Which programs and departments will suffer as a result of the spending freeze? Art: Corrie Jackson

Selling the budget

By: Stephen Bank, Staff Writer

Posted: 3/18/10

There isn't much to say about the 2010 budget, indeed, the 2010 budget was designed so that there wouldn't much to say about it. There's nothing in the budget that makes a good sound bite for the Opposition, and there won't be an election over the budget either. On the other hand, there's nothing for the government to brag about to Canadians. Eliminating tariffs on manufacturing imports is a good idea, but even the president of the Canadian Manufacturers and Exporters Association couldn't work up any enthusiasm about it.

The closest thing to news in the budget is the spending freeze. While the freeze won't affect transfers to individuals or provinces - and thus, won't affect health-care or education - it's worse than it sounds for two reasons. The first reason is that inflation is always eating away at the value of the dollar, so that while a spending freeze might sound like a neutral cap on the expansion of government, it actually commits the government to cutting spending, without having to justify why any particular department can, or should, make do with less. The second reason that a spending freeze is worse than it sounds is that the government agreed to 1.5% annual wage increases for the majority of public servants. I am willing to grant that honouring the wage increases is politically prudent and it may even be the right thing to do, but it makes a spending freeze more difficult.

Canadians will most likely shrug at cuts to Transport Canada or Canadian Heritage, but cuts to foreign aid will likely provoke a reaction. While Harper should be commended for raising foreign aid in past budgets, Canada is still among the stingiest of developed countries. In light of Conservative rhetoric about enlarging Canada's role in the world, and the Canadian self-image of moral superiority, cuts to foreign aid are deeply embarrassing.

In his elaboration on the throne speech, Prime Minister Stephen Harper said, "Bad choices now, unaffordable long-term spending commitments, ill-advised tax hikes, ditherings on deficits and difficult decisions will doom those countries who choose them to years of debt, stagnation, and unemployment." This is a strange defense of this year's budget. The supposed relationship between high levels of taxation and spending, and "debt, stagnation and unemployment" is a relationship that exists more in conservative ideology than in reality. And, "dithering on deficits and difficult decisions" is an apt description of the budget itself. The budget forecasts that the deficit will have been mostly eliminated by 2015, but the independent Parliamentary Budget Office disagrees by about $10 billion. What accounts for the discrepancy? The PBO has no idea, because the Finance Minister won't say how he came up with his numbers.

According to the PBO assessment of the budget, "In 2008 and 2009, PBO requested from the Department of Finance Canada the income and expenditure assumptions underlying nominal GDP (as well as the data to calculate effective tax rates) that were used to develop their status quo fiscal projections. This information was deemed a Cabinet confidence by the Privy Council Office and therefore was not provided." It's conceivable that the Ministry of Finance is right and the PBO is wrong, but it's hard to take any of Minister Flaherty's attacks on the PBO seriously while Finance keeps his own analysis a secret.

The 2010 budget is designed not to rock the boat, which would be fine in a country that has no serious problems: no aboriginal under-class, no environmental problems and no retiring baby-boomers to budget for. This is the approach Canadians voted for, but regardless of what the government does, it should account for it honestly.