The Conservative Party, even before this long election campaign got underway, asked for our support because it had done such a great job of managing the economy and deserved to continue in office. With widespread signs that the economy is sliding into a recession, we are now urged to support the Conservatives as the only party with the experience to govern during these perilous times. [It takes a certain chutzpah to claim that you deserve support because the economy is flourishing and then because it is tanking.]
After running deficit budgets throughout almost its entire time in office, it is understandable why the Conservative Party has been so preoccupied with recording a balanced budget for the fiscal year recently ended. It has relentlessly insisted that a balanced budget would demonstrate its prowess in managing the economy and Canada’s finances. It is now almost universally accepted (apart from the diehard Conservative holdouts) that the federal budget will once again be in a deficit position this year.
Ironically, this is not a cause for dismay (and denial) but – in fact – an entirely appropriate fiscal response to the declining Canadian economy. Budgeting for a deficit to provide stimulus to a weak economy is something taught in every first year course in economics but apparently the economist Stephen Harper didn’t read that part of his text book. Instead, he becomes almost apoplectic when the opposition parties propose policies that might result in a deficit budget. Yet even Harper’s own balanced budget legislation allows for running a deficit when there is a recession. But he won’t admit that we are in a recession (even though we have met the technical definition for one - a definition provided in Harper's balanced budget legislation), and continues to rail against the opposition parties for the deficits that they would create. This is a bit much from a Prime Minister who has given us seven deficit budgets in a row!
To put the issue in perspective, a recent article analyzes the impact of the ambitious infrastructure financing plan announced by the Liberal Party, an initiative that could push the federal deficit toward $10 billion for the next two or three years. This amounts to 0.5% of GDP in Canada’s $2 trillion economy. As long as the annual deficit stays below the long run growth trend, the debt-to-GDP ratio shrinks. On that basis, a 0.5% of GDP deficit has virtually no impact on the long run sustainability of Canada’s public finances.
Taxes pay for public services we need and want
Harper’s indignation and distress are only equaled when discussing the possibility that opposition parties might increase taxes. Such an action is apparently akin to the return of the plague or an outbreak of nuclear war. Sadly, some Canadians react in the same manner, showing great displeasure at any suggestion of a tax increase. Yet we continue to hear complaints about reduced standards of service, aging and collapsing infrastructure, inadequate support for public housing, cuts in funding for various agencies – the list goes on. For some reason, too many citizens fail to accept that addressing these servicing needs will require financing and such funds come from taxes.
It is time we stopped reacting to boo words
It is insulting and condescending when politicians use boo words such as deficit and tax increase in an attempt to frighten us and influence our response to political platforms. It is also discouraging to see the media falling into the same trap – such as when they recently clucked about the Liberal Party leaving itself vulnerable by not promising (as have the Conservatives and NDP) to balance the budget immediately should it form a government. Let me repeat: There is nothing magic, nor necessarily even appropriate, about balancing the budget in the coming year. Nor is there anything catastrophic about raising taxes to finance programs that Canadians need and want.
If Canadians demonstrate some maturity in responding to these issues, perhaps the governing party (and the media) will feel obliged to do the same.