Quebec shows country the need to balance the books.
PROVINCE’S AUSTERITY ROUTE BUCKS TREND OF PUSHING COSTS ONTO FUTURE GENERATIONS
When Carlos Leitao began work as Quebec’s Finance Minister three years ago he made a brave and unusual decision: rather than continue to follow the failing nostrums that had established the province as a high- tax, big- debt, ever- borrowing entity with a chronically struggling economy, he would try something different. Rather than continue to make things worse, he would try to make them better: he would have the province live within its means.
It was a novel idea, and dangerous. Politicians generally lack the nerve to adopt policies that might make them less popular with voters. Since Pierre Trudeau set the borrowing-ball rolling 50 years ago, prime ministers and premiers have mainly chosen to pretend they can continue to provide services they can’t pay for by the simple technique of borrowing the money, ever-expanding the debt, while turning a blind eye to the long- term consequences. It doesn’t work, as has become painfully evident, but they continue to pretend nonetheless.
Leitao chose instead to adopt “austerity.” This is considered a foul word among “progressives,” who deem it to violate the view that any service or benefit, once provided, must always continue to be provided, as a right, no matter how broke the government may become. It was a particularly novel ap- proach for Quebec, which long ago established itself as the province which most readily accepts the supremacy of government in all economic decision- making. Quebec has long been famed as Canada’s most heavily taxed and state- intrusive jurisdiction. It’s part of what makes the province “special.” It’s also why it requires $ 11 billion in equalization this year to keep it afloat, 60 per cent of the total equalization pie.
Leitao’s first budgets implemented his plan: a surtax on banks and other financial institutions; a reduced tax credit on union dues; a smaller civil service, reduced transfers to municipalities, cuts to the hallowed $7-a-day daycare program, an overhauled health- care bureaucracy … even a suspension of bonuses for government managers. The usual interest groups bellowed their rage: Leitao’s approach would “plunder public services and annihilate social justice.”
In reality, there was no overall cut to spending, just smaller increases. But that is heresy to accustomed recipients of public largesse. Progressive orthodoxy dictates that spending must always increase at the rate needed to provide the services demanded. Anything else is … austerity.
Last Tuesday, Leitao was able to demonstrate the fruit of his madness: the economy is improving, the budget is balanced, there will be a surplus available to begin salving some of the wounds of earlier years. Three years into its mandate, the government of Premier Philippe Couillard can rightfully claim to have bettered Quebec’s prospects. There is room for some small tax breaks and for revived spending on health and education. A hated health levy will be eliminated. Quebecers will be able to earn more before they start paying provincial tax.
Of course, wet blankets are dripping all over it. The improvements don’t make up for earlier economies, opponents complain, as if decades of bad policies could be remedied overnight. They miss the point: Quebec can now hope to build a stronger economy from a more solid base, backed by a surplus, rather than tapping moneylenders and adding to the annual cost of servicing those debts. It’s not ShangriLa, but it’s a lot better than the alternative.
Not many other Canadian ministers or premiers are as nervy as Leitao, or as willing to endure the mud flung their way. Newfoundland’s Dwight Ball and Saskatchewan’s Brad Wall are making a stab at it with painful measures to control spending, risking their jobs in the bargain. Alberta’s Premier Rachel Notley is firmly in the hope-and-pray camp: no government employee will lose a job, no salary will be threatened, no benefit endangered as long as lenders are willing to continue feeding her government’s borrowing fix.
Alberta at least has room to damage its bottom line, thanks to earlier administrations that resisted big borrowing and high taxes. Ontario has no such luck. According to its own Financial Accountability Office, which continues to operate in the face of stonewalling by Premier Kathleen Wynne’s Liberals, Ontario’s debt, at $300 billion, has grown almost 90 per cent since 2008- 9 alone. The province has $ 2.40 in debt for every dollar of revenue it brings in. Ontario owed $ 20,806 per person in 2014-15, compared to $8,387 in British Columbia. Al- though Liberals argue they need public “investment” to promote growth, 56 per cent of additional borrowing since 2009-10 went to financing existing loans, while just 26 per cent went to capital spending.
Having strung a noose for itself, Wynne’s government is now desperate to avoid choking on it. While her government borrows billions more for further subsidies to hydro bills that have swollen beyond public endurance, the top five executives at Hydro One, one of the province’s engorged power utilities, will share $ 11 million in compensation, with $ 4.8 million going to CEO Mayo Schmidt alone.
Federal Finance Minister Bill Morneau, once a successful private- sector executive, completed his transition to full politician with his recent budget, which quietly confirmed spending is so out of control after just 16 months of Justin Trudeau’s Liberals that sunny spending pledges have to be replaced with hearty proclamations of gender sensitivity. Oh, and we’ll be borrowing $ 30 billion a year forever, but nevermind that.
There’s no guarantee Quebec will stick to its newly responsible formula, though as long as Leitao is around you have to suspect there will be little backtracking. Most Liberals long ago discovered it’s easier to retain office by pushing costs onto future generations. And retaining office is what politics is all about. Only occasionally do voters actually benefit from the deal. Quebec’s return to surplus is one of those rare examples, which will likely be ignored by most of his colleagues across the country. No one ever said elected office comes complete with backbone.