Tag Archives: Parliamentary Budget Officer

Hoisted by their own petard

IMG_0129

There was never anything essentially wise – beyond the obviously political considerations – about the Government of Canada’s white-knuckled determination to balance its budget come hell or Armageddon.

In their quietest moments even the fiscal hawks among us must admit that into all lives, some red ink must fall. Individuals, banks, commercial enterprises and, yes, even governments do, from time to time, deficit-finance their way to durable prosperity. That’s simply because the coincidence of opportunity and solvency is not always – in fact, never – perfect.

Knowing this, then, we ought not become the saps that campaigners on the hustings seem to think we are when they point to their debt-defying antics as proof of their unimpeachable sagacity.

Of course, the Harper government isn’t the first in this country to claim that it, and only it, has the best interests of the average tax payer at heart when it refuses to consider any alternative to a bottom line that reads: zero.

The problem is this ambition just doesn’t appear sensible, or even achievable, at the moment.

“Rotten Luck”, thy name is Torytown.

Oil prices are slumping more deeply than anyone expected. The economic revival in the United States is losing steam. The tragi-comedy that is the Grecian formula for European recession unfolds even as a downturn in our Greater Canuckistan’s resource-fired economy conjures the dreaded “R-word” here.

Now, the Parliamentary Budget Officer, Jean-Denis Frechette, says all of this is becoming a lethal cocktail for Conservatives.

According to a CBC report last week, “The government had projected a slim, $1.4-billion surplus for 2015 in its budget, which was presented last April.

The PBO estimates a budget outlook updated with the lower GDP numbers alone would show a $1.5-billion deficit at the end of this year and a $0.1 billion, or $100 million, deficit in 2016-17. Canada would be back at a $1.5 billion surplus in 2017-18, according to the PBO projection.

Added the public broadcaster: “But that’s not the whole picture. Weak GDP growth, the budget office says, would be partially offset by higher inflation and lower interest rates. Once those are taken into account, the projected deficit is $1 billion this year, with a small surplus of $0.6 billion, or $600 million, in 2016-17, and $2.2 billion in 2017-18.”

In fact, writing in the Globe and Mail earlier this year, Jim Stanford, an economist with Unifor, had this to say:

“From the outset, the battle to slay the deficit was all about political optics, not economics. Canada’s deficits after the 2008-09 meltdown were among the smallest in the world. Our debt burden (the more important concern) is small compared to those of other countries and other periods in history. Indeed, as a share of GDP, the debt has been shrinking since 2012. So whether Ottawa has a small surplus or deficit any year is irrelevant.

“For this government, though, it’s a political imperative. Nothing will prevent the Conservatives from forecasting balance next year.”

Nothing, so far, has. Ignoring the writing on the wall has become a singular pastime in Ottawa. And no one plays the game more stubbornly than Finance Minister Joe Oliver who continued to insist – despite the rather compelling, new evidence to the contrary – that the government will better than balance the budget.

“We have looked at our numbers and we are very comfortable that we will have a surplus this year,” he said last week.

Such insistence, once merely economically unwise, is now becoming politically perilous to the self-described standard-bearers of wise money management.

Are certain petards about to hoist certain MPs, after all?

Tagged , , , , ,

No teen left behind

DSC_0126

Out of the goodness of its vote-conscious heart, the federal Conservative government has made child care a sturdy plank in its election platform this year. Noting that mum and dad are the “real experts” in raising a rug rat, the Tories have enhanced the Universal Child Care Benefit and Child Care Expense Deduction in 2015.

But what, in fact, does this mean?

In a report, released on Wednesday, Parliamentary Budget Officer Jean-Denis Frechette, explains that “the value of child care benefits grew from $0.6 billion in 2004-2005 to approximately $3.3 billion in 2013- 2014. This amounted to three-fifths (59 per cent) of what Canadian families were spending on child care in 2013-2014.”

What’s more, he added, “Families with young children (less than 13 years of age) spending money on child care received two-thirds (66 per cent) of these benefits. The remaining 34 per cent was distributed to families with no child care expenses and families with older children. As a share of households’ aggregate child care expenses, federal benefits represented roughly 42 per cent and 247 per cent, respectively.”

Now, Mr. Frechette finds, following the government’s so-called improvements to the programs, “if Parliament approves. . .PBO estimates the fiscal impact of federal child care policies will increase to roughly $7.7 billion from the 2013-2014 value of $3.3 billion. By 2017-2018, it will grow to roughly $7.9 billion.”

Fair enough, perhaps. But here’s the kicker, says the PBO:

“These proposals would also change the allocation of benefits. In 2015, 49 per cent of these benefits would go to families with child care expenses and young children, and the remaining 51 per cent to families with no child care expenses and families with older children. Since families with young children spend more on child care, their share will only cover 67 per cent of the amount they will spend on child care. Conversely, benefits that families with older children will receive from the government in 2015-2016 will represent nearly eight times the amount they will spend on child care.”

So, while millions of Canadian families that might legitimately need some federal help to defray the costs of raising their pre-adolescents, millions more that don’t are getting a free ride on the taxpayers’ dime.

This, of course, makes perfect sense – but only in an election year. Under any other circumstance it’s a travesty of sound, sensitive and useful public policy.

None of which actually addresses the larger issue, which is: In what sober version of reality do the benefit and expense deduction, which transfer, at most, a couple of thousand dollars a year, per kid, to families’ household budgets, constitute rational social policy when the annual cost of effective, professionally delivered child care can, and does, runs 14 or 15 times the current federal contribution?

Seven or eight billion dollars would go a long way towards inaugurating a universal system of affordable (to families) early childhood education and pre-school programs. It’s certainly not brain surgery. No one is asking the feds to reinvent the wheel. Apart from the United States, effective models of this sort of thinking exist productively and happily across the developed world – even here in Canada, where Quebec’s $9-dollar-a-day child-care system has both enhanced educational outcomes and reduced systemic rates of poverty in that province. The more kids enrolled in such programs, the more mums and dads provide for their families’ material needs.

Of course, that’s a hard sell, especially as political campaigners begin to beat the drums loudly.

After all, 14-year-old junior needs his Xbox.

Tagged , , ,
%d bloggers like this: