The right way to cut government spending? Focus on core responsibilities

Posted on March 17, 2018 in Governance Debates – Opinion – To insist that government should continue to do everything it does now, only cheaper, is a fool’s errand: a recipe for substandard services and an aggrieved workforce
March 16, 2018.   Andrew Coyne

Asked by a radio interviewer how he could cut billions from spending, as he has promised, without cutting a single job, as he has also promised, Doug Ford answered: “efficiencies.” Asked again, he answered: “you haven’t done it — I’ve done it.” Asked a third time, he offered: “sharing synergies.” In other words, he hasn’t a clue.

Kathleen Wynne, on the other hand, knows exactly how he’d do it. The Conservative plan, she claimed, “will put as many as 40,000 public sector jobs at risk. That means higher class sizes, longer waits for health care and fewer community supports.” She presented the coming Ontario election as “a stark choice” between “Conservatives who want to slash spending” and Liberals who believe “government is a force for good.”

These are, to be polite, generous helpings of nonsense. The idea that billions of dollars can be effortlessly sliced from public spending without anyone feeling a thing is obviously specious. But so, in its own way, is the idea that no cuts can be made without devastating public services — or that the Conservative proposals amount to “slashing” spending.

To be sure, the cuts in the Conservative platform — to the extent they still have one, or that anyone knows what is in it — are not pocket change. At the very least, the party would have to find the $6 billion over three years the “People’s Guarantee” (drafted under its previous leader, Patrick Brown) pencilled in as “savings from value for money audit.”

If it were also forced to do without the revenues from the federal carbon tax, which the People’s Guarantee had promised to accept but Ford has promised to fight, that’s another $10 billion it would have to find. That’s if it wanted to stick with its promise to run balanced budgets, starting next fiscal year.

That’s a lot of ifs. But suppose they cut the full $16 billion — again, that’s over three years: $3.3 billion in the first year, rising to $7.1 billion in year three (a little less if they merely balanced the budget, instead of running the small surpluses they propose). That sounds like a lot, until you remember how much the government spends overall: last year’s budget projected spending for next year at $135.8 billion. So we’re talking about roughly 2.4 per cent of spending in the first year, rising to 4.5 per cent three years out.

Could Ford cut four per cent out of annual spending just through “efficiencies”? It’s not as easy as it sounds. It isn’t that there isn’t a lot of fat in government. It’s that it’s hard to get at: that’s why it’s there. It’s difficult enough “driving efficiencies” in the private sector. But the nature of government — its vast size, its powerful unions, its many beneficiaries, its activities largely hidden from view until the moment someone tries to change anything, when they are suddenly lit by the flash of a thousand media Klieg lights — is such as to defeat even a management genius, let alone Ford, who is not a genius.

But let’s not exaggerate the size of the challenge, either. The 4.5 per cent the Tories would have to cut from spending by year three is from what it would have grown to by then. Essentially it amounts to flatlining spending in nominal terms — that is, holding it at the level to which the Liberals, after 15 years of herculean effort, have been able to raise it. Adjusting for increases in population and prices, that would wind spending all the way back to the dark days of 2009, under the Dickensian government of … Dalton McGuinty.

So we are a few horsemen short of an apocalypse. Where does Wynne get her 40,000 jobs “at risk” figure? From a piece in Maclean’s by Mike Moffatt, the economist and director of research at Canada 2020, a liberal (and Liberal) think-tank. But Moffatt didn’t say 40,000 jobs would be cut: just that that’s the number you get if you cut 4.5 per cent from what public sector employment will have grown to by then. Of course, that’s also pretty much the number you’d get from attrition, that is if you just refrained from hiring new staff to replace those who left. Again, not quite the conflagration Wynne had been banking on.

The idea that billions of dollars can be effortlessly sliced from public spending without anyone feeling a thing is obviously specious

What would it take to get us there? To shrink the size of government — or even to make room for the ever-expanding maw of health care spending — it is neither necessary nor advisable simply to cut spending across the board. To insist that government should continue to do everything it does now, only cheaper, is a fool’s errand: a recipe for substandard services and a sullen, aggrieved workforce. What’s needed, rather, is to think carefully about the role of government, what it should and should not do.

Lots of things the government does now — subsidizing business comes to mind — shouldn’t be done by anyone: they’re not just wasteful, but harmful. Lots of other things it does are worth doing, but could be done as well or better by the private or non-profit sector: it seems worth finding out, at least, if that is the case, by putting them to competitive tender.

And yes, some of the things government does it could do more efficiently — not by better central planning, as Ford proposes, but by structural reforms, changes to incentives that reward cost-consciousness rather than empire-building: for example, the “internal markets” that are the future of public health care. The sum of all these changes might well be a government that spent less — but as a consequence, not an objective; not at the expense of its core responsibilities, but by focusing on them.

Alas, these are the kinds of reforms that parties need to think about ahead of time, and seek a mandate for. There is no evidence that either leader has done the former, or intends the latter.

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