Tears for fiscal fears
Oh, that’s original. The New Brunswick Liberals, under what the CBC breathlessly describes as “the first budget delivered by a female finance minister in provincial history,” intend to deal with their fiscal crisis by continuing to spend recklessly. It’s enough to make one weep.
Not t ears of boredom exactly. But f r ustration mixed with ennui. We’ve been hearing this for half a century now. And it always turns out that spending money you don’t have doesn’t cause the stuff to fall from the sky. It causes your credit rating to do so.
In Finance Minister Cathy Rogers’ tiresomely familiar boilerplate, “New Brunswickers want their government to get our finances in order, but not at the expense of our social programs.” A classic now- you- see- it- now- you- don’t, in which fiscal prudence blooms in the first half of the sentence and wilts and dies in the second.
The plan, if that’s not too kind a word, is to spend $9.4 billion dollars, an increase of nearly four per cent, in the process running a $ 192 million deficit while somehow adding $1 billion to last year’s projected net debt of $ 13.4 billion, partly to take advantage of matching funds from the feds’ infrastructure/ stimulus program. And yet the Finance Minister chirpily insisted they are on track to balance the budget … in 2020-21. Free beer the day after tomorrow.
Well, not completely free. Provincial government debt amounts to around $ 19,000 per resident or $76,000 for a family of four. And the government increased the HST combined rate to 15 per cent last year, allegedly to deal with the deficit, then blew the extra cash and more. (On top of increasing property, fuel and personal income taxes since taking office in 2014.)
This approach leaves two key questions unanswered. The most fundamental is why, if this spending is so essential, it doesn’t work. Since the arrival of the full-fledged welfare state in the 1960s, and with it the permanent fiscal crisis, we’ve been endlessly told ever- greater expenditure is crucial to social and economic well- being. We’re also told the problems of want, marginalization and sluggish growth keep getting worse, but the sun will shine and the budget will balance itself in roughly four years because by then it will suddenly work. We should stop believing it.
Partly the problem is good old- fashioned government incompetence. Canadians, and citizens of Western democracies generally, know perfectly well the state is tragicomically inept. Yet they continue to believe it will do the next thing superbly and that it is already doing crucial things in indispensable ways.
It’s also like the alcoholic who figures the best way to get sober is to go on one last bender first. Repeatedly. Most spending is not on infrastructure projects real or imaginary but on social programs. And we, and governments, are hooked on the cycle of handing out benefits in return for votes even though these “benefits” cost more than they are worth (if they did not, they would be affordable) and voters switch from one party to another and back in disgust and frustration.
The more i mmediate question is why spending money you don’t have won’t bankrupt you yet again. As long ago as 1965, New York City mayor Robert Wagner classically declared that “I do not propose to permit our fiscal problems to set the limits of our commitments to meet the essential needs of the people of the city.” What he did not explain then, and no one has since, is why he thought fiscal problems needed his permission to limit fiscal commitments. When you have no money you can’t spend it.
No, really. Even if you are a government. Indeed, just over a decade later New York City went bankrupt, which many people thought taught an object lesson.
It didn’t. Governments everywhere went right on spending including in Canada. By the mid-1980s they were predictably reeling from crisis to crisis, implementing emergency meas- ures fiscal and monetary to peel the wolf off the door then going right back to their reckless ways. Remember Mulroney’s fancy promises of restraint, followed by Chrétien and Martin’s alleged slashing, Harper’s spending megablast, then Trudeau’s promises of a few limited deficits that turned into an ocean of red ink because, all together now, we do not propose to let our fiscal problems set the limits of our commitments to meet essential needs.
Even if, as in New Brunswick, interest on this crucial debt will be $701 million next year, the fifth- highest expenditure after Health, Education and Early Childhood Development, Social Development and general government. All of which must continue to grow rapidly because they’re working so well the hole keeps getting deeper. New Brunswick’s provincial debt was 16 per cent of GDP in 1981- 82, 33 per cent in 2000- 01 and is just over 40 per cent today.
Now please pass me a hanky. I need a good cry.
WE KNOW WELL THE STATE IS TRAGI-COMICALLY INEPT.