Let's get fiscal

Stephen Harper's Conservatives are the most ideologically committed right wing government any developed nation has endured since the days of the Iron Lady. Nothing encapsulates their worldview so much as their commitment to eliminating the federal budget deficit before the next election, due in 2015.  This commitment, truth be told, has little to do with fiscal rectitude per se.  Rather, it gives the Tories an excuse to eviscerate all manner of social programs and roll back decades of co-operation between the federal and provincial levels of government.  It also paves the way for a perfectly cynical attempt to buy votes in the 2015 election, by introducing a raft of tax cuts for the middle classes.

The deficit elimination plan appears to be on track, if not ahead of schedule, but there's no chance that Finance Minister Jim Flaherty will make any significant changes when he tables his annual budget next week.  The state will continue to be shrunk, and Flaherty will continue to set the stage for the shameless bribes that everyone knows he will offer in twelve months' time.  

With the Senate scandal rolling on, the government's fiscal stance generally receives surprisingly little attention in the national political arena.  Neither the opposition NDP nor the reviving Liberal party dares even to suggest that they might consider tax increases, so such debate as does take place is held largely on the terms that the Tories have set.

That said, it does seem that the NDP believes that the deficit reduction agenda is being pushed too hard at a time when the economy is expanding only slowly.  That view was endorsed to a degree by the IMF in a recent report, which mildly suggested that the government might need to take its foot off the fiscal brake if it appeared that its austerity efforts were harming growth prospects.  Evidently the Fund is not aware that Flaherty and Harper have a very precise, election driven plan for when they will take their foot off the brake and jam it down on the gas pedal.

According to this recent column by an NDP-leaning columnist, the official opposition is moving away from the balanced budget "fetish" and would allow the process of eliminating the deficit to drag out for an extra year or two if that would help revive growth.  That's a very reasonable view, but it's not one that I find very comforting coming from the NDP, or from columnists like Tom Walkom.   As he puts it, 

"While deficits should be eliminated over time, the idea of a balanced budget should not become a fetish".

Trouble is, nobody can really believe that either Walkom or the NDP finance critic, Peggy Nash, really means the first part of that statement.  When times are tough,  most leftish or centrist politicians will see a case for "Keynesian" deficit spending to goose the economy.  And when times are good?  Why, the rising tide of revenues makes it the perfect opportunity to dust off all those spending plans that have been sitting on the shelf, just waiting for the funding situation to improve.  Deficit and debt reduction doesn't get a look-in.

Back in the 1980s, Canadian governments of both left and right always talked about eliminating budget deficits when the time was right, but never actually did it, regardless of how well the economy was doing.  It took a modicum of actual spending restraint imposed by Finance Minister Paul Martin in the 1990s, and a heaping helping of good luck in the shape of a strongly-growing US economy, finally to get the fiscal situation under control. 

Similarly, for much of the past decade, the UK government (under Gordon Brown as first Chancellor, then PM) always saw the strength in the economy as a cause for more rather than less public spending.  Unlike Paul Martin, Brown's successor, George Osborne, has not been bailed out by a favourable international environment as he tries to sort out the fiscal mess.  As a result, austerity seems set to stay in place in the UK for a few more years yet.

The Harper Conservatives are an odious and cynical bunch, and their fiscal policy is directed at obtaining political advantage rather than securing the best interests of the country as a whole.  But if the NDP is going to fight the 2015 election on a platform of unfunded government spending, they had better hope that Canadian voters have short memories.