Trudeau's Deficit: Another Case of Chicken Little Syndrome

If you're Canadian like me and have been paying any attention to the #cdnpoli tag on Twitter, or to the news, or to opinion pieces in newspapers, two things are being considered a big deal right now: Morneau's "oh right I have a company but I'm already rich and who cares" gaffe, and the whole thing with Trudeau's budget deficit.

Freak-outs about the deficit assume two things: we've never had a higher deficit, and governments are supposed to run in the black 100% of the time.

Neither is true.

Definition: A budget deficit is when spending exceeds income. - TheBalance.com

Canada has carried a deficit of over $70 billion in today's currency, and that was during the 1980s and its really, really shitty economy. It's spent a lot of time in the $30 billion range and even managed to see a surplus during the handful of years before Stephen Harper's stint as PM.

That's right. The previous government inherited a surplus. It claimed to have gone out on one, and if you believe that I have some snake oil I'd love to sell you.

Why is this important to know? Because every single critic of the federal budget that's been very, very upset about the deficit seems to think that it was Trudeau who inherited a $13 billion surplus and then sunk it. The Canadian Progressive Conservative party — or CPC, our version of the GOP — is sounding the alarms as if they have never, ever brought out a budget with a deficit.

If it's not just the deficit itself that's getting harped on, it's that oh, oh no, projections weren't entirely correct — which happens. Welcome to the world of budgeting for running a country.

At least nobody projected a surplus and whipped out a deficit, instead. I'm looking at you, Harper. Several times over.

As it is, as nice as having a balanced budget might look on paper, it's not necessary for a government. Why is that? It has a lot to do with how governments work versus how your personal budget, or your company's budget, would work.

Whenever a company or individual repeatedly has a budget deficit, they may wind up having to declare bankruptcy and their credit gets fucked for quite some time. It doesn't work this way for a government. In fact, the way government is set up requires spending.

In order to have money to spend, the government taxes its citizens. This is basically the government equivalent to being paid to do the job of running the country. Those taxes are paid with the expectation that services will be rendered. Those services include things like pensions, infrastructure such as roads, medical care, various forms of benefits, funding for all sorts of programs that many people use on a daily basis, and more.

If those programs don't exist, people get cranky or can't survive and those politicians don't get voted in during the next election. See?

A government will carry a deficit when they're spending more money than what they're currently making on all those things that keep the country running. This is not a bad thing. It's very normal for a country to run a deficit, and it even contributes to growth!

The Trudeau government isn't currently worried about the deficit because the economy is doing well, according to the numbers. Those expenditures, whether you like it or not, need to happen to keep the country running smoothly. Or as smoothly as possible.

What should you be worried about?

Well, people inflating the seriousness of the issue and making up numbers to scare people, like one columnist in the Toronto Sun did recently. They projected a $1.5 trillion deficit in mumblemumble years, I think it was ten. Economists have maybe projected $100 billion.

And all that? Depends entirely on what the government does between now and the next several budgets.

In conclusion: don't worry, Chicken Little, the sky isn't falling. It's business as usual, that's all.