Fix the Structural Deficit: There’s No Question (Period)

Posted by John Streicker on 5 February 2010 | 0 Comments

2 years ago, the Prime Minister appointed Kevin Page as our first ever Parliamentary Budget Officer. The timing was amazing given that we were about to head into a recession.

It is Mr. Page's job to provide "analysis to Parliament on the state of the nation's finances, the government's estimates and trends in the Canadian economy". Since Parliament is currently prorogued in order to focus on our economy, and since we now have a Parliamentary budget officer, what does Mr. Page have to say about our finances?

He says our finances are in trouble. 2 weeks ago Mr. Page released a report declaring that Canada is in a structural deficit. This goes beyond our stimulus spending and our debt which is now expanding back over $500 billion.

Even leading into the recession, we had cut GST while increasing government spending across the board. And last year marked the peak of the percentage of Canadians working and paying taxes. Boomers are retiring.

To clarify, debt is the money Canada owes. According to the Canadian Tax Payers Federation, we pay $84 million a day just to service our debt. A deficit is when we spend more money than we have in a year. And a structural deficit is when we spend more money than we have every year.

A structural deficit is not sustainable. It must be addressed and the sooner the better. There is no question (period).

Currently Mr. Page estimates that we are spending $19 billion a year more than our revenue (and this is over and above the stimulus spending). It is a vicious cycle that ultimately means we are forced to cut more and more public services in order to service our growing debt.

How is Canada planning to respond? Well first of all Finance Minister Jim Flaherty says we are not in a structural deficit. He also says that in five years we'll be out of it due to growth.

Most economists would describe five years of deficit as structural and very few believe that the problem will just go away. It is my sense that our government knows this as well. They just don't want to be labeled as having created the problem so they deny it is happening.

Next month when Parliament gets back to work we will have a new budget. Already there are hints of which way our government would lead us.

The government has said that transfer payments to provinces and territories will not be affected. However, Treasury Board president Stockwell Day is indicating that we will need to have spending restraint and that all government spending will come under review.

The Prime Minister and Finance Minister have also stated that we will not have any new taxes, although it looks like they are planning to raise Employment Insurance. They just say EI premiums are not a tax. Sorry, but for Canadians (and Canadian businesses), EI is a tax.

I am not writing about this just to complain. Nor am I suggesting that we ignore the problem. I was raised by prairie folk that grew up in the depression. They instilled the importance of living within our means.

I am writing to stimulate the conversation about how we will tackle the structural deficit. Here are my ideas:

Stop putting stimulus spending into things like hot-tubs. Instead, put stimulus spending into the economy of the future so that it benefits all of us for the long term, especially when we are faced with the legacy of debt.

When taxes are raised, and they will be, let's not tax employment. We want to make it easier to hire people, not harder. It would be much smarter to tax those things we want to reduce, like greenhouse gas emissions and other pollution. This is the way to stimulate the economy and the environment at the same time.

When programs are cut, and they will be, let's not use this as a moment to be heavily partisan. Please. It's at times like these when I urge Parliament to act as the Government of Canada and not as the Government of the ruling party.

While I am at it, I think that all politicians (and aspiring politicians) could use a little humility. Speaking openly, honestly and plainly always strengthens our democracy. I am reminded of Edith Josie.

It was sad news that she passed away this past weekend. I had the privilege to sit next to her once at a gathering and I found her inspiring. As an elder, a leader and a columnist in this paper, Edith Josie always spoke from the heart. As a result, I think she elevated all of us as Yukoners. Mahsi Cho.