The latest federal budget shrinks the pandemic-bloated deficit considerably, but nowhere near as much as it easily could have
This week’s federal budget was a timely reminder that Ottawa is still a little fuzzy – maybe even dangerously fuzzy – on what a fiscal anchor really is.
Despite pledging its determination to reverse the fiscal damage from the pandemic, the Liberal government continues to define this commitment by a “fiscal anchor” that, really, isn’t much of an anchor at all. Its promise – to reverse COVID-19-related deficits and reduce the debt-to-GDP ratio “over the medium term” – merely points in a direction, with neither a specific destination nor a specific timeline.
Many economists argue that the current flimsy anchor is not nearly specific enough to instill serious discipline to buckle down and reverse the fiscal damage from the pandemic. It allows the government too much room to equivocate, to delay, to take its eye off the ball every time it sees a new pet program it wants to fund.By the government’s own reckoning, the COVID-19 emergency has passed. And yet the deficit, while shrinking, is more than $30-billion larger than in the last pre-COVID budget.
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