In Tuesday’s budget, Finance Minister Carole James walked her government right up to the edge of a precipice. There were plenty of new offerings. A billion dollars for climate-change measures. Cancellation of Pharmacare deductibles for low-income families. Elimination of interest charges on student loans.
And the marquee announcement, a new child-benefit program that will take effect in October next year. Families with one child will receive up to $1,600 per year, those with two children up to $2,600, and those with three children up to $3,400.
The new benefit is worth double the old income-tax credit, and is paid until the child reaches 18.
Here, though, is the precipice. Last year, government revenues increased, unexpectedly, by $2 billion beyond the original forecast. James promptly spent every nickel.
This year, the Finance Ministry is predicting a lift in revenues of $2.4 billion. And every nickel of that gets spent, as well.
The result is that, in a period of strong economic growth and low unemployment (Victoria has the lowest unemployment rate in the country), the budget surplus is a razor-thin $274 million. That’s less than last year, and a tiny fraction of the $59 billion James projects in revenues.
The minister stigmatized the previous B.C. Liberal government’s more substantial surpluses as “surpluses for surpluses’ sake.” That’s certainly one view of how to conduct fiscal management.
What happens when the inevitable economic downturn occurs? James might say she’ll economize.
But by then it will be too late. Every dollar she spends today has someone’s name on it. Taking some of those dollars back will be well-nigh impossible.
In effect, an apparatus of government programs is being set in place that future revenues are unlikely to support. We’ve been down this road before.
Between 1961 and 2015, federal spending rose from $53 billion to $350 billion, and those are inflation-adjusted dollars. The provinces followed suit.
However, much of that increase was funded by borrowing. In effect, governments, federal and provincial, outgrew their tax room, and one result was a mountain of debt.
But there was a more serious consequence. When governments live beyond their means for years, they build a structure that cannot be maintained in good working order over the long term.
Our rapidly deteriorating health-care system is a case in point. We haven’t enough family physicians. James might reply that she’s hiring 200 new GPs, but that almost certainly won’t keep up with retirements.
We haven’t enough specialists across an array of clinical fields, meaning patients frequently wait months for an appointment. There isn’t enough operating-room capacity, with the result that wait times for hip and knee surgeries often extend well beyond a year.
Hospitals across the Island are running above full capacity. That means patients are parked on gurneys in hallways.
Why are they above capacity? Because a significant number of beds are occupied by patients who shouldn’t be there. What they need is admission to a residential facility. But we don’t have enough of those, either.
Our mental-health services are completely inadequate, as is our home-support program. Staff across the sector are stretched to the breaking point.
This is what happens when government is overbuilt. The only politically survivable remedy is slow strangulation, even in priority areas such as health care.
It seems every generation of politicians has to learn this lesson anew. Ontario has been running huge deficits for years, despite a strong economy.
Federal finance officials say Ottawa won’t balance its books until 2051. And all it took to dump Alberta into a $9-billion hole last year was a downturn in oil revenues.
But that province’s politicians had been spending like drunken sailors for years. Had they behaved responsibly in times past, there need have been no deficit.
This is the precipice that stares James in the face. She is doubling down on the same strategy that has slowly eroded our safety-net programs, by scattering short-term wealth over long-term commitments.
Germans have a saying that trees don’t grow up to the sky. Apparently, our finance minister thinks governments can.
