Canada’s Parliamentary Budget Officer (PBO) says the federal stimulus plan may have been “miscalibrated” and will have less of an impact than the Liberals’ claim.
In a report released Wednesday, the nonpartisan watchdog said that a large part of the $101.4 billion in new stimulus spending announced in last month’s budget should not be considered new stimulus.
The PBO calculates the actual new stimulus to be $69.2 billion over the next three years.
“Finance Canada’s impact assessment of the Recovery Plan overstates the economic impact of stimulus spending in Budget 2021,” the report reads.
“We maintain our judgement that stimulus spending in Budget 2021 could be miscalibrated if the focus is solely on returning to pre-pandemic benchmarks.”
In the federal budget released in April, the government predicted the stimulus would increase economic growth by 2% and create 334,000 jobs. By comparison, the PBO predicts the true stimulus numbers would only boost growth by 1% and create fewer jobs.
“Given the $69.2 billion in stimulus spending in Budget 2021, we estimate that the level of real GDP would be 1.0 % higher in 2022-23 and 2023-24. The level of employment would increase by 74,000 jobs in 2022-23 and by 94,000 in 2023-24.”
In April, the federal budget predicted a deficit of $354.2 billion for the 2020-2021 fiscal year. Over the next year, the Trudeau government plans to add an additional $154 billion to the national debt.
Along with pandemic stimulus and other benefits, the budget made other expensive promises such as $30 billion investment towards developing a national child-care plan and over $17 billion in environmental spending.
As True North founder Candice Malcolm noted in her recent column, in order to fund these massive programs, the Trudeau government has resorted to unprecedented spending and money-printing.
“The Trudeau government is now borrowing an astronomical $3 billion per week to stay afloat — much of it being printed by the central bank, putting off the eventual need for drastically higher revenue to find a balance,” she wrote.
“Instead, each dollar printed by the feds — in what they call the ‘modern monetary theory,’ which is the profoundly irresponsible ‘theory’ that we can print money and not worry about the consequences or the realities of inflation — means that the money in your wallet and bank account will be worth less.”
The PBO notes that the federal government has substantially raised the debt-to-GDP ratio, meaning it will be harder to increase spending in the future without raising taxes or cutting spending in other areas.