Sunday, May 08, 2005

Fiscal Smoke and Mirrors

As part of my summer job a couple of years ago, I had a chance to read a bunch of policy papers entitled "Panel on the Role of Government". You can read them all HERE. They really are a great bunch of policy papers if one is trying to understand Ontario. Here is the paper I helped Dr. Paul Boothe write for the series - it was an exploration of the concept of Ontarian Alienation.

I'll tell you what - Ontario is about to get even more alienated once it finds out that these promised funds are not "promised" at all. There is nothing substantial to the 5.75 Billion promised to Ontario, as it can be obliterated altogether and yet still remain within the contractual obligations implied by the agreement.

I've read most of those POROG papers, and I think they give a good perspective concerning the recent deal between Dalton McGuinty and Paul Martin. Most of the coverage and punditry has focused on the huge spending increases and many people recoil in shock at the 5.75 billion amount - but what if there really is a fiscal imbalance or crisis, and what if this allocation of funding is actually righting past budgetary wrongs? Yes, what if..... It's still pork barrell politics.

Here's the funny thing about Paul Martin's Budgetary promises: if the Liberals stay in power, where do you think the first budget cuts will be delivered? Clearly the Liberals have a two-pronged strategy here: 1) Sabotage the country's finances to give the Conservatives a challenge when they try to even balance the next budget, and then vote that budget down in a no-confidence vote. 2) Should they stay in power, they can roll out some not-so-rosy fiscal projections just after the election and maintain that these spending projections are fiscally impossible to attain. And then renege on these promises.

What's even funnier is the way the "Act to Authorize the Minister of Finance to make certain payments" is worded:


2. (1) The payments made under subsections 1(1) and (2) shall be allocated as follows:

(a) for the environment, including for public transit and for an energy-efficient retrofit program for low-income housing, an amount not exceeding $900 million;

(b) for supporting training programs and enhancing access to post-secondary education, to benefit, among others, aboriginal Canadians, an amount not exceeding $1.5 billion;

(c) for affordable housing, including housing for aboriginal Canadians, an amount not exceeding $1.6 billion; and

(d) for foreign aid, an amount not exceeding $500 million.

Has anyone pointed out that ZERO dollars fits within the wording of this act?

From Terence Corcoran's astute analysis of the topic, as posted at Anrew Coyne's blog:

... Here's how it works. Sometime in August, 2007, the federal government will check the final numbers from fiscal year 2005-6. If there's more than a $2-billion surplus, that extra money above $2-billion can be spent. For example, if the surplus is $5-billion, the first $2-billion will be used to pay down debt, but the remaining $3-billion must be spent on the grab bag of unspecified areas. Same thing the following year.

Interestingly, surpluses are not mandated or guaranteed. So, all the Liberals have to do is make sure they spend all their projected revenues each year, and no disbursements need be made - the culprit of course, is going to be a slow economy.

The writing is on the walls - none of these funds need to even be disbursed, and Martin and his pals have provided themselves with an easy out in case voters are crazy enough to fall for this smoke-and-mirrors political game. What a gong show.