Some commenters had a bit of a panic attack at hearing the news that the Liberals’ inaugural budget contains a $29.4-billion deficit for the coming fiscal year. The Conservatives have gone so far as to call it a “nightmare,” noting that projected deficits through 2020 now exceed $100 billion.
But compared to the sorts of deficits Canada used to run, this new deficit barely qualifies as a bad dream, let alone a nightmare.
Economist Jordan Brennan of Unifor put the shortfall in perspective with this chart showing deficits, as a percentage of federal government revenue, going back 50 years.
— Jordan Brennan (@JordanPWBrennan) March 22, 2016
Note that Canada’s deficit crisis peaked in the 1984-85 fiscal year, as Prime Minister Pierre Trudeau handed the reins of power to incoming Prime Minister Brian Mulroney.
That year, in the shadow of the brutal 1982 recession, more than half of government spending was done through borrowed money. This year’s projected deficit of 10.2 per cent of government revenue looks like a drop in the bucket by comparison.
Prime Minister Justin Trudeau and Finance Minister Bill Morneau at the budget unveiling in Ottawa, March 22, 2016. (Canadian Press photo)
Of course, comparing ourselves to the worst of times isn’t necessarily a good way to go forward, and some economists worry that, while we aren't having a nightmare today, it could come back Freddy Krueger-style in years to come.
"We are going to end up after those next four or five years with a government that is bigger in size with an economy that doesn't grow very fast," C.D. Howe Institute research director Alexandre Laurin told HuffPost Canada. "There will be huge deficits. The federal debt will increase by $100 billion and [there is a] risk that the debt can spin out of control."
Still, as many economists have noted — and as Finance Minister Bill Morneau echoed Tuesday — if the government is going to borrow money, there’s probably no better time to do it. With interest rates at historic lows, the cost of servicing government debt is the lowest it has been in 50 years.
The Liberals' deficit: Too little, too much, or just enough? Let us know in the comments below.