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Friday, September 24, 2021

GOLDSTEIN: Trudeau’s campaign platform is a financial farce

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Why would anyone believe any of the numbers in what Prime Minister Justin Trudeau called his “fully costed” election platform released Wednesday?

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Remember Trudeau’s “fully costed” election platform in 2015?

The one where Trudeau promised — not predicted —that under his leadership Canada would have three years of modest deficits — $9.9 billion in 2016, $9.5 billion in 2017, $5.7 billion in 2018 — followed by a $1 billion surplus in 2019.

Trudeau’s actual record — all of it before the pandemic hit — was a $19 billion deficit in 2016, another $19 billion deficit in 2017, a $14 billion deficit in 2018 and a $26.6 billion deficit in 2019, the year he said he would balance the budget, with a small surplus.

Say this much for Trudeau about his latest “fully costed” platform — he’s no longer pretending he intends to balance the budget, ever.

It allocates $78 billion in new spending over five years — much of it repackaged from the $101.4 billion in new spending over three years announced by Finance Minister Chrystia Freeland in her April budget, and the more than $40 billion in spending Trudeau handed out in pre-election goodies leading up to his Aug. 15 election announcement. (The Globe and Mail added it up.)

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To pay for that $78 billion, Trudeau says he’ll raise taxes on the rich and corporations and crack down on tax evasion, bringing in $25.5 billion in new revenue over five years, leaving him about $50 billion short which will be financed by higher annual deficits and debt.

But through the magic of Trudeau accounting, this new debt won’t negatively impact the government’s bottom line, the PM says, and overall government finances will improve!

This will occur because of higher than anticipated tax revenues from economic growth coming out of the pandemic.

As a result, Trudeau says, Canada’s net debt to GDP ratio, which he describes as his government’s “fiscal anchor,” willimprove over time, compared to the projections in Freeland’s April budget.

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All of that’s great in theory if the economy expands forever.

But in the just completed second quarter of 2021 (April 1 to June 30), the Canadian economy contracted by an annualized rate of 1.1% when it had been expected to increase by 2.5%.

Statistics Canada warned of a possible further decrease of 0.4% in July.

A shrinking economy is the opposite of what’s needed for the budget, in Trudeau’s infamous phrase, “to balance itself.”

We apologize, but this video has failed to load.

What he meant was that in a growing economy, where government revenues increase because of higher revenue from taxes, government deficits decrease, as long as government spending is lower than the rate of economic growth.

But when the economy shrinks the exact opposite happens — government revenues from taxes decrease, causing the deficit and debt to rise.

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Higher deficits and debt inevitably lead to higher taxes, more debt, or cuts to government services, or all three.

That’s why Trudeau — and Liberal governments before him — keep promising the same programs election after election, such as pharmacare, without delivering them.

It’s because their calculations for financing them are a house of cards.

The only thing Trudeau said Wednesday that was believable in announcing his platform was that Conservative leader Erin O’Toole’s promise in his platform to balance the federal budget in 10 years without cutting any services was based on magical thinking.

True, because it’s based on the myth of perpetual economic growth. Unfortunately, that’s exactly how Trudeau plans to pay for the promises in his platform.

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