As Manitoba budget day looms, Canada's most popular premier prepares to solve a financial riddle

For the federal Liberal government, it had to be disheartening to see Manitoba Premier Wab Kinew — the most popular provincial leader in Canada, according to a recent poll — smiling and shaking hands with Conservative Leader Pierre Poilievre.

The Opposition leader doesn't meet with many premiers. He doesn't have to. Poilievre's party is riding a wave of popularity, even as he appears to eschew political convention.

But the opportunity to rub shoulders with Kinew on Thursday at the Manitoba Legislative Building presented an opportunity for the Conservative leader.

By exchanging compliments with Kinew, one of the few left-of-centre premiers left in Canada, Poilievre got to present himself as a very statesmanlike prime minister in waiting. 

The last thing Justin Trudeau wanted to see going into the weekend was his political arch-nemesis making nice with one of the prime minister's few remaining ideological allies.

How this shakes out for Kinew and Trudeau over the remaining 18 months before the next federal election is expected is unclear. Manitoba's newish NDP premier has yet to do much governing of his own, at least in the form of consequential decision-making.

That is about to change.

On Tuesday, Kinew and his finance minister, Adrien Sala, will present their government's first budget, a spending plan that has to outline how the two leaders can fulfil a series of somewhat disparate NDP pledges.

On one hand, Kinew and Sala have promised to improve health care, upgrade Manitoba's energy grid and continue with some of the tax cuts brought in by the former PC government. Those are costly propositions.

On the other, they've promised to eliminate Manitoba's suddenly staggering deficit — can it top $2 billion by the end of the fiscal year, which happens to be today? — over the course of a single term.

"There's been a tremendous buildup to this event, because the actions of the still relatively new government six months into its life have been about mainly symbolic announcements," along with a few budget teases, said Paul Thomas, professor emeritus of political studies at the University of Manitoba.

Expectations are high for the NDP government and especially for Sala, who has been asked to help Kinew fulfil his spending promises while cutting back on spending, said Thomas.

In purely logical terms, it doesn't seem possible for any government to do both. Sala doesn't agree, however.

"I think we're going to show that we can," Sala told reporters Thursday during a pre-budget photo op. 

"We can find that path and it's about responsible decision making, responsible budgeting — something unfortunately we haven't seen for some time."

'You can't run deficits in perpetuity'

The implication Sala is making is the PCs were not responsible with the public purse when they were in power. Thomas said he expects to see the finance minister continue to blame the previous government for Manitoba's fiscal predicament.

This is a dangerous rhetorical path for Sala. Prior to one spendthrift PC budget during a 2023 election cycle when former premier Heather Stefanson was desperate to remain in power, both she and Brian Pallister had to devise budgets in the midst of the COVID-19 pandemic.

No credible observer can blame them for struggling during that remarkable financial period.

As well, at the very start of the pandemic, a Pallister government actually balanced Manitoba's books at the end of five consecutive years of cost cutting.

Sala could argue, credibly, that the PC austerity in the late 2010s created long-term problems for Manitoba in the form of widespread understaffing as well as infrastructure deficits. 

Conversely, the now Opposition Progressive Conservatives could argue the scissors were required after six consecutive years of loose fiscal control by former NDP premier Greg Selinger.

The danger for Kinew and Sala is a revival of Selingeresque fiscal doctrine. During his time in office, Selinger appeared to disregard the threat posed to Manitoba's financial health by mounting deficits, which led to rising interest payment burdens, which tend to lead to credit downgrades and the canary-in-a-coalmine fiscal indicator known as a wider bond split.

Those, in turn, tend to push borrowing costs even higher, making it more difficult to control deficits. This upward spiral can be difficult to stop once it gains momentum.

"You can't run deficits in perpetuity. That's just not workable in financial terms," said Thomas.

"At some point, paying interest on the debt begins to eat into your capacity to spend on health and education and social services, the environment and all of those things that you stand strongly in favour of investing more in."

At the same time, Thomas said he does not believe many Manitobans care that much about deficits. What they do care about is fairness, something he said he expects to see Sala and Kinew use as a theme when the budget comes out on Tuesday.

"They'll try and defend the retention of some of the tax cuts introduced by the PCs," he said, referring to the adjustment of the personal basic income tax exemption and, for 2024, the 50 per cent rebate on provincial property taxes.

That rebate is slated to disappear in 2025 and be replaced by a flat $1,500 credit that will shift the burden of provincial property taxes to more valuable properties and likely raise more money for the province — though the NDP government is not yet saying by how much.

That move will please the NDP's base, which by and large supports the idea of taxing affluent Manitobans more aggressively.

What remains to be seen is how long Wab Kinew will continue to earn the favour of a majority of Manitobans and remain Canada's most popular premier.