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Budget balancing blunders

Maybe you should have put some other things on the revenue side besides oil, Steve./ Brett Nielsen
Maybe you should have put some other things on the revenue side besides oil, Steve./ Brett Nielsen

Harper bet on oil and screwed up.

In case you haven’t heard, it’s balanced-budget mania over on Parliament Hill. Yes, Stephen Harper knows that oil prices, and by extension, government revenue, have taken a beating, but he doesn’t care! Both he and Finance Minister Joe Oliver are determined that their government will finally deliver a balanced budget and prove that they are Fiscally Responsible Stewards of Your Tax Dollars, unlike those other leaders (especially ‘that one with the hair’) who will engage in reckless socialism! Yes, it may sound like a noble endeavor, but that’s before you read the fine print of what’s going to happen.

Already, the fact that the Conservative government has had to delay announcing the budget should be bad news to prospective politics watchers. Remember, they’re going into a federal election based on those spending requirements; they also said that they had everything under control. Just last fall, CBC quoted Oliver as saying in his fiscal update that the government, “[is] projecting a surplus of 1.9 billion.” That is an incredibly precise thing to say. What does it now say if they’re running behind the scenes trying to fix things up?

Another thing to consider is that the government is willing to go a long way to gain their balanced budget. CBC was one of many outlets that reported Employment Minister Jason Kenney as saying Canadians should expect more cuts than expected as part of the balancing process. Here, I think the Conservatives are really playing with fire. The last thing you want to do before an election is announce that you are cutting such things as social services and health care, yet we will have no idea what will be cut until April 2015; even then, federal Opposition finance critics have said there would be no time to properly scrutinize the budget. Given the government’s already-documented problems with veterans over cutting funding for them, among other issues, I cannot see how this cost-cutting venture could spell anything but disaster.

For me, however, the quest to balance the budget is more than just imprudence; it is madness. At a time when our economic condition is so precarious, the last thing governments should do is withdraw from the economic sphere. The great British economist John Maynard Keynes precisely warned against this during the height of the Depression for one simple reason: if people feel the economy sucks, they will try to get out of it and not spend. If everyone were to do this, there would obviously be a contraction. With ample evidence of this uncertainty pervading the global economy, such as the UBS Billionaire Census showing that billionaires are hoarding more cash than before, the case seems clear for more government spending.

And yet, our government still wants to balance the books. I don’t really expect them to come out and support Keynesianism; I suspect Harper secretly venerates the free-market policies of Milton Friedman and Friedrich von Hayek. However, I would find it nice if they could avoid looking and acting like clueless amateurs. Part of this rests on Conservative ideology, which holds that governments must support businesses first and people second. In balancing the budget, the Conservatives hope to prove that this will help people by creating a better business climate. Yet, Harper’s objective of making Canada a resource economy has made a balanced budget a near-impossible goal, in my opinion. With the global economy appearing to suffer from weak demand, and with the government refusing to consider tax increases, I see no way how Harper can balance the budget without inflicting significant pain on Canadians.

At a time when Canadians and others around the world are facing the largest burst of economic insecurity since the Great Depression, the Harper government is refusing to throw them a life raft. They are determined to prove their mettle as Fiscal Stewards instead. I fear that this effort, designed to vainly escape the effects of making Canada dependent on commodities, will hurt far more people than it heals. That is, of course, assuming the books are properly made to begin with.

About taras matkovsky

I am a fairly opinionated person, willing to listen to several opinions and intervene when necessary. I like reading books on economics and history and enjoy playing video games, be they Mario platformers or Western RPG’s.