Canadians are onside with ‘controlled deficit’: poll

theglobeandmail.com
April 8, 2016
By Bill Curry

Most Canadians are okay with annual federal deficits as long as the debt is kept under control, according to a new poll by Nanos Research and The Globe and Mail.

The results show that Prime Minister Justin Trudeau’s approach to budgeting is onside with public opinion, but it also found tepid support for the Liberals’ first spending plan.

Respondents gave the March 22 budget an average score of 5.8 out of 10.

Mr. Trudeau’s surprise campaign pledge to deliberately run deficits in order to fund infrastructure spending was a direct challenge to Canada’s political orthodoxy, given that all major parties had embraced the view that balancing the books should be a key federal-policy goal.

The government’s first budget announced annual deficits that were nearly triple the $10-billion-a-year maximum promised by the party during the campaign, but Canadians appear to support the new government’s claims that deficits are manageable and warranted in the current environment.

In a random phone survey of 1,000 Canadians, 54.3 per cent agreed with the statement that the government should continue to run annual deficits as long as the federal debt is shrinking in relation to the size of the economy, which is the government’s stated objective.

In contrast, 37.2 per cent said they agreed that the government should do what it takes to balance the budget before the next election. A further 8.5 per cent said they were unsure. The government is no longer promising to erase the deficit before the next election, but it says that may still happen depending on economic growth.

“There’s support for what I would call a controlled deficit,” pollster Nik Nanos said. “It’s when deficits are perceived to kind of run rampant that people have problems with that.”

Mr. Nanos said his polling shows that Canadians are concerned about their own finances and are receptive to seeing a more active federal government.

“A deficit is basically code for governments doing something,” he said. “The wild card in all of this is the future state of the Canadian economy. If the economy picks up, then the government will probably be fine in terms of its state of affairs, but if things get worse, the government shouldn’t think that there will be a lot more slack for greater deficits.”

The March 22 budget - which forecasts $113-billion in deficit spending over five years - has intensified the debate in public-policy circles over the merits of deliberately running deficits to boost economic growth at a time when the economy is not in a recession. Advocates for such a plan - including former U.S. treasury secretary Larry Summers and former Bank of Canada governor David Dodge - argue that because interest rates are low, spending on infrastructure can actually help a government’s bottom line over time by boosting economic growth. Mr. Summers has called this a “free lunch.”

However, others with senior experience in government - including Janice MacKinnon, a former Saskatchewan finance minister, and Paul Boothe, an economics and public-policy professor and former federal deputy minister - warn that politicians will lose control of government spending without the “fiscal anchor” of a clear balanced budget pledge.

Ms. MacKinnon had warned during the campaign that agreeing to a $10-billion deficit would open the door to larger deficits down the road. She now says the government’s deficit plan is “much worse” than she expected.

She said Canadians should be concerned that a downturn in the economy would trigger even deeper deficits, adding federal debt on top of already large provincial debt loads.

“I think there is a point at which a majority of Canadians will say, ‘Wait a minute,’ but the real fear I have is by the time they do that, you’re already into a situation in which you’re in significant difficulty,” she said.

The survey of 1,000 Canadians conducted by live agents involved a mix of cellphone lines and land lines and was conducted from March 31 to April 4. The results were weighted by age, gender and geography to be representative of Canada. The margin of error for a random survey of 1,000 Canadians is plus or minus 3.1 percentage points, 19 times out of 10.