A legacy of deficits -- thanks, Stephen Harper!

Well, who'd have thought that could happen? Two weeks on from the election, Canada's Parliamentary Budget Officer (PBO) has revealed that the baseline fiscal outlook sees small budget deficits in each of the next three years.

Think about that. The Tories castigated Justin Trudeau's Liberals for the "irresponsible" suggestion that a Liberal government would run small deficits for three years in order to invest in infrastructure and boost the economy.  Harper, in contrast, was promising to "keep the economy safe" by balancing the budget. It now turns out, as Harper surely must have known, that the tiny surplus eked out in the most recent fiscal year was only made possible through the one-time sale of a government asset (the GM shares the government acquired during the financial crisis). The underlying budget is in fact in deficit, as it has been through each of the past six years of Tory government.

It's not clear that this will make a huge difference to the first part of the new government's fiscal plans. The PBO's projected deficits are only $2.4 billion a year on average, so even if the Liberals stick to their pledge of keeping annual deficits to $10 billion, there is still some room to maneuver -- just not as much as the Trudeaupians were counting on. However, the PBO's projections largely reflect a less buoyant growth outlook than was previously assumed, which implies that it will be that much more difficult to get the budget back into surplus by the time of the next election, as the government has pledged.

The budget news is part of a difficult backdrop that the inexperienced Trudeau team is already facing, even as the new ministers try to figure out the way to the executive washrooms.  Ineptly-run Bombardier has its hands out for yet more government largesse, President Obama has effectively cancelled the Keystone XL pipeline project (though it's unlikely that Trudeau is too upset about that, his public statements notwithstanding), the pledge to bring in 25,000 Syrian refugees by year end looks by turns unachievable and irresponsible.....and so on. By and large, Canadians are happy to see the back of Harper and like what they're seeing from Trudeau. but it's unlikely that the new government will enjoy much of a honeymoon.