OTTAWA — "What we've seen from Mr. Mulcair over the past weeks is an irresponsible promise to eliminate Mr. Harper's deficit, no matter the cost to Canadians, right away. What that means is — since we're in deficit right now — he's not only going to have to scale back his promises ... now he's going to have to backdate them." — Liberal Leader Justin Trudeau on Monday.
"We are in deficit right now. Mr. Harper has put us in deficit this year." — Trudeau on Monday.———
The annual financial report from Finance Canada dropped on the election campaign trail Monday, certifying that the Conservative government officially returned the federal books to a modest surplus of $1.9 billion last year, despite budgeting for a modest $2 billion deficit.
Liberal Leader Justin Trudeau asserted that, notwithstanding the return to balance in 2014-15 after six consecutive federal deficits, the government has fallen back into deficit in the current 2015-16 fiscal year.
How accurate is his claim?
Spoiler Alert: The Canadian Press Baloney Meter is a dispassionate examination of political statements culminating in a ranking of accuracy on a scale of "no baloney" to "full of baloney."
This one earns a rating of "a lot of baloney" — the statement is mostly inaccurate but contains elements of truth.
The 2015-16 federal budget, delivered April 21, forecast a slim surplus of $1.4 billion this year.
The Conservative budget was predicated on economic growth of 2.0 per cent in 2015, and oil prices averaging out at $54 a barrel.
Since then, Statistics Canada has reported that Canada experienced two consecutive quarters of negative GDP growth to start the year — the technical definition of a recession — and the Bank of Canada has lowered its outlook for economic growth to 1.1 per cent this year from 1.9 per cent. Oil has been trading between $40 and $50 a barrel.
Using the Conservative government's own budget analysis and the Bank of Canada's July forecast, the parliamentary budget office issued a report on July 22 that projected the loss of government revenue associated with slower-than-projected growth will result in a budgetary deficit this year of $1 billion.
A spokesman for Trudeau said the PBO report is the basis for the Liberal contention that the federal government has returned to deficit.
Prime Minister Stephen Harper, by contrast, is citing Finance Canada's monthly "Fiscal Monitor" report to assert that the government will post a budgetary surplus this year. The Aug. 28 report found that government accounts showed a $5-billion surplus through April, May and June — the first three months of this budgetary year. That compares to a surplus of $0.4 billion reported during the same period of 2014–15.
"I see zero to little risk that we will have anything other than a surplus for the second year in a row, based on the trajectory we are on," Harper said Monday on the campaign trail.
WHAT THE EXPERTS SAY
Three different economists with experience working at Finance Canada said it's impossible at this point in the budgetary calendar to definitively forecast a deficit or surplus, given economic volatility and the narrow margins of surplus or deficit in a $2 trillion economy.
Don Drummond, whose 23 years at Finance ended with him shepherding federal budgets, dryly noted that the federal budget delivered this past April proved to be off by $3.9 billion on the bottom line for 2014-15, even though the budget was delivered after the fiscal year end.
"So imagine the uncertainty when you're halfway through the (2015-16 fiscal) year," he said.
The PBO forecast in July is no more reliable, he suggested.
"It seems kind of amazing that we're getting these statements thrown out that somebody's predicting to the dollar where we're going to be," said Drummond.
"I'm sorry — no one in the past was able to do that and I don't think anything's changed. If anything, it's harder to (forecast) at the moment because we've had a real, quite sudden shock to the economy and it's not really clear how that's going to filter through the economy for the rest of the year."
Scott Clark, another former finance official now teaching at Carleton University in Ottawa, said the current year's surplus or deficit cannot be known until the final accounting comes out in October 2016.
"So anyone can say whatever they want, quite frankly, and have any view they want because no one really knows."
Clark called it "fair ball" for Trudeau to cite the PBO report to suggest a deficit is possible. But that doesn't make it gospel any more than Harper's citation of the Fiscal Monitor to insist the government's books will be in surplus when the dust settles.
"Those of us who have been involved in this game wouldn't make any predictions on three months of Fiscal Monitor data," said Clark.
"Right now, it could be a deficit, it could be a surplus. Who knows? It's such a small number either way it's basically statistically equal to zero."
Kevin Page, the former parliamentary budget officer who is currently a research chair at the University of Ottawa, said declarative statements on deficit or surplus for the current year are just political posturing during a heated election campaign.
"No one should be emphatic," said Page. "There's no certainty."
Page pointed to Harper's erroneous declaration during the 2008 election campaign that there would be no recession and no deficit in 2009.
"I think we should all know better, particularly economists."
Whether the federal budget ends up in red ink for fiscal 2015-16 simply can't be known at this point in the year, according to every expert consulted.
Any projections of surplus or deficit are based on forecasts of how the Canadian, U.S. and global economies perform over the remaining six months before fiscal year-end, not to mention unforseeable events such as natural disasters or U.S. interest rate changes.
Finance Canada, in its Fiscal Monitor report last month, cautioned that "financial results for the first three months of the fiscal year provide limited information with respect to the outlook for the year as a whole. That being said, the financial results through the April to June 2015 period are consistent with the fiscal projection for 2015–16 presented in the budget."
For these reasons, Trudeau's statement that the federal government is currently in deficit contains "a lot of baloney."
The Baloney Meter is a project of The Canadian Press that examines the level of accuracy in statements made by politicians. Each claim is researched and assigned a rating based on the following scale:
No baloney — the statement is completely accurate
A little baloney — the statement is mostly accurate but more information is required
Some baloney — the statement is partly accurate but important details are missing
A lot of baloney — the statement is mostly inaccurate but contains elements of truth
Full of baloney — the statement is completely inaccurate
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