John Robson: We Have Far Less Time Than We Think to Balance the Budget

Commentary

Kaboom. It’s loud, scary, and urgent. But it’s not the sound of new Canadian munitions going off as we ramp up to $150 billion a year in defence spending because they said so. It’s the federal budget detonating. And if anyone’s minded to call the bomb squad instead of waiting to be blown to insolvency come, now would be a good time. A really good time.

In C2C Journal, Gwyn Morgan snidely recalled a former prime minister’s assurance that there’d be modest initial deficits of under $10 billion for three years then a balanced budget by 2020, which led to nine consecutive often-massive deficits that essentially doubled the national debt. And alas, that part was the good news.

The bad is that Morgan then asked, “[w]ho could have imagined” that this performance would suddenly “look frugal by comparison?” Yet the recently released spending plan “formally known as the Main Estimates” boasted the usual massive increase in spending and also in “non-budgetary spending,” which is budgetary spending they call something else to try to avoid sowing panic.

It doesn’t work, because hiking spending by 8.5 percent to $437.8 billion and “non-budgetary spending” to a once-staggering, now trivial, $74.1 billion, will push the total well past half a trillion dollars, from under $300 billion a decade ago. If everything goes well. How often does it in life, let alone in government budgeting?

The C.D. Howe Institute, with the usual disclaimer that my brother runs the place plus here he’s a co-author, then weighed in with a study predicting deficits of $92 billion this fiscal year and averaging around $78 billion over the coming four which, the newspapers note, is “more than double the level forecast by the parliamentary budget officer before the spring federal election.”

Scared yet? No. Actually you’re not because this “optimistic” scenario counts as cold hard cash “speculative savings” due partly to the mouldy promise of cutting waste, the refuge of the urban budgetary scoundrel and his naive country cousin since Brian Mulroney was into pink slips and running shoes. (For other people, I mean.) Otherwise, we’re looking at $86 billion per year through C.D. Howe’s glasses. Which I respectfully suggest are as pink as the finance minister’s face will be when we see the real numbers.

One reason is that the study treated the prime minister’s pledge of 2 percent of GDP on defence, no sooner made than suddenly hiked to 5 percent, as a gradual aspiration. But speaking of suddenly, it’s mostly because I quote the late economist Rudi Dornbusch, not for the first time or the last, that “In economics, things take longer to happen than you think they will, and they happen faster than you thought they could.”

Decades of blithely reckless fiscal policy at the federal, provincial, and often municipal levels, which we’ve mostly gotten away with, have led people to think there’s no pot of gunpowder at the end of the rainbow. But there is, and when it goes boom, shockwaves will strike so fast in such rapid succession that those in charge will stand agape and stunned, or stagger from last Thursday’s disaster to yesterday’s, while today’s opens an abyss at their feet they’ll tumble into before they see it.

Even worse, there are two reasons the smouldering fuse will blaze up. First, as C.D. Howe has long tracked, Canadian governments have a long history of spending more than they predicted. Second, decades of reckless borrowing that accelerated in the last decade have pushed interest payments on the federal debt to nearly $50 billion. That same parliamentary budget officer was already warning of reaching $70 billion by 2029. But should interest rates rise as well as the debt burden, exactly the kind of thing that happens when you act as if tomorrow will never come, compound interest blows you straight to the poorhouse.

So where in this infernal engine will they find that massive extra pile of money for national security year on year? Over at the payday loan store? Down at the mint? Deep in your pocket?

Unfortunately, for reasons ranging from government improvidence to their own, about half of Canadians report being one $200 expense away from their own version of Hemingway’s line about going broke two ways: slowly then fast. As Morgan says, we may find Trump annoying with cause, but we’ve been neglecting our economy as well as our bottom line since long before The Donald turned politician, increasing regulations and taxes we urgently needed to reduce. Also, I insist, spending. Yet here we’re committed to massively funding defence while madly hiking other stuff too.

If we want to defuse this petard, we have far less time than we think. But if we wait smugly until it goes off, we’ll be ducking a firestorm wondering what the heck “bomb shmomb” was all about.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.