Throne Speeches are, by nature, wish lists. They are aspirational. They talk in rosy tones about what a government wants to do, without any of those pesky details about how it’s going to do it or what it will cost or who will pay for it.
But those pesky details are going to tug hard at the pant legs of those aspirations, and the already severely stretched federal budget, sooner rather than later. In six months, maybe a year, the government will need to begin the transition from its throw-everything-at-the-problem emergency response in the COVID-19 crisis, to the promises in Wednesday’s Throne Speech to build a stronger, healthier, more sustainable economy from the ashes.
It has that much time to figure out how to deliver on its most ambitious and costly goals – such as overhauling the Employment Insurance system and creating some sort of national affordable child care plan – without dooming the country to an unsustainable structural deficit in the process. It needs to use that time wisely.
What it needs is to launch a program review.
When the government presents the economic and fiscal update it has promised for some time in the fall, it would be well advised to commit to a broad, detailed, department-by-department review of all its programs and their costs – similar to what the government of prime minister Jean Chrétien conducted in 1994-95. That government faced what had become an untenable debt problem it could only solve with a large-scale rethink of how it delivered federal programs within sustainable fiscal restraints.
This government’s crisis is quite different in nature. But it faces a fiscal reckoning just the same.
Even before the pandemic – and its $343-billion federal deficit, a fiscal hole that was previously unthinkable – federal program expenses had crept up to 15 per cent of gross domestic product, the highest outside of a recession since 1994-95. The size of government has grown every year since the Liberals took power in 2015.
There’s an argument to be made that government was overdue for some program growth, that the Harper-era tight-fistedness and tax cuts had swung the pendulum too far in the other direction. There’s an argument that the government wasn’t doing nearly enough to invest in things that would stimulate lagging productivity and long-term economic growth potential, which had become, and remain, major sources of concern.
Some of the priorities emerging from the pandemic – such as universal child care, such as guaranteed basic income – are themselves productivity boosters, and arguably are logical next building blocks for that long-term potential. They’re also expensive, at a time when the past five years had already left the government with less fiscal space for big new program expenses – even if it wasn’t wrestling with a pandemic.
At the same time, as my colleague John Ibbitson pointed out this week, the country’s tax base also looks destined to stagnate in the coming years, as an aging population will mean more pensioners and fewer taxpayers.
If the government is going to pursue an ambitious agenda that involves a major expansion of social programs, simply stapling them onto the existing program framework seems not just clumsy, but unsustainable. It calls for a wholesale re-assessment of what we want our government to do, and how we expect to pay for it.
Last week, I talked with three of the architects of that 1995 program review, which resulted in a massive overhaul of the federal fiscal framework, the rapid elimination of the federal deficit and the reversal of what had looked to many to be an irreversible debt problem. What they made clear was that it couldn’t have been accomplished without an eight-month, intensive review of government – asking hard questions about its priorities, and making painful but necessary decisions about what it could realistically deliver and at what cost.
A review in 2020-21 should do no less. The task ahead is on a different scale than any government has faced since the Second World War. It demands not just new programs, but a new way of thinking. This government needs to roll up its sleeves and thoroughly re-examine not only its spending priorities, but its revenue sources, its antiquated tax code, its industrial strategy.
Only once that’s completed can it come back and say, “Postpandemic, this is where we want to go and how we’re going to get there.” Without it, this remains just an unsustainably expensive wish list.
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