Midweek podcast: The fall fiscal update
Canada's economic engine is chugging along, the federal government assures us in its fall fiscal update, issued Wednesday.
But there are a few potential hazards up ahead, including unpredictable oil prices, trade disputes and deep tax cuts south of the border.
This week's fall fiscal update focused on making corporate Canada competitive by taking the government deeper into deficit — adding new business tax write-offs and introducing a new accelerated capital cost allowance.
To break it all down, Chris Hall is joined by the CBC's parliamentary bureau chief Rob Russo and Vassy Kapelos, host of CBC News Network's Power & Politics.
CH: What narrative are the Liberals trying to sell with this fall economic update?
RR: The narrative is, "We're going into deficit to help those poor CEOs on Bay Street. But if they want the candy, they're going to have to increase productivity by spending money on new equipment here in Canada." So I'd say that's the narrative. Yes, you can condemn us on Bay Street for going into deficit, but try to condemn us while you're taking the cash.
VK: It is important to realize that during the campaign the Liberals were not peddling the same narrative. They were saying that deficits should be modest, and what we mean by modest is a maximum of $10 billion. That narrative is now gone, so the Conservatives are not surprisingly jumping on it.
CH: Will Canadian voters jump on it too?
VK: I don't know if that's something that people are going to care about in the election. I think the idea of debt, adding to the debt and the interest we pay on it, is something that resonates, but I don't know if the messaging has gone through the way the Conservatives hope. I'm not sure it's a slam dunk for either side.
RR: I think Vassy's right, because Canadians themselves have taken on more debt than ever before. We are more indebted than ever before. So are Canadians more comfortable with debt now than they were, say, 25 years ago? I think they are. But those of us who were around in the 80s remember how one-third of every dollar the government spent went to servicing the debt.
We are nowhere near that rate now, but some Canadians do remember how difficult it was to get service out of the government because of high interest rates. They do remember how difficult it was to get a mortgage. People of a certain era are scarred by that, and scared by that.
CH: Did Finance Minister Bill Morneau have any choice but to respond to Trump's steep corporate tax rate cuts and 100 per cent write-offs?
RR: He probably didn't have a choice in terms of the corporate side. He certainly couldn't match the Trump tax cuts. Did the Liberals have a choice, though, on the rate in increase on social spending? They certainly did. Because that's running far and above the rate of inflation.
I do think it's very clever politics, though, to say, "Yes we're going into deficits longer and deeper than we thought and I blame Donald Trump." It's going to be hard for people to say, "You should have done what Trump did." That's a tough line of attack for anyone trying to go after the Liberals.
CH: Is Morneau showing with this fiscal update that the Liberals are not afraid to continue to spend over this next year, ahead of the 2019 election?
VK: I think they signalled that yesterday very clearly. I think it was to move them out of the way so you can present a budget later next year that is full of goodies for all the others. Now you've dealt with this big elephant in the room, the cries from the business community, and you're moving it out of the way so you can focus your budget on pharmarcare, social spending. There's no indication from Bill Morneau that there are any plans to tighten anything up in the foreseeable future.
CH: Where does this leave the NDP?
RR: There's no oxygen for them. [The Liberals] are consciously, deliberately eating their lunch and it shows in the polls. There's not a lot of room for the NDP and there really won't be for them or the Conservatives on this, unless there's a downturn.
I've learned that the way things look a year out from an election look very, very different than how they look on election day. The Liberals have to hope there isn't a downturn in the economy. A downturn for the Liberals would be bad news for them and, of course, good news for the Opposition.
Interview has been edited and condensed. Tune into The House on Saturday at 9 a.m. ET for Chris' interview with Finance Minister Bill Morneau.