Presupuestos balanceados, Alex Usher
Mayo 31, 2019
 
May 28th, 2019 – Alex Usher
A few weeks ago, the federal and länder governments in Germany reached a ten-year accord with respect to funding for scientific research. Result: a decade of planned 3% annual increases. Needless to say, this elicited quite a few envious glances from folks in Canada, who only get funding increases in jerky fashion, often after years of neglect.  Partly, this was a product of Germany’s more healthy system of science federalism, where different levels of government talk to each other like grown ups instead of childishly ignoring one another the way ours do. But it is also a product of something much simpler: balanced budgets and healthy public finances. When you’ve got them, you can make long-term plans and when you don’t, funding for programs is always at risk.Also a couple of weeks ago, I posted HESA’s annual review of provincial budgets and their associated investments in post-secondary education. Only two provinces increased their funding to post-secondary education in real terms: British Columbia and Quebec. What binds these two provinces together? Well, low unemployment rates for one; they have the two lowest in the country. But they also have the two healthiest balance sheets in the country, and – maybe more to the point – the commitment to balanced budgets in both provinces is bipartisan. Quebec’s budget this year was the seventh balanced budget in a row, under three different administrations; British Columbia’s was the fifth under two administrations (consisting of three parties, thanks to the current NDP/Green arrangement). Again, if you have balanced budgets and healthy public finances, investments are possible; if not, they’re not.
Balanced budgets are sometimes seen as passé. All the main parties federally seem now to have decided that deficits are also not something to get too excited about in the short term, (though those same long-term demographic trends actually work in the feds’ favour, so in this case they happen to be at least partially right); the Wynne government in Ontario treated deficits as something best viewed from a great distance. And of course, south of the border, Republicans decided deficits didn’t matter just as soon as they got the chance to pass a plutocrats’ tax cut, which in turn has led the Democrats to match them in claiming deficits don’t matter either (in the latter case, this is buttressed with a new flirtation with something called “Modern Monetary Theory,” a purportedly new theory whose only manifestation in practice ended in the Weimar Republic’s hyperinflation of the early 1920s, but lolz nothing matters, right?).
But here’s the thing: balanced budgets do matter. OK, nobody actually thinks we are heading back to the mid-90s when the country was actually flirting with bankruptcy (one dollar out of every three in the federal budget went to pay interest on the debt, at interest rates 400 to 500 basis points above the US rate to prevent capital flight). But many provinces do have serious long-term mismatches between their spending commitments and their sources of available revenue. According to the Parliamentary Budget Office, Alberta, Newfoundland and New Brunswick all have cost base/revenue mismatches equal to more than 2% of GDP (meaning it would take changes in budget of that magnitude to make the provinces solvent over the long run, given demographic trends); in Manitoba it is a stunning 4.5% of GDP (or about $1.25 billion). In these provinces, there is literally no hope of significant increases in core public funding for services – including higher education – until those budget numbers are put right.
Which is why it truly gets under my nose that most of bien-pensant Ontario has decided that every single cut made by the Ford government needs to be opposed on the grounds that it constitutes “austerity”. Austerity is not bad, per se. Austerity is a prime ingredient of Keynesian demand management (expansion in bad times needs to be offset by cuts in good times). In fact, what Ford is doing isn’t even necessarily austerity: the fiscal plan for this quinquennium involves annual increases in program spending of about 1% per year, which to most people’s eyes is not materially different than the 1.4% annual increases of the late McGuinty/early Wynne period of 2011-2016 (so if you think one was austerity the other was not, you either are working off double standards or you have an extremely finely honed sense of where the austerity/not austerity line lies).
By all means, criticize the Ford government for the daft way it added to the budget deficit through definitional changes, mostly to spite the previous government. Criticize it for some truly foolish policy choices like killing a rather good stem cell institute (which, to be honest, is probably more a silent nod to the pro-life crowd than it is a financial correction measure) or its incomprehensible stumbling about on autism or the penny-wise, pound-asinine cuts to children’s services or its (in my view) unnecessary butchering of OSAP. That’s all more than fair game.
But cuts aren’t in and of themselves bad. In the long run, balanced budgets are the basis of pretty much any kind of sound, long-term policy-making.   Knee-jerk reactions to cuts lead to perpetual budget deficits which sound generous but in practice leads to terrible, stunted policy-making. BC, Quebec, and Germany are models everyone can and should follow.

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