The focus on the federal deficit has rightly been on the staggering scope of emergency spending, but there has been much less talk about the other big part of the equation: government revenues have plunged due to the economic shutdown.
Indeed, the federal government’s July fiscal snapshot revealed that the government expects a steep drop in both personal and corporate income tax revenues, along with the catchall category “other revenues” which account for a whopping $71 billion of the projected $343 billion deficit.
Suffice to say this is a big problem. In pre-pandemic times, the Trudeau government could have balanced the budget relatively easily with some modest spending restraint. But now, even deep cuts would not be enough to close the gap unless revenues also rebound in a big way.