Joe Oliver’s ‘balanced budget law’ is a political gimmick: Editorial

The promise of a balanced budget law is nothing more than a political gesture designed to shore up the Harper government’s claims to fiscal conservatism.

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DARREN CALABRESE / THE CANADIAN PRESS

At the Economic Club on April 8, 2015, Finance Minister Joe Oliver said he is planning to bring in a balanced budget law.

Published on Wed Apr 08 2015

Joe Oliver, the federal finance minister, must really take us all for fools. Speaking for a government that’s coming off a seven-year run of record budget deficits, adding up to a staggering total of $150 billion, Oliver now proposes to make balancing the budget the law of the land. This takes serious chutzpah.

Nonetheless, that’s what the minister promised Wednesday in a speech to Toronto’s Economic Club. The government, he said, plans to bring in legislation that would require Ottawa to balance its books — sort of.

Let’s be clear: this promise is nothing more than a political gesture designed to shore up the Harper government’s reputation among fiscal conservatives. After (quite understandably) running big deficits in response to the 2008-09 financial crisis, the government now wants to present itself to voters this fall as champions of old-tyme fiscal rectitude.

It won’t wash, for several reasons:

The law itself is bound to include so many qualifications and escape clauses that it will be basically meaningless.

On Wednesday, Oliver said the legislation will require the government to balance its books in “normal economic times” (whatever those are), but also permit it to run a deficit in the case of a recession or “extraordinary circumstances” such as war or natural disaster that costs more than $3 billion a year.

These are loopholes big enough to allow the government to do pretty much what it wants. In other words, business as usual. Oliver’s proposed law would require a future government that goes into deficit to lay out “concrete timelines” for a return to balance and for ministers to suffer token 5-per-cent wage cuts if they fail. But the only real check would be, as usual, the vigilance of voters.

A quarter century of experience shows that “balanced budget” laws don’t work.

Such laws are nothing new in Canada. Since 1991, when British Columbia first brought in legislation along those lines, seven provinces (including Ontario under the Mike Harris government) have adopted some version.

The pattern has been predictable. Governments usually bring in the laws in good times, when balancing the budget seems easy; they then ignore or repeal them when things get tough.

A 2012 study by two University of Manitoba economists, Wayne Simpson and Jared Wesley, found that everywhere but in B.C. the growth in government spending actuallyincreased after balanced budget legislation was passed. The laws simply do not accomplish their stated goals, they found. Instead, “like every other piece of legislation, (balanced budget legislation) is only as strong as the political will and public support underlying it.”

Even if balanced budget legislation did work, it would be fundamentally wrong in that it aims to tie the hands of future elected governments.

Striking a balance between spending and saving is at the heart of our politics. That’s the biggest thing voters decide when they choose a new government. The Conservatives shouldn’t try, however ineptly, to impose their political agenda on future governments by constraining their ability to react to events.

More broadly, the Conservatives’ drive for balanced budgets for the sake of balanced budgets ignores the overall balance in society. Oliver may well eliminate the deficit in his April 21 budget, but at what cost in terms of lost jobs, fraying social programs and eroding infrastructure?

One of the biggest ironies in Oliver’s latest promise is that the Harper government itself is a case study in erasing budget surpluses, for both ideological and practical reasons.

When the Conservatives were first elected in 2006, Ottawa had been running surpluses for years under Liberal prime ministers. The Conservatives immediately tossed away most of the surplus they inherited by slashing the GST by two percentage points, seriously undermining federal finances.

Then when the Great Recession of 2008-09 hit they dumped their remaining deficit fears in the face of fierce criticism and opened the financial taps to make sure the crisis didn’t turn into a full-blown depression. In other words, they reacted as almost any government would — and will in the future, regardless of any budget laws.

Oliver’s “balanced budget” law will be full of loopholes, ineffective and wrong on principle. Voters should see it for the election gimmick it is.