The hypocritical liberals will do anything to save face. They just could not stand the fact the outgoing Conservatives left a surplus, so they actually manufactured a deficit so large for one month to wipe out the surplus for the previous year. What kind of government would do that. They obviously do not care about tax payer dollars.
Well, that was predictable — which is why I predicted it. On Friday, the Department of Finance’s Fiscal Monitor finally revealed a deficit of $2 billion for 2015–16, due to a blockbuster deficit of $9.4 billion in the last month of the year alone.
In every month since October’s election, the monitor turned up a budgetary surplus. That resulted in a culminated surplus of $7.5 billion for the 11 months from April 2015 until February 2016. So, to generate a deficit for the full year, the Liberal government had to go into the hole several billion more than that $7.5 billion in just the month of March.
As it turns out, the minister of finance was up to the challenge. Granted, the last month of the fiscal year usually has a deficit, as the government makes its final adjustments to assets and liabilities. In March 2015, the monthly deficit was $3 billion — less than a third of March 2016’s, the biggest March deficit in 11 years. No surprise, since the Liberals had three compelling reasons to deliberately run up a deficit last year, none of which had to do with unavoidable spending.
First, without that huge splurge in March, it would have been impossible for the Liberals to continue pretending that the previous government had left them a deficit, given that the budget was in surplus when they took power and in every subsequent month right up till the last one. There is a limit to what their spinmeisters can get away with, even among the credulous. In fairness, the measure of how the Conservatives left the books should be limited to when we were in power, and perhaps a few months later. What happened after that was in the new government’s control.
Bill Morneau defends big-spending budget
Second, if the Liberals had allowed this past year to show a surplus, but then followed with four years of whopping deficits, that would have presented a clear but unhelpful picture: The government was handed a strong fiscal hand, but decided to fundamentally change direction. As time moves on toward an election, the contrast between then and now would become increasingly stark. They can’t have that.
And third, pulling spending into March takes some spending off the books for 2016–17, which will be seen as the start of this government’s fiscal legacy.
Now you may be asking, is it that easy to play with the numbers? Well, yes. There are numerous ways to increase spending in an individual month. Since we do not yet have all the information about what went on in March, we are left to speculate on the details. The most obvious method would have been to accelerate expenditures on projects or services. A related tactic is to reduce lapsed spending; that is, shrink the portion of the budget approved by Parliament that departments regularly do not spend, which would otherwise help boost the government’s bottom line.
A number of specific items could have been booked, for example if the Liberals made a formal decision to compensate farmers protected by supply management who might be adversely impacted by the Trans Pacific Partnership. Other possible liabilities could relate to environmental costs (remediating mines or nuclear waste), First Nations (treaties, health or other payments), or pensions (liabilities for public servants based on changes to interest rates, benefits or actuarial calculations). The fiscal-year numbers are not yet finalized, pending some year-end adjustments. But the finance ministry states that an additional $3.7 billion expense will be added to account for veterans’ benefits.
I am not implying someone cooked the books. The Finance Department would not countenance inaccurate statements, nor would the auditor general approve them. However, the government has considerable discretion in how to arrange the numbers, and it is simply too big a coincidence that they resulted in a deficit just large enough to achieve the desired political result.
This raises several uncomfortable questions for the finance minister. How much were expenditures bolstered or moved around for partisan purposes? Is the public being candidly informed about what is really going on? What happened to his much-vaunted open and transparent government?
Had the government not been insisting all this time that it was left with a deficit, it may not have felt compelled to try so hard to increase expenses at year-end. Number crunching that is too cute by half may achieve short-term political gain, but ultimately adds up to long-term credibility pain. Now the government has to explain an unusually high one-month number. It also has to address the more fundamental question: How, after a surplus and an engineered small deficit, can it justify its plan for four years of massive deficits, at a time when the economy is growing?
Joe Oliver is the former minister of finance