Nothing can shake Canada’s political class from its obsession with balanced budgets—not even the prospect of a recession.
As the collapse in oil prices prompted the Bank of Canada to cut interest rates, finance ministers remained under the spell of fiscal prudence. Those who were plunged into red ink promised to get back in the black as quickly as possible. Those who remained on solid ground carried on as if nothing had happened. Federal Finance Minister Joe Oliver insisted balanced budgets were the only way to ensure long-term prosperity, a sentiment with which Opposition leader Tom Mulcair agrees. In B.C., Finance Minister Michael de Jong said his government would not force “future generations to pay for our groceries.”
It’s been 20 years since Paul Martin declared he would erase the federal government’s chronic deficit, “come hell or high water.” The world has changed a lot since then. Economic thinking has evolved. Yet Canada’s politicians carry on like it is the 1990s, convinced there is a binary relationship between balanced budgets and economic growth.