Prime Minister Justin Trudeau insists, in the face of economic hurdles, his pledge to balance the federal books in four years is "very" much cast in stone.
On top of the balanced budget, Trudeau told The Canadian Press on Wednesday that the Liberal government will also live up to its other fiscal "anchor" to lower the debt-to-GDP ratio every year until the end of its mandate.
Trudeau's remarks follow several revelations that his new government is standing on significantly shakier fiscal footing than it had predicted.
For example, the Liberals have recently shied away from another election commitment: to keep annual deficits over the next two years under $10 billion.
The Liberals, who made billions of dollars in campaign spending vows, are facing many obstacles that stand in the way of fulfilling their balanced-budget goal.
Pulling the books back into the black is a tougher target than lowering the debt-to-GDP ratio, which represents a government's capacity to pay back debt. The ratio — also known as the debt burden — is reached by dividing total federal debt by the overall size of the economy, as measured by nominal GDP.
Last month, the Liberals said in their fall fiscal update that the books inherited from the Conservatives and a weaker-than-expected economy will drive the country billions of dollars deeper in the hole than it had anticipated during the campaign.
The parliamentary budget office later issued forecasts that suggested the Liberals could be poised to generate annual deficits up to $15 billion once their costed, big-ticket election pledges are accounted for. In addition, the party has also made several uncosted vows.
Earlier this month, the Liberals revealed that their new tax package, which will raise taxes on the highest earners and lower the rate on the middle tax bracket, will actually siphon more than $1 billion net per year from the treasury. In their platform, the Liberals had predicted the plan would be revenue-neutral.
Trudeau vowed during the campaign to respect the $10-billion upper limit for deficits in 2016-17 and 2017-18 unless the economic situation got radically worse.
The Liberals are banking that their commitments — to spend billions on infrastructure and to implement tax changes benefiting middle earners — will kick-start the struggling economy and create jobs.
When asked if balancing the budget would involve austerity, Trudeau said he's going to focus on growing the economy in responsible, meaningful ways.
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