Canada government tries to fend off critics worried about deficits

OTTAWA (Reuters) - Canada’s government on Wednesday sought to deflect criticism that it had condemned the country to years of budget deficits, saying it could balance the books within five years if efforts to boost the economy succeed.

Canada's Prime Minister Justin Trudeau (L) and Finance Minister Bill Morneau walk to the House of Commons to deliver the budget on Parliament Hill in Ottawa, March 22, 2016. REUTERS/Patrick Doyle

The ruling Liberals on Tuesday projected a C$29.4 billion ($22.3 billion) deficit for fiscal 2016-17, nearly three times larger than what they promised during last year’s election campaign.

The Liberals, who say the spending will help boost growth, gave no target date for returning to balance, with the budget still expected to show a deficit of C$14.3 billion in 2020-21.

Opposition politicians and influential media commentators said they feared Canada would face a long string of shortfalls of the kind it has not seen in two decades. This could cause problems for Prime Minister Justin Trudeau.

“We’re hoping to increase the growth rates,” Trudeau told CBC Radio on Wednesday.

If the government can stimulate the economy, “we get to balance in the coming five years,” he said. “There is a track to that if we increase the growth in the economy.”

Trudeau faces no immediate political threat, since he only took power last November and is sitting high in the polls.

But the longer the deficits last, the greater the potential political risk.

“The general public has never really been through a situation in which a deficit has been a good thing so he’s got some convincing to do on this,” said Ipsos Public Affairs Chief Executive Officer Darrell Bricker.

Finance Minister Bill Morneau, pressed repeatedly about the deficit, said last year’s election showed Canadians backed the idea of investing in the economy.

“Our goal is to get to a balanced budget over approximately the five-year time period, recognizing our priority right now is to make those investments,” he told reporters.

Asked whether Ottawa might reconsider its stance if the economy underperformed, he replied: “We’ll worry about Budget 2017 in 2017.”

Trudeau came to power by defeating the right-of-center Conservatives, who stressed the importance of balancing the books.

“The prevailing wisdom among Canadians is that running deficits is not a sustainable political strategy,” said pollster Nik Nanos of Nanos Research. “The Trudeau government has some political slack right now, but it’s not a bottomless well.”

Additional reporting by Leah Schnurr in Ottawa; Editing by W Simon and Lisa Von Ahn