The minister of finance framed the 2012 budget using the theme of fiscal prudence in uncertain economic times, but this can't be further from the truth. There is nothing prudent about deliberately underestimating the amount of money the government has to work with and padding budget estimates for what could only be interpreted as political reasons (to help justify their ideological position in favour of small government and ensure that targets are exceeded in advance of next year's election). There is nothing prudent about shirking our responsibility to tackle the global climate crisis, to reduce income inequality, to support the vulnerable among us. On the contrary, we know that failing to address these problems now will only make it more difficult and more expensive to deal with their consequences in the future.
It's the slow economy, rather than out of control spending, that presents the major fiscal problem for Canadian provincial governments. A slow economy means that the government revenues are growing slowly while demand for many public services remains high or even increases. In the case of B.C., this problem is compounded by the large tax cuts we've seen over the last decade, which have additionally drained the public purse of much needed revenues. Government revenues as a share of gross domestic product have fallen from 22.6 per cent in 2000 to 19.6 per cent in 2012. If we collected the same share of our economy in revenues today as we did in 2000, we'd have $6 billion more to spend on much needed supports for families. (B.C.'s GDP was $203 billion in 2010, 3 per cent of that is $6.1 billion).
We can't just wait until the economy improves. We must step up to the challenge and address our pressing social and environmental problems today. Our debt levels are still very reasonable, projected to peak at 18.3 per cent of GDP in 2014/15, among the lowest in Canada. It's a far cry from the predicament of Greece and other European countries that find themselves with debt levels well in excess of 100 per cent of their GDP.
We can afford to borrow a bit more at today's record low interest rates to make capital and social investments that will pay off in the future. But if we were unwilling to leave any more debt to our children, what we need to do is step up and pay slightly higher taxes today instead of just ignoring our problems and hoping that they'll go away. Yes, it will cost money to seriously tackle the climate crisis, to reduce income inequality, to properly support the vulnerable among us and enable them to reach their full potential. But failing to address these problems now does not make them disappear, it only makes it more difficult and more expensive to deal with their consequences in the future.
- Iglika Ivanova is an economist and public interest researcher with the Canadian Centre for Policy Alternatives.
