After years of careful stewardship of the economy, the Liberals are acting irresponsibly. The political imperative, like a drug, has addled their brains. How else to explain the surge in spending that led up to yesterday's election call?
Last week's mini-budget will inject billions into a booming economy in the form of tax cuts and spending programs. You don't have to be an economist to realize that adding more fuel at this time just might have dire consequences.
But far from being restricted to the economic realm, the consequences of pre-election spending will also be political. Let's look at both, starting with the political.
It was always going to be difficult for the Liberals to make the transition from fighting deficits to spending surpluses. Life is so much easier for a finance minister when all he has to do is say no to everything. Once he is in a position to say yes, the pressure for him to spend becomes intense.
In normal times, that pressure comes from fellow ministers and powerful lobby groups that have the ear of the government. Once the possibility of an election enters the picture, campaign strategists add their short-term views to the mix.
The Liberals' tough and single-minded drive to eliminate the deficit seemed to signify that while in government they were able to rise above pure politics. It is disappointing to see them give in to the sirens of political opportunism.
Grow up, is what some readers are probably thinking at this point. At their core, politicians ultimately care about being re-elected. Even if you believe this to be true, the argument can still be made that opening the purse strings now will backfire.
Why? Because the Liberals are riding high in the polls precisely because of their fiscal discipline. They were able to put federal finances back on a sound footing, and for that Canadians are grateful. The Liberals in Canada are not unlike the Labour Party in Britain, the Social Democrats in Germany or the Democrats in the United States. Traditionally left-leaning, they shifted their policies to the right to follow the public mood.
To abandon this stance right before an election is a mistake. At best, it will confuse voters about what the party really stands for in terms of economic policies.
At worst, it will make them appear both cynical and untrustworthy. In addition, they will appear to be out of touch with modern reality.
The problem with old-fashioned politicking is just that -- it is old-fashioned. Voters know when they are being bought with their own money.
So that's the political argument. By spending lavishly now, the Liberals are turning their backs on the very policies that have made them popular.
The economic argument against a surge in pre-election spending is that it could push the economy past the limit where it can safely grow without boosting inflation. The sustained rise in oil prices already has central bankers worried about the outlook for inflation.
But even before oil prices became a factor, Bank of Canada Governor Gordon Thiessen was already pondering publicly about how much room was left in the economy before it began pushing up against these capacity limits. And that was before last week's mini-budget.
It is difficult for a government seeking re-election to arrange fiscal policy in a counter-cyclical manner. But that would be the responsible thing to do. By not doing that, it is creating the circumstances for a boom followed by a bust, when a soft landing was possible.
With all the billions being doled out in the mini-budget, it's easy to overlook the $200-million or so the federal election is going to cost taxpayers. That covers the extra administrative costs of running an election, plus the portion of candidates' expenses reimbursed by taxpayers. The sum of $200-million is still a lot of money. It could be spent more usefully on many things, such as paying down the public debt.
Too bad the Liberals do not have the political vision and fortitude to stick to the course they set in their seven years in power. They will pay for their political mistake. But we will all end up paying for their economic blunder. mdrohan