Sala, NDP need to figure out which side of Tories’ troubled ledger they’re on

Opinion

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This article was published 26/02/2024 (583 days ago), so information in it may no longer be current.

You could call it Finance Minister Adrien Sala’s tale of two fiscal realities.

On the one hand, the rookie minister has been spinning a tale about how the former Progressive Conservative government left finances in a total mess with a record budget deficit of $1.6 billion.

This tale received a huge boost in credibility last week with the release of a new analysis performed by accounting firm MNP, which showed a combination of reckless tax cuts and significantly increased spending had created “significant risk” going forward.

However, when Sala describes how he will address this fiscal crisis, a second tale emerges.

Gone is the hyperbole about Tory crimes against fiscal sanity. In its place, Sala offers a calm confidence the NDP government can correct the fiscal situation while still delivering on most of the spending plans and all of the tax cuts promised by its predecessors.

“Our commitments were clear on (honouring Tory tax cuts) and we plan on delivering on our commitments,” Sala said last week.

With respect, he cannot have his fiscal cake and eat it, too. Not in this instance.

If the previous Tory fiscal plan was fiscally irresponsible — and there is every good reason to believe that it was — then any subsequent government that adopts its insane features would be equally as irresponsible.

Before getting into just how irresponsible, we first need to ask whether the fiscal picture the NDP is painting of PC mismanagement is fair and accurate.

The MNP report leaves little doubt the Tories were burning the fiscal candle at both ends.

The MNP report leaves little doubt the Tories were burning the fiscal candle at both ends.

On the expenditure side, the government led by former premier Heather Stefanson tried to dramatically ramp up spending to reverse or, perhaps, obscure the austerity practised by her predecessor, Brian Pallister. The result was that following years of enormous deficits created by extraordinary pandemic expenses, the Tories introduced a new round of income tax cuts while plunging billions into health care, infrastructure and program operations.

The result was that in 2023-24, through a combination of both tax cuts and spending increases, Stefanson ran up a record deficit and added more than $4.7 billion to gross government borrowing, MNP found.

Why would Stefanson throw so much fiscal caution to the wind? It appears to be a desperate attempt to undo a lot of what her predecessor had wrought in government finances.

From the moment he took over as premier in 2016, Pallister unleashed an absurd plan that reduced much-needed investments in public services and deferred otherwise unavoidable ongoing liabilities.

Pallister slowed the rate of spending in key areas such as health care and education to levels that were well below the need created by the combined impact of inflation and population growth. He slashed spending on infrastructure, an enormous driver of economic growth.

And in one of his costliest and most foolish strategies, he simply refused to negotiate collective agreements with unionized workers, leaving a retroactive pay liability from dozens of expired contracts.

Pallister did it to create the fiscal wiggle room to cut taxes. And cut taxes he did.

It is hard to pin down the exact cost of Pallister-era tax cuts, because most are tied to growth taxes. As a result, the total value increases significantly every year. But it is safe to estimate that right now, the combined impact of reductions to income tax, sales tax and education property tax, along with a whole host of other smaller tax expenditures, is costing the provincial treasury about $1.5 billion annually.

Just as a reminder, the Tories produced only two balanced budgets in their seven years in government. That means the vast majority of those tax cuts came from — and continue to come from — borrowed money.

Once we accept the MNP report is fair assessment of government finances, then it’s time to judge the approach the NDP is taking to deal with mess left to them by the Tories.

Once we accept the MNP report is fair assessment of government finances, then it’s time to judge the approach the NDP is taking to deal with mess left to them by the Tories.

In order to protect themselves from accusations they would be just another “tax-and-spend” New Democratic government, Premier Wab Kinew and the party’s campaign brain trust felt obligated to adopt the Tory tax as their own.

The NDP’s fears about being painted as a high-tax bunch were well-founded; Stefanson’s Tories began lobbing unfounded allegations long before the campaign officially began, suggesting that if elected, the NDP would immediately raise taxes to fund its campaign promises.

The strategy has also taken some of the sting out of Tory claims that the MNP report is nothing more than political propaganda. Last week, Tory finance critic Obby Khan’s most-pointed line of attack was to suggest the report was just vain attempt to divert attention from the raw sewage spill in Winnipeg and the decision to fire Manitoba Hydro’s CEO.

If that’s all the Tories have, then we can declare the NDP’s campaign strategy a winner.

But what may have made for clever campaigning is threatening to become a fiscal millstone hanging around Sala’s neck.

The rookie finance minister needs to remember that forgoing much-needed revenue at a time when restoring programs, deficit reduction and debt-servicing are more pressing issues is insane, no matter the party in power.

dan.lett@winnipegfreepress.com