Andrew Coyne: This budget is a testament to the pleasures of endless growth. Forget productivity, tax cuts or investment
|National Post 19 Mar 2019 at 13:04|
In the days when inflation was high, interest rates were volatile and growth was very stop and go, budgeting was hard work. Reining in runaway deficits absorbed most of the energies of finance ministers for the better part of three decades.
But since then inflation has been tamed and growth has been steady: Canada has had only one recession in the last quarter-century, and a mild one at that. Budgeting in such times is comparative child’s play — governments, at the federal level at least, have to positively go out of their way to run deficits.
Indeed, so steady has the revenue gusher been— no government has ever had as much money to play with, measured in inflation-adjusted dollars per citizen — that the Liberals have been obliged to perform quite heroic feats of spending just to keep pace. Though real per capita spending is at all-time record levels, the deficit remains stubbornly below one per cent of GDP — hardly a deficit at all, really. My God, in the fiscal year just ending, the deficit actually fell: revenues came in faster (6.8 per cent ) than even the Liberals could spend them (4.9 per cent).
I’ve said before that these are deficits of choice, rather than necessity. A better way to describe them might be deficits for show. Not even the Liberals still pretend deficits of this size would have any impact on growth, nor have they: real growth per capita in the bad old Harper years, from fiscal 2007 to 2016, averaged 0.9 per cent — versus 0.7 per cent, actual and projected, in the shining new era ushered in by the Liberals (2017-2024).
I’ve said before that these are deficits of choice, rather than necessity. A better way to describe them might be deficits for show
Indeed, they’re not even supposed to. Their impact is, first, symbolic — behold, we run deficits because we like to, whereas the previous government did so only grudgingly! — and second, to permit the government to spend more, mostly on the care and feeding of Liberal client groups.
Remember infrastructure? That was supposed to differentiate the new Liberal deficit spending from the old Liberal deficit spending. It wasn’t about pork-barrel politics, or short-run economic fixes. It was about making strategic investments that would increase productivity for the long run. Only it hasn’t quite worked out that way, has it?
The budget boasts that federal infrastructure spending has increased from $8 billion in fiscal 2016 to $14 billion in the current fiscal year. That’s an increase of $6 billion, which sounds like a lot, until you realize total program spending has increased by $47-billion in the same period. At one point the Liberals used to claim one dollar in three of new spending would go to infrastructure. The actual result: more like one in eight.
It is time, then, for the conversation to move on: from how spending is financed to what it is spent on, from the size of government to its composition, from the macro to the micro. Deficits of this size are not going to ruin us, as the opposition claims; neither would eliminating them, as the Finance minister pretends.
The quantity of spending isn’t so much the issue, as the quality. It isn’t that we can’t afford it: it’s that, in the rush to get all that spending out the door, little thought appears to have been given to whether the money is being spent in the best way, or whether it should be spent at all.
The most telling table in the budget is the last: the one that tallies up the estimated savings from the several “comprehensive reviews” of spending the government claims to have undertaken. The total annual saving: $237 million. Out of a budget of $323.5 billion.
Perhaps one day something a little more stringent will be attempted. And perhaps this budget’s signature initiatives on training and housing, which give every impression of having been cooked up in the Prime Minister’s Office, if not in party election planning sessions, will be the subject.
The training chapter notes, with evident satisfaction, that the government now spends close to $7.5 billion a year on skill development “across more than 100 distinct programs.” Given the country’s acute and growing skills shortages, some questions might be asked about their efficacy. Some, but not too many: a review of skills programming provided “an opportunity to reflect on past successes and determine where more can be done.”
Such a forgiving attitude to the past does not bode well for the future. Has any serious analysis been done of the new Canada Training Benefit — how it will interact with provincial programs, what sort of training will be eligible, and so on?
Likewise for the government’s suite of new policies to make housing more affordable. The budget acknowledges the only real solution to high house prices in the long run is to increase the supply of houses. But the specific measures it announces would mostly stimulate the demand — notably a First-Time Home Buyer Incentive that would involve the Canada Mortgage and Housing Corporation, worryingly, in lending directly to prospective buyers. The details are sketchier than sketchy, but any benefit would more than likely be capitalized into prices. Would anyone really be made better off?
But why ask hard questions, when growth is endless and budgets need never be balanced? Except … even if the business cycle has been abolished, and growth does persist, it will be much slower growth than we have known, now that the Baby Boomers are hitting their retirement years. That may not be of much concern to the feds, who largely insulated themselves, in the deficit-slashing years, from the fiscal consequences. But it’s a huge problem for the provinces, who will have to pay to look after all those aging Boomers.
What would the budget do to stimulate growth in the long run — to improve Canada’s sluggish productivity record, to arrest the alarming decline in business investment, to reform Canada’s complex, growth-killing corporate and personal income tax system?
Er, nothing, as it happens. For as it has been said, in the long run we are all out of office.
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