Wow! Â What an upset!Â Â A Liberal majority! Â Â From 35 seats to what are they projecting … 185!?
If the Liberals outflanked the NDP on progressive economic policy, it was on a single issue, that of budget policy.Â With the Liberals promising three years of budget deficits to finance infrastructure spending and the NDP committing to four years of balanced budget (while introducing $15 a day childcare financed by corporate tax hikes), it seemed Lester Pearsonâ€™s famous quip had been turned on its head:Â Liberals as socialists in a hurry?
Looking beyond this evening, here howâ€™s things may play out over the next year, once the celebrations have drawn to a close.
- October 19 to December 31, 2015: transition. Trudeauâ€™s cabinet will named and staff, including advisors, will be hired.
- January, 2016: The 42nd Parliament will commence with a throne speech, outlining the Trudeau vision for governing Canada.
- February-March, 2016: A â€œthinâ€ budget will be presented, probably featuring the promised cut to the â€œmiddle classâ€ tax bracket.
What is important to keep in mind is that March 31, 2016 is the end of the 2015-16 fiscal year and the fiscal position will likely be in deficit.Â This deficit is unfolding as I post this: with slow growth, including a contraction in the April to June 2015 quarter, less tax revenue is coming in, while spending, including what is paid out through the â€œautomatic stabilizersâ€ like EI, remains unchanged if it is not growing.Â Â Congratulations, Prime Minister Trudeau, you have recorded your first deficit without having to lift a finger.
A consolation for Tom Mulcair, with his commitment to a balanced budget, is that he will now not have to figure how to square this circle had he formed the government.
- March-November, 2016: Planning.
The period leading up to the fall 2016 economic update, if the Trudeau government chooses to have one, will be a critical one as it will allow the government to formulate its economic policy vision for its four years of governing.Â It was in such an update in the fall 2006 where the Harper Conservatives unveiled Advantage Canada, its economic policy blueprint, that guided government policy, until the 2008 financial crisis upended that plan.Â Here, we can expect to see details on the new discretionary spending programs featured in the Liberal campaign platform.
Unlike Tom Mulcair, who was rather vague about when the NDP would roll out its spending programs over the next four year, Justin Trudeau has been rather adamant about immediate public spending, such as on public transit infrastructure.Â However, there are good reasons to not rush these spending initiatives, but instead take time to design and plan.Â The Liberals do not need another procurement scandal like the Sponsorship imbroglio, but this could happen if contracts are rushed out the door and land in the laps of loyal Liberals.Â Another consideration is that many of the Liberal spending promises, such as on infrastructure, require the cooperation of governments at the provincial and municipal levels.Â Such consultations take time. Â When was the last time there was a First Ministers conference?Â Trudeau the Younger should avoid cues from Trudeau the Elder in this respect.
All is to say, with the intent of this new government to be more active in the economy, there are good reasons to take time to plan and get it right.Â Weâ€™re not in a sharp crisis like in late 2008.Â It is the longer term trend, this stagnating trend, Â that needs to be addressed.
Good luck, Mr. Trudeau!