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So what if they balance the books?

Quick takes on what are sure to be budget-talking points


 
Chris Young/CP

Chris Young/CP

There will be surprises when Finance Minister Joe Oliver delivers the 2015 federal budget —there always are—but some of the Conservative government’s main talking points are already pretty clear.

Stephen Gordon, economics professor at l’Université Laval and Maclean’s contributor, will join us in Ottawa to analyze the budget. We caught up with him in advance to discuss the points Oliver is sure to try to drive home.

Q: Joe Oliver is going to make much of the fact that, after seven consecutive deficits, the federal books are balanced again. Does it matter?

A: In a certain sense, the timing doesn’t matter that much, certainly not in the position Canada is in now. We’re not like Greece with the International Monetary Fund (IMF), where we have to meet some sort of deadline or the IMF funding runs out. If we ran another deficit or two, in the great grand scheme of things, nobody would care in international financial markets. There’s no external pressure.

Q: How about Oliver’s promise to table balanced-budget legislation?

A: This is clearly a matter of trying to tie any future government’s hands. You couldn’t run a deficit without jumping through some legislative hoops. It’s not necessarily a bad idea. It’s the kind of thing you’d probably want to do anyway; committing yourself is probably not a bad thing. You can imagine a future Conservative opposition having lots of fun with, let’s say, Justin Trudeau’s government trying to run a deficit to fund infrastructure programs.

Q: The Tories already boast that their infrastructure program is the biggest in federal history, but they say even more is coming. It’s common these days to hear infrastructure spending touted as almost irreproachable. Do you agree?

A: Part of [recent infrastructure spending] was needed, just because there had to be a rebound from the 1990s, when, during the budget-cutting era, putting off infrastructure was an easy thing to do because the consequences weren’t immediate. But a lot of that has been recovered. So I’m going to push back a bit against the idea of infrastructure for infrastructure’s sake. It’s fine on a project-by-project basis, but if you just say, “We must spend more on infrastructure,” well, you can imagine the pork-barrelling that can go on.

Q: Another refrain you hear a lot in pre-budget chatter is that the middle class needs a boost. The opposition Liberals, in particular, say middle-class incomes have stagnated, and they’ll almost certainly go after Oliver for not doing enough on that front. Is this a valid point and, if it is, what about cutting middle-class taxes?

A: Part of it is just wrong. We’ve seen steady increases in median incomes over the last 10, 15, 20 years. On the other hand, that has not recovered the losses from the previous 20 years. But the trend hasn’t been steadily down from, say, 1976. And you can talk about tax relief, but the thing about the middle class is, there’s lots of people there. That’s expensive. If you’re going to cut taxes there, then you’ll be cutting spending somewhere else. Or increasing taxes on—whom? The rich? There aren’t that many of them.

Q: Another key Harper government claim is that the Conservatives managed Canada through the recession brilliantly, injecting $60 billion in stimulus at just the right time to pull the country into a fast recovery. Is this accurate?

A: What was more important in the recovery was monetary policy, the exchange rate and commodity prices. The thing about the stimulus program was that it had to be temporary, and it was. It probably wasn’t strictly necessary, though, because we had depreciation in the Canadian dollar, which helped exports, and then a rebound in commodity prices. But, as part of a global thing, Canada was pretty much obliged to participate in the stimulus program. At the G20, it would have been hard for Canada to say, “You know what? We don’t need it. We’ll just ride the global recovery.”


 

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