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To paint a rosy portrait of the Liberals’ federal budget, Morneau will have to get crafty

Bill Morneau is the artist asked to paint a picture without much paint. He is the Liberal finance minister without much latitude for spending.

In this past year's budget, there were broad brushstrokes and bright colours. The economy was sliding, but still, the bold choice was even bigger deficits, a Canada Child Benefit, a big infrastructure program, "historic investments" in First Nations, and the hope of improving economic growth.

Now, as Mr. Morneau prepares the 2017 budget for March 22, there is prudence, and a question mark about what U.S. President Donald Trump might do.

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That is a reflection of Prime Minister Justin Trudeau's Liberal government in early 2017. The heady tone and driving agenda seems to have turned into pause. The UN peacekeeping mission that was a sure thing last August is a maybe now. The Liberals commissioned a high-profile advisory panel on economic growth, but its bigger ideas, like expanding immigration to 450,000 people a year, do not even seem in the realm of debate.

There is some cause for the hesitation. Even without Mr. Trump, the Liberal government is no longer untouchable in the polls. And Mr. Trump's election really did tilt the world, and Ottawa's assumptions: Mr. Trudeau still does not know precisely what is coming on trade, and Mr. Morneau cannot know what kind of tax and business environment will be next door.

But budgets still have to paint a picture. The Liberals do not have the luxury, if you can call it that, of making it a portrait of restraint, focused on balancing the budget, as Conservatives did when they were reducing the big deficits incurred during the financial crisis. Mr. Trudeau and Mr. Morneau promised to do something, to intervene, to make the economy better – most explicitly, ad nauseum, for the middle class. They cannot just put that on pause.

Budgets are political documents that use money to describe governing agendas. And Mr. Morneau does not have much money. He cannot take the public finances much further into the red, even though the Liberals have ditched their promises about the size of deficits and a timeline for balancing the budget. Mr. Trudeau's government still has one last metric to bolster its claim of fiscal responsibility: not allowing the debt-to-GDP ratio to grow, so it can credibly argue it is not making Canada's debt-load more unmanageable. If the Liberals stay in those bounds, use current assumptions about future growth, they do not have much room to do new things.

So Mr. Morneau will have to paint with shades of grey, with dabs of blue sky to describe hope for future growth.

His budget will mostly recycle money that has already been promised, according to government insiders. Mr. Morneau set aside $800-million for innovation clusters last year, and details can now make that more concrete; there can be new information about infrastructure projects funded in this past year's budget. That kind of repetition can be useful in politics, especially when it is the specifics that make the budget figures seem real: Building a new bridge is a bigger political winner than a new federal-provincial accord on tripartite funding allocation.

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Mr. Morneau could, if he dared, find sizable sums by reworking old programs into new ones. He could transform the $3-billion in research and development tax credits into a new kind of innovation program – but it is just not clear that the Liberals are in the mood for rocking boats.

But the Liberals do want to look like they are filling in chapter two of their middle-class economic agenda. On Tuesday, Mr. Morneau said a key theme will be skills-development "to help Canadians get the skills that they need in a dynamic and changing economy."

One bit of blue sky for the Liberals is that the economy looks like it might be gaining a little strength. That would be a political boon, of course, and it would put a little wiggle room back into the Liberals' stretched public finances. But Mr. Morneau cannot afford to work that into his plans now, in case he needs to find budget room later. Mr. Trump is promising "massive" tax cuts – and if he follows through, the Finance Minister will feel pressure to keep Canada's business taxes competitive.

So Mr. Morneau does have some waiting to do. His political challenge is to present a budget that does not look like it puts the Liberal agenda on hold.

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About the Author
Chief political writer

Campbell Clark has been a political writer in The Globe and Mail’s Ottawa bureau since 2000. Before that he worked for The Montreal Gazette and the National Post. He writes about Canadian politics and foreign policy. More


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