The liberals are the real conservatives. Or is it the conservatives who are the real liberals...

Partisan or ideological labels are meaningless

Coyne’s article on the budget perpetuates the myth that it is the “right” that wisely manages your money and the “left” that squanders it. It is conservative governments over the past 2 1/2 decades that have overspent and undertaxed, leaving high deficits to mop up. It was a Liberal government in the 90s that practised restrained conservative fiscal management and took flak from a Conservative opposition for it. Perhaps it is time to abandon cozy, outdated and deceptive labels.

– Letter writer in the current issue

You see this sort of thing a lot these days: the meme has escaped the lab, as it were. And it’s certainly true that big-C Conservative governments have often been anything but small-c conservative. But as to the broader thesis, that it is characteristic of conservative governments, owing to their reckless tax cuts, to run deficits that liberals have to clean up, well, it just ain’t so.

It was indeed the Liberals who cleaned up the mess in the 1990s (with large assists from the Reform opposition and Alan Greenspan). But, if you remember, they also created the mess: when the Mulroney Conservatives came to power in 1984, they inherited a deficit in excess of 8% of GDP from a party I’ll call the Liberals. True, they then spent nine years not doing much about it, but not because they cut taxes: they raised taxes (16.2% of GDP in 1985, 17.8% in 1993). So it can’t have been, in the writer’s fetching idiom, that we were “undertaxed.”

As for the Harris Conservatives in Ontario, another example that often pops up, it’s true they cut tax rates. But tax revenues didn’t fall after the Harris tax cuts: they went up. Own-source revenues (that is, not counting federal transfers) averaged just over 12% of provincial GDP in the early 1990s under the NDP, but averaged more than 13% through the Harris years. That’s how they were able to whittle a $10-billion deficit (again, inherited from the previous, left-leaning government) to zero, even as federal transfers were being cut in half. Well, that, and the spending cuts they imposed in their first term.

The reason the Ernie Eves (Harris’s successor) government ran deficits wasn’t because they cut taxes, but because they raised spending: having been held to roughly $5500 per citizen (in 2008 dollars) through the Harris years, program spending suddenly ballooned to nearly $6000 under Eves (in nominal dollars, it jumped from $56-billion to $64-billion in two years). Had they kept spending under control, there would have been no deficit.

If, further, the Liberals under Dalton McGuinty were then able to balance the budget, it wasn’t because of their conservative fiscal management: McGuinty spent money even faster than Eves did. By fiscal 2008, real spending had jumped all the way to $6800 per capita. The only reason he was able to balance the books was because of the massive increase in federal transfers in that period: just $6-billion in 2001, by 2008 they were $16.6-billion. Well, that, and the tax increases he imposed.

As for the Harper government, while they did cut taxes — the wrong ones — they also increased spending, rapidly. As did the Liberals before them.  As I noted in a recent column,

It was in the 2000 budget, the deficit vanquished but memories of it still fresh, that Paul Martin promised to hold future increases in spending to no more than the rate of inflation plus population growth—“the benchmark used by most economic commentators”—or about three per cent per year. Yet hardly had he issued the pledge before he broke it. Program spending that fiscal year jumped by nearly $12 billion, or 10 per cent, twice as much as forecast. This was followed by increases of 5 per cent, 8 per cent, 6 per cent, and an astonishing 15 per cent in 2005. The Conservatives followed with increases of 7 per cent, 6 per cent, and 4 per cent—again, well in excess of the inflation-plus-population growth standard.

It is worth considering where we would be today, had governments of either party stuck to the not-terribly-exacting standard of fiscal discipline Martin promised in 2000. Had program spending been held to 2000 levels in real per capita terms—that is, allowed to increase by no more than inflation plus population growth—it would today be just $165 billion, or some $43 billion less than currently projected.

The moral of the story: partisan or ideological labels are meaningless.  Right or left, Conservative or Liberal, if they have the revenue, they spend it. Except for those occasions when they spend it even if they don’t have it.