Deficit Spending: The Elephant in the Room Nobody’s Talking About

October 9, 2019 Updated: October 9, 2019

This commentary by Morris W. Dorosh is followed by an excerpt from his book, “If You Ask Me: Reflections of a Canadian Conservative 2005-2018,” released on Oct. 1, 2019.

The federal government’s deficit for the 2018-19 fiscal year ending March 31 was $14 billion, down from $19 billion in the previous fiscal year and the year before that. Government revenue, wealth sucked out of the economy, rose 6.7 percent or by $21 billion last fiscal year, over twice the GDP growth rate. Government program expenses increased 4.7 percent and debt service costs by 6.3 percent.

Since coming to power, the present government has added $52 billion to the public debt, which was $685.5 billion on March 31. The debt-to-GDP ratio was 30.9 percent, relatively low among the G7 countries until provincial government debt of approximately $688 billion is considered. All in, the true government debt-to-GDP ratio is 86.7 percent, a level exceeded in only seven or eight advanced countries (but also in Barbados, Cabo Verde, Republic of Congo, Mozambique, Togo, and Venezuela).

With numbers like these in this election season, deficit spending and the affordability of government should be the leading issue by far. But in fact, deficit spending is hardly mentioned while the main parties propose more costly new programs. Politicians and parties are not confronting government overspending because opinion polls consistently show little interest among voters in budget balance, deficit control, or debt reduction. 

Fiscal responsibility is a core conservative value and the present government’s record creates an opportunity to show that deficits into the indefinite future are unsustainable and a new direction is needed. Instead, all parties are engaged in an unprecedented auction sale in which they offer voters more of their own money—or more correctly, money the government will borrow in their name for their descendants to pay off.

Fiscal management is by no means the only area in which the campaign does not offer conservative alternatives to progressive ideas. The prominent topics can be divided into three categories: subjects in which there is no critical need for more government involvement, areas outside of primary federal jurisdiction, and those on which the positions of the leading parties differ only in detail.

In the matter of climate change, the opposition would repeal the government’s carbon tax but would allow the provinces to impose their own or take other measures, which can be interpreted as an abdication of federal responsibility; it does not disagree with the notion that aggressive government involvement is needed to curb Canada’s share of carbon emissions, which is 1.6 percent of the world total.

All parties support the principle that the financial burden of raising Canada’s children should be transferred from parents to taxpayers and all propose to increase the rate and extent of such transfer. Likewise with education, which is constitutionally under provincial jurisdiction. Proposals by both major parties would assume more of the of the cost of higher education at a time when post-secondary educational opportunities in Canada are already readily available to anyone prepared to make a reasonable effort to access them.

In health care, no matter which party forms the next government, the self-assigned federal contribution will increase by billions per year. Yet again, both parties offer measures for housing that will benefit a narrow, select band of home buyers and owners at greater expense to all taxpayers, while ignoring the historic fact that housing subsidies are inevitably folded into housing prices.

If the major parties are in substantial agreement on many key issues, they are in perfect harmony on agricultural supply management—the government-sanctioned monopoly by which  organizations of dairy and poultry farmers can deliberately restrict production of staple foods and price them accordingly while the government protects them from world-priced import competition, imposing higher food costs on those least able to afford them.

The Peoples Party of Canada embraces classic conservative principles, but so far the polls show they are not a serious consideration for voters. None of the other parties are embracing these principles, largely due to the Canadian public’s preference for government policies that lessen the need for personal responsibility and self-reliance. Such policies would strengthen the country and improve the economic environment for all citizens no matter what party proposed them, yet few voters give credence to them.

Few voters are asking what they can do for their country.

Morris W. Dorosh is the dean of Canadian specialty, subscriber-supported newsletters of interest to business owners, executives, and investors. His current and former titles include Ottawa Week and Agri-Week among many others. He has been a contributor to the National Post and divides his time between Winnipeg, Toronto, and Florida. His latest book, “If You Ask Me: Reflections of a Canadian conservative 2004-2018,” was released Oct. 1, 2019.

The following except is from Morris W. Dorosh’s new book, “If you Ask Me,” published by Optimum Publishing International

The Necessary Evil of Political Parties

By common account political parties came into being in 17th-century England at the dawn of modern democracy, as people with similar opinions and outlooks came together into organized units to more effectively contest elections and form governments. From the earliest times the divisions between parties were essentially along conservative-liberal and right-left lines. In time these straightforward demarcations became blurred and ideological profiles of parties became less distinct. Searching for combinations of policies with the broadest voter appeal, conservative parties began to appropriate liberal ideas and vice versa. It also developed that two parties were not enough to accommodate the entire span of political opinion. More parties formed around new combinations of ideas and policies, often emphasizing narrow issues or those of a transient or temporary nature. Today the two-party system is a rarity in the western world. Some countries, especially those with enabling voting systems and lenient policies concerning official recognition of parties, have upwards of 20. Single-issue parties routinely appear not so much with an expectation of being elected as to influence public opinion.

