OTTAWA -- A Conservative government would balance the budget "without cuts" within 10 years, leader Erin O'Toole said Tuesday, elaborating on a plan that hinges on a decade of juiced-up economic growth.
At a campaign event from the party's broadcast centre at an Ottawa hotel, the Tory leader said Canada effectively borrows more than $400 million each day, resulting in last year's $354-billion deficit amid emergency spending measures prompted by the COVID-19 pandemic.
O'Toole said that, if elected, he will roll out more stimulus spending but end much of it after the first year and wind it down completely over five years.
"We will help highly affected sectors caught by the pandemic so that those jobs are preserved. We will grow the economy so that we can get back to balance in a responsible and equitable way without cuts," he told reporters.
The Conservative platform says the robust economic recovery on which the Tory plan rests assumes annual GDP growth of roughly three per cent, a target reached only once since 2011.
Neither the Liberal budget nor the NDP platform specifies a horizon for fiscal balance, with both parties saying investment in economic and social programs can rev the economy and generate revenue more effectively than slashed budgets.
Earlier Tuesday, Statistics Canada released numbers showing the country's economy had its worst quarterly stretch since the start of the pandemic, contracting by 1.1 per cent at an annualized rate between April and June and possibly dropping further in July.
"Under Justin Trudeau, we are heading further down the road of recession, not the road to recovery," O'Toole said of the Liberal leader.
O'Toole, whose platform is not costed, also pointed to a report from the Organization for Economic Co-operation and Development that shows Canada trailing the United States in its economic rebound.
The Liberal budget in April unveiled major spending on social programs and vowed a return to small deficits by 2025.
Like the Conservative plan, a Trudeau-guided recovery hinges on strong growth in gross domestic product this year and next.
In recent years, the Liberal government has underscored the ratios of net debt to GDP and of deficit to GDP as key metrics of Canada's fiscal health, noting repeatedly that the country boasts the lowest debt-to-GDP ratio of the G7 countries.
"These are important markers. They show that the spending proposed today is sustainable, and that the extraordinary spending we have undertaken to support Canadians through this crisis, and to stimulate a rapid recovery in jobs, is temporary and finite," the April budget states.
The debt-to-GDP ratio for all levels of government rocketed up to 50.6 per cent in the first quarter of 2021 from 38 per cent a year earlier. Debt to GDP is expected to breach 51 per cent this year before dropping to about 49 per cent by 2025, according to federal projections. The Liberal government forecasts that the current deficit-to-GDP ratio of 8.2 per cent will dive back down to about one per cent within five years.
Serge Coulombe, emeritus professor of economics at the University of Ottawa, said committing to a declining debt-to-GDP ratio demonstrates at least a smidgen of fiscal restraint.
"The cost of borrowing is extremely low. The danger is that this experience shows that the government can spend hundreds of billions of dollars at a very low borrowing cost, and it is a big temptation. Governments that spend and don't tax are extremely popular -- up to the point where inflation comes."
The immense influx of cash into the economy via federal stimulus and relief spending over the past 18 months, combined with initially slowed production and snarled supply chains, has helped to boost demand for various consumer products and trigger higher prices amid a dearth of items.
"The danger of the mechanism of inflation is that it will push interest rates up. That will be bad for all Canadians who have borrowed to buy houses at very high prices recently," Coulombe said.
NDP Leader Jagmeet Singh said Monday that measures to raise revenue such as cracking down on wealthy tax dodgers and hiking the tax rate for corporations and the highest income bracket can help pay for big-ticket programs like universal pharmacare, a guaranteed livable income and affordable housing.
"In all cases, we will manage debt and deficits responsibly, borrowing when required to defend the services that Canadians and their families rely on, and moving towards balance in the future when it's prudent to do so," the NDP platform reads.
This report by The Canadian Press was first published Aug. 31, 2021.
