Operating deficits piled up from the Pierre Trudeau years through the 1980s and early 1990s

Do balanced budgets really matter?

Stephen Harper may have engineered the sudden surplus confirmed last week, and Justin Trudeau wants to return to deficits

The federal election campaign has produced a jumble of conflicting claims about whether or not Canada has a balanced budget or a deficit, how it was determined, and whether it even matters.

The definitive word on this came out last week, with the release of the Government of Canada Annual Financial Report, signed off by Auditor General Michael Ferguson.

“The government posted a budgetary surplus of $1.9 billion for the fiscal year ended March 31, 2015, compared to a budgetary deficit of $5.2 billion in 2013-14,” the report says.

“Revenues increased by $10.7 billion, or 3.9 per cent, from 2013-14, reflecting increases across all major revenue streams. Program expenses increased by $5.2 billion, reflecting increases in major transfers to persons and other levels of government, offset in part by a decrease in direct program expenses.”

The Conservative government’s pre-election budget calculated that last year was in deficit, and this year would be the first in the black since 2008. Ottawa pundits say this “surprise surplus” was engineered with intentionally pessimistic budget estimates, so Prime Minister Stephen Harper would get a boost right about now.

Liberal leader Justin Trudeau claimed last year’s surplus was partly generated by cuts to Veterans’ Affairs and Aboriginal Affairs. Wrong and wrong. Veterans’ Affairs spending was up 13 per cent, and Aboriginal Affairs spending rose nearly 30 per cent.

(See page 16 of this report for details.)

Trudeau has also insisted Canada is in recession now, which helps his suddenly adopted position that a Liberal government would run deficits for the next three years to build infrastructure.

Harper ran the biggest deficits in Canadian history after the 2009 crash, bailing out auto makers and building lots of “shovel ready” infrastructure, as did the U.S. and other countries. The question raised by Trudeau’s plan is whether it’s a good idea to keep doing that without a financial crisis.

France, for example, has run operating deficits every year since the early 1970s, although the current Socialist government vows to balance the books by 2017. France’s operating debt is now equal to 91 per cent of its Gross Domestic Product.

Canada’s net debt-to-GDP ratio is currently around 30 per cent, down from frightening levels in the 1990s before the Chrétien government finally balanced the budget.

(Fun fact: then-finance minister Paul Martin not only cut transfers to provinces, unlike the current government, he inflicted the largest-ever cuts to the CBC. Harper’s CBC cuts were part of government-wide reductions, again due to that 2009 crisis.)

NDP leader Thomas Mulcair has promised to balance the budget every year of his mandate, should he form Canada’s first-ever socialist government. He will spend the rest of the campaign trying to reconcile this promise with the grandiose spending plans he has piled up.

Meanwhile in B.C., Finance Minister Mike de Jong may have benefited from Harper’s lowball budget. In his first quarter update last week, de Jong reported that his February budget forecast is on track, with a $277 million surplus.

This is despite a $300 million bill for forest firefighting, thanks to personal and corporate income tax revenue expected to be $374 million higher than budgeted. B.C. bases its tax revenue figures on federal estimates, and the ones they got early this year were clearly low.

Understated or not, this is a nice problem to have. De Jong says that at the current pace, B.C. will pay off its accumulated operating debt by 2020.

The last time the province was free of operating debt was 1982. The big debt peak came during the NDP 1990s, with another spike from 2009 to 2013 under the B.C. Liberals.

Tom Fletcher is legislature reporter and columnist for Black Press. Twitter: @tomfletcherbc

Just Posted

120 West Coast kids rock Bruhwiler Surf Classic in Tofino

“Surfing is a gift of this place.”

Rain and high winds to hit Vancouver Island this afternoon

Thursday and Friday to see downpour of 20 to 50mm and high winds on Vancouver Island

Vancouver Island partners sign hull design contract for floating LNG project

Steelhead LNG and partner Huu-ay-aht First Nations say the agreement was signed in Barcelona

Campfire ban coming into effect across West Coast

The Coastal Fire Centre says bans will begin on Wednesday

Tofino pickleball club welcomes new players

Free drop-in activity runs three days a week and all the needed equipment is provided.

Fashion Fridays: Rock some animal print

Kim XO, lets you in on the latest fall fashion trends on Fashion Fridays on the Black Press Media Network

Permit to give B.C. deer birth control on hold until consultation with First Nations

Complexity of consultation will depend on level of First Nations support for the project

Feds launching review of oil tanker traffic in bid to renew pipeline approval

The feds have ordered the National Energy Board to bring recommendations on whether pipeline expansion should proceed

Horvat leads Canucks to 4-3 shootout victory over Kings

Vancouver dumps L.A. in NHL pre-season contest

Update: Search called off for missing plane between Edmonton and Chilliwack

Search efforts were concentrated along the Highway 5 corridor between Valemount and Kamloops

Why Whistler for ski jumping in 2026? Calgary proposal gets pushback

Calgary 2026 proposes re-using the 2010 ski jumping venue Whistler for that sport and nordic

Despite progress, threat of 232 tariffs dominates NAFTA negotiations

Any deal is seen to require congressional approval before Dec. 1 to survive new Mexican government

VIDEO: Hundreds line highway as family brings home body of B.C. teen

Northern B.C. showed their support by lining Hwy 16 as Jessica Patrick’s body returned to Smithers.

B.C. MP Todd Doherty receives award for saving man who collapsed on a plane

Conservative MP was flying from Vancouver to Prince George, B.C., in June last year

Most Read