Pity the beleaguered editors of the Calgary Herald… In two opinion pieces this morning they lament the apparent flight of “fiscal conservatives” from the scene in the mad rush to plunge the government into levels of deficit spending that just months ago were inconceivable.
Are there no fiscal conservatives left in Canada? Evidently not: The allegedly Conservative federal government is set to post a deficit of up to $30 billion over the next four years, rather than addressing the issues raised for government by the recession through reduced spending.
Now, we have Alberta’s Progressive Conservative government, its conservatism clearly overwhelmed by its progressivism, predicting a technical deficit for the coming fiscal year — again, with no apparent recourse to financial rigour.
Perhaps that’s what one should expect from a party with an oxy-moron for a name, along with such fuzzy concepts as “technical” deficits: Deficits happen when government expenses exceed revenues, at which point governments typically borrow, or cut spending. That Alberta alone among the provinces has a Sustainability Fund to draw upon doesn’t mean it is somehow not in the red. In other words, unless it’s possible to be technically speeding or technically pregnant, Premier Ed Stelmach offers a distinction without a difference.
The second editorial is even more amusing. In addition to bemoaning the Conservatives’ enthusiastic (albeit belated) embrace of deficit spending, it desperately attempts to shift blame for this dramatic reversal of course on the opposition parties, the Bloc in particular.
If only it were possible to spend one’s way to wealth. As any person laden down by debt now keenly appreciates, it is not.
Yet, stripped of its padding, that seems to be Ottawa’s plan to “get through”what Finance Minister Jim Flaherty told provincial finance ministers gathered in Saskatoon Wednesday would be a tough year in 2009: Canadians can expect job losses and for the first time in nearly two decades, a contracting economy. The federal response, said Flaherty, would be a cocktail of expanded federal infrastructure spending, tax cuts and federal participation in a plan to free up stranded debt — the so-called asset backed commercial paper held by banks and financial institutions, now considered too risky to touch.
A federal budget deficit, thanks largely to the threat of a separatist-backed coalition, is now a certainty.
Unfortunately, in their exuberance to jump start the economy, it may be that the Conservatives are overreacting. According to Don Drummond, Canada should limit next year’s budget deficit to $22 billion even as it boosts spending to deal with the world economic downturn.
Even so, “It’s not going to make a horrific difference to most Canadians… We do have physical limits to what we can do,” Drummond told CBC Newsworld.
Calling Harper’s proposed deficit in the range of $30 billion in the next fiscal year “unrealistic” Drummond instead recommends a maximum of about $12 billion in extra fiscal stimulus, bringing the final shortfall to $22 billion or 0.75 percent of the national GDP.
Given that Drummond has been acting as an advisor to Michael Ignatieff since his installation as leader of the LPC, it’s probably safe to say that this more modest proposal reflects the Liberal position on the “stimulus” package and deficit spending. Also, I might add, one that’s somewhat more in tune with the public mood that is skeptical about the concept of deficit spending. If so, this should prove to be a rather interesting role reversal between the Conservatives and Liberals in future discussions about the upcoming budget.
Update: Seems like as good a place as any to include this interview of Harper by Steve Murphy of CTV Atlantic from several days ago.
*Graphic via Calgary Grit.