2018 Budget: No worries… budget will balance itself

Policy appropriation (300 dpi)

One reassuring thing about the budget is that spending and deficits are under control.  Both are huge, and growing. But not to worry.  We have top peoplekind working on it.

Which budget, you ask in surprise?  And I answer “All of them.”  Including this week’s federal one.

Lately I’ve been going through recent Ontario budgets in preparation for the 5th annual Freedom School Conference in Calgary this weekend by the Economic Education Association of Alberta, updating my charts.  And while you might claim the Ontario government’s fiscal hair is not just on fire, it’s been blazing for years, I can assure you that they can assure you it’s just a comfy little headwarmer.  Stylish too.

Every year they produce deficit charts showing the dang thing rising now but declining in future as determined spending controls kick in.  As in Canada during the Mulroney years.  I know.  I was there.

Turn now to a thing called “EQUALITY + GROWTH/ A Strong Middle Class”.  It looks rather like one of those computer-generated word clusters but is, of all things, the latest federal budget.  And in it we find that spending and revenue are… um… well they are obviously good.

Very good. “[T]he Government has invested in Canadians” which is jolly decent of it.  Oh, and “in the things that matter most to Canadians.”  Which of course included “the choice to reject austerity”.  With more good things to come.  “It’s time to build an economy that truly reflects the kind of country we are, wish to be and need to be.”  Shakespeare is turning in his grave at this prose.

You just can’t imagine all the great things this vision entails, including women finally getting ahead, especially “Women with disabilities, visible minorities, Indigenous women, members of the LGBTQ2 community, new Canadians and others with marginalized intersecting identities”.  Single mothers.  Transit.  A National Housing Strategy.  And by golly I’m only on page 15.

Still, what about that vaguely ominous overall spending picture?  If “Equality + Growth” is a budget it must be here somewhere.  And it is, so I’ll spare you all the GBA+ and CCB and GIS and CSJ and CLB and Superclusters and Supporting the Rural Economy and Forestry and Reconciliation and skip to the banal details buried on p. 319 of 367, in an Annex.

They show spending rising from $311 billion last year, which already seemed like a lot, to $383.2 billion by 2022-23 if everything goes according to plan.  Which seems like even more.  But wait.

Two weeks ago my National Post colleague John Ivison wrote “Program spending, which has been rising at six per cent a year since Trudeau came to power, needs to fall to three per cent to keep the debt-to-GDP level ticking downward.”  And apparently it will.  Massive as these new numbers are, the $17 billion increase from this year to next is 6% but if they keep to their projections it “settles down” with $8, $9, $10, $9 and $10 billion rises through 2022-23, all in the 2.5 to 3% range, while the overall $72 billion increase, $200 million a day, only amounts to 23%.


Meanwhile revenue increases chug along at around $12 billion a year and the gap sloooowly closes, so by 2022 we face a “mere” $12.3 billion deficit with built-in $3b “Adjustment for risk” cushion, even with interest on the debt projected to rise from $24.1 billion this year to $33.1 billion in the 5-year crystal ball.


All these numbers are, characteristically, way too optimistic.  Especially in assuming everything will go well.  Politicians who run deficits in good times and bad because they’re determined to maintain existing programs and add new ones will now also firmly restrain spending, and bad times won’t return causing lower revenue, increased interest payments and a big spending spike to relieve want and “stimulate” the economy.  Wanna bet?

If our massive social programs and government initiatives to stimulate this, subsidize that and strengthen the other work so well, you’d actually think we’d need less of them.  But apparently not.  And that thinking is at the root of the habit governments have of spending every dime they can reconcile with tolerably positive long-term scenarios that never come true.  Exactly like all those Ontario budgets, and federal ones in days of yore, with exciting new programs now and deficits and debt-to-GDP ratio gently declining later because spending is firmly restrained over long periods by people who never yet did it.

Oh, one more thing.  Pharmacare.  It’s still just a plan in search of a plan.  But when last did a major new social program not cost dramatically more than anticipated because its architects failed to heed the key economic insight that “incentives matter”?

So even if everything goes as planned, it won’t.  As usual.

More from John Robson.    Follow John on Twitter at @thejohnrobson

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