John Ivison: Mark Carney’s platform relies on fiscal alchemy and hopeful assumptions

WHITBY, ONT. — On this week’s Ivison video, regular guest Eugene Lang referred to “the trifecta — or what Van Morrison would call The Great Deception.”

Lang, an experienced Liberal operative, was talking about the tendency of governments to promise to simultaneously reduce taxes, increase spending and balance budgets.

“This kind of thing has never been achieved by any federal government,” he said. “It’s probably not advisable in any context, especially not the current context, where the prospects are that the Canadian economy is probably going to go into a recession, where the tax revenues will go down and automatic stabilizer expenditures on things like employment insurance are destined to go up.”

Yet, that’s exactly what the Liberal policy platform promises to do.

It commits to a $20 billion income tax cut, “investments” of $129 billion, and a balanced operating budget within three years, eliminating the current $15 billion operating deficit.

These documents are not drawn up under oath and there appear to be a number of highly presumptuous assumptions.

For one thing, the baseline for all the calculations is a Parliamentary Budget Officer report from March, when the tariff situation was still in flux.

For another, the platform books $30 billion in savings from productivity improvements over three years. All governments say they will make savings, improve program efficiency and cut red tape but they generally don’t make them the backbone of their revenue assumptions.

More prudently, the platform only includes tariff revenues for the current year. I asked Liberal Leader Mark Carney if that suggests he thinks the trade war will be resolved in 2025.

He replied that it is more a matter of fiscal caution. “I don’t think we want to rely on those revenues,” he said.

Two decades of covering revenue projections have bred a deep cynicism. It is a truism that governments should be judged by results, not intentions.

That said, the Liberals should be commended for taking on problems deeply ingrained in the Canadian economy.

The focus of the platform is capital spending. In 2021, the Liberal platform devoted 65 per cent of its “investments” to the operating budget — consumption — and just 32 percent to capital spending on projects designed to generate future revenues.

In this document, that ratio is reversed: 33 percent on operations and 64 percent on capital.

The intent is to trigger private sector investment through government intervention designed to reduce uncertainty and bolster confidence among investors.

Carney said the Trudeau government spent too much and invested too little. He said the new plan would reduce operating spending increases to an average of less than 2 per cent a year, from an average of 9 per cent over the past decade. He said his government would do this without cutting transfers to individuals or to provinces for things like health care.