(OTTAWA) The federal Liberals’ new budget announced new spending primarily for the green economy and health care, but despite this relatively tight guidance, Ottawa is expected to continue running deficits over the next five years.
Many economists are expressing disappointment with the federal budget and its fiscal projections, noting that the government could be in trouble if the economy were to slow more than expected. They also say the Liberals could have saved themselves a lot of headaches with better planning in previous years.
Finance Minister Chrystia Freeland had promised that Tuesday’s budget would be subject to budget cuts given the slowing economy, which could weigh on government coffers.
But budget projections show the deficit has been revised upwards since the fall, and no return to balanced budgets is in the cards, as the fall budget update unveiled in November provided one for the 2027-2028 budget.
“The idea that you’re not even achieving a balanced budget within this budget horizon is, in my view, not fiscally responsible,” said James Orlando, TD’s director of economics.
Tuesday’s budget targeted a $14 billion deficit in 2027-28, and higher than previously projected deficits for every year until then.
Former Parliamentary Budget Officer Kevin Page says it’s no surprise the deficit was higher than forecast in the fall, given that the economic outlook has since deteriorated.
The budget’s economic projections, which are based on a survey of private sector economists, show the economy slowing more than was expected in the fall. The federal government now expects a mild recession this year as high interest rates weigh on growth.
This means less tax revenue to fund federal government spending priorities. If the economy slows more than expected, the federal government could run even larger deficits.
While the budget announced nearly $60 billion in new spending, much of it was to invest in clean energy and technology, as well as health care.
According to Mr. Page, it is “difficult to criticize the priorities of the government”.
The Liberals faced pressure to match U.S. incentives for clean energy and clean technology, while taking on health care spending and creating a federal dental plan promised in the deal to “support and trust” with the New Democratic Party.
However, in hindsight, the federal government had the opportunity to better position itself by cutting spending in previous budgets, Mr. Page argued.
“We could have saved a bit,” he said. So yes, we find ourselves in a situation where there is not a lot of money in the fund right now. »