Fiscal Conservatism

Via the Toronto Star:

OTTAWA—As Conservatives prepare to recall Parliament, Finance Minister Jim Flaherty is setting the stage for a clampdown on federal government spending under the newly elected government, that would include cutting the public service by 80,000 — or one-third.

The Conservatives now have the power to cut spending to bring down the deficit, says Flaherty, a message that could foreshadow a round of deep cuts to services and programs in coming years.

I've made my own opinions clear on the causes of Canada's current fiscal deficit; a combination of tax cuts and the recession has pushed Canada into a sea of red ink.  Not surprising the Tories' solution to fixing this rather fixable problem is to choose austerity by axing a third of the entire civil service.  The Tories are arguing that they want to concentrate on the economy by focusing specifically on the deficit; yet spending reductions, especially the kind of hardcore austerity that results from hacking apart a third of the civil service, are only going to add further downward pressure on the Canadian economy.  Precisely as the British Conservatives have done and experienced across the pond.  This increases the likelihood of a double dip recession and will only serve to depress revenues and increase outlays through social spending programs such as EI, widening the deficit in the process.

The Conservatives aren't stupid, they know that this is the case.  Which leads us to another matter, which is the intentional underfunding of the public sector with the purpose of undermining the welfare state.  If you can't simply destroy the Canadian Pension Plan, Medicare or Employment Insurance through direct legislation (this would be political suicide), then why not underfund and under-staff them so they are indirectly denied the ability to preform the services to which they are intended?

Quoting Mrs. Ducharme, national executive vice-president of the Public Service Alliance of Canada:

“If we went back to the 1990s, the federal government cut around 45,000 jobs, and they realized pretty quickly that they didn’t have the people to actually do the work that Canadians expect.”

She said the people who suffer in this scenario are those most dependent on government services such as immigrants, the unemployed, pensioners and military veterans.

“I think this government really needs to stop and think through some of their ideas before they, quite honestly, destroy the public service and services that are expected, needed and delivered as part of everyone’s day-to-day lives,” Ducharme said.

 They did think it through, which is why they're doing what they're doing.

Deficit Woes

Apparently hoping the media wasn't noticing, current Finance Minister Jim Flaherty waded into the American political scene by warning the Americans that they must rectify their deficit issues pronto; then the Government indicated on the same day that they were likely to break a campaign promise by failing to balance the Canadian federal budget by 2014-2015.  Firstly, why is Flaherty even bothering to lecture the Americans on this issue?  His management of the deficit while Finance Minister in Ontario under Harris was horrendous.  And how good does he think the optics are of meeting with Rep. Paul Ryan, the architect of the infamous budget that would have privatized Medicare in the United States.

Secondly, the Tories have pressed hard that the deficit is a major issue in the country.  For the most part the deficit I figure is cycle-related.  Even back in 2009 when the deficit reached its high, most of the extra spending was related to the auto industry rescue, which turned out to be a massive success, along with increased EI pay outs and decreased revenues from the recession.  The cyclical nature of the problem thus makes cutting stimulus spending absolutely absurd, since it along with cuts to government spending through a sort of United Kingdom-like austerity program will merely act to suck away aggregate demand from the economy; diminishing a recovery and increasing unemployment in the process.

For me though this is the kicker,

Mr. Flaherty said he often gets questions from his American counterparts on Canada’s experience dealing with a fiscal crunch. “It’s an opportunity for me to talk about our view that we are on the right track, that this is doable” Mr. Flaherty said.

He said he thinks there are lessons for U.S. politicians in the way Canada ended a generation of budget shortfalls in the 1990s.

“I think the recent history of Canada shows we can move from a time of dramatic deficits where the (International Monetary Fund) was eyeing our country and our currency was weak to a time of stability and solidity with a good plan going forward,” Mr. Flaherty said. “That’s useful generally because we have been through difficult times.”

In the early 1990s Canada was facing a significant debt problem which threatened to cut off international financing, potentially forcing the country to take a loan from the IMF; presumably with all of the baggage of a restructuring program aimed at dismantling all sorts of public assets and elements of the welfare state.  What is missing from this discussion is the part where the Liberals are the ones responsible for balancing the federal budget during the 90s, partially by raiding education, military and provincial transfer expenditures.

Also missing is the part where the Conservative Party's remarkably weak record on deficit management is discussed, specifically the colossal amounts of debt collected by the Mulroney government during the 1980s and then the move from surplus into structural deficit through GST and corporate tax cuts during the first Minority under Stephen Harper.  Overall, Tory governments at the federal level have tended towards the creation of massive amounts of debt for the country.  Presumably this is why Flaherty's trying to carpet it over by attempting to speak with some authority on the subject of how the deficit was eliminated in the first place during the 90s, even if the Tories were out of power and the Liberals were the ones actually responsible.

In a way this is comparable to if a foreigner asked a Republican for help in attempting to implementing expansions to health care access; there's a clear credibility issue at play.