OTTAWA — While Tuesday’s spring economic update included mostly tepid steps in response to what Prime Minister Mark Carney has called a period of ruptures, the document was not without substance. For instance, it showed a slightly lower deficit of $66.9 billion for the past year due to improved fiscal outcomes, along with a rash of new spending thanks to the windfall. However, just as important as the document’s contents, as is often the case, were the items and information that were not included.
More Public Sector Cuts
True, the Carney government has already announced a reduction to the federal bureaucracy, which it dubbed the Comprehensive Expenditure Review. Here’s the thing about that review, however, despite its call to reduce the public service by about 40,000 positions over the next few years: It’s really not that comprehensive. Many of those positions will be eliminated through retirement and other forms of attrition, and those reductions would only return the size of the federal bureaucracy to what it was a few years ago amid the Trudeau hiring spree. That’s despite further advancements in the digital world and the growth of artificial intelligence, both of which are allowing private companies to increase efficiencies through the use of more technology. Tuesday’s spring economic update did not take the drive for further efficiency much further, beyond the latest promise to save money by relying less on consultants.
Apples to Apples
The update’s international comparisons of national debt are not exactly apples to apples. The Canadian net debt figure, for example, which is much rosier than that of each of the other G7 countries, is bolstered by the fact that Canada’s liabilities are significantly lower comparatively than its counterparts in large part because the Canada Pension Plan (and its Quebec counterpart) is fully funded. In short, that means our future obligations for the country’s primary pension plan are basically covered, whereas many other countries simply use a pay-as-you-go system for pension costs, similar to how Canada manages employment insurance, Old Age Security and many other programs. It’s a fiscal advantage for Canada to have those hefty pension costs taken care of in advance, but it leaves the international comparisons imperfect.
Future Spending
Of course it’s impossible to say what new spending future governments will come up with. But given that we can be pretty sure they won’t be short of ideas, it makes many of the future spending and deficit projections — which always seem to be on the rosy side — less than valid. The spring economic update did not provide concrete details on how the government plans to achieve its fiscal targets, leaving many questions unanswered about the sustainability of its spending plans.
