Some observers seemed shocked, shocked to see Canada’s federal government projecting annual deficits for four decades to come. No balanced budget, ever? But if anything, it’s not clear that Canada can afford to have the federal budget numbers look as good as those presented in the long term fiscal outlook released by the Finance Department in late December.
First, let’s clarify what these estimates really are, and what they aren’t. They are in no way an effort to estimate each year’s fiscal results from now to 2056, even though that’s what the tables appear to show. Instead, beyond the first few years, given that the business cycle’s peaks and valleys can’t be predicted, they are an estimate of the average budget balance, and debt/GDP path, in the coming decades.