Ontario's `Human Fund' budget

In the famous “Festivus” Seinfeld episode, many people will recall, the miserly George Costanza, instead of buying Christmas gifts for his co-workers, gave them cards stating that a donation had been made in their name to the “Human Fund,” a bogus charity that he made up. Unfortunately for Costanza, the plan backfired when his boss discovered that the Human Fund and all the donations were fake. The Human Fund came to mind last week as I scrolled through the Ontario budget.

The budget is subtitled “Protect, Support, Recover.” It's not an entirely bad description, but perhaps a bit inaccurate. Take the word “recover” for example. The budget significantly increases program spending and handouts to various groups of people, which diverts resources away from productive private-sector activity. This would probably impede an economic recovery instead of hastening it. A more accurate budget subtitle would have been “Money for People” — the label Costanza gave to his fake charity.

The budget provides money for university students, parents and seniors. It provides money for Indigenous business owners, Francophone entrepreneurs, skilled-trades workers, agricultural societies, horticultural societies, young people, community museums, local theatres, recreation organizations, artists, musicians, organizers of local or online festivals, municipal governments, small business owners, the tourism industry, and many more. Add it all up and program spending is projected to rise from $152.3 billion in 2019-20, which was already much too high, to $177.1 billion in 2020-21.

The problem with all this additional money for people is that it necessarily means additional money from people, too. Money for Ontario resident Smith means money from Roberts and Brown. But Smith is no better off, since money for Roberts is transferred from Smith and Brown, and money for Brown is transferred from Smith and Roberts. And of course, Smith, Roberts, and Brown must all pay to provide a plum job for bureaucrat Jones, who is in charge of shuffling all this money around. A reasonable person might conclude it would make more sense for the government to let Smith, Brown and Roberts each keep more of their own money in the first place and release Jones to do work that actually produced something.

Jones and others might protest that government needs to provide money to some people to alleviate economic hardship. It is certainly reasonable to have people pay taxes to keep the poorest members of society from experiencing dire poverty, but if that's all that was going on, Ontario's budget document would have been a hundred or so pages shorter. The size of government has long since expanded past the point of simply providing help for the poor, so that we have now reached the point, as 19th-century French economist Frédéric Bastiat put it, at which in looking to the government for money, “everyone seeks to live at the expense of everyone else.”

Everyone pays taxes and everyone receives benefits, but such an arrangement does not net out. Invariably, ineluctably, in every place and every time it has been tried, the result is net economic loss. The reason? If everyone is spending someone else's money, then everyone will be less diligent in spending that money, not to mention earning more of their own. This observed reality has not prevented governments from pursuing “money for people” fiscal strategies, however — just the opposite, as the expansion of government spending continues unabated.

This is best seen at the federal level, where the current fiscal strategy is the Ontario strategy on steroids. The list of federal interventions is longer, the cost of the programs higher, and the size of the deficits much, much greater.

Much of the new spending, both provincial and federal, will permanently increase the size and cost of government. Ontario's $24.8-billion increase in nominal program spending this fiscal year is projected to fall only modestly (by $4.7 billion in 2021-22) before increasing again by $2.2 billion in 2022-23. As for the federal government, Bloomberg reported in late October that even after this year of massive pandemic spending has passed, there could be some $20 billion more in permanent annual spending on climate change, child care and other non-pandemic items.

All this new spending will require a great deal of money from taxpayers. With such profligacy, it's clear that George Costanza shouldn't just be a source of pithy budget subtitles. Governments should also look to his example of carefulness in, and aversion to, spending money.

AS BASTIAT ONCE WROTE, EVERYONE SEEKS TO LIVE AT THE EXPENSE OF EVERYONE ELSE.