This week's fiscal update showed that the government's path to a balanced budget is still a slow march, but one that didn't have to be that way.  The documents showed that the path to balance was actually closer than we thought the deficit could have been virtually eliminated by 2023, were it not for all of the new spending measures announced that kept the deficit at status quo.  But rather than trying to sell the Canadian public on why this continues to be necessary, and most especially why it's necessary to keep spending the windfall that the growth rate and roaring economy are producing, Bill Morneau and Justin Trudeau have done as they always do reciting some happy sounding pabulum that doesn't really explain anything.

We should establish a few things first there is no actual debt crisis facing Canada.  The size of the deficits the government is running are really quite modest in comparison to the size of our economy, and the debt-to-GDP ratio continues to trend downward, at the best rate in the G7.  If you look to the south of us, the American economy is piling on trillion-dollar deficits to finance tax cuts that have been the equivalent of a sugar rush to their economy, used for stock buy-backs and shareholder dividends without creating sustainable growth, while in the UK, their economy has stalled given the interminable uncertainty over the Brexit omnishambles.  Our economy is running at near-capacity, and we are at near full-employment (oil-producing regions aside) and in fact, some parts of the country are facing labour shortages instead.  We're not Greece or Venezuela, contrary to some of the voices of doom that you hear.

We also need to remind ourselves that while the Conservatives insist that they left the country in surplus in 2015, that should be taken with a shaker's worth of salt the global oil price crash and brief recession that happened that year put a $70 billion hole in the budget that the Liberals inherited, so no matter who was in government, they were going to start from behind.  The austerity of the Conservatives' fiscal policy was also hitting up against the stimulus in the monetary policy from the Bank of Canada, and that mismatch did create problems in the overall economy.  And add to that, the Conservatives booked a bunch of false savings in their budget in order to achieve a paper balance, which meant that the Liberals had to also clean up the disasters at Shared Services Canada and the Phoenix payroll system.

With this in mind, we did see a modest effort by Morneau in the early years to say that while the deficits were bigger than initially promised, their spending promises were essentially the same and the deficits were because of the weaker fiscal situation they were left with.  Which was fine, and the government made the political choice to honour their spending promises over their deficit promises.  That's fine and defensible if actually made rather than just offering some trite lines about how they're Helping the Middle Class and Those Hoping to Join Itâ„¢.  The problem is now that they can't keep using that excuse because they've been spending beyond what was initially promised because they've made the decision to spend the returns from their economic growth rather than using it to close the gap.  After all, the "budgets balance themselves" line that the Conservatives like to throw in Trudeau's face was actually about how when you have economic growth, budgets will balance themselves.  The Liberals have economic growth, and that growth would have very nearly balanced the budget by now and indeed, I was almost expecting them to announce that the deficits were smaller than initially reported, followed by a round of self-congratulation and back-patting about how their strategy was working.  And they might have done so, if they didn't decide to keep spending.

I get that there are economic challenges that this government is trying to address, and some of those measures cost money.  The fact that they made these changes to the write-downs for business equipment and depreciations were probably necessary to keep a level of competitiveness in our economy without necessarily matching the US tax cuts (that were themselves deficit-financed and yet the same fiscal hawks who kept demanding that Morneau cut our own rates to match seemed to forget that important aspect, as they simultaneously demanded he balance the budget) did add to the deficit here.  There are also other systemic problems in our economy that the Liberals are actually working to address, whether it's dealing with capacity issues in First Nations, poverty reduction, or investing in reducing barriers to women and minorities so that they can be more productive economically.  These are actually important things.

But we're not being sold on it.  We get trite slogans but very little frank discussion from the prime minister or Morneau about why these things are important to our economy, and why it's worth remaining in deficit for, because right now, I'm not seeing it.  Trite phrases about Helping the Middle Class and Those Hoping to Join Itâ„¢ don't explain to me about building capacity, or about providing training to those who are currently under-utilized in the job market, or even about how their plans to help alleviate poverty will have a greater economic impact.  Trite phrases do make it look like the government is engaging in "virtue signalling" and like the importance they place on gender and minority rights are frivolous and without economic impact.  They do have an impact but you wouldn't know it based on their messaging.

It becomes very frustrating when Canadians can't be treated as though they can comprehend what the government is doing with their tax dollars by either side.  The Conservatives will spin lies about the state of the economy, which the government will let stand unchallenged on the record, while their own pabulum and slogans they respond with come off as "trust us, we mean well."  We shouldn't be subjected to this kind of discourse.  And until we can be trusted with an adult conversation about the nation's finances, the skepticism of the public will remain well deserved.

