Deficit hysteria is a manufactured crisis
Feds have more than enough financial capacity to avoid perpetual austerity
The federal Parliamentary Budget Officer’s position was first created in 2006 with support from across the political spectrum.
But at the time, there was some basis for concern about a proposal that originated largely with right-wing politicians looking to stoke deficit hysteria.
Instead of reinforcing admonitions that we’re stuck with perpetual austerity, though, the PBO’S impartial analysis has largely confirmed how misguided those demands have always been. Two recent developments confirm the opportunities available to us as we chart our path in this fall’s federal election.
First, for all the attempts to manufacture a crisis out of relatively small and shortterm deficits, the PBO has concluded that Canada’s federal government has substantial fiscal wiggle room in planning for the future.
In its most recent fiscal sustainability report, the
PBO found that the federal government has an available cushion of $29 billion per year — the amount by which it can increase spending or reduce revenue while maintaining its current level of debt to GDP in the longer term.
As a result, the question of how any given party will pay for its promises carries much less weight. Indeed, the platforms presented in this year’s election campaign suggest that our choice is between visions as to how to use an abundance of resources for everybody’s benefit.
To be fair, the same sustainability report did raise concerns about our subnational governments, which face rising debt loads if they don’t find a way to raise projected revenues or reduce expenditures.
But the health of budgets at the subnational level is directly influenced by what’s done federally. National investments that reduce the burden on provinces in crucial areas such as housing and pharmacare would better balance the resources of the respective levels of government, in addition to achieving important first-order policy effects.
Beyond the current fiscal picture, we’re also not bound by the federal government’s present revenue levels. And the PBO’S analysis has confirmed that there’s everything to gain by ensuring that excess wealth is harnessed for the public good.
In response to a request to evaluate the NDP’S proposal for a wealth tax of only one per cent on individual fortunes of $20 million or more, the PBO projected increased revenue of nearly $70 billion over the next decade.
There’s more room beyond that wealth tax alone to bring in revenue in ways that would also enhance social equality. But the revenue we can expect even from a tiny wealth tax would fund major planks in an ambitious platform for social progress — such as tuition-free post-secondary education for every student in Canada or a major investment in a Green New Deal or head-to-toe health care.
Of course, those plans would go beyond putting available money to use and generate virtuous circles of their own — both in reducing what are currently unaffordable costs and unmanageable risks for far too many Canadians and generating additional economic development.
We’ve always had the resources to build a society that focuses on meeting people’s core needs for health, security and hope for the future. But the PBO has provided independent expert confirmation that there’s no need to be bullied into accepting baubles that would undercut our fiscal capacity while accomplishing little.
We face urgent and important challenges rooted largely in an economy built around precarity and unsustainability. But we should take heart in knowing that we have the means and the opportunity to meet those challenges — leaving only the question of whether we’ll choose to put our available resources to the highest and best possible use.