Federal deficit could average $78B over 4 years, think tank warns

The C.D. Howe Institute predicts Ottawa’s recently announced spending plans — which include a much bigger defence budget — will drive its deficits markedly higher in the coming years.

In a new analysis released today, the think tank says it expects Canada’s deficit to top $92 billion this fiscal year, given Prime Minister Mark Carney’s plan to meet NATO’s defence spending target of two per cent of GDP.

C.D. Howe says it expects deficit growth to slow after that but predicts deficits will still average around $78 billion annually over four years, more than double the level forecast by the parliamentary budget officer before the spring federal election.

The Liberal government did not publish a spring budget this year and has said it will instead push the planned fiscal update to the fall.

In addition to ramping up defence spending, Prime Minister Carney’s Liberals recently pushed forward legislation to accelerate major project development and delivered a one-percentage-point cut to the lowest income tax rate.

The C.D. Howe Institute accuses Ottawa of making costly commitments without showing the numbers to Canadians.

Meanwhile, in a new report, the Canadian Centre for Policy Alternatives says cuts to the public service may be deeper than the government is letting on.

Report author, and economist at the CCPA, David MacDonald tells CityNews that as the defence spending won’t be touched due to the NATO spending target, all other departments will carry a large load of the slashing.

“You’d be getting to cuts in the neighbourhood of 24 per cent of operational expenditures. Most of that would be on personnel,” MacDonald explained.

That level of fiscal slashing is higher than the cuts under the Stephen Harper-led government. MacDonald says people will notice the impacts, especially when trying to address issues with taxes or Old Age Security payments.

“The Harper cuts of the early 2010s were five to 10 per cent. The Martin cuts of the mid-1990s were 18.9 per cent,” he explained.

Ian Lee, with the Sprott School of Business, thinks the federal government should go further and overhaul the country’s social assistance programs. Lee believes people with a lot of money shouldn’t have the same access to services as those without.

“We have a reverse Robin Hood social structure in Canada,” Lee said. “We have been living in a fool’s paradise where we thought we could subsidize just about everything and everybody.”

The details of the possible cuts will be released in the federal budget this coming fall.

“There’s going to be grumbling, but as long as [Carney] protects the bottom third of Canadian society, I think he can achieve it politically,” Lee stated.

With files from Charlie Carey.