Trudeau Could Play Electoral Split on Red Ink to His Advantage

Canadians are evenly split on whether their government should reduce its Covid-inflated budget deficit, as Justin Trudeau prepares to push the nation deeper into debt.

A Bloomberg News survey this month by Nanos Research found 41% of respondents are in favor of continuing with large shortfalls to provide ongoing support to Canadians, versus 43% who want them to be lowered to at least pre-pandemic levels even if it means fewer benefits.

Trudeau Could Play Electoral Split on Red Ink to His Advantage

Trudeau, who is seeking to rejuvenate his government amid an ethics scandal, has promised an ambitious new spending plan to drive the recovery and fill gaps in the public health and social safety nets exposed by the virus. That would likely keep deficits at historically elevated levels for years, building on the C$380 billion ($289 billion) in new debt, or about 17% of total output, already budgeted this year as response to the downturn.

While showing the nation is divided on the issue, the results highlight why higher deficits could be politically worthwhile for Trudeau. They will become a major wedge issue that can galvanize voters in an electoral system where winning 40% is usually enough to form government.

“The pandemic has likely created two Canadas, with the receipt of stimulus being a new emerging schism in the electorate,” said Nik Nanos, chief data scientist at Nanos Research. “Those who want or need stimulus and big deficits to continue may be very motivated to get out and vote because it is the difference between putting food on the table or not.”

Trudeau Could Play Electoral Split on Red Ink to His Advantage

Another political incentive to pursue deficits for Trudeau is that they are most popular in two key battleground provinces, Ontario and British Columbia -- and among women, with whom he already leads in the polls.

The government will unveil the next elements of its agenda in a Sept. 23 speech to open a new session of parliament. Trudeau has said the pandemic offers an “unprecedented opportunity” for a long-term recovery plan. Economists expect Canada to see budget deficits in excess of C$100 billion for at least another year, even without new measures.

After losing his parliamentary majority in October, Trudeau would need to win backing for the spending plan from at least one opposition party with the left-of-center New Democratic Party the most likely candidate. Erin O’Toole, the new leader of the main opposition Conservatives, told the Globe and Mail newspaper last week he wants to eliminate the deficit in about a decade.

The Trudeau government’s minority status also means the prime minister will likely need to take the plan to the electorate sooner than later. The speech to parliament will be put to a vote in the legislature, as will the next federal budget, expected in spring.

At a press conference Wednesday, Trudeau declined to comment whether the government’s new spending plans will include a new budget goalpost, now that the virus has forced it to abandon a declining debt-to-gross-domestic-product ratio. Last week, one of his top economic aides, Mike McNair, said on Twitter the use of “fiscal firepower to support households and businesses is a required strategy for growth.”

Support for letting budget deficits run high is strongest in British Columbia, with 51.8% in favor, and Ontario at 44.5%. The picture changes in Quebec and the energy-rich prairie provinces. A near majority of respondents in those two regions said they are in favor of reining in red ink to at least pre-pandemic levels.

There is also a big gender split on the question. More than half of male respondents preferred lower deficits, while 47% of women said they want the government to keep running large budget gaps if it meant retaining support levels for Canadians. There is also more support for large deficits among older Canadians, with youth less likely to back the policy.

Few Canadians support a full return to balanced budgets, with only 14% favoring a zero deficit if it means reduced support. The hybrid telephone and online random survey of 1,039 Canadians was taken Aug. 31 and Sept. 3 and has a margin of error of 3.1 percentage points

MaleFemaleB.C.PrairiesOntarioQuebecAtlantic
Cut deficit to at least pre-pandemic levels, even if it means reducing support53.3%33.8%39.7%49.2%40.6%48.3%33.6%
Keep running large deficits to continue supporting Canadians34.1%47.3%51.8%31.2%44.5%35.1%43.9%
Unsure12.6%19.0%8.5%19.6%15.0%16.6%22.5%

©2020 Bloomberg L.P.

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