Deficit of debate on economy
TheStar.com – Federal Election – Deficit of debate on economy
September 24, 2008. Carol Goar
Stephen Harper is firm. A Conservative government would not run a deficit.
Stéphane Dion wavered briefly, then made the same pledge on behalf of the Liberals. “A Liberal government will never put Canada in a deficit. Period.”
Jack Layton, determined to shed the New Democrats’ reputation as a tax-and-spend party, says he would balance the federal budget every year.
And Elizabeth May says the Green party would produce a $10.9 billion surplus in its first year in office.
This is what passes for responsible economic policy in the 2008 national election campaign.
But is it? Do Canadians want a government that will slash programs, sell off national assets, reduce health and education transfers to the provinces and disinvest in public infrastructure to keep Ottawa’s “fiscal house in order”?
According to pollsters, the answer is yes. Any politician who countenances a budgetary shortfall will be punished at the ballot box. Any party that refuses to rule out the possibility of red ink will lose its credibility.
This attitude is understandable. Ottawa lived beyond its means for 30 years. It took a tremendous effort of will – and painful cuts in health care, post-secondary education and social services – to break the deficit-spending habit.
For the last 10 years, the federal budget has been in surplus. Four successive finance ministers – Paul Martin, John Manley, Ralph Goodale and Jim Flaherty – have praised Canadians for their fiscal rectitude and vowed to keep the virtuous cycle going.
That was the right message when the economy was expanding, revenues were pouring into the federal treasury and the outlook was sunny. Today’s circumstances require a different debate.
Regrettably it is not happening. None of Canada’s political leaders has the courage to initiate it.
The nation is on the brink of a recession. No one knows how severe it will be. Forecasters have consistently underestimated the vulnerability of the financial system to the subprime mortgage crisis in the United States. To add to the volatility, commodity prices are bouncing around erratically and speculators are exacerbating the market swings.
Against this backdrop, federal economists can only guess how much money Ottawa will need to pay its bills. If they guess wrong – and their 1.7 per cent growth projection in the 2008 federal budget does not inspire confidence – the only way to avoid a deficit will be to cut spending.
No doubt some voters will applaud. But others will have nowhere to turn when the bottom falls out of their world.
A similar mindset prevailed in 1930. It had taken Canada seven years to work off the expenses of the First World War. Taxpayers expected their political leaders to be frugal.
Prime Minister William Lyon Mackenzie King, ever sensitive to public opinion, kept a tight rein on federal spending despite plunging farm incomes, falling industrial wages and pleas from the premiers to help the jobless. On April 3, King told the House of Commons: “As far as giving money out of the federal treasury to any Tory (provincial) government in this country for these alleged unemployment purposes, I would not give them a five-cent piece.”
Seventy-eight years later, no prime minister would be so blunt. But any contender for the job who categorically forswears deficit financing is saying much the same thing: If welfare costs balloon, the provinces and municipalities will be on their own. If businesses fail, their workers will have to absorb the blow.
No government should undertake deficit financing casually. It is often addictive. It leads people to believe they can have more than they pay for. It fuels inflationary pressure. And it leaves future taxpayers on the hook for the current spending.
But keeping the government’s ledger balanced as the economy crumbles also carries high risks. The damage can be irreversible. The personal hardship can be incalculable.
Voters deserve a chance to hear both arguments, weigh their options and decide.
They won’t get it this election. There is only one choice.