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Balanced budgets should be a given

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Jim Flaherty's 10th federal budget represents the dominance of expediency and opportunism over ideas and values in modern politics.

The 2014 federal budget increases spending on infrastructure and dishes out a few small goodies to interest groups but holds the line on spending overall.

Throw in another new highly specific (read: cheap) tax credit, this time for volunteers and reduce the deficit a bit more, all while continuing on the slow but inexorable road back to a balanced budget.

In other words, this budget is almost exactly the same as last year's, and as if to illustrate this dearth of ideas, the key message of this year's budget wasn't anything in the document itself, but that next year's budget will be in surplus.

It's been very well publicized for several years the government intends to balance the books in 2015, just in time for the next election.

A political masterstroke, perhaps, to signal this fact so far in advance, not only to blunt any claims it's an election ploy, but also to reduce any expectations on the government in the meantime.

It has also allowed the government to argue it is taking the middle, and therefore the implied moderate, path by being responsible and balancing the budget eventually, without cutting too hard or too fast -- a neat way to avoid criticism from both sides.

But a position or choice is not automatically right because it happens to fall in the middle of three possible options -- for that you need ideas and guiding principles.

So, how exactly did we get to the point where balancing the budget in the last year of a government's term, as a political ploy, is considered a success?

A balanced budget should be the absolute minimum we require of a government -- the starting point for all other policy discussion.

Every dollar 'invested' into the economy by the government is a dollar they must first remove from the economy through taxes or monetary policy.

The multiplier effect describes wider economic benefits of government spending, but ignores the wider economic harms multiplied through the economy of the taxation and borrowing needed to fund that extra spending.

Billions of dollars spent on infrastructure are concentrated into a few projects that are hugely visible and win votes, while the job losses that come from the higher taxes and borrowing they necessitate are dispersed over the whole economy or lost in the noise of the recession statistics -- one job here and there, but they all add up.

Overall, government spending only works in a recession if you think governments are more careful spending tax dollars than individual citizens are at spending their own money, and people generally don't believe this unless the government is spending tax dollars on them.

Yet, when asked, during a post-budget interview, what he'd learnt in his time in office, Flaherty replied -- "I really don't think there's a place in democracies for ideological position taking."

And what would he do with the surplus once it's achieved next year? -- "I don't know."

The man who hated the very thought of deficits, and a conservative government, reduced to drifting in the wind -- the ultimate triumph of politics over ideas.

A government that, at the first sign of economic trouble and poor polls that might cost them re-election, abandoned the ideas of balanced budgets and only spending what the government collects, adopting big-spending Keynesian investment policies instead -- seeming oblivious to the idea such policies are themselves just another kind of ideology.

Unfortunately, the hundreds of billions in new debt racked up while the government talked about balanced budgets in the future is only part of the cost.

What price can we put on a culture where abandoning one philosophy for another completely opposite set of ideas, is described and lauded as abandoning all ideology?

What do we lose when politicians are encouraged to change their views to suit whatever people want to hear, or whatever polls are telling them to say?

Let's hope next year's budget takes some risks and puts something new on the table, so the election can be the battle of ideas the public deserves.

 

Peter McCaffrey is a policy analyst for the Frontier Centre for Public Policy where he conducts research on a wide variety of municipal, provincial and federal public policy.

Republished from the Winnipeg Free Press print edition February 14, 2014 A11

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