For Prime Minister Justin Trudeau, $15-billion is the magic number for the federal deficit in his upcoming budget – anything higher and some of the sheen begins to rub off his new government.
Last year, Mr. Trudeau campaigned in the general election on running modest deficits of about $10-billion a year for three years to be spent on infrastructure, affordable housing and green energy as a way to stimulate the economy.
It was a bold move, and it worked. The Conservatives and NDP had promised balanced budgets.
Now just three months since the election, Mr. Trudeau is facing tough economic conditions, including a very low Canadian dollar, tumbling oil prices and job losses in Canada's once most prosperous province, Alberta.
Canadians will expect some reaction from the government, says Darrell Bricker, Global CEO of Ipsos Public Affairs, who says the government can't go over the $15-billion mark.
"Provided that he presents increasing the deficit beyond $10-billion as a necessary action … the actual number won't be held against him as long as it's reasonable," suggests Mr. Bricker. "However, beyond $15-billion will likely raise some eyebrows for purely psychological reasons."
And, Mr. Bricker adds that all will be forgotten if Mr. Trudeau manages to eliminate the deficit at the end of four years.
Nik Nanos of Nanos Research agrees: "If the Liberals are within the zone of their target, which is $10-billion, then they are home free. Once they get past $15-billion they are out of the zone. Once you get past $15-billion you are now approaching $20-billion."
Realistically, says Mr. Nanos, the optimal deficit number for the Liberals is to come in "below $14-billion."
If the number is higher than anticipated, Mr. Nanos says the Liberals must clearly explain to Canadians why.
"He has capital that he can expend to advance his agenda while still maintaining the advantage over the opposition parties," says Mr. Nanos.
But, he doesn't have carte blanche. A recent Nanos Research poll for The Globe and Mail showed that although 52 per cent of Canadians supported deficits if the economy was weak, 48 per cent were opposed or somewhat opposed to the Liberals running deficits higher than they promised.
Mr. Trudeau and his Liberals are enjoying a honeymoon period, but mishandling the deficit number could leave them vulnerable to criticism of their brand.
He says a higher number gives the opposition parties ammunition to speculate loudly on how much higher the Trudeau deficit will go.
"What he doesn't want to do is to give the opposition fodder for the attack," argues Mr. Nanos.
The Conservatives already have some fodder. Tory finance critic Lisa Raitt says, "There's nothing like seeing a $7 head of cauliflower to focus one's mind on the economy being in difficulty."
"It's pretty scary times right now," she says.
Ms. Raitt believes that Canadians might not have the same appetite they had during the election for a larger deficit than promised. In addition, she says, Canadians will become even more concerned if the deficit is made of money spent not only on infrastructure stimulus, but on increasing the size of government, for example.
During the election, Mr. Trudeau had said that his plan would still keep the debt-to-GDP ratio, which is a key measure of the government's ability to manage debt, on a downward trajectory. Given this, Ms. Raitt says the Liberals have about "$30-billion to play with to keep that promise."
"The reality is, I think what Canadians will be asking is 'How do we get out of this deficit?' And, 'How long will it take?' And, 'Is this going to be permanent structural deficit?' … That's the stuff that scares people because I think Canadians are financially literate," says Ms. Raitt.
However, TD Bank Group economist Brian DePratto says he expects a deficit in the "$15-billion range" and it should not create concern.
"Our calculations would suggest that with a credible fiscal plan that returns to balance within three to four years, running near-term deficits in the $10-billion to $15-billion range should keep federal government debt-to-GDP on an overall downward trajectory," he says.
In fact, he believes there will be some "wiggle room" of about $5-billion to $6-billion "that would still be consistent with a stable future path for debt-to-GDP."
"It is important to keep in mind that we are not talking about persistent deficits," he says. "I would stress that while there is fiscal room in the near term, ultimately government spending will need to be pulled back more or less to balance to maintain Canada's enviable debt-to-GDP position."