Defending her latest federal budget, Deputy Prime Minister and Finance Minister Chrystia Freeland said spending that increases economic capacity is fiscally responsible.
“If you are making investments that increase the economic capacity of the country, that is fiscally responsible,” Freeland told reporters on Wednesday after touring an Ottawa child-care centre to tout the 2023 spending plan.
Tuesday’s budget unveiled continued deficit spending targeted at Canadians’ pocketbooks, public health care, and the clean economy, with Freeland pitching it as her plan to “do big things” while still staring down a potential recession.
But new Liberal spending coupled with a slowing economy has resulted in the 2023-24 federal deficit being nearly $10 billion more than the federal government had projected in the fall.
Freeland’s defence of her economic approach came in response to a strong rebuke of the Liberals’ freshly-revealed fiscal plans from one of Canada’s largest banks.
“Governments did a fantastic job in the early days of the pandemic. The problem is that they are now addicted to high spending and delivering divisive jabs at certain interests. Nothing is being done about productivity and competitiveness pressures that are mounting year by year,” wrote Scotiabank vice president and head of capital markets economics Derek Holt, in a report to clients.
“Big spending, big deficits, big debt, high taxes, high inflation and bond market challenges are not the path to prosperity.”
Holt also cast doubt on the federal Liberals being able to make the kinds of cost savings they’ve committed to materialize.
“And if the NDP’s ongoing demands for a national pharmacare program resurface… then deficits will explode by even more,” he wrote.
Freeland, who stated in presenting her budget that she was ready to “take on” anyone who questioned her approach, pointed to a post-budget briefing from former Bank of Canada governor Stephen Poloz who argued that spending that expands economic capacity may not be inflationary.
“It’s relevant to where we are, because he spoke about how our investment in the 2021 budget in early learning and child care has expanded the economic capacity of the country. It has improved women’s labour force participation. That has driven economic growth… And his point was that our investments in building the clean economy could very well do the same thing. That’s what we believe,” Freeland said.
Also responding to criticism that the 2023 budget isn’t as economically prudent as he’s framing it, Prime Minister Justin Trudeau said alongside his deputy that the Liberal spending plan “is there to meet Canadians with what they need for right now, and for the coming years.”
“Our plan is responsible,” Trudeau said. “This is the right budget for the time.”
Speaking during debate on the budget motion seeking the House “approve in general the budgetary policy of the government,” Conservative Leader Pierre Poilievre quipped about how big Canada’s debt is.
“We’re talking about a trillion. We have a problem here. There isn’t actually a word for trillion in the French language. It doesn’t actually exist. This government’s debt is so big it violates the Official Languages Act,” said Poilievre to an amused caucus seated around him in the House.
According to the budget, the country’s overall debt is set to rise to $1.31 trillion over the next five years, and with continued high interest rates, the federal government is projected to pay $43.9 billion next year just servicing that debt.
“We now spend more on interest for debt than we spend on our military, more than we spend on child-care benefits, more than we spend on transfers for education and social services to the provinces, almost as much as we spend on health care,” Poilievre said.
The budget is poised to move ahead without the Official Opposition, as the NDP is sticking to the supply-and-confidence agreement that sees the party prop up the Liberals on key votes including budgets.
In a speech to caucus touting the wins the New Democrats “forced” the Liberals into in this budget, NDP Leader Jagmeet Singh said he was “proud” but “not satisfied,” indicating they will keep pushing the Liberals do to more, including taking at least the pre-committed-to step of a legislative framework for pharmacare.
“Yesterday’s budget shows that when New Democrats have power, we get things done for people. That’s what it’s shown,” Singh said.