Finance MPs juggling calls for more spending with shaky economy

As the pre-budget sprint gets underway, the Liberal government finds itself squeezed between calls to invest more public cash and spreading jitters about the wobbly economic outlook.

With the budget expected late next month, a parliamentary committee started fielding formal pitches Tuesday from lobbyists, First Nations leaders and experts on what they think should be included in the plan.

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Some witnesses called for a bump in government spending this year for projects such as improving public transit and ensuring clean water starts to flow in more aboriginal communities.

Others used the forum to stress the importance of fiscal restraint during tough economic times.

Caught in the middle is the Liberal government, which faces the challenge of drawing up their first budget in an economy dragged down by stubbornly low commodity prices, especially oil.

The budget prep work is further complicated by the billions of dollars in spending commitments — some of them as yet uncosted — the Liberals made during the fall election campaign.

For example, Dale LeClair of the Assembly of First Nations gave the hearings a sense of the potential cost of Liberal promises to lift the two-per-cent cap on federal funding for First Nations communities and ending all boil-water advisories on aboriginal reserves within five years.

The AFN estimates a total of about $25.5 billion in federal money has failed to flow to First Nations communities since funding was capped in 1996 — not including another $3.3 billion in the upcoming budget, LeClair said.

Deficit will be bigger than $10b

The potable water pledge, meanwhile, will require an additional initial investment that is going to be "quite large," he added.

All of the Liberal vows are supposed to fit within promised deficit ceilings designed by the party to reassure voters that expenditures would not spin out of control.

Last week, however, Prime Minister Justin Trudeau acknowledged in an interview with Montreal's La Presse newspaper that his government would no longer fulfil its pledge to keep the 2016-17 deficit under $10 billion.

In that same interview, Trudeau also raised doubts whether the Liberals would live up to its other vow to balance the books within four years — a central pledge in the election platform.

On Tuesday, Finance Minister Bill Morneau appeared to back further away from a commitment Trudeau had called "very" set in stone.

"We still have the goal to balance the budget, but we also recognize that the task will be difficult in our economy," Morneau told the House of Commons during question period.

Debt to GDP ratio to lower

Instead, the government has been emphasizing its other, more flexible "fiscal anchor," which is to continue lowering Canada's debt-to-GDP ratio during its mandate.

Morneau reiterated the government's intention to prioritize spending measures that will help boost the economy and create jobs. To generate growth, the government is banking on increased infrastructure investments, tax-bracket changes to provide relief on the middle-income bracket and changes to child benefits.

"We are going to make investments in the short term that are going to help our economy, but we're going to focus on investments that, over the long term, will ensure a more productive Canada," Morneau said as the hearings took place down the hall.

Those investments, he said, "will help Canadians today and Canadians tomorrow and will get us, over the long term, back into budget balance."

It remains unclear how much fiscal room Morneau's budget will have left for other initiatives.

As the consultations got underway Tuesday, MPs heard a wide variety of requests from witnesses — from beefing up the employment insurance program and invest in a "green" jobs skills program.

"Canada has a comparatively strong fiscal position and has ample fiscal room to undertake significant, long-term investments in public, physical and social infrastructure," said Angella MacEwen, senior economist for the Canadian Labour Congress.

Targeted investments could improve long-term productivity while helping to fix the country's social safety net, she added.

Other witnesses, such as John Williamson of the Atlantic Institute for Market Studies, called on the government "not to become hooked on chronic deficit spending."

The committee is scheduled to hear pre-budget requests from some 90 interest groups over a four-day blitz that ends Friday. Morneau is expected to appear next week.