August 27, 2015 / 5:03 PM / 4 years ago

Canada's Liberals take gamble, propose deficits to boost growth

OTTAWA (Reuters) - Canada’s opposition Liberals, trying to kick-start a sluggish election campaign, on Thursday took a political gamble by proposing to run budget deficits to help finance a major national infrastructure program.

Canada's Liberal leader Justin Trudeau speaks during the Maclean's National Leaders debate in Toronto, August 6, 2015. REUTERS/Mark Blinch

The Liberals are now the only party to suggest going into the red to help stimulate the economy. They trail the ruling Conservatives and front-running New Democrats, who are both promising to balance the budget.

Prime Minister Stephen Harper - running mainly on his economic record ahead of the Oct 19 federal vote - says deficit spending would be disastrous.

Liberal leader Justin Trudeau said low interest rates and Canada’s favorable debt-to-GDP ratio meant now was the time to pour money into public transit as well as social infrastructure and green projects.

“These investments have been put off for far too long. They are vital if we want to grow the economy,” he told a news conference in Oakville, Ontario, saying the plan would create “many jobs across the country.”

The plan would almost double federal infrastructure investment to nearly C$125 billion ($95 billion) over the next 10 years. This would mean running deficits of less than C$10 billion in each of the 2016 and 2017 fiscal years.

The deficit would shrink in 2018 before the budget returned to balance in 2019. Trudeau also committed to establishing a Canada Infrastructure Bank to provide low-cost financing

to build new infrastructure projects.

Harper, seeking a rare fourth consecutive term in power, told reporters that Trudeau “has no idea what he is talking about” when it came to budgets.

“That’s why you could be sure his small deficits will become large deficits,” he said, predicting the Liberal plans would result in higher taxes and job losses.

The Conservatives, who have run seven consecutive budget deficits in the wake of the 2008 recession, are promising a surplus in the 2015/16 fiscal year.

A Nanos poll for CTV and the Globe and Mail on Thursday showed 54 per cent of Canadians backed a new round of deficit spending by the government to stimulate the economy.

The left-leaning New Democrats have traditionally favored government investment but leader Thomas Mulcair, asked about the Liberal plan, said he was tired of watching governments put debt on the backs of future generations.

Polls suggest the Conservatives will lose their majority in the House of Commons and could even be turfed from office.

Reporting by David Ljunggren; Editing by Andrew Hay

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