Sunday, March 7, 2010

Budget day in Canada Pt 2

It's a little known fact that the more ridicule a subject has in the media, the closer it is to being what the media person wanted in the first place. So too with the most recent budget.

There are many people who have had many interesting views on the budget. There are people who think that the Conservatives didn't cut enough spending. There are many on the opposition benches who say that the government didn't spend enough. There are people who say the Conservatives shouldn't have cut the GST to 5% from 7%, and there are people who are also deriding the Conservatives for sprinkling around 1.6 Billion in new spending during the budget.

But the fact of the matter is that the budget was a good first start for a fiscally responsible government that was forced at gunpoint to spend into deficit and now has to work its way out of the hole that's been dug. Some may have thought that the Conservatives had to raise taxes and cut deeply into spending in order to get there, offloading to the provinces and municipalities, but instead the Conservatives are taking the same tack as they originally did with "greenhouse gases" - reduce the intensity first, and then make real cuts while the economy grows us out of the hole.

Many don't understand how this could possibly work, but I note that very few economists have spoken out about the plan. Maybe it's because they realize that the Conservatives are led by someone with a Masters in the subject. For the naysayers, however, here's why their particular brand of bitching and moaning is irrelevant:

GST Cuts - while they were panned at the time, many mistakenly think that the GST cuts were bad fiscal policy. They might be right, except that the purpose of those cuts was NOT necessarily to stimulate an economy or to do an effective tax cut. Those were cuts that accomplished 2 purposes - to kneecap the ability of any successive governments to implement a larger spending agenda without spending political capital, and to give a tax cut back to the middle class who have bore the brunt of the GST since its inception in 1991.

Not spending enough - What these people are ACTUALLY saying is that "you didn't spend enough on what I want you to spend on". It started before the budget when Mr. Ignatieff was talking to the press and said that the government "needs to cut not only with its head, but also with a heart". I'm sorry to tell all the opposition MPs, but a good manager doesn't cut with a heart - a good manager will make the tough decisions that need to be made, regardless of the optics or the "heart" of the matter. Unfortunately, Mr. Harper wasn't in a position where he could make those cuts without finding himself in a quick election as an unpopular politician (see Clark, Joe).

Didn't cut spending enough - What they are ACTUALLY saying is "Please Mr. Harper, commit suicide so that we can be led by a government that will spend at will and continue deficits into eternity". Because quite frankly, that's what would happen if he did that. He lost his majority in the last election over a few million dollars of arts and culture spending, what do these people think would happen if he cut a program that more people care about? What it comes down to folks, is that Mr. Harper and Flaherty did what they could to ensure that they would have some support for the budget - as they need to do in a Minority Parliament.

Sprinkled some money around - of course they did. But when you look at it, the government is actually showing remarkable restraint, considering that what they sprinkled was less than 2/3rds of 1% of the total budget.

To make a long story shortened, I'm not happy to see this much spending from a Conservative government, but I don't think they have much of a choice in this Parliamentary situation. I would like to see them implement Maxime Bernier's suggestion that Federal governmental spending should be limited to $250 Billion total (including interest and an actual, planned debt repayment). After all, everybody has to live within their means, and when I see that my governments are spending $17,500 per person per year on programs and other spending, I get a pit in my stomach (not to mention my pocket book) and question where all those dollars are going.

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