Federal Treasury Secretary Chrystia Freeland handed over her budget for 2022-23 this week, with the final result being $ 53 billion in red. At one time this would be considered a big deficit, but not anymore. Few of the questions he faced in the post-budget were related to the deficit.
Read more: Budget 2022: Liberals to allocate $ 15 billion to new venture capital funds
Even the Opposition seemed half-hearted to attack the red ink. The Conservatives are complaining about the “big spending” of the Liberals, but then proposing their own measures (including tax cuts) that would produce essentially the same deficit. The story goes on under the ad Best of all, this $ 53 billion deficit is melting before our eyes anyway – without pompous rhetoric about “fiscal correctness” or painful austerity. This year’s deficit is less than half the size of last year, which in turn was one third of the previous deficit. The annual deficit has shrunk by $ 275 billion in just two years, although the government is announcing new initiatives: such as $ 5 billion for the dental care program negotiated with the NDP.
Read more: The dental care program for children under 12 will start by the end of the year: Budget 2022
What does it give? Why is the deficit disappearing, both in dollars and in political significance? It seems we have all learned two things about budgets since the pandemic broke out. The first is that governments have virtually unlimited power to spend large sums of money when needed. They did it before: as in World War II, when no politician would dare to complain that Canada’s military effort was “too expensive.” And they did it again during COVID. Ottawa increased spending to $ 250 billion a year to protect health and keep Canadians at work and at home. the provinces spent tens of billions more. 6:07 Full analysis of the federal budget 2022 Full analysis of the federal budget 2022 The second lesson is that love with balanced budgets is misguided and counterproductive. Economists have realized that deficits, even long-term ones, can play a vital role in supporting growth and jobs when other sources of spending (such as business investment or exports) are scarce. Trending Stories
Ezra Miller’s arrest sparks Warner Bros. emergency meeting on actor’s future 6 cases of COVID-19 XE have been reported in Canada
The story goes on under the ad The last and most enjoyable lesson is that the best way to get rid of a deficit is to not cut and burn public programs – as Canada did in the 1990s and Europe in the 2010s. to be avoided in society (shrinking services and infrastructure), austerity also undermines the fundamental mathematics of fiscal progress. By neutralizing the macroeconomy of such a large expenditure force, austerity is slowing growth, causing self-inflicted damage to the government’s own budget. The exact opposite is happening now in Canada, to the delight of Mrs Freeland – and her provincial counterparts. Canada’s economy is on fire. And the government’s aggressive response to the pandemic is the main reason.
Read more: Canadian economy grew 0.2% in January despite COVID restrictions
Canada’s nominal GDP grew at an astonishing annual rate of over 13 percent in the fourth quarter of 2021. Growth this year may be just as fast, maybe even faster. The unemployment rate reached a new 50-year low of 5.3% in March. Wages are rising as a result, drawing billions into Canadian wallets – and billions into government coffers (through income taxes and GST). This rapid growth reflects a combination of pandemic recovery, strong job creation, rising global export prices and inflation. Indeed, for the first time in 30 years, growth is so strong that the Bank of Canada is now struggling to keep inflation within its target range (1 to 3 percent). This will mean higher interest rates in the coming months (although interest rates will remain low by historical standards). But inflation itself boosts government revenue and shrinks the deficit. The story goes on under the ad 1:30 Ways to save money as inflation soars Ways to save money as inflation soars – March 26, 2022 Provincial governments also enjoy this happy budget recipe. Many have already balanced their budgets – even Alberta, which had the worst deficit of all (relative to GDP) during the pandemic. Across the country, the remaining provincial deficits equate to just 1 percent of GDP: insignificant for any level.
Read more: Most Canadian provinces are falling behind amid disappearing COVID deficits: report
Through those hard and frightening two years, Canadians have learned that the government can and must do great, costly things to protect us when needed. Governments have not been placed on the ground to balance their budgets. designed to protect and promote the public interest. And the best way to pay for things the government does is to create jobs and grow the economy. This is very much the case now – and Canadians are better at it. The story goes on under the ad Secretary Freeland did not set a specific timetable for balancing the budget, and this is appropriate: in part because medium-term forecasts are inherently uncertain, but mainly because we now realize that it does not matter. Until the last year of its forecast (2026-27), the remaining deficit is nothing more than a rounding error. And it is not more important from a political point of view. Jim Stanford is an economist and director of the Center for Future Jobs in Vancouver. 2:11 Budget 2022: How will the federations balance by protecting the economy and the environment? Previous Video Next Video
