Saturday, February 18, 2012

More of the same

After about a year and $75,000, Don Drummond finally tabled his report on how to eliminate the Ontario government's budget deficit.

Coming as no surprise to anybody his prescription was for deep cuts to government services.  That is what we got for the money Ontario taxpayers paid for his services.  Talk about a waste of money.  Really, all Premier McGuinty had to do was ask Tim Hudak for his opinion of what needs to be done to reduce the deficit and he would have provided the same advice as Mr. Drummond but it would not have cost taxpayers a penny.

There were two glaring oversights in Mr. Drummond's advice.

One was perhaps that the Ontario government should consider raising taxes.  Although in fairness to Mr. Drummond his brief expressly stated he was not to consider that option, which I believe speaks volumes about the priorities of the McGuinty government and has me questionning whether his time has come to be replaced.

When the Canadian government was enjoying all of those budget surpluses (you remember those it was only 7 years ago even though it feels like a lifetime) Conservatives and the business community claimed that this was evidence that Canadians were overtaxed.  Well, if governments are running deficits is that not evidence that Canadian are undertaxed?

Government services cost money.  Doctors, teachers, government bureaucrats, cops, judges, etc. do not work for free.  They seem to believe that they should be paid for their time and efforts in serving the citizens of their country, province or city.  (The bastards!)  If you are unwilling to pay them then you can expect to receive less services.  That fact seems to be lost on those who use those services.  They seem to expect that if it comes from the government it should not cost them anything.  So, they demand these services but resent paying the taxes necessary to pay for them.  Politicians in their infinite stupidity pander to that expectation instead of educating their electorate on the basics of economics.  The result is these politicians have to provide these services because their citizen's demand them, they cannot raise sufficient taxes to pay for the services because their citizen's also demand low taxes, so these politicians have to borrow money to make up the difference.  This goes on until someone points out the deficits are getting too big and have to be reigned in, which prompts a government to take measures to do that until the inevitable backlash against service cuts reaches critical mass and the deficit cycle begins again.

If any politician finally shows the courage to point out to the electorate that they cannot have good government services and low taxes at the same time I will vote for them, regardless of their political stripe.  It is about time we all grew up and realized there is no such thing as a free lunch.

The other oversight of Mr. Drummond was he could have pointed out that budget deficits are not the end of the world.  There is not a single government within the G20 that is not saddled with government debt.  Indeed, the debt to GDP ratio for these countries have been rising steadily for decades.  As well, budget deficits are the norm while surpluses are the exception.  None of the G8 economies are running surpluses right now and many of them are running rather substantial deficits.

Has the world economy ended as many deficit hawks claim it would if deficits are left unchecked?  Of course not.  The only developed country that is showing any imminent signs of problems is Greece and those problems are more linked to its integration into the Eurozone than just deficits.  There are other countries who are suffering under similar debt and deficits burdens as Greece that are doing just fine.

There is, of course, a limit to deficit financing.  It cannot go on forever without some consequences but no one ever tries to really objectively define those limits.  Mr. Drummond would have done Ontarians a great service if he would have taken a crack at defining those limits for Ontario.

There is no magic bullet for eliminating the Ontario deficit or any deficit.  All options should be on the table for dealing with it, from service cuts, to tax increases, to accepting a reasonable amount of deficit financing.  Mr. Drummond's report only provides us one option which is why very few of its recommendations will eventually be implemented.


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