The Parliamentary Budget Officer (PBO) is a non-partisan organization that reviews, analyzes and provides feedback on Canada’s financial status. Commonly referred to as the ‘budget watchdog,’ last week the PBO released several criticisms of the Trudeau Liberals’ 2016 budget. Above all, their main criticism is the budget’s lack of fiscal transparency – directly contradicting the Liberal election promise to “raise the bar” in this respect.
The key criticisms contributing to this alleged ‘lack of transparency’ include:
- Overstating Job Growth – The 100,000 jobs claimed to be created or maintained through tax cuts and spending will be more like 60,000 jobs in the PBO’s estimation.
- Excessive Risk Adjustments – The budget assumes that nominal GDP will be $40 billion less than private sector forecasts, leading to a reduction in revenue of $6 billion annually. While some adjustment for risk is good, the PBO claims this one has been overshot, citing $3 billion as a more realistic adjustment used in past budgets. As a result, the Liberals have left themselves a large margin for error.
- Timeline? – Budgets are typically expected to show policy-specific spending over the five years their policies will apply. The original budget provided only 2 years. However, the Finance Department has since released the 5 year numbers in response to the PBO’s request, providing Canadians with a greater indication of which policies will be supported in future years.
In my opinion, this budget meets the definition of “under-promise, over-deliver”. The Liberals have used ultra conservative risk adjustments so that in a worst-case scenario, the $30 billion deficit will come to life as promised. In a more realistic or best-case scenario, the deficit will be far less than expected, providing a ‘pleasant surprise’ for Canadians. The concern, of course, is that the Liberals won’t stick to their spending plan at all, leaving us with the $30 billion deficit promised and an extra $3-6 billion annual spending in areas of their choosing, not outlined in the budget. Indeed, a concerning lack of transparency.
What do you think? Should the Liberals have acted differently to honour their commitment to fiscal transparency? Leave us your thoughts in the comments below!
Authored by Candice White, Co-Founder mPolitics.co
Parliament Buildings, Ottawa. Source: Neville Nel, Flickr