Photo Credit: Jeff Burney, Loonie Politics

There is a great deal of wailing and gnashing of teeth in Alberta these days around the record price differential for oil exports.  It's a tough nut to crack, no doubt, but it's also one that there's not a lot that any one government is going to be able to solve overnight.  While people keep insisting that more pipelines will help and it's true, they will if they're going to tidewater that's easier said than done, but not for the reasons you may think.  Let me also preface this discussion by reminding everyone that I am from Alberta, and I have family that works in the oil patch, so yes, this is something that I have a personal stake in.

Let's first examine why we're in the situation that we're in, and it's not something that happened overnight.  For decades, there was an expectation that Alberta could more easily sell to a captive US market, given that they imported a lot more than they produced domestically, and we were willing suppliers.  While there has always been a differential in price, owing to the fact that Alberta crude tends to be heavier and has a higher sulphur content, that differential was always expected and manageable.  This is in large part why we didn't have much in the way of pipelines that went to tidewater there simply wasn't the economic case for it.

Over the past decade, the market shifted in ways that no one really could have anticipated.  The shale oil revolution in the US has ramped up their domestic production and displaced a lot of our imports.  The difficulty in building new pipelines was also something that nobody really anticipated, but there is a lot of misleading rhetoric around why that's the case.

The current differential situation is largely a supply and demand problem new oilsands production in Alberta has come online that is pumping new supply into a market that is already overloaded.  Thanks to refinery shutdowns in the US largely for routine maintenance and retooling oil is piling up with nowhere to go.  Lots of new supply with less demand equals lower prices that's the simple math behind it.  Some of this will ease as those refineries come back online and the demand for product starts to ramp up, but it has a lot of people demanding a longer-term solution for this differential issue.  The problem, of course, is that there are few options when it comes to finding one.

Some voices, such as the NDP and Green Party, want more refineries built domestically, believing that there is a "value-added" industry that is somehow being ignored. The problem there is the economics of the proposal refineries are expensive, on the order of $10 billion apiece, and proponents want government subsidies to build them. But refining is a low-margin exercise, and there's a reason why there's been less demand for refining overall across the country, and why more refineries have shut down over the past decade than have been built.

Other voices demand pipelines as the solution, but again, that's not something that can happen overnight either.  Pipeline champions have been labouring under the impression that the current government has been hell-bent on killing them at all costs, mythologizing about the deaths of Northern Gateway (struck down by the courts for lack of proper consultation), Energy East (market conditions didn't warrant it to go further given that Keystone XL was moving ahead and the proponent needed to shift their supply contracts to it), and now the Trans Mountain expansion (and yet the government bought the existing pipeline to ensure it would go ahead).

There have been demands that the federal government kill their Bill C-69, their environmental assessment legislation, and yet nobody can point to any one section in the bill designed to kill pipelines.  The bill is flawed, but the underlying idea is to better pre-scope projects to that proponents don't have to do the unnecessary work of producing hundreds of boxes of documents that nobody will read, but would rather do the work of engaging with local communities up front to ensure a swifter process.  And both proponents and environmentalists point to the level of ministerial discretion that the bill gives over the approval process as being the biggest impediment to certainty, but we also need to remember that a purely technocratic process would mean that nobody is ultimately accountable for decisions, which isn't necessarily a good thing in a democracy.

We also need to remind ourselves that the gutted environmental assessment process that the Harper government implemented didn't ensure that projects got approval any faster, given that everything landed in court, and the reasons why projects keep getting stopped by the courts is because both governments and proponents haven't been doing their due diligence, but were rather trying to cut corners and weasel out of their obligations wherever possible, and the courts were having none of it.  That's not a failure of the regulations, but a failure of governments and proponents to abide by the rules.

So is there an immediate solution to this problem?  There have been attempts to get Alberta Premier Rachel Notley to try and impose a throttling of production in order to keep too much supply from entering the market, thus hopefully increasing prices, but there is no uniformity in the market as how the impacts will be felt, given that some oil companies built their own refineries, and others have better pipeline contracts.  Imposing a solution could simply make things worse, which means that we'll probably have to wait and let the market sort itself out.  It's a solution that won't make the problem go away anytime soon, but these are also problems that are decades in the making, and exacerbated by local supply and demand issues.  There won't be a quick and easy solution, and no easy answers, but simply screaming and demanding that the federal government do something anything won't make it go away.