Feb 6, 2009

Love Those Deficits


As noted by Vaughn Palmer in the Vancouver Sun, it seems that all the political parties will benefit from Premier Campbell’s recent conversion to deficit budgets. While deficits are the obvious outcome of a rapidly decreasing economy, little is mentioned about the long-term effects that successive waves of tax reductions will have on building BC’s and Canada’s social programs. After all, it is social programs that have been most damaged by the federal spending restraints of the mid 1990s and the BC restrains since 2001.

The chart on page 224 in the recent federal budget papers shows just how far revenue has fallen as a portion of GDP. The chart shows that revenues has fallen from around 18% of GDP in the mid 1990s to around 16% in 2007/08, and is projected to fall further in 2012 after the end of the projected recession. While a similar chart was not in the 2008 BC budget, revenues as a portion of GDP must have fallen given the very large tax reductions since 2002.

So, even if budgets do eventually come back into balance with an economic recovery, how would government (we the people) pay for all of the wonderful, hoped for programs such as universal child care, full-day kindergarten, increased income assistance rates, etc?

I wonder if any political party would have the guts to either say, we will raise taxes after the recession to pay for such programs, or we will not raise taxes but we will never provide those programs either. But then such announcements would require truth in advertising as well as being obsessed with deficits.

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