Finance Minister Bill Morneau made one thing patently clear this week: As far as the federal Liberal government is concerned, deficits dont matter.

They really dont.

Justin Trudeaus Liberals have long been cavalier about deficits. In the 2015 election campaign, they promised to spend in order to get the economy moving even if that meant briefly running a deficit.

In the 2019 campaign, they dropped the word briefly, arguing that they could run deficits indefinitely as long as the federal governments debt as a percentage of the national economy was falling.

This week, they effectively abandoned even that target. Thanks to the pandemic, the debt-to- gross-domestic-product ratio has risen sharply. But that, said Morneau in his fiscal snapshot Wednesday, isnt reason to cut back spending or raise taxes.

In fact, he said, the government will spend $50 billion more. In the current fiscal year, the deficit is expected to balloon more than tenfold to $343 billion.

Dont get me wrong. I think the Liberals are right to abandon what had been, in the days of Paul Martin and Jean Chrtien, their fixation on deficits.

Since then, federal and provincial governments of all political stripes have used the deficit bogeyman as an excuse to slash social programs ranging from medicare to employment insurance.

Whenever a new social program, like pharmacare, is proposed, naysayers needed only raise the word deficit to scupper it.

So kudos to Morneau and Trudeau for acknowledging what many economists have long pointed out: countries like Canada can survive deficits quite handily. Government borrowing is not necessarily a recipe for disaster. In most cases, it involves Canadians borrowing from themselves.

Since April, for instance, the government has been borrowing at least $5 billion a week from the Bank of Canada. In effect, and properly so, the central bank is printing money to help fund the deficit.

Todays monster deficit stems from COVID-19. Shutting down the entire economy in order to preserve public health carries a cost. Morneaus fiscal snapshot predicts that Canadas gross domestic product will shrink by a stunning 6.8 per cent this year.

The governments response has been to devise a bevy of emergency programs designed to patch things up. Employers have been offered wage subsidies if they agree to keep workers on the job. Workers sideswiped by the virus have been offered benefits to tide them through temporarily.

Small businesses have been offered low-interest bank loans to stay afloat. Young people have been offered money for volunteering.

All of this is aimed at keeping the economy afloat until the pandemic has run its course. All of this assumes that the pandemic will run its course.

But what if it doesnt? What happens if the world doesnt return to a pre-pandemic normal?

Will people eat out as much? Or will they fear catching the virus? Will holidayers and business people be willing to travel as much as they did? Or will they try to avoid crowded planes and heavily frequented hotels?

Will we get through this first wave of the pandemic only to be sandbagged by a second? If so, do we just shut down again?

Most Canadians labour in the service industry. But it is workers in this industry, ranging from store clerks to nursing home workers to baristas, who have been hit hardest.

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The service industry was whacked by the first wave. Will it survive a second?

All of these questions were neither asked nor answered in Morneaus snapshot. They will have to be faced eventually.

But at least the finance minister made it crystal clear that hes not bothered by deficits. Thats not much. But its something.

Link:

Liberals are right to ignore deficit bogeyman - TheRecord.com