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Shifting government revenue from the future to the present is not the trade we want to be making just now.

This is the situation we are in: economic growth — and hence growth in government revenues — is slowing, and population aging is going to put increasing pressure on health-care budgets. Right now, two per cent of Canadians are 85 years or older; that share is projected to double in the next 20 years. In these circumstances, it makes zero sense to use future income to finance current spending; if anything, we should be trying to shift current income out to the future. A sensible infrastructure project that generates future revenue is one way of making that exchange.

But if pre-budget leaks are anything to go by, this isn’t the Liberals’ plan. Only a small fraction of the money the government plans to borrow over its mandate will be used to finance new infrastructure; the rest will be used to finance current expenditures. Borrowing to finance regular spending isn’t “investment”; it’s the opposite of investment.

Not only will the Liberals be depriving future governments of their revenues, they are also saddling them with extra expenses: the reversal of the Conservatives’ decision to increase the age for eligibility for Old Age Security from 65 to 67 will cost the equivalent of one percentage point of GDP in 2035.

It is correct to note that borrowing costs are low and that there’s no immediate danger of a debt crisis. Correct, but unhelpful: shifting government revenue from the future to the present is not the trade we want to be making just now.

It’s good that Liberals are talking about stronger economic growth. We’re going to need it, now more than before.

National Post

Stephen Gordon is an economics professor at Université Laval.