Heather Scoffield
Fiscal discipline? Parties have entered a whole new realm of making a virtue out of promising the moon,
Fiscal discipline is at risk of becoming a casualty of the election campaign.
For sure, voters have come to expect that political parties will woo them with largesse during election campaigns, and federal spending has a tendency to rise in the last few months of a government.
But we are in a whole new realm of making a virtue out of promising the moon. Monday saw Finance Minister Bill Morneau take on Andrew Scheer for comments the Conservative leader made three years ago about the need to communicate “carefully” about any budget cuts that may be required for a more rational use of taxpayers’ money.
On his official Twitter account, Morneau posted a crudely edited video of Scheer’s 2016 comments, with a caption that distorted Scheer’s original words — implying that spending reviews are wrong and cruel.
“The clip I think is really important,” Morneau said in an interview defending the post despite Conservatives saying it was misleading. “What we’re hearing is they need to make cuts, but they need to be very careful in how they talk about those cuts. I see an exact parallel with what happened in Ontario with Doug Ford, where we didn’t hear about what the exact cuts were before the budget, and then it trickled out week after week following the budget, that there were cuts actually impacting people.”
Meanwhile, after a 10 per cent rise in spending during the first three months of this fiscal year, the Liberals have announced billions in spending in the last couple of months without thoroughly accounting for where all the money will come from. The Conservatives have backed away from a two-year commitment to balance the budget, opting for five years instead. And the NDP has released its full platform stuffed full of new national programs — without attaching a price tag.
Part of the political license for limit-free spending comes from an international context. Across the developed world, interest rates are so low that there is almost no financial penalty for government borrowing. There’s not much of a political price either, especially in the age of populism. Austerity is out, profligacy is in — as the trillion-dollar deficit in the U.S. will attest.
“The persistence of low inflation across advanced economies has led central banks into the realm of zero and even negative policy rates, with the result that government borrowing (and thus spending) is now free,” writes Harold James, a Princeton University professor of history and international affairs. “Populist politicians find themselves right at home, while those warning that there is no free lunch will be ignored — until it is too late.”
Canada is not at that point. Its deficit, at about $20 billion this year and next, is not considered to be in the danger zone by any means. And with government revenues running high these days, there’s a chance last year’s deficit won’t be as big as the $15 billion projected.
But some of the current attitudes toward spending in Canada mirror the global context and are compounded by homegrown forces that have taken on new momentum with the pending campaign.
The deficit scare of the 1990s led to a decade of belt-tightening, program review and a national consensus around the need for deficit elimination. That consensus evaporated with the victory of the Liberals in 2015. Instead of balancing the budget, they took on small deficits in the name of bolstering growth and productivity over the long term. Justin Trudeau borrowed on the understanding that voters would see the returns, and soon.
Small and soon was then replaced at first by a commitment to move towards a balanced budget by 2019, and then replaced by a goal of keeping the debt burden on a downward path.
The conviction to hurry up and eliminate the deficit, however, is gone.
That’s amplified by changes to the federal Elections Act that set up a spending grey zone starting on July 1. The changes placed restrictions on spending by political parties in the lead-up to the official campaign. But no such restrictions existed for the government; and the Liberals took full advantage of that leeway to announce government spending across the country in the past two months.
Much, but not all, of that spending simply adds details or re-announces monies already booked in various budgets, Morneau said. However, the government has not said how much is “new” — either pulled from future spending envelopes or not already set aside elsewhere; and the Department of Finance won’t make those figures public until the fall fiscal update — after the Oct. 21 election, Morneau confirmed on Tuesday.
Morneau’s public disdain of spending reviews, and his nonresponse to questions about why the finance minister needs to push that case with heavy-handed videos, blurs the Liberals’ dedication to fiscal discipline even further.
Wise governing is about making choices. For a while during their mandate, the Liberals looked hard at existing arrangements for spending to see what efficiencies could be found. They streamlined some innovation programs, as well as some health research funding — carefully, as Scheer would say, so that the public would not perceive the condensing of programs as cuts to health care or the future economy.
But if any public attempt to discuss those choices and their long-term fiscal implications is simply pilloried and turned into an attack ad, then James’ free-lunch warning will be well worth heeding.