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Ottawa's Peter Pan budget


March 10, 2010
by Mark Milke

If you care to know what governments desperately want to hide, it’s best to skip speeches and introductory fluff in the beginning of budget documents. Instead, dig deep until you find hard numbers that in past years would be trumpeted.

Here’s a good example, this one on Canada’s federal debt after another five deficit years: Back in the 2007 budget, you could find the total debt figure on page 32. This year, you have to scroll through 175 pages to find a table where the figure “$622 billion” first appears. That $622 billion is the projection for 2015. It’s 36% above and $165 billion higher than the recent low of $457 billion in 2008, this after a decade-plus of debt repayment.

The excuses for this newest debt binge are plentiful and mostly weak, and the federal books reveal Ottawa has no credible plan to attack the deficit. Among the excuses:

1). Part of the current year’s $54-billion deficit can be explained away due to the suddenness and severity of the recession, but not all of it. Much of the red ink is by choice, including the $15.3 billion spent on bailouts for General Motors and Chrysler, ongoing corporate welfare for other sectors, regional development slush funds, and increased transfers to the provinces, which are similarly blind (or don’t care) about stealing from tomorrow’s generation to deliver unpaid-for benefits to today’s.

2). Deficit spending/stimulus is needed to rescue the economy from the recession. Hello. Much of the 2009 stimulus money was only approved in late January, about five months before the recession ended on June 30. To credit government spending for ending the recession (even though the recession was already done before most government stimulus cheques were cashed and before most shovels were in the ground, or to worry that $10, $20, or $40 billion less in annual spending by Ottawa would throw a $1.2 trillion economy back in recession) is to live in a time warp in which public sector intentions can affect the economy to a greater degree than actual private sector investment and spending. It’s the latter that rescued Canada from the recession, not late-to-the-party “stimulus” cheques.

3). The increased debt and continued stimulus are the price of compassion for those affected by the recession. But unemployment insurance money was still going to be paid, and EI had nothing to do with stimulus money anyway.

Much of the past and present stimulus/deficits have come at the expense of future growth. For example, financing a home renovation this past year can be subtracted from future hammers, nails and labour.

Added debt also constricts future choices as tax dollars won’t be available to be used privately or publicly. Thus, even the social programs of tomorrow will suffer because of today’s excess spending. Those who don’t get that should look at public debt charges—$30 billion this year, $40 billion in 2015—and ask what $30 billion or $40 billion can buy in the way of social programs, or as economic incentives if overall personal or business tax levels were reduced by such amounts.

Not that it matters, given Ottawa’s minority government has decided to borrow from the future to spend now.

Government stimulus measures had little to do with ending the recession; credit near zero interest rates instead. More stimulus spending also won’t prevent another recession if a weak world economy and defaults in Greece, Japan or California push us all back into the economic soup.

There’s also no plan to bring the budget back into balance, at least not one worthy of the name. Finance Minister Jim Flaherty says he’ll find a microscopic $17.5 billion in savings over five years, which represents 1.4% of the $1.2 trillion in total program expenditures over five years. Most families could cut 5%, 10% or 20% from their budgets if they had to, but the federal Conservatives can’t from the collective public budget.

Looking through the 424-page budget reveals no substantial cuts to spending, including no reforms to public sector entitlements, salaries and pensions to bring them into line with private sector realities.

Quite the opposite: “Employee pension and other benefits are not subject to the general operating budget freeze,” reports the budget on page 183.

It’s hard to know what to make of this budget. Despite 424 pages, it comes across as the single most un-serious and flimsy budget document in recent memory. It’s the Peter Pan budget, created on a wish and a prayer. It hopes the world economy recovers instead of soberly facing up to the possibility that Canada’s federal government should get our fiscal house in order. 

I hear Paul Martin is now consulting for some European governments. The Conservative government would do well to put him on retainer here.

Mark Milke is the director of research for the Frontier Centre for Public Policy www.fcpp.org, a Winnipeg-based think tank focusing on policy choices that will help Manitoba.

More budget coverage: Manufacturing left to its own devices in Budget 2010