In a fiscal update Wednesday, Canada's finance minister ditched a promise to balance the budget next year and instead rolled out measures to help companies compete with the U.S.
The delivery of $17.6 billion Canadian dollars ($13.3 billion) in new spending and forgone revenue over six years comes after U.S. President Donald Trump brought in massive U.S. corporate tax cuts that have taken a bite out of investment in Canada.
The Canadian measures include accelerated capital cost allowances and more tax write-offs of equipment and machinery to encourage businesses to invest in Canada, sooner. The government also pledged to build additional port and rail infrastructure to get more goods to Atlantic and Pacific ports and tap new overseas markets in an attempt to diversify trade.
Nearly 80 percent of Canada's current trade is with its U.S. neighbor. The government also offered a hand to struggling Canadian media by allowing non-profit news organizations to apply for charitable tax status and providing tax credits to newsrooms that expand local coverage as well as to Canadians who buy digital newspaper subscriptions. Opposition parties spent the day hammering Prime Minister Justin Trudeau for breaking his balanced budget promise. Trudeau had vowed in the 2015 election campaign to post small budget deficits of about CA$10 billion per year, before returning to balance in 2019 when he will again face the electorate.
In a speech to the Canadian Parliament, Finance Minister Bill Morneau said dealing with "a new administration in the United States" has posed "some interesting challenges." "The current U.S. administration has moved forward with an aggressive package of tax cuts for large corporations," he noted.
"Some have lobbied us to match those measures," he said. "If we were to do that, it would add tens of billions in new debt and it would do more to worsen income inequality in Canada than improve it." In his fiscal update, growth was forecast to slow to 2.0 percent in 2018 and 2019, while the government plans to continue posting deficits of more than CA$10 billion through to 2023-24. It was estimated in Morneau's February budget at CA$18.1 billion this year. In the update, higher spending (CA$344.1 billion) was forecast to outpace a boost in revenues (CA$328.9 billion), but the deficit was expected to remain unchanged. Meanwhile, the revised federal debt was predicted to rise to CA$687.7 billion or 30.9 percent of the economy this year.