When the financial crisis hit five years ago, there was no shortage of analysts, politicians and pundits who thought what the world needed was a lot more debt.
In Canada, where much back-patting has taken place – this on the grounds that our economy didn’t crash and burn à la the Europeans or the Americans – a strange narrative took shape: even though many people credited the mid-1990s federal and provincial reforms – where cuts to government spending were properly credited with putting our fiscal house in order – the post-2008 response by governments in Canada and abroad has been the opposite: spend, spend, spend; borrow, borrow, borrow.
In other words, just as many in Canada and abroad pointed to our 1990s policies of fiscal rectitude as having been prescient, this to avoid the over-indebtedness of the Europeans, Americans and the Japanese, no Canadian government since the last recession has practised what it preached about that 1990s approach: prudence. Thus, B.C. has runs deficits since the last recession; so, too, Alberta. And, meanwhile, the federal Conservatives have racked up new borrowing at an alarming pace. They even have the audacity to use public money to brag that their extra spending and borrowing helped Canada exit from the last recession.
That claim is false. The federal government’s much-vaunted stimulus program was announced in early 2009 but much of the extra infrastructure spending didn’t even start until later that year. Problem: the recession ended in mid-2009. Thus, for a stimulus program announced in the first quarter of 2009 and where some borrowed money didn’t even begin to flow until later in 2009, and much of it came even after 2009, one has to believe that federal spending magically transported itself back in time to affect the second quarter of 2009 – and thus caused the recession to end.
That is fanciful nonsense, but it illustrates just one absurdity about the claim that extra government stimulus programs beyond already useful economic stabilizers (unemployment insurance) will save economies from recessions.
Despite the odd contradictory position taken by Canada’s politicians these days on public red ink, consider that for most Canadian governments, all they’ve done is return to their mostly profligate ways: putting the next generation in debt while claiming to save the present from the vagaries of the economy.
Since 1967, as far back as the federal government’s fiscal reference tables go, Ottawa has produced balanced budgets in just 12 years, or barely more than one-quarter of the time.
The provinces haven’t fared much better. The same statistics, except dating back just to 1991, show that when all provinces are combined, surplus positions were the norm in just one out of every three years.
Fact is, such continual red ink is the rule. The period between the mid-1990s to the 2008 recession where many governments in Canada mostly produced surpluses was the exception. Also, such deficits can’t be blamed on recessions. It’s not as if Canadians experienced a national recession in three out of every four years since 1967 or provincial recessions in two out of every three years.
Which leaves another possibility: our federal and provincial governments, despite how they and others credit the mid-1990s period as an example of fiscal prudence, mistake the exception for the rule. The rule is that in most years, Canada’s governments have been averse to prudence; they much prefer to borrow and hand the bill to future generations. •
