After being knocked off course by (as a Prime Minister of the UK once famously put it “events, dear boy, events,”) the media took their cues from the sign bearers at Conservative rallies. As week seven of the election campaign began, they decided that the “economy” was once again the issue.
Having the economy front and centre seems to work to the Conservatives’ advantage. Why else would they have ads and backdrops featuring people with faded-looking signs that say “Protect Our Economy?” And when they have the opposition parties attacking each other’s economic policies, can it get any better?
So Harper started off the week with a good news announcement. The final audited results were in from Finance Canada and, lo and behold, instead of a really tiny deficit in the fiscal year that ended on March 31, there was a really tiny surplus. Let the bells ring out and let the banners fly, as Foghorn Leghorn would say.
Although the pundit panels were quick to categorize the deficit-to-surplus transformation as a mere “rounding error” reporters (and the pundits themselves) took their cues from the Harper campaign. “The economy” was the issue, and the news was the division between Mulcair (the balanced budget guy) and Trudeau (the deficits for economic stimulus guy). In the end, the newsies decided that the daily trivial pursuit worked better for Mulcair, who says he can increase social spending without running a deficit. It was less helpful for Trudeau, who seems committed to spending his way to three years’ of deficits, regardless.
Harper, naturally, called the Finance department report “incredibly good news.” Hyperbole aside, it may be so construed if you look only at one of Monday’s releases, the Annual Report of the Government of Canada. However, to its credit, Finance Canada released a companion piece to the annual report, the Fiscal Reference Tables. http://www.fin.gc.ca/frt-trf/2015/frt-trf15-eng.pdf
That is where the real story can be found, and it’s not particularly good news for most Canadians.
The latest annual compendium contains 59 pages of fiscal data, some of which goes back as far as 1966-67 for the feds and 1990 for the provinces. It provides something that is in scarce supply in this election campaign – perspective. For one thing, the tables show that federal spending as a percentage of GDP hit a 48-year low of 14.2% in 2014-15, continuation of a 30-year decline from 23.8% in 1984-85. For another, federal government debt charges as a share of GDP have been in steady decline since 1990-91 and stood at 1.3% of GDP, in 2014-15, the lowest on record. In short, the feds have lots of room to increase necessary spending if they choose to.
Provincial transfers represent one expenditure area that clearly needs to be increased. As the fiscal tables show, the feds have acquired much of their spending room at the expense of the provinces, all of which have either been running up debt or (in the case of Alberta) burning through assets in order to fund operations. Despite the small federal operating surplus, the tables show that Canadian governments overall experienced a 2.7% increase in net debt last fiscal year. That’s because of a $30 billion jump in provincial net debt, a development that contributed to the dubious milestone reported by Statistics Canada in June, when the provinces’ share of the country’s debt surpassed that of the federal government for the first time in history (see July 1 post on the subject).
Although some provinces like Ontario have dug themselves into a fiscal hole by prioritizing tax cuts, this downloading of debt along with increased responsibility for funding health care and education is particularly troublesome for provinces with limited fiscal capacity and already high rates of taxation. The $30 billion increase in provincial indebtedness last year brought to $254 billion – or 81% – the increase in provincial net debt since the Conservatives came to power. The release of the Fiscal Reference Tables provided an opportunity to debate this worrisome development, but to Harper’s advantage, the focus remained on the “rounding error” and its impact on the campaigns of Harper’s opponents. Unfortunately, Kim Campbell probably had it right many years ago when she suggested that “an election is no time to discuss serious issues.”
Fiscal Facts don’t help NS Liberals’ case
Under the rules applied to other parties, Justin Trudeau’s embrace of deficit budgeting would be trouble for the austerity agenda of Nova Scotia’s provincial Liberal government. Liberals, though, rarely get called on their inconsistencies or on policy contradictions between their federal and provincial wings. So while old Liberal hands like Paul Martin and Eddie Goldenberg emerge during the campaign to do a 180 on their own past positions, the balanced budget zealotry in the McNeil cabinet goes mainly unquestioned down this way.
In the case of Martin, Finance Minister at the time, and Goldenberg, chief of staff to Jean Chretien, they were deficit hawks in the mid-1990s when the deficit was large and growing. There was a good case for dealing with it (although not in the way they chose). The latest numbers reported in the Fiscal Reference Tables are yet another indication that the McNeil government’s war on the deficit is a phoney one, designed, I suspect, to clear the way for a pre-election tax cut.
Since the Great Recession of 2008-09 provincial governments have been piling on the debt. Altogether, total provincial and territorial net debt has increased by $220 billion, or 63%. Nova Scotia’s net debt increased by just 22% over the six-year period, the lowest of any province. Here are the numbers, by province, for increases in net debt, 2008-9 to 2014-2015.
Prince Edward Island 51.9%
Nova Scotia 22.0%
New Brunswick 58.0%
Alberta 65.6% reduction in accumulated surplus
British Columbia 47.3%
As you can see, but for once oil-rich Newfoundland, the ranking is not even close. Nova Scotia – land of lobsters, blueberries and fiscal prudence.
 The PM was Sir Harold MacMillan; the events were the farcical – peegate – and the tragic – refugees