Canada has spared no public debt to counter the effects of restrictions imposed in response to COVID-19. The three major federal parties do not seem to mind, however, with the Liberals and Conservatives getting so quick to want to bring out the credit card.
It was said in December that Canada is, on a relative basis and among the major economies, the country that has probably led the war effort the most felt to mitigate the economic impact of the pandemic. It was measured that the effect of the deterioration of economic activity and of the fiscal and budgetary assistance deployed, in the form of public deficits in relation to GDP, would be 1.8 times greater in Canada than the average of the so-called economies. advances.
This penchant for public debt remains observable in electoral platforms. According to calculations by the Parliamentary Budget Officer (PBO), the federal budget deficit would reach $ 138 billion at the end of the 2021-2022 fiscal year and gradually be reduced to some 25 billion in 2025-2026, for a total of $ 266 billion. over this five-year horizon. A Liberal government would add $ 70 billion to this five-year total, compared to $ 54 billion for a Conservative government and $ 48 billion for an NDP government.
That said, the Liberals’ fiscal framework provides for a COVID-19 emergency reserve of $ 15 billion. This provisional allocation is close to $ 28 billion in the NDP’s five-year plan, while that of the Conservatives does not. Assuming that this provision is not used, adding the 100 or so new initiatives proposed in the Liberal program to the debt would be equivalent to what a Conservative government would bring.
On an accounting basis, the comparison is also made in the chapter of net expenditure. The Liberals’ promised $ 78 billion in five-year new spending is partially funded by $ 25.5 billion in new revenue. In the Conservatives’ platform, new spending of $ 60 billion is backed up by just $ 9 billion in new revenue. The New Democrats are entering another world, with roughly 70 new initiatives totaling some $ 215 billion, funded by new revenues of $ 166 billion.
In all three cases, the cumulative deficit between 2021-2022 and 2025-2026 will exceed $ 300 billion – it would fall below $ 290 billion for the NDP if “COVID prudence” is not exercised -, far above stratospheric projections from the DPB. But, small consolation, in these three cases too, the debt-to-GDP ratio would continue the downward trend drawn in the post-pandemic stimulus scenario.
Economically, the Liberal program would add 0.6 percentage point to forecast GDP growth in 2022, according to calculations by Oxford Economics, compared to 0.5 for the NDP and 0.3 for the Conservatives. But whatever the party, this additional stimulus would add almost
0.2 point to inflation next year, which could prompt the Bank of Canada to start raising its key rate earlier than expected.
Whatever the platform, we can deplore the lack of anchoring of a plan to return to balanced budgets. But the priority is not there.