Deficit could hit $25B and still honour Liberals' 'fiscal anchor'

With uncosted election promises piling up on top of unforeseen shortfalls in the underlying fiscal plan, Prime Minister Justin Trudeau has emphasized the more-reachable fiscal anchor in recent days.

"We will continue to decrease (the debt-to-GDP ratio) every single year because that's important for the fiscal health of our country," Trudeau said Wednesday, after casting further doubt on the $10-billion annual deficit target because of economic challenges.

"We always targeted modest deficits, we had hoped it would be around $10 billion we will see if we will be able to hold at that level."

The Liberal Party is promising to run deficits of up to $10-billion a year over the next three years, touting a new infrastructure program as the best way to create economic growth and help balance the books by 2019.

Economist Moffatt, who stress-tested the fiscal numbers in the Liberals' election platform, said if nominal GDP growth returned to a more-normal level in the coming years -- of about 3.5 or four per cent -- then the government could probably run deficits up to $25 billion without pushing the ratio up.