Finance messages stand in contrast
Nova Scotians next month will witness the peculiar inversion of a Conservative government insisting that large budget deficits are nothing to worry about and an NDP government saying we’re at serious risk of drowning in red ink.
The optimists are the federal Conservatives who intend to bring in a budget March 4 that in their view will stay the course, and in the view of the opposition will do nothing. It’s been purposely leaked that there’ll be no new tax increases or spending programs and the $19-billion remainder of the previously announced economic stimulus program will be competed in the coming fiscal year.
The budget is to be accompanied by a multi-year plan to bring the government out of deficit through spending restraint, exempting health care, education and public pensions. The projections will be closely scrutinized because there’s considerable skepticism among economists that the government can trim its way out of a deficit position that stands at $56 billion for the current year.
Meanwhile, back in Nova Scotia, Finance Minister Graham Steele will deliver his second budget (the first, if you accept the NDP government’s argument that the defeated Tories are wearing the 2009-10 budget) a little more than three weeks after the federal one.
In contrast to federal counterpart Jim Flaherty, Steele has been on tour selling the case that Nova Scotia is in serious structural deficit requiring a tough, multi-year plan of action starting in 2010-11. In town hall meetings around the province, Steel hammers on a consultant’s projection that the deficit of $525 million will balloon to $1.4 billion by 2013 in the absence of decisive measures.
In recent days, to no one’s surprise, Steele has suggested that there’s a public consensus to accept a two-point increase in the harmonized sales tax which would bring in an estimated $345 million annually. Whatever grand design the finance minister may have had for bringing Nova Scotians around to the wisdom of higher taxes has been seriously compromised by continuing public fury over excessive MLA expenses but he may just have to clench his teeth and get on with it.
Scarcely discussed in the politics of budgets is why deficits matter, and some people think they don’t. But demographic realities are finally starting to break through. With various levels of urgency, the implications of an aging population, declining workforce and so on are beginning to impinge on public and political awareness. The financial health of governments matters because there are no credible scenarios that say maintaining essential public services is going to get any easier over the next 50 years. It’s going to get a lot harder at every level. Canada weathered the recession relatively well because national finances were in decent shape. The challenges ahead will be more service and longer.