NATO spending pledge could push federal deficit as high as $92B: think tank – National

The C.D. Howe Institute predicts Ottawa’s recently announced spending plans — which include a much bigger defence budget — will drive its deficits markedly higher in the coming years.

In a new analysis released Thursday, the think tank said it expects Canada’s deficit to top $92 billion this fiscal year, given Prime Minister Mark Carney’s plan to meet NATO’s defence spending target of two per cent of GDP.

C.D. Howe expects deficit growth to slow after this year but predicts deficits will still average around $78 billion annually over four years — more than double the level forecast by the parliamentary budget officer before the spring federal election.

But the report also considers this an “optimistic” scenario that takes into account “speculative savings” in the form of new revenues and cost-cutting efficiencies outlined in the Liberals’ spring election platform.

If those savings aren’t realized, C.D. Howe estimates the federal deficit would average closer to $86 billion per year over the same time frame.

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Carney’s defence spending announcement in early June came with an extra $9.3 billion in spending this year. He made the commitment before NATO allies pledged at last month’s summit to ramp defence and security budgets up to five per cent of GDP by 2035.

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C.D. Howe’s analysis sees defence spending adding a “staggering” $68.4 billion to the federal deficit a decade from now.

In addition to accelerating defence spending, the Liberals recently pushed forward legislation to speed up major project development and delivered a one point cut to the lowest income tax rate.

The Liberal government did not publish a spring budget this year and has said it will instead push the planned fiscal update to the fall.

In its report, the C.D. Howe Institute accuses Ottawa of making “costly commitments’ without showing the numbers to…