Election 2015 is shaping up, at least on fiscal policy, as a choice between pro-deficit and anti-deficit. Justin Trudeau says the government he wants to form will run three consecutive deficits. Mr, Harper and Mr. Mulcair say they will balance their budgets and in articulating what they will do are very clear that deficit budgets are contrary to the needs of this economy and the interests of Canadians. Mr. Trudeau contends that deficit spending, particularly on public works/infrastructure projects is necessary to stimulate a slow growth economy.
It is noteworthy that the other two leaders are committed to extensive infrastructure spending as a well, perhaps not as extensive, but with billion dollar price tags nonetheless. Indeed, Mr. Harper can claim to have already invested billions in public works in the course of his tenure.
The issue then is not whether we spend money on these public works projects – everyone agrees there is need for renewal just to maintain what we have and for new investment, particularly in the area of transportation. This is not a matter of stimulating the economy, but a matter of necessary spending. And it is axiomatic. If you spend money on capital infrastructure, you will provide some stimulus for the economy – with jobs creation and materials acqusition. That is not really the issue.
The issue is, what is the correct level of government spending – not on public works – but on everything. What no one is talking about but we need to talk about is the effect of spending beyond our means.
In the context of the nation what does it mean when we aren’t able to balance our budgets. It means we accumulate debt. And just because it is government debt does not mean there aren’t consequences for the average citizen. The consequence?
Simply stated and cutting through mind numbing numbers and statistics, the answer is easy to grasp. The effect of many years of deficit spending, always for essential public purposes, always to achieve national priorities, has resulted in the current federal public debt of over $616 billion and counting. This is $17, 242.00 for every man woman and child living in Canada. Servicing that debt – interest costs- consumed 10% of the federal budget in the 2013 -2014 fiscal year. This is some $28.2 billion for that year.
Servicing the debt – the interest we pay on our debt – is money obtained from citizens every year in the form of taxes – the same taxes that are needed to fund programs (including infrastructure projects). In Canada, the public debt today (the federal government and provinces combined) is over $1.2 trillion. It is an astonishing number. And it continues to grow because too many politicians find it easier to borrow and spend than to say no.
They don’t seem to appreciate that saying no to this generation means saying yes to the next. And they don’t seem to appreciate what we could be doing with those billions of tax dollars today if we hadn’t spent it yesterday.
Unfortunately, promises made in the euphoria of the campaign are often not honoured in the aftermath. And campaign mathematics is always a little fuzzy.
The trouble with announcing you intend to engage in deficit spending is that you will and likely in a much bigger way than you intended. When it comes to fiscal policy, there are always more demands for spending than sources of revenue. At least when you promise to balance a budget, the reality might more closely resemble the promise.
Balancing the cheque book is an end in itself. And avoiding deficits should be a national priority.
September 20, 2015