Epoch Times Photo

The smaller the differences among political parties the greater the number of parties. As parties proliferate, the legislative majorities required in most versions of the parliamentary system become more difficult to achieve. Coalitions and other cooperative arrangements become necessary which often lead to undesirable compromises. Splinter parties can easily hold the balance of power, with influence over public policy vastly greater than their demographic representation.

The two-party system in Canada can be considered to have ended in 1932. The Co-operative Commonwealth Federation was formed in Calgary in that year by socialist, co-operative and labor groups to promote policies to the left of those accepted in the existing Liberal and

Conservative parties. It won its first election in Saskatchewan in 1944. The Social Credit party appeared in Alberta in 1935 with an orientation to the right of the centre of the then-mainstream ideological spectrum and governed that province until 1971, also achieving slight success at the federal level particularly in Quebec. Also in Quebec the Union Nationale was created in 1935 and the Parti Quebcois in 1968 on the notion that the national parties were unsuited to the unique social, cultural and political conditions of Quebec. The PQ existed to separate the province from Canada and form an independent country, almost succeeding in 1995, with decidedly left-wing persuasions in economic affairs.

The desire to sharpen conservative-liberal distinctions at the federal level led to the formation in 1987 of the Reform Party and its transition into the Canadian Alliance in 2000; the Progressive Conservative Party was nearly destroyed until a difficult reunification in 2003. The Green Party of Canada materialized in 1983 to advocate for more extremist environmental policies than those held up to that time by the major parties.

The Unionist Party (1917-1920) was the first example in Canadian history in which members of two opposing parties whose views were misaligned with those of their hierarchies came together to form a new party. A similar process led to the creation of the provincial Saskatchewan Party and the Wildrose and Alberta parties.

The political parties that have endured in Canada over generations are the Conservative, Liberal and New Democrat. On no account can they be considered to cover the full spectrum of political ideology. There has been a persistent drift to the left by all parties since the 1960s. The Liberal party of today is in the ideological space once occupied by the CCF and NDP. The NDP has been squeezed into a shrinking band at the extreme left of the scale. The contemporary Conservative party is today’s permutation of the formerly centrist Liberal party. The space at the right of the spectrum, not even the extreme right, is essentially vacant. The People’s Party of Canada has been formed with the intent of occupying this part of the band notwithstanding its claims to be of neither the right nor left.

In the half-century since 1968 Canada has been ruled for approximately 28 years by Liberal governments and for 22 years by Conservative governments, including intervals in which one or the other did not have a majority of seats in Parliament. The average life of a government was 5.6 years, although terms were as short as a few months and as long as 14 years. There were 14 general elections. There were three economic recessions (as conventionally defined) under Liberal governments and two under Conservative administrations, lasting a cumulative five and three years respectively.

There is only a weak tradition in Canada of enthusiasm for limited government and public spending restraint. Federal spending increased over that of the pre- ceding year in all but four of the last 50 fiscal years. Be- tween 1967 and 2017 federal spending rose by 27.5 times, from roughly $12 billion to $313 billion in cur- rent dollars or about 5.5% per year. The average decrease during four years was 0.4%. During this period old age security payments increased by 36 times, transfers to parents of children by 37 times, transfers to other levels of government by 48 times and defense spending by 13 times. Only two administrations left office with a smaller federal debt than they inherited and one neither increased nor decreased it; all others in- creased it. The only sizable reduction in federal deficit and debt during any administration was atypically achieved during the latter two-thirds of the Chretien- Martin period (1995-2005). The largest increase in debt, approximately 2.3 times, was amassed during the 14 Pierre Trudeau years (1968-79 and 1980-84).

Liberal governments almost invariably followed policies which caused or allowed the size, scope and cost of government to grow rapidly and at times exponentially. It can be argued that conservative governments at- tempted to retard or reverse the trend but were unable

to do so because the task was too great, their time in office was too short, their resolve inadequate or (most likely) because of insufficient public support for genuine fiscal discipline. Fiscally irresponsible governments have hardly ever been punished at the polls. Budgetary restraint has not greatly or consistently rewarded governments which attempted to practice it.

Canada today finds itself in the majority group of advanced western countries whose fiscal and political policies are unsustainable. It includes France, Italy, Spain, Japan, Argentina, the United Kingdom and the United States. Not so long ago it was in the other group, which still includes New Zealand, Norway, South Korea, Netherlands and Switzerland. Public spending is out of control in the first group, where efforts to confront fiscal imbalances are variable and inconstant. Countries in the second group pursue responsible fiscal policies with common-sense political orientations. Canada and its cohorts have been poorly served by politically confused, unprincipled and incompetent legislators elected by politically unsophisticated and even politically illiterate voting populations.

Optimum Publishing International

C 2019 All rights reserved

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