Spending ourselves silly

Now it's obvious what the pre-budget leaks were about. They were softening us up, so when we saw the actual $84.9 billion five-year deficit figures we'd go, oh well, that's only $20 billion more than the $64 billion over two years they already said, and what's $20 billion to government? Other than a giant familiar debt sinkhole, I mean.

For numbers like that, we might as well have elected a Liberal government. Or not; the front-page chart in Wednesday's Citizen showed a flood of Mulroney Tory red ink followed by a decade of Liberal surpluses and now more Tory red ink. You don't have to like Liberal governments (and you know I don't) to acknowledge they seem to be better financial managers. But facts are facts.

Including that it's silly for people to talk about this Tory government abandoning "its conservative antipathy to spending." It hasn't got one. Never did; it inherited spending of $209 billion, and promptly hiked it to $222 billion, $233 billion then $237 billion in good times. Now in hard times it's to rise to ... say, they didn't mention that in their press release, did they? Or in the budget speech, come to think of it. Nor did the press dwell on it; I had to get to the 19th page of Wednesday's National Post for John Ivison to blurt out that the spending target five years out is $293.7 billion.

It sounds like a lot. But it gets ignored because everyone seems to grasp that politicians don't control spending, it controls them. Under the comparatively prudent Liberals, spending rose from $163 billion in 2000 to $209 billion in 2006 -- about $7.5 billion a year, less than the Tory good-times average of $9.5 billion but still a relentless upward march.

Governments babble solemnly about prudence and decisions on budget day, but structural dynamics, not specific decisions by finance ministers, drive spending up faster than economic growth, in good times and bad.

The Citizen editorialized, "The prospect of five years of deficits, totalling $84.9 billion, is scary. The government has no way of knowing how long it will take to pull Canada out of that hole. Nevertheless, it has no choice but to dig it." And it is scary. But the Tories had choices; they just didn't make any. Remember Finance Minister Jim Flaherty's November statement to Parliament that the days "of those chronic deficits are behind us"? Ooooh. Sounds good. But he was just telling us what the current projections said and trying to claim credit. Now they show something different, and the government talks as if it did that on purpose too. Phooey.

For that reason I am disinclined to quarrel with Mr. Flaherty's vexatious hammering home of the focus-grouped catch phrase "Canada's economic plan" (as in "Budget 2009 is Canada's economic action plan"). It is not Canada's economic plan; Canada doesn't have a "plan" and if it did it would be for entrepreneurs and workers to create wealth in a free enterprise economy and the government to march in and scarf it. The budget is the government's economic plan, not Canada's, and someone who cannot tell the difference ought not to be in Parliament at all, let alone on the Conservative benches. But since the government has no plan, and is simply being tossed like a cork on a stormy economic and budgetary sea yipping about its master plan, such a complaint, though accurate, would be irrelevant.

Dan Gardner wrote in Wednesday's Citizen, "In theory, there's nothing wrong with debt. What's a mortgage but debt? When the economy goes south, it makes sense that government would borrow and spend to juice the economy." His main worry was that the government wouldn't balance the books once the economy recovered. But there's no more evidence that deficits "juice" the economy than there is that they keep away purple dragons.

Whatever happens next, good or bad, the government will say it would have been worse without their prudently deciding to run these Goldilocks deficits, not too big, not to small. Unless of course their projections prove to be comically wrong in which case they'll insist that the new actual deficit figure was the genuinely prudent carefully chosen course. And there will be no more way to test that proposition than to determine whether $84.9 billion in deficits kept the purple dragons off or if they were not going to appear anyway.

By the way, as you look at the careful spreading of "stimulus" spending among regions, interest groups etc., can anyone point me to a theory that distinguishes that stuff from "pork"? I didn't think so. But I know several economic theories that say what deficits do. Those theories say the problem with Dan Gardner's analogy is that this spending is all mortgage and no house. What caused decades of deficits wasn't bad decision-making but politicians overwhelmed by circumstances and insufficiently endowed with understanding or courage, and so they spent money they didn't have to avoid choices they couldn't face.

That's what we've got again. And no theory, not even one with purple dragons in it, says it helps the economy.

[First published in the Ottawa Citizen]

UncategorizedJohn Robson