Canada Must End The Taboo Against Cutting Spending

Advocates of centralized government control want to make it impossible to advocate against ever-increasing spending. And so far, they’re winning.

Before this past year, it was reasonable to think that most political debate could take place within a reasonable fiscal range.

After all, the arguments were between the idea of balancing the budget, or running deficits of about $20-$30 billion, far less than Canada saw during the 2008-2009 financial crisis and ensuing global recession.

At that point, why would Conservatives take the heat for being accused of ‘cuts,’ when the difference was relatively small?

Before this past year, the idea of a balanced budget – or at least some restraint in spending – was well entrenched.

To get elected, parties felt at least some need to make a pretense of planning to get back to balance in a reasonable timetable.

But not anymore.

After a year in which we witnessed a massive decline in government revenue and a massive increase in spending to mitigate the impact of lockdowns, the Liberals are now seeking to lock in massive budget deficits for years and years to come.

Far from ‘temporary emergency measures,’ the Liberals want to make massive spending permanent.

We are looking at a deficit this year of roughly $350 billion, and by 2022 roughly half of Canada’s all-time federal government debt will have been incurred in just two years.

To put it mildly, that’s not good.

The Liberals now only plan to reduce the deficit to the $50-$60 billion range over time, meaning we’ve gone from seeing deficits of $30 billion as something to reduce, to having deficits twice that size as a baseline.

For the Conservatives, they appear to be torn on how to respond.

On one hand, Pierre Poilievre has been warning about the damage that will be caused by rising inflation, as the Liberals spend and the Bank of Canada enables that spending by printing tons of money.

On the other hand, Erin O’Toole says the Conservatives won’t balance the budget for another decade after taking power.

O’Toole is also simultaneously claiming the Liberals are driving up the debt too much, while saying they didn’t do enough to help families, and refusing to say what – if anything – he would cut.

And that brings us to the main issue.

Thanks to special interest groups, the media, and the Liberal government, a taboo has formed around the idea of ‘cuts,’ a taboo that has become self-reinforcing, since the stronger it gets the more it makes it easy to advocate for even more spending.

Consider that with neither the Liberals, Conservatives, or NDP advocating any near-term return to a balanced budget, the entire political spectrum on fiscal issues has shifted far to the left.

Indeed, a main ‘Conservative’ criticism of the Liberal budget was that they didn’t spend enough money on healthcare for the provinces, leaving open the possibility that a ‘Conservative’ budget would have featured roughly the same level of spending as the Liberal one.

And, on the aforementioned Conservative ‘promise’ to balance the budget but only a decade from now, imagine the debt that will accumulate in that time.

All of Canada’s main parties have surrendered to the idea of seemingly endless massive deficits and a huge surge in debt.

That’s expected from the Liberals and NDP, but it’s a big problem coming from the Conservatives.

Have the courage to promise cuts, and explain why

What Canada needs is strength and courage, as that will stop and reverse the far-left drift of our fiscal policy.

Ironically, the most recent example here is Justin Trudeau, who went against the taboo on marijuana and deficits, and dragged the political spectrum with him.

While Trudeau’s position lacked much strength and courage due to the media being largely on his side, it was still ‘bold’ relative to what the other parties offered.

By contrast, Tom Mulcair tried to play in the Conservative frame on deficits and lost big.

The lesson isn’t to copy Trudeau’s ideas, but to realize that Canadians will – in the right circumstances – reward someone who is willing to go against political orthodoxy.

And with inflation surging (far above what the government claims), and debt rising at every level (federal, provincial, household, corporate), this is the right circumstance to move the Canadian political spectrum back in the direction of fiscal responsibility.

Pushing for cuts would be real boldness, as opposed to the ‘CPC boldness’ of promising a carbon tax.

Butchering Keynes

A key place to start is to recognize that much of this is based on a butchering of the ideas of John Maynard Keynes.

Keynes, the English economist who advocated for governments to spend money to make up for falling private sector economic activity during recessions, also advocated for governments to reduce their spending once the economy was recovering.

Basically, his idea was to run surpluses in good times, and use those accumulated savings to strengthen economic demand when a recession hits.

Of course, what we see today is a complete rejection of the fiscally responsible aspect of Keynes’ ideas, and an embrace only of the spending part.

We get spending in good times, and more spending in bad times, so the only thing we accumulate is debt, not savings.

It’s no wonder then that the Liberals are now embracing ‘Modern Monetary Theory,’ as it represents the only ‘intellectual sounding’ ‘justification’ for their plan to spend and spend without any fiscal anchor.

Courage will be rewarded in time

Many Conservative politicians are of course scared to advocate cuts, because they think they’ll be ‘unelectable.’

And certainly, the media and special interest groups (who can always make an emotionally manipulative argument for why their specific cause should get taxpayer funding rather than compete on their own merits), would rip anyone who straight up announced plans to cut spending.

Yet, many Canadians would also reward this, as we can each understand in our own lives that sometimes difficult decisions must be made to stay afloat.

For the question of electability, the Conservatives are currently undertaking an experiment in trying to move closer and closer to the Liberals by embracing a carbon tax and – as mentioned above – planning to run long-term deficits.

And the result?

They’re behind where they were under Andrew Scheer:

While it seems odd at first glance that the Liberals would be leading by a wide margin, it tracks both with many other polls, and with what we hear on the ground, with many core Conservatives outraged by O’Toole’s reversals even as he falls flat among the broader Canadian public.

So, to see the Conservatives down from their 30% core base, and to see the Liberals close to 40% amid weak opposition and massive spending, isn’t exactly a surprise.

All this goes to say that trying desperately to be ‘electable,’ rather than showing courage, isn’t working anyway.

Far better to show courage and strength of conviction, build credibility among the public, and move the political spectrum towards rational fiscal thinking, instead of following the Liberals ever-more to the left.

Fiscal responsibility is an age-old idea for a reason

Fiscal responsibility, restraint, and balanced budgets are all age-old ideas and age-old wisdom.

And the reason is because they work.

The alternative of over-spending and debasing currency to try and hide the impact of overspending has had many different names (Modern Monetary Theory is only the latest), but the end result is disaster over and over again.

Canada must return to the time-tested wisdom of fiscal responsibility, and we need the courage to advocate for it even in the face of the inevitable political attacks and denunciations that will follow.

Spencer Fernando

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