COMMENTARY: Budget 2022 and Canada’s incredible disappearing deficits – National | Globalnews.ca:

What gives? Why is the deficit disappearing, both in dollars and in political importance? It seems that we’ve all learned a thing or two about budgets since the pandemic struck.

The first is that governments have virtually unlimited power to spend big when they need to. They did it before: like in the Second World War when no politician would dare to complain that Canada’s military effort was “too expensive.” And they did it again during COVID. Ottawa boosted spending $250 billion in one year to protect health, and keep Canadians working and in their homes; the provinces spent tens of billions more.

The second lesson is that infatuation with balanced budgets is misplaced and counterproductive. Economists have come to appreciate that deficits, even long-running ones, can play a vital role in supporting growth and jobs when other sources of spending (like business investment or exports) are inadequate.

The final and most pleasant lesson is that the best way to get rid of a deficit is not to slash-and-burn public programs – as Canada did in the 1990s, and Europe did in the 2010s. Apart from imposing avoidable harm on society (shrinking services and infrastructure), austerity also undermines the fundamental math of fiscal progress. By sapping the macroeconomy of so much spending power, austerity slows growth, causing self-inflicted damage to the government’s own budget.

The exact opposite dynamic is now occurring in Canada, to the delight of Ms. Freeland – and her provincial counterparts. Canada’s economy is firing on all cylinders. And government’s aggressive response to the pandemic is the main reason why.

COMMENTARY: Budget 2022 and Canada’s incredible disappearing deficits – National | Globalnews.ca: What gives? Why is the deficit disappearing, both in dollars and in political importance? It seems that we’ve all learned a thing or two about budgets since the pandemic struck.The first is that governments have virtually unlimited power to spend big when they need to. They did it before: like in the Second World War when no politician would dare to complain that Canada’s military effort was “too expensive.” And they did it again during COVID. Ottawa boosted spending $250 billion in one year to protect health, and keep Canadians working and in their homes; the provinces spent tens of billions more.The second lesson is that infatuation with balanced budgets is misplaced and counterproductive. Economists have come to appreciate that deficits, even long-running ones, can play a vital role in supporting growth and jobs when other sources of spending (like business investment or exports) are inadequate.The final and most pleasant lesson is that the best way to get rid of a deficit is not to slash-and-burn public programs – as Canada did in the 1990s, and Europe did in the 2010s. Apart from imposing avoidable harm on society (shrinking services and infrastructure), austerity also undermines the fundamental math of fiscal progress. By sapping the macroeconomy of so much spending power, austerity slows growth, causing self-inflicted damage to the government’s own budget.The exact opposite dynamic is now occurring in Canada, to the delight of Ms. Freeland – and her provincial counterparts. Canada’s economy is firing on all cylinders. And government’s aggressive response to the pandemic is the main reason why.Read More