The rank-and-file members of Canada’s natural governing party have spoken.
At their weekend policy convention, Liberal Party of Canada delegates said “no” to balanced budgets and “yes” to censoring online news content. Though these policy resolutions are non-binding on Prime Minister Justin Trudeau, they do speak volumes about modern Liberal values.
A majority of Liberal delegates who showed up to vote supported “exploring options to hold online information services accountable for the veracity” of their news content, in apparent obliviousness to the Orwellian nature of the proposal. Mr. Trudeau was quick to insist this “is not a policy we would ever implement.” But for a government that has already embarked on the slippery slope of seeking to regulate the internet with Bills C-11 and C-18, and which is preparing legislation to police “online harms,” Canadians could be forgiven for having their doubts.
What is not in doubt, however, is that the party that rescued Canada from a debt spiral in the 1990s has officially decided that deficits do not matter any more. Of course, we did not need a Liberal convention confirm this. The Trudeau government’s 2023 budget, which abandoned all pretexts of seeking to eliminate the deficit in the foreseeable future, told us so.
Still, delegates at the convention voted down a resolution from the Liberals’ Quebec wing calling on the party “to develop a clear, costed proposal for a return to balanced budgets” and include it in the Liberal platform for the next election. Even before its defeat, Mr. Trudeau indicated that he did not think much of the idea: “The most important thing for me is to create a strong and resilient economy in which we can continue to invest and create good jobs,” he said when asked about the proposal. “We know that it is essential to demonstrate fiscal responsibility, which we are still doing.”
Canadians will be the judge of that – unless the markets beat them to it. Because that’s the thing about a debt crisis: You never know you’re in one until it hits you.
Suffice it to say, it is not very meaningful for Liberals to rely on comparisons of Canada’s debt-to-gross-domestic-product ratio with those of other developed countries to suggest we have nothing to worry about. Investors do not apply the same criteria to Canada as, say, the United States, which has a federal budget that’s in far worse shape than ours, but boasts an economy that remains the world’s biggest and most innovative. The latest looming debt-ceiling crisis in Washington threatens to change investor perceptions for the worse. But short of an outright default by the U.S. Treasury, the U.S. government will always be able to borrow comparatively much more than Canada.
Beyond the U.S. dollar’s global attractiveness, our differences come down to our diverging prospects for growth and wealth creation. Canada’s are not so great. We consistently lag on the productivity indicators that investors watch most closely. We have systematically eroded our comparative advantage in natural resources, a self-inflicted economic wound if ever there was one. On the critical measure of GDP per capita, we are treading water and dangerously close to sinking. We are getting progressively poorer.
The Trudeau government has failed to show that it grasps the seriousness of the situation. It touts its historic “investments” in electric vehicle and battery production, but it has provided no evidence to support its massive subsidization of foreign automakers other than to point to what the U.S. is doing. It has locked in spending far above prepandemic levels without justification, despite nearly doubling the federal debt to more than $1.3-trillion since 2019, with more to come.
No, Canada is not on the cusp of a debt crisis similar to the one it faced in the mid-1990s. Still, it is not fear-mongering to suggest we are not immune from one. The most recent federal budget projected deficits that total more than $130-billion over the next five years. Since this is a government that routinely revises spending projections upward, that figure was suspect from the get-go. It also excludes the cost of recent wage settlements with federal public servants and the national pharmacare program that the minority Liberal government has promised to introduce to earn the support of the New Democrats. Nor does it include the increased spending that would result from the current defence policy review.
Whether or not any federal party specifically includes a balanced-budget promise in its next election platform, Ottawa will face increasing market pressure to take control of its public finances. The world has moved from an era of easy borrowing to one of tight money. Outside of their convention bubble, the Liberals can no longer pretend otherwise.