Trudeaumania strikes back
The Liberal government’s recent cabinet shuffle signalled no change of course on fiscal policy, in spite of the dramatic deterioration, over a two-year period, of Canada’s projected fiscal situation from budgetary surpluses to deficits extending to midcentury. Andrew Coyne and Colby Cosh, writing earlier in the National Post, evinced little worry on the subject. Does this sound the death knell of fiscal responsibility as a widely accepted idea? I certainly hope not because, as George Santayana wrote, those who cannot remember the past are condemned to repeat it. Paradoxically, while many remember his quote, they frequently forget history’s lessons.
For those of us who found it painful to endure the reign of Trudeau Père, a lot is worryingly similar about Trudeau Fils. The admiration of China’s one- party rule and affection for Fidel Castro. Policies unfriendly to Western Canada. Impoverishment of the military. A bureaucratic centre- l eft orientation, with its attendant waste. A sense of self-entitlement and condescension. Charisma that diverts attention from substantive problems, combined with an authoritarian bent. Pierre’s “Well, just watch me” insouciance, regarding the impending suspension of civil liberties during the 1970 October crisis, has its parallel in Justin’s imperious 2015 declaration that it would be the last time Canadians elect MPs the way we have since Confederation.
The list goes on, but my focus is how out- of- control spending and ballooning debt will inevitably come to grief, damaging Canada’s economy and undermining the standard of living of current and future generations. Recall, national debt increased 10 times from 1968 to 1984. We went from near fiscal balance to a $37 billion deficit, while federal spending rose from 25 to 42 per cent of GDP. Notwithstanding Pierre Trudeau’s iconic status, we cannot afford a repeat of his fiscal mess.
The result was predictable then and it is predictable now. Indeed, the Depart- ment of Finance, with its beady- eyed look at economic data, revealed the stark numbers in its latest Update of Fiscal Projections.
During the election we were assured that sunny ways would cure all ills, that a “modest” deficit and aggressive infrastructure spending would stimulate the economy and achieve superior growth. That debt would quickly decline in relation to GDP and the books would be balanced in the last year of the government’s mandate. It has all come to naught in a mere 15 months. The Trudeau government has been mugged by reality and its core economic strategy has crumbled.
In spite of spinmeisters’ attempts t o muddle t he issue, we can agree on one thing. Challenging demography did not suddenly emerge a couple of years ago. In November 2014, the Department of Finance forecasted balanced budgets and the elimination of the federal debt before 2040. That reflected the Conservative government’s prudent approach to fiscal policy, taking into account the impact a low birth rate and aging population would have on growth. As to the collapse in oil prices, they were by then already down over 30 per cent, and on a rapid decline. The fundamental difference between then and now is the Liberal approach to spendi ng, a function of failed ideology, untenable political promises and generational selfishness.
This ideology holds that government can solve most problems ( proven false by a bitter history of socialist failures). That green technology can replace fossil fuels at reasonable cost (coal, oil and gas will represent 74 per cent of global energy in 2050 and Ontario’s catastrophic electricity fiasco is ample evidence that ignoring economics and science is doomed to be a costly failure). And that stimulus spending unfailingly produces a multiplier effect in the economy ( apparently not, according to Finance forecasts).
The political promises relate to climate change policies that impose job- killing regulatory and tax burdens and preclude the full and timely development of our natural resources ( underscored by Trudeau’s latest bombshell that we must “phase out” the oilsands). They include tax policies that reduce competitiveness and affordability. And, of course, spending that quickly spun out of control, most of it unrelated to infrastructure.
The selfishness is in the massive borrowing for current expenditures. By 2045, the Finance Department models project national debt growing to an alarming $ 1.5 trillion (versus the $ 11 billion in net assets it forecasted two years ago), saddling our children and grandchildren with a crushing annual interest bill of $ 82 billion. Parenthetically, it is ironic that millennials, who are most captivated by Justin Trudeau, are least helped by his policies now and will be the most hurt down the road.
Fiscal responsibility need not entail austerity. To the contrary, it enhances prospects for economic growth, providing the means to address Canadians’ critical social needs.
The Finance Department laid out a base case, which can be considerably better or worse, depending on growth, inevitable recessions and unpredictable geopolitical events. But this is the government’s median estimate. It is therefore prepared to live with the results. That is what is so profoundly troubling.
MODEST DEFICITS AND A PROMISE TO RETURN TO BALANCE HAVE ALL CRUMBLED IN A MERE 15 MONTHS.