Stephen Gordon: The Liberals dont want to admit that their fiscal math isnt working
You may have missed the release of the Department of Finance’s latest Update of Long-Term Economic and Fiscal Projections. You were certainly meant to miss it: even though it was produced back in October, the actual release of the update was delayed until the Friday just before the Christmas holidays. The Liberals did the same thing with the previous exercise, although at least this long-term update was accompanied with a press release. One gets the impression that the Liberals would rather not think about — much less talk about — the outlook for federal government finances.
And with reason. The government’s Mandate Letter Tracker says that the Liberals’ commitment to balance the budget in 2019-20 and continue to reduce the federal debt-to-GDP ratio is “Underway with challenges.” Many have already remarked that this is a very generous assessment: the debt-GDP ratio increased in 2015-16 and again in 2016-17, and the government has yet to produce a budget projection in which the budget is balanced before 2040. We’re at the point where it’s fair to ask whether or not the Liberals even want to meet their fiscal commitments.
It’s hard to keep on top of this file: there are a lot of numbers to keep track of, and a new set of projections is published every six months. But there is one number that has stayed the same since at least 2014, and it’s probably the most important one to keep in mind: federal government revenues fluctuate in a narrow range around 14.5 per cent of GDP. This ratio — the lowest it’s been since before the Second World War — is the enduring fiscal legacy of the Conservative government.