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Deficit albatross hangs on Selinger

Timing may work politically, or not

Hey there, time traveller!
This article was published 10/12/2012 (1713 days ago), so information in it may no longer be current.

The state of the province address, scheduled for Tuesday, is usually an opportunity for the premier to highlight all the promising developments over the past year and others expected for the year ahead. This year, that's going to be a tough trick for Premier Greg Selinger to pull off.

In an interview with the Free Press, Selinger and Finance Minister Stan Struthers confirmed what many had already suspected: It will take until 2016-17 to balance the budget, three years longer than previously forecast. A sputtering global economy has dampened hopes for robust economic growth this year and next, and that has left Manitoba unable to keep its commitment to balance by 2013-14.

Politically, the timing of the original target was perfect. With the next provincial election scheduled by law for the fall of 2015, Selinger had every opportunity to slay the deficit and wipe it from the collective conscience of voters the next time they go to the polls. The new target creates the real possibility Selinger will face a vote with the province's books still in the red.

A quirk in provincial fixed-date election law could provide some respite for the NDP government. Manitoba is allowed to push the date for the next election back as far as May 2016 if the federal government goes to the polls in 2015. In that scenario, Selinger would hope to make a formal announcement the deficit was no more in the 2016-17 budget (tabled in March 2016), right before hitting the campaign trail.

Still, that's cutting it close. And given that "unpredictable is the new norm," as Selinger likes to say, it's no lock the deficit will be slain in time for the new target. At the very least, Selinger is looking at spending the entirety of his current mandate in deficit, a fact the opposition parties are sure to make the key feature of their efforts to bring down the NDP dynasty.

Now we know Selinger may not be able to balance the budget until the eve of the next election, the big question is whether there is political hay to be made over this, arguably the most significant problem he has faced during his time as premier. The Opposition Progressive Conservatives have already been doing the spadework to portray Selinger as a loose-spending, indecisive leader who does not have the intestinal fortitude to make the tough decisions necessary in these challenging economic times.

Of course, it's always easier to run a government and manage an economy when you're not the person responsible for doing either of those things. Opposition hyperbole aside, the nation is more or less in a deficit position. Ottawa recently announced it would take an extra year to balance its budget. Even oil-and-gas-rich provinces are spending more than they're taking in. If misery loves company, then Canada's premiers are finding some comfort in the misery the gross majority of provinces are feeling.

It's important to recognize none of the provinces are resorting to severe austerity to attack the deficit, as was the case in the early 1990s. In that decade, the elimination of deficits was the priority, come hell, high water or cutbacks to health and education. That was the accepted groupthink on fiscal policy, which made it easier for individual provinces to embrace austerity. They had each other for cover.

The groupthink now is also a source of comfort for Selinger as he tries to defend his fiscal record. Since 2008, when the global economy began its meltdown, Manitoba has resisted the temptation to drastically reduce expenditures. Part of that was the expectation that revenues would bounce back. That has not happened, and so the whole plan to slow spending and grow our way out of deficit has proven ineffective.

What's interesting is that the provinces have, on the most part, resisted severe austerity. Some provinces have reached back into the 1990s playbook and cut spending on health and education. But most have instead chosen to apply moderation to their fiscal decision-making. This has meant pushing back deadlines for the return of balanced budgets while applying incremental measures to "slow" spending, rather than cutting it deeply.

In Manitoba, as elsewhere, this has meant wage and benefit concessions from civil servants along with mergers, reductions and reorganizations of departments and program delivery. Selinger indicated Monday that along with pushing back the deadline for balancing the budget, the province would likely seek more wage concessions from its unionized workers.

The real trouble for Selinger may come if this new, delayed target for deficit elimination is not met. Selinger is correct to note the entire country is in the same predicament as Manitoba. Over the next three years, however, it's quite likely some of the other provinces will overcome their budget deficits, leaving those that remain exposed and open to renewed criticism.

As well, with uncertainty being the new norm, Selinger's new target is just the latest and most educated best guess. It is no more accurate than the last target, which has been officially tossed as being unrealistic. Thus, Selinger's whole theory -- that the province can simply slow expenditures and wait for the economy to catch up -- remains just that: a theory.

The night may be darkest before the dawn. But in this unique scenario, that profound darkness is no indication when, or if, that dawn will ultimately come.

Read more by Dan Lett.


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Updated on Tuesday, December 11, 2012 at 9:42 AM CST: Corrects that it will take until 2016-17 to balance the budget

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