A tale of two budgets
With the provincial and federal budgets coming out within 24 hours of each other again this year, it gives rise to some interesting comparisons between the two governments’ approach to fiscal management.
Naturally, you would assume two right-of-centre, fiscally conservative governments, with a strong pro-business and rural bias, would deliver similar budgets and you wouldn’t be far wrong. As a matter of fact, last year, both Saskatchewan Party and Conservative Party governments delivered mean, tough on spending budgets that took the axe to some long-cherished programs.
In Saskatchewan, the Saskies eliminated Film Employment Tax Credit, effectively signalling to the rest of the world that Saskatchewan was giving up supporting its film and video industry. Not surprisingly, the film and video industry responded by packing up and leaving in droves.
In Ottawa, the supposedly farmer-friendly Conservatives cut a swath through agricultural support programs, including the 112-year-old shelterbelt centre at Indian Head, the community pasture program and the Canadian Grain Commission, not to mention hundreds of jobs at Agriculture and Agri-Food Canada, PFRA, CFIA and other agricultural agencies.
Fast forward to this week and Finance Minister Ken Krawetz delivered a far kinder, gentler budget, which provided millions of dollars to job training, women’s shelters, aboriginals, the disabled and the disadvantaged, even (gasp) artists and musicians.
Subsidies to business, like the ethanol industry and labour-sponsored investment funds, were cut and promised corporate income tax cuts were put on the back burner.
To a lesser extent, Finance Minister Jim Flaherty played Mr. Nice Guy and trickled out spending in dribs and drabs to hockey dads and soccer moms, while appearing to boost job training, housing and infrastructure spending.
The only really nasty bit was closing down the Canadian International Development Agency (CIDA) and consigning aid programs to developing countries to the tender mercies of International Co-operation Minister Julian Fantino.
That’s where the similarities end, however.
Saskatchewan’s budget was balanced both in the general revenue fund and the summary financial statements — no mean feat these days. Just ask Alberta Finance Minister Doug Horner.
For his part, Flaherty is promising to balance the federal budget by 2015, but ol’ “Flim Flam Flaherty” will need the luck of the Irish to get there.
As former finance minister and Deputy Liberal Leader Ralph Goodale observed, the Conservatives’ projected “razor-thin surplus in 2015-16” relies on “gushy estimates of future growth,” and “tiny reserves against unexpected problems,” among other things.
Opposition hyperbole? Let’s look at the numbers.
Flaherty is projecting program spending to average 2.1 per cent for next five years, basically in line with inflation, but with assumed population growth of 0.8 per cent annually, a significant decline on a per-capita basis.
Revenues are expected to rise by an average of 4.6 per cent during the same period, which is slightly higher than nominal GDP growth, a tad optimistic given the queasy state of the global economy these days.
The “tiny reserves’’ are the $3 billion in annual cushion in the event of a small underperformance in the economy. But major squalls could throw the Conservatives off course significantly. Nor would it be the first time the Tories have failed to meet a deficit target. In fact, they’ve failed to balance the budget since 2008, their first in a string of five consecutive deficits.
The projected $18.7-billion deficit in 2013-14 will make it six in a row.
To be fair, Flaherty deserves some credit for ratcheting back spending after blowing out the fiscal doors in the aftermath of the 200809 financial crisis-recession, with program spending expected to fall below 13 per cent of GDP by mid-decade down from its recent peak of 16 per cent.
But his plan to balance the budget by fiscal 2015, rather than 2016 (which Flaherty promised to do in the November update) is made all the more difficult by the $7-billion deterioration in the country’s finances since the 2012-13 budget.
Of course, when the boss tells you to balance the budget by 2015, Flaherty has to do it, whether it makes any sense or not.
Like King Canute commanding the tides to recede, Prime Minister Stephen Harper can demand the budget be balanced in three years. That doesn’t mean it’s going to happen.