With the provincial election in our rear view mirror and the new majority Liberal government ready to get down to the business of governing, perhaps it’s time to press the reset button on the conversation of fiscal policy. Especially once we kick into municipal campaign gear and everyone starts chattering away again about billion dollar savings, previous year’s surpluses and out of control government spending. Let’s re-examine the conversation on what constitutes good fiscal sense.
Last week David Dodge, former Bank of Canada governor and a Finance Department mucky muck from Pierre Trudeau through to Jean Chretien, suggested that maybe high-octane deficit reduction isn’t necessarily the way governments should be going right now. Yes, that David Dodge. Not some wild-eyed, socialist leaning, CCPA economist, David Dodge. Inflation-hating, deficit fighting, David Dodge.
“It is thus important to realize that in the current environment of low long-term interest rates, fiscal prudence does not require bringing the annual budget balance to zero almost immediately. Small increases in borrowing requirements to finance infrastructure investment would still lead to declines in the debt-to-GDP ratio.”
“Governments should expand their investment in infrastructure while restraining growth in their operating expenditures so as to gradually reduce their public debt-to-GDP ratio.”
That analysis is very different than Diagnosis: Austerity which every self-proclaimed fiscal conservative is demanding and touting as inevitable these days. Take on some additional debt, start spending money on much needed infrastructure (a deficit estimated in 2012 at $123 billion at the municipal level), hold the line on other operational expenditures and try to grow the economy rather than cut, cut, cutting into shape.
I didn’t see any pitch for lowering taxes. No drastic reduction in the civil service. Reasonable suggestions devoid of tough talk about tough choices.
The irony is not lost on me that the source of our current infrastructure needs can be traced back, at least in part, to the war waged on the federal deficit back in the mid-90s featuring none other than David Dodge, then a senior level Finance department bureaucrat. Downloads to the provinces, cuts in transfer payments, all managed to trickle down to cutbacks in spending on new infrastructure projects and the neglect of that already built and in place. There’s a little bit of the inflictor of damage stepping forward with his trowel and pail of cement, offering to help repair the shit he knocked over.
Hell, I don’t even know if David Dodge is right but he’s presenting an alternative to what’s being sold to us as the only way to get ourselves back into the black. Austerity. An approach implemented elsewhere without any satisfactory results to show for it yet. If we just cut a little bit deeper, a little faster, we can stop this ship from sinking, this ship is sinking…
So when the federal government gets all sanctimonious about Ontario’s out-of-control deficit, and the need to introduce harsh measures to rein it in, we can just respond, But David Dodge said… Or if the provincial Liberals cite budgetary concerns for not, say, electrifying the GO corridor or building a particular LRT line, we can respond, But David Dodge said…
This is important to remember at the municipal level too. Although cities can’t run annual operating budget deficits (as per legislation from another, deficit-plagued level of government), there’s always the question of what to do with the inevitable operating surpluses that arise. If a municipal government is budgeting properly, there should always be an operating surplus.
Our current administration at City Hall has proudly puffed out its chest at the fact it’s used its operating surpluses to pay down capital debt and keep taxes low. Meanwhile, the state of good repair for the TTC and TCHC continues to grow. The roads and parks are just a little worse for wear. And the city’s credit rating remains unchanged from the so-called profligate days of David Miller.
Fiscal responsibility doesn’t mean being cheap or simply hating the concept of government spending money. It means making smart decisions, decisions based on the reality of the day and not some theoretical exercise that looks great on a blackboard and fits neatly into an ideology. There’s no one way to be a fiscal conservative except for, maybe, a right and wrong way.
— sensibly submitted by Cityslikr