On the Canadian Deficit, Conservative or Otherwise

Finance Minister Flaherty

Opposition critics would be wise not to get too cocky or moan too loudly if Stephen Harper’s budget next week puts us into a substantial deficit position. Moan as we might about “Tory times being hard times”, the fact of the matter is most Canadians, I believe, know when an economic situation is outside the control of the government. They know full well that if the Liberals were in charge right now, they’d be facing the same numbers. The way Employment Insurance and Social Assistance is structured, a deficit is inevitable.

And, frankly, a $30 billion deficit might be what this country needs right this moment to get us through the worst of the economic times to follow. Certainly, a lot of Canadians could use the money, and it can be spent on a number of useful things. Think of the infrastructure deficit, which we never closed, even when Paul Martin produced record surpluses. The Federation of Canadian Municipalities has released a list of “shovel ready” municipal infrastructure projects that could create thousands of jobs this year and provide these cities with significantly improved infrastructure that will contribute to the economy for years to come. Any and all politicians at the federal level would be wise to champion this list.

However, I do have questions for this government about how this deficit materialized, especially if, as some reports suggest, we find ourselves in a deficit position this year without enacting any tax cuts or spending increases. My questions would be: who knew that this country was slipping into deficit, and when did they know it? Did anybody in the finance department take steps to downplay the possibility of a deficit before the October 14 election?

Back in July, the finance ministry announced a deficit of over $500 million in the first two months of the year. This was wiped out by a rather improbably large surplus come the month of June, but I do not recall fiscal numbers being released after that point, especially during the federal election campaign where various candidates resorted to hearsay to question the state of the economy and our nation’s fiscal health.

If it turns out that we held an election campaign during a time when we were in deficit and didn’t know it, it shouldn’t be much of a surprise. This would not be the first time governments have hidden bad news deficits in the advance of an election. David Peterson’s Liberals did it in 1990, leaving Rae to pick up the pieces. Glen Clark’s New Democrats did it in 1996 with their “fudge-it budget”, to the destruction of their credibility. Heck, even Jim Flaherty did it during Ernie Eves’ waning days in power. And can it be a coincidence that the minister in charge of our finances at the federal level today is none other than Jim Flaherty?

Maybe I’m being a tinfoil hat conspiracy theorist, but can somebody explain to me, if the following is true, why we added $10 billion in new public debt between April and June 2008 — a period where we were supposedly in surplus? By October, some have claimed that we’ve added $23 billion in new public debt. Why is new debt appearing if our budget is currently supposedly balanced or in surplus? And if we are in deficit now, before the introduction of an economic stimulus package, how much leverage does Stephen Harper have to provide strong economic stimulus?

Whether these numbers bear out or not, the fact remains that the signs that the United States was slipping into a serious recession were plain to us a lot earlier this year, so I have my doubts that Stephen Harper, Jim Flaherty and the bevy of economists who provide their expertise to the Finance Department, couldn’t have seen these muddy waters coming — such that Harper’s claim made during the election campaign that we would never go back into deficit, seem disingenuous at best. Yes, Dion made similar claims, but he didn’t have access to the information that Harper surely did.

And at the very least, Conservative bloggers who lampooned us nervous Nellies, who claimed that there wasn’t a deficit and there never would be, and who lampooned Opposition proposals on the basis that they would have put us in deficit — they owe us an apology. Yes, the state of the economy is such that it would be hard for any party to fulfil its promises, but some of us saw this coming, even if the Conservatives didn’t.

So, while I’m willing to wait and see what the budget contains before I pass judgment on it, and while I’m prepared to be happy with a budget that pours money into infrastructure projects that start construction later this year, I do think the voters and the opposition should press for greater openness and accountability in the way our financial numbers have been reported. There are questions here about the competence of our Minister of Finance, and his deficit that got too big to be swept under a rug.

A Coalition if Necessary, but Not Necessarily a Coalition?!

Reading the tea-leaves, I’m predicting that the NDP-Liberal coalition government proposal that materialized under Stephane Dion will be scrapped by Michael Ignatieff. He won’t say anything definitive until he sees the budget, because no man worth his salt sets aside his weapon during a standoff unless absolutely necessary. However, if Harper backs down enough to give the Liberals enough cover to support the budget (or abstain from defeating it), that’s what Ignatieff will do. And I have to say, I’m not particularly happy.

According to sources within the Liberal party (yes, take that with a grain of salt), the strategy some Liberals want to take is to hold off on an election, so that Stephen Harper ends up wearing this recession. Rather than accept a handoff of power, Ignatieff intends to let Harper hold the football and get creamed.

Which is a pretty disingenuous (but unfortunately common) way for a politician to act, in my opinion. I mean, either Ignatieff has an idea of how to get us out of the economic crisis or he doesn’t. If he does, he should be making his suggestions now and, if necessary, working with the constitution to take charge to implement them. If not, then he should get out of the way and cede power to the professionals who do have the ideas. It says nothing good about the character of some Liberals that they’d allow individual Canadians to suffer so as to increase anger at the current governing party, making it easier for the Liberal party to take power down the road.

Say what you will about the merits or morality of Jack Layton and Stephane Dion’s coalition proposal, but these two leaders were still willing to put themselves in charge at a time when it may be very politically inconvenient to be so. That, in my opinion, is an example of two people putting their country before their parties, which is something we should laud.

What Principle of Confidentiality?

Impolitical raises an interesting point (given a known amount of the interest in political points): isn’t it odd that we should be receiving so much early information about what’s going into the next budget, particularly the anticipated size of the coming deficits? What has happened to the principle of budget confidentiality? Plenty of businesses out there make critical decisions based on the numbers the federal government puts forward; to be able to plan effectively, they want all the numbers in place, and they want to be sure that their competitors don’t receive the numbers earlier than they do, to ensure a level playing field.

Now we have a couple of reports in the press that must be called leaks, and the reaction to the fact that we’re having leaks is pretty muted. Certainly it’s a far cry from the controversy in the mid 1980s that surrounded a reporter getting a hold of a budget pamphlet the day before the budget (forcing finance minister Michael Wilson to read the budget twelve hours early to reporters), or the controversy of Liberal finance minister Marc Lalonde accidentally letting a cameraman spy an open page of the as-yet unreleased budget on his desk. Is this something we’ve just moved past in recent years? Are leaks now just another tool in the government’s arsenal to communicate? Or was this always the case?

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