Last week, the Parliamentary Budget Office published a Fiscal Sustainability report, that lays out the reality that anyone with a little knowledge of math has known for a long time. The problem is that there are many in Ottawa and the media who think that Kevin Page’s preferred solution, higher taxes, is the right one. And they would be wrong.
(OK, Page did say in the report that government had to either raise taxes or cut spending, but then states that recent tax cuts (corporate, GST) were irresponsible and unsustainable. Seems clear to me what side of the fiscal tent he sits on…)
Recent events around the world, particularly in Greece, show us that high taxes and high government spending are unsustainable. The Wall Street Journal said it best:
Whether it be Greece, the rest of the EU, the United States or Canada, we cannot afford the growing size of government. Even Keynes, who believed government should grow during recessions, believed that government should never consume more than 25% of the economy. Today we are well above that, and much of Europe is above 50%.
It disappoints me that commentaries like this get written, decrying the lack of policy vision in Canada, then demanding more government to solve the problems. I agree there has been a dearth of good policy (or new policy) coming from Ottawa – but I would ask that our leaders look towards a country that had the most success avoiding the recent economic downturn and has seen both sustained economic growth for 20 years, while not just balancing the books but paying off debt: Australia.
Australia is the least regulated economy in the OECD, has the lowest government debt, and has the most open and free trade. While the current Rudd government makes noises about reversing many of the good policies of the Howard era, we should ignore that and move in the direction of less government, less regulation, lower taxes and freer trade. And that means we need to cut government spending at all levels and let the free market do more. It is for this reason that I vehemently oppose any proposals to expand government (such as Iggy’s recent call for government run daycare and preschool). We don’t need it. We never will. And we can’t afford it.
I do commend the Globe editors – this editorial is very good. It calls out the government to make hard choices. But it lets them off the hook until “current agreements expire in 2014″. The longer we wait the worse this gets…
5 comments
Nicola Timmerman says:
21 February 2010 at 11:53 (UTC -7 )
I am not religious, but I seems to me as in the story of Joseph in Egypt we are supposed to store up our grain during the fat years and then have it on hand when there are the lean years…
The_Iceman says:
21 February 2010 at 13:12 (UTC -7 )
Kevin Page did admit this week that lowering taxes on businesses does create jobs. When the government takes less money from business, they hire more workers and you get more taxpayers. He then goes on to say that it doesn’t matter if the cuts create jobs because there is a permanent structural gap. He draws that conclusion based on long term GDP forecasts where he presumes to predict resource prices in the future. We are heavily dependent on resource prices for government revenue.
Say, did you notice that oil was up 8% on the week? Apparantly some people are nervous that Iran may attempt to start a nuclear war. Get oil back over $100 a barrel, and there goes your “structural” deficit because the oil sands become profitable again.
Taliesyn says:
21 February 2010 at 19:52 (UTC -7 )
But you miss the point – the structural deficit exists ONLY because we insist on the maintaining a generous welfare state…
skuleman says:
22 February 2010 at 6:29 (UTC -7 )
Taliesyn, some aspects of the welfare state are essentially wasteful, but there is a huge fiscal black hole (many billions) that no one seems to address and that is all the money from all levels of government that goes out in grants to various NGO’s, crown corporations etc.
There are several problems with these expenditures. First & foremost, most of these agencies have virtually no economic oversight and the grants exist a budget line items so never get any parliamentary oversight.
Second, we fund agencies like the CBC in a way that literally encourages them to be inefficient and wasteful.
Third, by funneling taxpayer money to charities and NGO’s we introduce a huge and unnecessary administrative burden. When the government decides to “give” taxpayers’ money to some cause like Haiti, there is the overhead of collecting the taxes, then the administrative overhead of the government departments, who ultimately give the money to some NGO or foreign government.
Fourth, by burying these expenditures as line items, the vast majority of Canadians have no idea that their tax dollars are going down these fiscal drains, and if they did, would be up in arms about it.
The very first target Page should have been going after was transparency in the expenditures, which means every departments budget, at every level of government, at the line item level should be on their websites. Then taxpayers could see where their money is really going.
Cynical Bard says:
22 February 2010 at 9:15 (UTC -7 )
That’s all true. One of the serious problems is that governments tend to spend money with no idea of what the project will cost, or what will be achieved by it. Look at the bio-fuels programs or CPP.
CPP was supposed to provide for retirement at a cost of 5% of our incomes, then after it was firmly established, the cost jumped to 10%, and the chief actuary was fired because he said it should be higher, and we got to pay for the wrongful dismissal charges. At that time there were news reports that the original beneficiaries (people born in 1911) would get a rate of return of 18%, but people born in 2000 would get as small negative return.
And it goes on and on. Programs continue for decades and no one knows what is being achieved. As your MP why western farmers are bound to the Canadian Wheat Board and Ontario farmers are not.