Stupid Harper Tricks

Balanced budget laws: the pinky-promise of desperate politicians

by Paul Dechene

The Governor General was barely a page and a half into the throne speech when the klaxons went off in Prairie Dog’s office.

“Balanced budget legislation?” someone shouted over the din. “They’re not seriously considering—”

“Over my dead body,” snapped editor-in-chief Stephen Whitworth. “Balanced budget legislation is a sneak attack on the social programs Canadians value and need! But they’re not going to get away with it in my quadrant.

“Arm torpedoes!”

Once the initial euphoria of political outrage passed, Whitworth called me up and asked me to “like, actually read the throne speech and maybe write something.”

Turns out, it’s true. In among the piles of pablum heaped-up for their base — and even a few nuggets, like reducing bank fees, that were cribbed from the NDP’s platform, of all places — the Conservatives snuck in a promise to make every right-wing think tanks’ wet dream the law of the land.

This despite the fact that you need look no farther than California to see how such legislation — which can sabotage a government’s attempts to respond to an economic crisis — could lead us to ruin.

“Our Government will enshrine in law its successful and prudent approach. Our Government will introduce balanced-budget legislation,” read Governor General David Johnston.

But it’s funny he’d say that, because balanced budgets sure don’t sound like business-as-usual for finance minister Jim Flaherty, whose minority government, said then- Parliamentary Budget Officer Kevin Page in 2010, created its own structural deficit with tax cuts and spending hikes.

It’s also funny because when you consider the global financial clusterfuck we were staring at in 2009, letting the opposition arm-twist them into running budget deficits was probably the most prudent thing the Conservatives could have done.

And that has to be a bitter pill for their supporters to swallow. No wonder then, they’d be talking big about balanced budget legislation.

Of course, they don’t even reach the end of the bullet point before waffling.

“[The legislation] will require balanced budgets during normal economic times, and concrete timelines for returning to balance in the event of an economic crisis,” states the throne speech. In other words, governments will be able to run deficits when times are tough.

And pinky promise to get back into the black once times are good again.

Erin Weir, chair of the Progressive Economics Forum and an economist for the United Steelworkers Union, notes that the real questions are: how will the legislation define an economic crisis? And how will it determine a reasonable timeline for getting back to balanced?

Because without those details, it’s all kind of a meaningless gimmick.

“The federal Conservatives want to position themselves as the party of sound fiscal management and announcing balanced budget legislation is an easy way [to create] that perception,” says Weir.

The Conservatives’ next big trick will be balancing the budget in time for the next election in 2015 — a tough thing to accomplish without boosting revenues somehow. Unfortunately, raising taxes doesn’t exactly sound like Harper’s modus operandi.

“I fear they are going to introduce more austerity,” says Weir.

But considering how austerity measures have failed to kickstart the European economies, how will such measures work in Canada?

“I think the Canadian economy is still very weak and, perhaps more importantly, the job market is very weak,” Weir replies. “So I don’t think that our economy and job market should handle cutbacks to federal spending on needed public services and infrastructure.

“I do think our corporate sector could handle an increase in the corporate tax rate.”

But that would mean reversing course on a boneheaded economic policy. And why do that when there are so many other boneheaded, unnecessary gimmicks that the Conservatives haven’t tried yet?

2013-10-31

4 thoughts on “Stupid Harper Tricks”

  1. As I recall, we have balanced budget legislation in SK . Brought in by the Romanow government.

  2. Most provinces do. The balanced budget legislation that SK introduced in 1995 was repealed in 2008. But we have some new thing, if my memory serves. But even the balanced budget legislation we have allows the provincial government to run a deficit if it needs to.

    It’s worth reading this piece by Chris Selley in the National Post. He looks at how the BC gov’t has balanced budget legislation but when the economy went sour, they just changed the law to allow them to run a deficit. http://fullcomment.nationalpost.com/2013/10/18/chris-selley-just-balance-the-budget-already/

    Regardless, balanced budget legislation from a province is a very different thing than balanced budget legislation from the federal government.

    Here’s more from my interview with Erin Weir:

    “A lot of the balanced budget legislation in North America was enacted before the financial crisis. In the years before the financial crisis, there was a view that governments couldn’t stimulate or didn’t need to stimulate the economy. But of course, as soon as the crisis hit, everyone rediscovered Keynesian economics. And I really think that discredited the notion of balanced budget legislation. So I was quite surprised by the proposal in the recent federal throne speech. The other difference that might be worth noting between the federal government and provincial government or state governments south of the border is that federal governments have quite a bit of latitude to borrow money and stimulate the national economy. Provincial governments are in a weaker position to borrow and to stimulate their economies partly because their economies are so much smaller. So for example if the federal government spends more money there’s a very good chance of it recirculating in the Canadian economy. If the government of Saskatchewan were to borrow and spend money there’s very good chance of that money being spent on goods or services produced outside the province.

    “I would say the case against balanced budget legislation being strongest at the federal level.”

  3. On paper, balanced budget legislation is a good idea.
    Yet, any gov’t can change that legislation however they see fit.

  4. Governments have ways of accounting that make it appear that a budget is balanced. For ex., in SK, Crown earnings are skimmed and dumped into General Revenue. Debt is thus transferred to the Crowns but it is still provincial debt. If there is a provincial reserve, that, too, can be pillaged. I’m sure that P3 debt will be on municipal, school, and other local accounts, but, this, too, is provincial debt. All this is creative book keeping. The real problem is that governments refuse to collect in taxes and resource royalties the revenue that is required to cover the costs of services that are required.

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