As Canada shuffles slowly out of the Great Recession, public spending isn't the problem and ideological cuts aren't the solution.
By Ryan McGreal
Published April 09, 2012
As we all digest the Federal and Ontario budgets just handed down, our leaders keep telling us we're deep in debt and running unsustainable deficits, and we need to make sacrifices. We all need to tighten our belts, cut the fat, trim the sails, pick your cliche. That's what we're told, but the budgets themselves tell a different story.
If you're on social assistance, your benefits will be frozen - which amounts to a cut in real, inflation-adjusted dollars. If you work in the public sector, you will face a wage freeze, a benefits rollback, and the real prospect of a layoff (19,200 federal jobs are being cut).
We are investing more in dirty, dangerous oilsands extraction and slashing investments in environmental sustainability.
We're sinking billions of dollars into prisons for all the people who will be caught up in the net of mandatory sentencing, but we're cutting resources to support child and youth development - including youth employment centres.
We're pouring tens of billions of dollars into new fighter jets for national security while we slash Development and Peace and delay eligibility for old age security.
We're phasing out the penny (it's about time), but penny-pinching cheap and effective programs like Katimavik and the National Film Board.
Most important, after almost two decades of tax cuts that mostly favoured the wealthy, we're not adding new taxes to help share the responsibility to balance the books.
Neither the Federal Conservatives nor the Provincial Liberals are asking the affluent to contribute toward a sustainable budget. At worst, the wealthy are being asked to wait a few years until the next round of tax cuts kick in.
The cuts introduced by the Harper government since 2006 amount to $13 billion a year in lost revenue, creating a structural deficit that serves mainly to justify real cuts in program spending.
Provincial cuts are costing Queen's Park $4 billion in lost annual revenue. Instead of slightly raising taxes on those who can most afford to pay it, the Province would rather expand its network of casinos to collect voluntary taxes from gamblers.
Meanwhile, Premier McGuinty's promise to the poor lies in tatters.
Of course, a comparative look at how various economies have weathered the Great Recession offers some lessons on how to get our finances back in order.
Lesson one: neither public deficits/debts nor social spending caused the recession. The European fiscal bogeymen - Portugal, Ireland, Italy, Greece and Spain - have long been all over the graph on both measures, with no correlation between their spending, deficits and debts and their exposure to the recession.
Ireland and Spain, for example, maintained budget surpluses and low debts before the crash. Their problems stemmed from a reckless private sector, not from a profligate public sector.
Lesson two: austerity doesn't work. Those countries that dug the deepest into public spending after the recession have also suffered the slowest rates of recovery and the highest deficits. The worst offenders in Europe - like Britain - have backslid hard into big-D Depression territory.
Letting people fall through the social safety net is not just inhumane: it's also lousy economics. A whole generation is going to pay the long-term price of eviscerated public spending and evaporated economic opportunities.
Alternately, those countries that have maintained tax revenue and program spending and upheld responsible market regulations have generally experienced milder recessions and faster, stronger recoveries.
It turns out bleeding sick patients doesn't make them better; but instead of an infusion of revenue from the people who have been the biggest beneficiaries of years of tax cuts, our federal and provincial governments would rather squeeze and punish our most vulnerable citizens further in a time when they need support.
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