Morneau’s problem credibility, not deficits

Finance Minister Bill Morneau’s credibility on fiscal matters continues to unravel.

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The latest sorry episode occurred Monday in the House of Commons as he continued to insist, in the face of evidence from his own department, that Stephen Harper’s Conservatives left him with a deficit.

The nearly-final numbers for the fiscal year that ended on March 31, 2016, released Friday, show a deficit of $1.96 billion and Morneau says that deficit is all Harper’s fault.

In fact — as his own budget said in March — it’s directly the result of the increased spending and lower tax revenue the Liberals campaigned on and then swiftly implemented mid-way through the fiscal year.

And yet, Morneau continues to stick to the claim, as he did Monday, that the red ink is all the fault of the blue team.

This claim is patent nonsense.

And that’s a problem for a minister whose credibility is already weak.

So far, Morneau has built a reputation for failing to keep his promises — he failed to stick to a $10 billion deficit, failed to deliver a small business tax cut, failed to table a plan to balance the budget in four years, etc. — and now he is crafting a reputation for inaccurately describing and accounting for his own financial numbers.

The Liberals promised evidence-based policy.

Well, the evidence is that Harper promised to spend $288.9 billion in 2015-16 and deliver a tiny surplus.

In the end, $291.5 billion was spent — and Morneau had the keys to the treasury for the last five months of the fiscal year — and there’s now a tiny deficit.

Our credit rating is pure gold in any event and the Canadian government’s fiscal position is the envy of the world.

But a finance minister who cannot accurately account for his own fiscal position is not going to be taken seriously by our international partners.

Eventually, credit rating agencies may wonder about the veracity of Morneau’s promises or explanations.

The opaque, evidence-defying bookkeeping Morneau now engages in has already come under fire from the Parliamentary Budget Officer, Bay Street economists, and other independent experts.

This is not good for Canada which owes its enviable fiscal reputation to the sometimes difficult decisions made by finance ministers stretching back to Liberal Paul Martin through to Conservative Jim Flaherty.

(Flaherty, to be fair, was an un-credible character in his first year and a bit, breaking promises on income trust taxation and delivering an austere fiscal update in 2007, completely out of touch with the times.)

It was likely as difficult for Martin to slash, slash, slash in 1995 as it was for a deficit hawk like Flaherty to spend, spend, spend in 2008-09.

But both calls were the right ones and both men were able to pursue their multi-year programs to eventually balance the budget because they took care to maintain the credibility of their office and their department.

Morneau should do the same and own the deficit his government created as soon as it took office.

Reference

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