Federal government has room to spend more: PBO

The Canadian Press

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Parliament Hill

OTTAWA -- Parliament's budget watchdog says the federal government has room to increase spending and still remain financially sustainable over the long run, though the same can't be said for many provinces.

Parliamentary budget officer Yves Giroux says based on current policies and programs, the federal government could permanently increase spending or reduce taxes by around $41 billion and maintain its current debt-to-GDP ratio over the long term.

That is likely good news for the Liberal government, which has been criticized by the Opposition Conservatives for ringing up tens of billions of dollars in additional federal debt in recent years even as it looks to make good on a promise to introduce pharmacare.

Yet Giroux's assessment was less rosy for many provinces, especially Manitoba, Saskatchewan and Newfoundland and Labrador, which are in danger of being swamped by debt over the long term.

Part of the reason is rising health-care costs as well as expected declines in the amount of money provinces are expected to receive from the federal government.

Giroux says the federal government, which has faced pressure to change the formula for deciding which provinces receive equalization payments, could use some of its own financial room to help those provinces.

This report by The Canadian Press was first published Feb. 27, 2020.