Lots of options for spending cuts

NationalPost.com – Opinion
Published: January 26, 2010Terence Corcoran,  Financial Post

The Legendary Immovable Spending Blob appears to be descending over Ottawa’s pre-budget consulations. Forecasters now predict the federal government is heading for years of deficits unless something is done. By 2013-14, Ottawa could still be racking up annual deficits of $19-billion, according to the Parliamentary Budget Office. So what, exactly, is that something that must bedone? Enter the ISB, ritually dragged onto the scene by a little army of volunteers who will tell you that, no matter what the state of the economy, the one thing that can’t be done is spending cuts. Just impossible. Beyond the rhealm of possibility. Don’t even waste time thinking about it.

The Rev. Jeffrey Simpson did his bit last week to prop up the idea that Ottawa’s spending is more or less immovable, a great fixed thing that can never be reduced in size. It can grow, but never be cut. As a result, when Ottawa moves into deficit territory, there is only one alternative.” The economists all believe,” said Rev. Simpson in one of his regular sermons, his iPod on direct download from the higher powers in Ottawa, “the federal government should raise taxes to eliminate the defict with certainty, pay down debt to prepare for aging, and give Canada a buffer against future shocks.” The preferred option: raise the GST.

Spending, apparently, cannot be cut. Back in 2001, when Paul Martin was still finance minister and federal spending was a mere $130-billion a year, the idea of spending reduction was seen as just not feasible. There is nowhere to cut, no fat to trim, and no program that can be scaled back. In the wake of his own 2001 budget, Mr. Martin said: “People always come back and say, ‘You can’t find the money to do that within $130.5-billion? And the answer is no.'”

This year federal spending is expected to top $270-billion on its way to $300-billion by 2015, an increase of 160%. So we have gone in a little more than a decade from a place where Paul Martin could find nothing to cut from $130-billion to a place where nothing can be cut from $300-billion.

This is ancient history now, but back in 2001, just to get the ball rolling, I recommended some possible reductions in Ottawa’s annual expenses, a suggestion-list of cuts. The Western and Atlantic business subsidy agencies ($500-million), the Technology Partnerships Program ($200-million), the Sustainable Development Foundation ($100-million), the Prime Minister’s Africa Fund ($500-million), the antitobacco marketing campaign ($200-million), the green municipal funds ($250-million), new cultural programs ($500-million).Needless to say, these ideas were ignored and I imagine most of these spending categories have since been renamed and expanded.

So the battle must be waged anew to drive the Immovable Spending Blob out of Ottawa. Spending can and must be cut. Fortunately we have two rough blueprints at hand to get us all started. Over at Maclean’s magazine, Andrew Coyne has crafted a handy plan to trim federal spending over the next few years. In “How to cut $20-billion from spending without really trying,” Mr. Coyne proposes cuts that would bring the budget deficit to zero over 5 years. A useful but tougher companion document is the Canadian Taxpayers Federation’s pre-budget call for about $20-billion in cuts over three years.

In brief, the Coyne cuts would include $6-billion in reduced transfers to the provinces between now and 2014. Via Rail and AECL should be put on full cost recovery to save $500-million. Half the CBC allocation should be raised by the CBC via direct cable fee, saving $500-million. Assorted regional development agencies would be shut down ($700-million). Handouts to private industries could be trimmed by $1-billion. Tax breaks for Labour Sponsored Venture Capital Funds, farmers, fishers, resource industries would save another $2-billion.

The taxpayers federation has similar ideas in mind, including cuts in equalization ($4.3-billion), a 5% reduction in departmental spending ($8.5-billion), and $2.5-billion saved by reducing regional development spending and crown corporation outlays. A public sector wage freeze and a freeze in public sector hiring, along with reductions in spending on consultants and advertizing could also be used to bring the deficit under control.

Spending can’t be cut? Not true. There are lots of options. And now’s the time for Ottawa to start making a list.

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