’s job is now a little tougher than it was when he was appointed to cabinet in November. Science cannot explain what makes successful executives/multimillionaires take a pay cut, take on national responsibility and take to the international stage as finance ministers. One would like to think it is about the assertion of power or acceptance of duty and not the ascension of self-loathing.
Justin Trudeau’s choice for the role is experiencing how election promises (past) are meeting the reality of the numbers (present) and the less flattering outlook (future).
We have seen this movie before: a new government inherits what the old government either tried to conceal or did little in its last gasps to avert. To his credit, Morneau’s financial update last week pointed fingers only at the future.
His message was short on the diagnosis we all know – to the wider world, oil and many commodities aren’t as much worth getting out of the ground – and long on the prescription we will need to know.
Canadians will still get the full dose of Liberal campaign promises-turned-medicine, even if we don’t have a spoonful of sugar to help it go down. Truth is, though, the treatment appears rather sweet: significant spending, no discernible cuts and tax relief targeting the middle class. The only revenue grab will hit those earning more than $200,000 – NHL players and Vancouver realtors will mourn.
The number upon which many fixate with federal finances is our deficit, and in recent times we’ve been conditioned to believe operating in the red is incongruent with decent economic stewardship.
The Liberals are facing down this orthodoxy and doubling down on the projected numbers in the fiscal year starting April 1. They are betting the bank on economic stimulus.
Morneau now predicts the deficit could climb to $18.4 billion in 2016-17. Bear in mind that number now includes a doubled-in-size contingency of $6 billion for what it cannot predict. Thus the anticipated deficit is $12.4 billion, and then some – how much, it won’t be clear for some time.
That projected deficit is a floor in a room with a very high ceiling, presumably with a skylight to let in the sunny ways.
The debt-to-GDP ratio, a sager gauge of our standing, remains comparably low compared with other economies. And the cost of borrowing is low, much more so than in earlier times of large deficits.
Almost all of that imminent deficit will be owing to increased spending, an election promise the Liberals and quite a few economists see as vital and opportune. We will all see in a few years.
Our neighbours to the east – but not very far to the east, just a time zone away – appear to be the immediate beneficiaries of triage. If Trudeau and Morneau can tie swift Albertan assistance to its slow transformation to a greener economy, they will have accomplished not only a politically advantageous helping hand but a veiled distraction from what even Rachel Notley admits will be an active oil patch.
Many investments in infrastructure won’t hit the books in 2016-17.
If Vancouver gets its subway or a large commitment to social housing, for instance, the big spending won’t arrive until years from now. Even Surrey’s light-rail transit system won’t be shovel/cheque-ready for a couple of years.
What it may mean, though, is that B.C. is penalized March 22 for our frisky financial picture.
Kirk LaPointe is Business in Vancouver’s vice-president of audience and business development.
