So the budget is out and it looks like the Tories are going to take us time travelling. Poof! It’s the 1970s again, and there’s no problem the government can’t spend its way out of. Never mind that it didn’t work then, and it left us with a government debt that crippled a generation and was only recently paid down to a reasonable level.
The truth is that we’ve been living beyond our means for a while now, and the only solution is to get used to living within our means. There is no black magic that can make that ugly truth go away. Running consecutive deficits is simply a way of borrowing more money in a desperate attempt to keep the party going. But it won’t stop the pain, it will just delay it. It’s like dealing with a hangover by going on another drinking binge. Excessive government debt will have to be paid back down again in the future, so we are simply punishing “future” Canadians for our mistakes. By running up a deficit we may make life better now, but we’re making our future less bright.
I saw Warren Buffett give a talk in Toronto about a year ago, and he observed that there has never been a case where a government had run up a large debt where it didn’t subsequently crank up the money presses and allow the value of its currency to fall, thus reducing the amount it owes to its creditors. Problem is, that usually leads to inflation. No one can predict the future, but with governments running up big debts all over the world, it doesn’t seem impossible that global inflation could be a huge problem five years from now. If it is, it will only make things worse.
Anyone would be in favour of stimulating the economy if they knew it would make things better, but I’m not 100 per cent sure that it will. Not the way this budget does it, anyway. Even the Tories seem to have misgivings about what they’re doing, hinting that they’re being pushed into something that they’re not entirely comfortable with. I can understand spending government money on bridges, roads and other infrastructure projects, because that stuff needs to be done anyway. But I’m not sure I like the idea of bankrolling my neighbour’s kitchen renovation, which is exactly what this budget forces me to do. It will no doubt help my neighbour, but I don’t think it will help the country—and it certainly won’t help me.