As deficits return, be afraid - very afraid
To get ready for Halloween our politicians are dressing as the ghosts of deficits past. I admit it's scary. But it's also in very bad taste. It's scary because spending money you ain't got is unwise in good times and catastrophic in bad and, as Adam Smith warned, accumulating public debt "has gradually enfeebled every state which has adopted it." And if Smith is too "right-wing" for you, how about that mad Jacobin Thomas Jefferson, who said "The principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale."
Such was the dusty wisdom of the ancients, blithely discarded in the 1960s and then painfully reacquired in the 1970s, 1980s and 1990s. Strange that it should so promptly go out the window in the 2000s. Frightening, too.
These costumes bring back queasy memories of tragicomic finance ministers in the late 1970s and 1980s assuring us the deficit was finally tamed, and proving it with lovely charts showing it shooting up for a couple more years then suddenly coming down as though we had elected fiscal Uri Gellers who could bend curves with their minds. Of course the end result was that interest on the debt started crowding out program spending and after the electorate pummelled governments that relied on the paranormal to restore order, we actually got quasi-cutters who, in good times, managed to sort things out within reason.
I say within reason because the Chrétien Liberals balanced the budget largely by cutting transfers to the provinces, which meant cutting other people's spending, not their own. Which is more than the Mulroney Tories ever did. But they never learned how to curtail the tendency of governments year after year to do less with more -- nor did the provinces, who responded by delaying vital spending on health care and infrastructure, thus swindling futurity in a different way rather than treating it with honest respect.
Given that in many ways we are already that futurity, the trick looks less impressive now than it once did. Hence the new Fraser Institute report saying that, having blown the locks back off the treasury door in the good times just ended, six provinces will spend more than half their revenue on health care by 2036. Underinvestment followed by panicky overspending isn't prudence and it isn't frugality. It certainly isn't leadership.
Our political masters have the rhetoric down pat for their disguises. Stephen Harper, whose Tories inherited annual spending of $210 billion and have already sent it past $240 billion in a budget titled "Responsible Leadership," just declared it "premature" to say whether he'll run a deficit. (Though it wasn't premature to say he wouldn't during the campaign.)
However, Mr. Harper gravely assured us, his government would definitely maintain "responsible fiscal policies." Exactly the right tone: Solemn guff about responsible policies was the invariable accompaniment of irresponsible ones in the past, and will be again.
Then there's Ontario's Dalton McGuinty, uniting with his fellow premiers in demanding that Ottawa maintain transfers even if it means a federal deficit but unlike them admitting that, even if he contributes to financial catastrophe at the federal level, he'll inflict it provincially as well.
"I've got 200,000 people who have lost their jobs, so now I'm going to shut down their hospitals? It just doesn't make any sense," was his excuse for possibly going into a deficit so he wouldn't have to make program cuts or raise taxes.
"I think Canadians are ahead of us," he blithered. "I think they understand these are very challenging economic times, they understand that our revenues are going to go down, that we have to make some difficult choices."
It's exactly the appropriate tone of brazen double-speak, because drifting into disaster to avoid changing his spending or revenue plans is neither difficult nor a choice. And it was delivered with such sanctimonious solemnity you'd think Don Mazankowski was back, wrapped in the tatters of his budgets, especially once you remember that Mr. McGuinty inherited spending of around $74 billion, and within four years had cranked it up to $96 billion with further large increases planned.
Hard choices? It is to laugh. (And in case you're thinking about Ralph Klein, his Tories doubled program spending between 1996/97 and 2005-06. Yes. Doubled.)
What's really scary is that politicians haven't forgotten the lessons of the past. They haven't forgotten how to cut spending; they never learned it. And they haven't forgotten that deficit spending is ruinous. They just don't care.
So yes, the costumes are scary. Now please take them off before we really say Boo. And then boo hoo.
[First published in the Ottawa Citizen]