This opinion piece was featured in Canadian Business, April 12, 2010 edition.
The Harper government just pressed the wrong panic button — prematurely tackling the budgetary deficit before resolving the jobs crisis, Canada's worst in a generation.
Over the past year and a half, the most forceful global economic downturn since the Great Depression has destroyed half a million full-time jobs in Canada. They tell us the recession is over, but we’re still short hundreds of thousands of permanent jobs.
There are more temporary and part-time jobs, and more self-employment, but often these are poor substitutes for the stable incomes that were lost. Out of the 1.5 million unemployed Canadians, half don’t receive jobless benefits. Even Canadians who managed to keep their jobs during the recession are stressed about high household debt, stagnant incomes and rising costs.
Our federal government, in its tabling of Budget 2010, acted as if none of this was happening. Finance Minister Jim Flaherty’s signature storyline is his promise of producing the fastest balanced budget in the West — as if that was the biggest problem facing Canada.
Stock markets, corporate profits and GDP are all up, but so far private-sector growth has not translated into private-sector jobs growth. The jobs that are being created offer lower pay, less-reliable hours and fewer benefits than the ones that vanished.
The reduction in Canadian purchasing power has implications for the durability of the recovery. And beyond the recession, we have even bigger fish to fry: future labour shortages, crumbling infrastructure and soaring energy costs. Failingto seize the moment to address these problems may save some federal cash now, but will leave Canadians on the hook for higher costs later.
We face a $125-billion deficit in municipal infrastructure maintenance and repair. This infrastructure supports Canadian households and businesses every day. Addressing this backlog is non-negotiable; the repairs have to happen sooner or later. Why not borrow money now, when credit is cheap, to invest in jobs and infrastructure? Within the decade, we’ll be facing labour shortages. Why wait to hire people later, when they’ll be harder to find and more expensive to hire?
Canadians may be wincing about the size of the fiscal deficit now, but they’ll be howling when future governments stick them with needlessly higher bills just because Harper and Flaherty were obsessed balancing the books at the cost of economic security tomorrow.
A strategic plan that focuses on preparing for the needs of the next generation of families and businesses would not only address Canada’s unemployment problem and balance the books, it would help communities shift from tentative recovery to robust growth that benefits the majority, not just the few.
Getting more Canadians working is good for the government’s fiscal bottom line. It means more people contribute to the treasury while drawing less on the public purse. That speeds up deficit reduction without necessitating deep cuts to supports and services.
Some would claim Canada cannot afford more government stimulus spending, but that’s simply not true. We can affordto do more. Canada has the lowest debt-to-GDP ratio in the G7. We have the ninth-largest economy on the planet. As a share of the economy, federal spending and revenue collection are at the same scale as in the late 1950s — a time when we didn’t have medicare, employment insurance, or a vast network of colleges and universities.
Increasing federal government spending and revenues by a percentage point or two of GDP is not unaffordable. In reality, it would take us back to about 15% of GDP — the postwar average. That was a period of expansion of opportunity and innovation that most of today’s decision-makers benefited from.
The Conservative government and their supporters, meanwhile, want us to believe that federal spending does little for us, is out of control and needs to be reined in. Small government may have been the policy fetish of the 1990s, but not only is it yesterday’s thinking, it’s a myopic choice that risks doing irreparable damage to the economic future of this country.
Balanced budgets are nice, but there is more than one way to get there, and there are important things we can accomplish along the way. By focusing on getting Canadians back to work, we can both balance the books and leave a lasting legacy for future generations.
Canadians want more than bean-counters now. We want leaders. As the Olympics showed us, with focused effort and lofty goals, Canada can be golden. Give us more than balanced budgets. Give us something to cheer about.
Armine Yalnizyan is a senior economist for the Canadian Centre for Policy Alternatives.