Brian Lee Crowley

Of deficits and infrastructure

One of the signature policies of the Liberals in the last election was their promise to increase substantially infrastructure spending and to run a deficit solely for this purpose. As Sean Speer and I argued in this 19 April 2018 piece for Inside Policy their policy has failed on both counts. Not only have they proven woefully ineffective at spending infrastructure dollars, they have nonetheless run up deficits on a host of other spending.  Ottawa’s approach to infrastructure badly needs a rethink.

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MLI launches Pod Bless Canada — first 6 episodes

The Macdonald-Laurier Institute has launched a new series of podcasts entitled Pod Bless Canada. Each episode of roughly 30 minutes showcases a chat between an MLI representative and someone knowledgeable about a key issue of the day.  Here are links to the first six episodes:

On 2 Feb. 2018, Sean Speer and I talked debts, deficits and responsible public finances.

On 16 Feb. 2018 Shuvaloy Majumdar and I talked about the Canada-India relationship in the context of Prime Minister Justin Trudeau’s trip to India.

On 22 Feb. 2018 it was the turn of MLI Sr Fellow Ken Coates to join me to talk about the opportunities for Indigenous people in the natural resource economy.

On 6 March 2018 Sean Speer to discuss the nexus between business and political decision making in Canada.

On 20 March 2018 in one of my personal favourites, Canadian J. Michael Cole, a specialist on Taiwanese affairs, came in to discuss with me China, Taiwan, cross-strait relations, tensions in the Indo-Pacific and more.

Finally, another favourite: on 23 March 2018 Ryerson University history professor Patrice Dutil and I talked frankly about whether Canadians should feel ashamed about Canada’s past.

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Trudeau was selling deficits, but the G7 wasn’t buying

The 2017 G7 meeting in Japan should give Prime Minister Trudeau ‎reason to reflect on his plan for deficit spending as Sean Speer and I argued in an op-ed in the Financial Post on June 3rd 2017. Trudeau arrived in Japan determined to sell other leaders on the merits of budgetary deficits to grow the economy. But his peers weren’t buying. ‎The summit’s 14,000-word communiquĂ© was silent on calls for more government spending. Perhaps the other leaders know something Justin doesn’t…or that he’s trying his hardest to ignore.

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Justin Trudeau was selling deficits; the G7 wasn’t buying

The recent G7 meeting in Japan should give Prime Minister Trudeau ‎reason to reflect on his plan for deficit spending as Sean Speer and I argued in an op-ed on June 3rd in the Financial Post. He arrived in Japan determined to sell other leaders on the merits of budgetary deficits to grow the economy. But his peers weren’t buying. ‎The summit’s 14,000-word communiquĂ© was silent on calls for more government spending.Perhaps the other G7 leaders know something Justin doesn’t, or at least something he is trying his darnedest to ignore….

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VIDEO: Ottawa subsidizing risky provincial borrowing

VIDEO: Ottawa subsidizing risky provincial borrowing

 

New MLI video shows that Euro-style debt crises can happen here if status quo continues

Alberta and Ontario lead the parade of Canadian provinces running unsustainable public finances, in part thanks to the market’s belief that Ottawa will never let a province default on its debt. Based upon an exhaustive study by the Macdonald-Laurier Institute – Canada’s premier non-partisan think tank – this video explains the risk all Canadians face: that federal taxpayers will have to pick up the tab for profligate provincial governments. It also explains what we can do to fix the problem!

Click here to watch “Debtbusters: Who’re broke provinces going to call?”

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Why cuts are how to balance the budget

In all the blather surrounding Red Ed Clark’s call for higher taxes, and the federal Tories response, most of the attention has been focused on either the issue of whether wealthy bankers should be volunteering other people to pay higher taxes OR whether the PM should be criticising private citizens for voicing their opinions about such matters.

Interesting as those questions are, they are not the most important matter. What really matters is whether raising taxes is the right way to fix the deficit. On this, history and human nature respond with a resounding “No”.

History first: the last time we wrestled successfully with the deficit, under Paul Martin’s stewardship at Finance, we did so chiefly by reducing the size of government. The most startling measure of our success: We went from spending a historic high of 53% of GDP on government in 1993 to roughly 40% in 2008, an unprecedented decline in our history. We were able to do so, by the way, while increasing spending on programmes AND cutting taxes because our fiscal discipline allowed us to stop spending so much on interest on our debt. And we ushered in an era of strong economic growth: we outperformed all the other G7 nations for over a decade after Paul Martin tabled the first balanced budget in the late nineties.

Remember that all other attempts to deal with the budget, including the gig tax reform that led to the creation of the GST, did not bring the budget into balance. It was *only* when we got our *spending* under control that that happened.

And that brings us to the human nature side of the equation. The fact of the matter is that politicians are human beings and subject to many pressures and incentives. When a dollar gets in their hands, it does not come with an endorsement saying “May only be used to reduce the deficit”. Instead it becomes the prize in a tug of war between various interests all wanting to get something out of government. Many and perhaps most politicians regard a dollar in the consolidated revenue fund as a reason to spend that dollar on their favourite programme.

That may be one reason why a recent poll in the US shows Americans deeply sceptical about using tax increases to bring their own public finances into balance. They told Rasmussen pollsters by a margin of 58% that politicians “are more likely to spend the money on new government programs.”

The reality is that if we want to balance the budget, the strategy that has proven itself without a doubt is to control spending. Raising taxes too often just gives politicians comfort that they can continue in the bad old habits. And it is those habits that have to be broken.

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Brian Lee Crowley
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