Perhaps the opposition benches in Ottawa are looking at the Caribbean Diaspora in Canada, among other immigrant groups, when they point and howl about the fledgling Liberal government’s embracing of a deficit.
Finance Minister Bill Morneau – a successful businessman in his own right who knows his way around a ledger – has quite openly said that declining oil revenues, among other pressures on federal revenue, will mean a budget deficit of perhaps $18 billion or even higher. Recall that this is a party elected partly by promising to run a deficit, albeit a smaller one, while fitting stimulative jumper cables to the national economy.
In Ontario, Alberta and Newfoundland and Labrador, provincial governments are also forecasting deficits.
Balanced budget good, deficit bad the Tories chatter, channeling George Orwell’s Animal Farm.
They may hope that Diaspora members in Canada will be alarmed by talk of huge deficits and will help them turn up the heat on the government. After all, anyone from The Islands knows that with some exceptions, the regional and individual national economies of the Caribbean Sea have seen their share of economic woes.
Just recently, the International Monetary Fund (IMF) estimated that economic growth in the Caribbean and Latin America contracted .03% in 2015, and the agency predicts the same drop in 2016. Shifting global trade alliances, multi-nationals that all but ignore small states, reduced support from richer nations and now low oil prices all conspire against the Caribbean. But still the region survives and in most cases thrives.
Before we start running from the Deficit Monster, let’s take a look at what makes up this straw man.
Deficits in households are definitely bad and if they extend too long in business they are bad there too.
But government deficits are a different kettle of fish.
First, governments are not businesses and are not tasked with posting an annual profit. Break-even is best – too many surpluses in a row and one must ask if we are paying too much tax.
Second, governments are there to lead, including on the economy. Government partly exists to create conditions conducive to business and personal well-being. By the people, for the people as our neighbours to the immediate south express so well.
Government deficits caused by spending on infrastructure and helping all citizens to maintain a reasonable standard of living stimulate private enterprise by creating large projects that in turn make profits, create jobs and result in payment of various taxes, returning much of the government money to the government.
As New York Times columnist and Nobel Prize-winning economist Paul Klugman says, “The government does everyone a service by running deficits and giving frustrated savers a chance to put their money to work.” And as he points out, borrowing costs for government are at all-time lows and inflation rates are manageable.
Those who would scare us with the Deficit Monster speak of austerity, another way of saying cuts in government services to finance cuts in government spending. Many of those cuts would directly harm those in our Diaspora.
Such cuts would most likely slow, stall or even reverse the fragile recovery our economy has experienced since the worldwide economic crisis in the first decade of this century.
It’s time to put the pedal-to-the metal, stimulate the economy and bravely ride out this rough patch to better times. As wise business leaders like the finance minister know, you need to spend money to make money.
Brad Savage is the editor of The Caribbean Camera.