Article content continued

So the Liberal double act continues. Was the decision to plunge the country another $113 billion into debt about boosting growth in the short term or the long? The correct answer is neither. It clearly isn’t about fighting a recession, because we aren’t in a recession, and because if we were deficit spending, especially in an economy open to trade, is of little help. And it isn’t about investing in capital projects that boost productivity in the long run, because only a fraction of the tens of billions of new spending in the budget is even notionally for such purposes, and because the part that is offers no estimate of the expected long-run returns, nor any evidence they exceed the returns from alternate uses of the same funds.

We apologize, but this video has failed to load.

tap here to see other videos from our team. Try refreshing your browser, or

Still: if the budget offers no persuasive justification for running $30-billion deficits, neither does it portend our economic doom —bankruptcy, or at least a return to the crisis of the early 1990s. I make this point, less because there have been many claims that it would, than in response to a volley of opinion pieces reassuring readers that it will not — and therefore, implicitly, that all is well. But alarmism and complacency are not the only responses open to us. It is possible to believe both that deficits of the sort the budget envisages will not ruin us and that they are not a good idea.

We live in a world of risks, not certainties; degrees, not absolutes. Taking on more debt does not, in itself, mean fiscal disaster, but it does mean exposure to greater risk. The extra risk involved in the present case may seem small, with a deficit and debt of just 1.5 per cent and 31 per cent of GDP, respectively. But it is not zero. In 1974-75, when the federal budget began its headlong descent into deficit, the risks must have seemed at least as small, with a debt-to-GDP ratio of just 18 per cent of GDP. Stuff happens.