First, it will be recorded as the longest campaign in Canadian electoral history. Our political campaigns used to be a sprint to the finish line. This time, it is a marathon of perpetual political bashing and public ridicule.
Second, it is a campaign where the Canadian public insists that the politicians focus on the economy. No matter how hard our political parties attempt to change the channel and talk about national security, the environment, education, and healthcare, the Canadian public is adamant that political parties reveal their precise plans for the economy.
Canadians want their political parties to articulate how they intend to kick-start the economy, lower the mercilessly high unemployment rate, and increase their standard of living.
Canadians did not have to wait for Statistics Canada to confirm that we have been in a recession for the last six months. The signs are all around us. From an economic recovery that remains elusive, an unemployment rate that is far too high, declining consumer expenditures and a faltering manufacturing sector that needs to hide behind a falling Canadian loonie in order to remain competitive on the global stage, recession is here.
As political parties struggle to develop an appetizing economic plan for the critical scrutiny of the Canadian public, a common buzz phrase that is surfacing time and again is a balanced budget. The pursuit of an annual balanced budget is presented as the cure for all our economic misfortunes. The Canadian electorate is urged to interpret balanced budgets as the exercise of prudent fiscal management and visionary economic leadership.
In my opinion, proposing a balanced budget as an economic panacea is an abdication of economic responsibility and a failure to grasp the modern economic role of government. Balanced budgets are not the miracle cure for our ailing Canadian economy.
The Canadian economy, as well as national economies around the world, experience yearly fluctuations in economic performance. This is the way it has been in the past, and this is the way it will be in the future. The business cycle with its booms and busts has been, and will remain, a fact of life.
Indeed, the first documented business cycle occurred in biblical times. In Genesis 41, the Bible refers to Joseph’s interpretation of the Egyptian pharaoh’s dream as seven years of prosperity followed by seven years of famine. Joseph’s advice to the pharaoh was to save a portion of the bumper crop during the first seven years of plenty for disbursement to the Egyptian people during the subsequent seven lean years.
Faced with the reality of annual economic and business fluctuations, does the stranglehold of a yearly balanced budget make sense? My answer is a definitive no. Political parties should acknowledge that the modern role for government is to devise public policies that sustain economic growth through the private sector. In this scenario, government should have the necessary freedom to fine tune its fiscal policy to achieve that objective.
This means that during good times the federal budget should end the year with a surplus. Similarly, during the lean years the federal budget can, in good conscience, reveal a deficit. However, what is non-negotiable is that over the period of the business cycle the surpluses must pay for the deficits.
In conclusion, what we need is not an annual balanced budget but a cyclical balanced approach to the federal government’s fiscal policy.
Dr. Constantine Passaris is professor of economics at the University of New Brunswick, an Onassis Foundation Fellow and a national research affiliate of the Prentice Institute for Global Population and Economy at the University of Lethbridge.