Fact check: Can the federal deficit be eliminated in 10 years without cuts?

The federal government is running a large budget deficit according to recent projections from the Parliamentary Budget Officer (PBO), it's on trackto spendabout $138.2 billion more than it's taking in this year. That's compared to a$334.7billion deficit in 2020-21. The reason for these big deficits isprimarilyincreased spending and other effects on the economy relating tothe COVID-19 pandemic.

So isit possible to get from the current deficitin the hundreds of billionsto balanced books within a decade?

On Tuesday, Conservative Leader Erin O'Toole said a government led by him would bring the federal books back to balance within 10 years without cutting government spending outside of rolling back temporary support programs related to the pandemic.

"We'll grow spending in a few key areas, like health care and wellness, while keeping it under control everywhere else," O'Toole said. He added that his party's fiscal policy would "responsibly wind down emergency supports, get the economy growing," and "restrainthe growth for spending."

At an announcement for the Liberal Party's platform Wednesday, Prime Minister Justin Trudeau called the proposal to balance the budget without cuts "magical thinking."

In this fact check, CBC News asked an expert.

Deficit falls as pandemic ends

Trevor Tombe is a professor of economics at the University of Calgary and co-director of Finances of the Nation,an online publication which features analysis and commentary on Canadian fiscal policy from a non-partisan perspective.

"We should not look at deficits right now as indicative of what's normally the case," Tombe said. "These are exceptionally highlevels of borrowing."

Temporary emergency government benefits tied to the pandemic, such as the Canada Response Benefit (CRB), the Canada Emergency Wage Subsidy (CEWS) and more, are expected to end as businesses open up and life returns to normal.

The end of these programsisgoing to have big implications for federal coffers.

According to an outlook from the PBO released near the start of the election campaign, the deficit is projected to decrease to just under$25 billion by 2025-26.

"That gives you a better sense of scale in terms ofthe size of the deficit the next government will need to think about," Tombe said.

While that is a projected deficit cut of more than $100 billion infive years, the government is still projected to be in the red about $25 billion. What options does a government have to eliminate it especially ifcuts to government spending areoff the table?

Growing up

O'Toole is not wrong to look toeconomic growth as a plausible means of eliminating the deficit, Tombe says.

"A growing economy means higher levels of income. A growing population is going to mean more taxpayers. So, roughly speaking, federal revenue is going to grow along with the size of the Canadian economy," Tombe said.

But would annualeconomic growth rates have to be at unrealistic or unprecedented levels to achieve balance? Tombe says they wouldn't. He estimates that an averagereal gross domestic product (GDP)growth of around 1.8 per cent per year would allow the federal government to balance the budget by 2031.

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"If revenues grow, as they normally do with the economy overall, then by 2031 we're looking at federal revenues of about $560 billion, give or take, that year," he said.

"In terms of total spending, if it grows at the rate of population plus inflation, then we're in a situation where, in 2031, we have about $560 [billion] just a little shy in total spending. So that would be your point of balance."

This can even be done without necessarily increasing taxes, Tombe says.

"The pure arithmetic is quite straightforward," he said.

Increased health spending

It's important to note that O'Toole is proposing no reduction tooverall federalgovernment spending. His proposal includes a spending increase in health initiatives, for example, so there will likelybe cuts in some other areas.

"All governments cut something, somewhere, and they increase spending elsewhere. Absolutely every party has something that they would cancel," Tombe said.

The PBO has not yet fully costed the Conservative Party's platform, so it's not known how welltheirpolicy proposalsfit into thepledgeto balance the budget.

And while the Liberals have not formally committed to a similar timeframe forbalancingthe budget, Tombe says it's similarly not out of reach should they continue governing.

O'Toole's proposal echoes the way oneof his predecessors as Conservative leader, Stephen Harper, eliminated the deficit in the years following the 2008-09 financial crisis, Tombe says.

The government ran large deficits as part of a stimulus plan. By 2015, federal government spending, adjusted for inflation, was back to2008 levels and the federal books were balanced.

There's another way to balance the books. For an example, one can look atthe mid-'90s, says Tombe, when Prime Minister Jean Chretien and Finance Minister Paul Martin substantially reduced the amount of federal government spending to balance the budget.

Fact check: true (excluding temporary emergency support programs tied to the COVID-19 pandemic,)but governments could choose to redistribute allotments in overall spending, which could result in cuts in some areas.