Finance Minister Jim Flaherty tabled the federal government’s budget in the House of Commons on Thursday afternoon. The fiscal plan focused on limited spending on areas like defence and international aid in order to tackle the whopping $56-billion deficit.
How do governments navigate budget politics in an era of deficits? How do they promote both targeted spending and fiscal restraint? How do they fend off the opposition and sell their vision to the public?
Earlier today, we invited readers to join us for an online discussion on budget strategy with Tom Flanagan, a University of Calgary political science professor and a former top Conservative official.
Prof. Flanagan was chief of staff to Stephen Harper in 2002-03 when he was leader of the Opposition, served as the Conservatives' national campaign manager for the 2004 election and worked as an advisor in the Conservatives' war room during the 2005-06 election campaign. He was also director of research for the Reform Party in the early 1990s.
He has also written several books, including Harper’s Team, Waiting for the Wave: The Reform Party and Preston Manning and First Nations? Second Thoughts.
Read the full transcript of the discussion:
Jill Mahoney: Hello everyone. I’m Jill Mahoney and I’ll be hosting our live discussion with Tom Flanagan today.
We’ll get going shortly. In the meantime, please feel free to start submitting your questions.
12:56 Jill Mahoney: Professor Flanagan, thank you for joining us today. Let me start off our discussion by asking you what are the main challenges of crafting budgets in periods of fiscal restraint versus times of prosperity?
1:01 Tom Flanagan:
First, there has to be serious public demand for fiscal restraint. That usually happens only when deficits are spiralling out of control and the national currency is faced with devaluation. That's what happened to Canada in 1995. We aren't at that point now, so the government will deliver some mild restraint but not draconian cuts of the kind we experienced in the past.
1:02 [Comment From Blair ShumlichBlair Shumlich: ]
Thanks for taking the time to do this Prof. Flanagan. My question is this: If Harper had a majority today, what would we see differently?
1:04 Tom Flanagan: Blair, I think if there was a Conservative majority, the plan would probably move more quickly towards balancing the budget. But I still don't think it would be draconian. The conditions just aren't there. Canada's currency is strong, our debt is manageable, and people are more worried about things other than the deficit.
1:04 [Comment From GuestGuest: ]
Mr. Flanagan Cutting taxes seems like a conservative mantra. Indeed it often seems to me that it is their only economic plan. Now, I don't like paying taxes any more than anyone else, but would you agree that the country would be in much better shape if the government had not cut the GST while increasing its spending?
1:06 Tom Flanagan: I'll agree with you 50%. I think the Conservative tax cuts (and the GST cut was only part of a longer list including reductions to personal and corporate income tax) were well advised. But I do think the Harper government should have restrained its spending from the start. So they created a gap between revenue and expenditure.
1:07 Jill Mahoney: Read this Globe story on Prime Minister Stephen Harper’s comments about putting off additional spending.
1:07 Jill Mahoney: Finance Minister Jim Flaherty is widely expected to unveil a budget today with a dual focus: Continued stimulus spending while tackling the huge $56-billion deficit. Are there inherent challenges in presenting two-headed budgets?
1:09 Tom Flanagan: Yes, the message gets muddled. It's hard to emphasize the need for restraint when you're still increasing spending and running a large deficit. I was never a fan of the stimulus program. In my view, Canada is doing better than countries such as the USA, UK, Japan, France, Italy, etc., precisely because we've had a smaller stimulus package. I would have preferred even smaller, but you never get everything you want.
1:10 [Comment From GuestGuest: ]
In order to bring the deficit to zero in a few years, taxes will likely have to be increased. Should these taxes be levied on business or on households?
