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Economists saying the budget is disappointing due to continued federal deficits

The Canadian Press
   

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Many economists are expressing disappointment in those fiscal projections, noting the government could be in trouble if the economy slows more than it is expected to.

Even as the Liberals keep a tight focus on new clean-tech and health-care spending, the federal budget released on Mar. 28 still projects deficits for the next five years.

Many economists are expressing disappointment in those fiscal projections, noting the government could be in trouble if the economy slows more than it is expected to — and saying the Liberals could’ve saved themselves headaches with better planning in previous years.

Finance Minister Chrystia Freeland promised that Mar. 28’s budget would be fiscally restrained in light of a slowing economy that could weigh on government coffers.

And Prime Minister Justin Trudeau insisted on Wednesday that the government remains “fiscally responsible.”

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But the fiscal projections in the budget show the deficit has been revised upward since the fall, showing no end in sight for deficits despite the fall budget update in November projecting a balanced budget in 2027-28.

“The idea that you’re not even getting to a balanced budget within this budget horizon, is, in my mind, not fiscally responsible,” said James Orlando, TD’s director of economics.

Mar. 28’s budget forecast a $14 billion deficit in 2027-28, and higher deficits each year than had previously been projected.

As to whether the budget stayed true to Freeland’s promise of fiscal restraint, former parliamentary budget officer Kevin Page likened restraint to beauty.

“It’s in the eye of the beholder,” he said.

Page, who heads the Institute of Fiscal Studies and Democracy, said it’s not surprising that the deficit is higher than what was forecast in the fall, given that the economic outlook has since worsened.

The budget’s economic projections, which are based on a survey of private-sector economists, show the economy slowing more than what was anticipated in the fall. The federal government is now expecting a shallow recession this year as high interest rates weigh on growth.

That means less tax revenue to finance the federal government’s spending priorities. And if the economy slows more than expected, the federal government is at risk of running even larger deficits.

The Liberals were facing pressure to match U.S. incentives for clean energy and technology, while also on the hook for health-care spending and creating a federal dental plan promised in the supply-and-confidence agreement with the NDP.

But looking back, the federal government had the opportunity to better position itself by pulling back on spending in previous budgets, he said.

“We could have saved a little bit,” Page said. “So yeah, we find ourselves in a situation where there’s not a lot of money in the till right now.”

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