Economist MLA Lauds the Prudence of Budget 2010
March 4, 2009
ECONOMIST MLA LAUDS THE PRUDENCE OF BUDGET 2010

VICTORIA – West Vancouver-Capilano MLA Ralph Sultan made the following statement in response to Budget 2010 in the Legislature yesterday, highlighting the strong fiscal management and record investments made by the BC Liberal Government.

“Earlier the Finance critic of our official opposition, the NDP member for Surrey-Whalley, further elevated the calibre of fine debate in this House by pronouncing on the 2010 Budget with a speech which must set new records for the quantity of invective which can be squeezed into one and a half pages — because I actually counted — and with such language as: distortion, betrayal, deception, families in pain, not honest, betrayal — repeating himself — a mess, can't be trusted, shortsighted, nothing, a betrayal — for the third time — mismanagement, broken promises, and cover-up. That was just the first page.

“Somehow the member overlooked the words treasonous, treacherous and criminal, but perhaps if we'd given him more time he would have thought of those descriptors as well.

“I would offer, Madam Speaker, my own descriptors: careful, cautious, conservative and constructive. Furthermore: realistic, with the right priorities, with a minimum of rhetoric — and also within limits — innovative but not ideological, and containing a maximum of information.

“So somehow I wonder if we're even considering the same document, because the disparity in our language and also, within limits, innovative but not ideological, and containing a maximum of information. Somehow I wonder if we're even considering the same document, because the disparity in our language certainly illustrates the great philosophical gulf between the MLAs on this side of the House and our friends on the opposite bench.

“Three statements of the member from Surrey-Whalley struck me as being particularly nonsensical, and I'd like to cite them in turn. The first statement of special nonsense from the official Finance Critic of the party opposite was: "slashing health care."

“Now, if we refer to this wonderful blue book — the estimates book accompanying the budget presentation of the Finance Minister — on page 129, referring to the Ministry of Health Services, it shows actual operating expenses in 2009-2010 as being $14.1 billion, to round it a little bit, and budgeted operating expenses for 2010-11 at $14.8 billion, or an increase of approximately $700 million.

“In the planning document which accompanies this voluminous display of everything you ever wanted to know and really didn't about government spending, you can see that the projected increase over three years is $2 billion. Now, in the face of these skyrocketing numbers, it takes a rather extreme degree of numerical incapacity to describe it as slashing health care.

“Now, if we turn the page, on page 130 to 132 we see in only 12 months, '09-10 versus 2010-11, regional health sector funding growing by $400 million, Medical Service Plan growing by $200 million, Pharmacare growing by almost $45 million, health benefits operations growing by $600,000, emergency and health services growing by $18 million.

“Therefore, for the opposition to characterize the health sector, where spending growth in fact threatens the ability of government to find sufficient resources for all of the other vital things which we are called upon to do, as being slashed is a whopper of truly majestic proportions.

“Moving right along, we have statement of special nonsense No. 2: "cutting education." Again, let us refer to the estimates book, page 85 and on the succeeding pages. Actual operating expenses in '09-10 are $5.03 billion. Budgeted operating expenses in 2010-11 are $5.16 billion, increasing about $130 million in one year.

“The projected increase over a longer period of time is from approximately $6,300 per student budgeted, which prevailed when this government came into office, to approximately $8,300 per student in the period 2012-13, as projected.

“Now, we can all readily appreciate the difficulty of managing a school system with declining enrolment and the felt need of members opposite and their allies to keep all schools fully staffed and operating whether there are any students in there or not. However, the remarkable thing about this government is that despite these disturbing declines in enrolment — it could be the subject of another debate on another day — this government has in fact increased K-to-12 budgets consistently every year in the face of declining enrolments.

“I find that remarkable and in fact laudable. We should give the ministers, past and present, a pat on the back for putting, as this caucus is frequently reminded by its leadership, education as perhaps the deepest priority of this government, even surpassing, in critical importance, the health system. That's an interesting statement of values. Accordingly, the assertion that the government is cutting education hardly stands up to scrutiny.

“That's an interesting statement of values. Accordingly, the assertion that the government is cutting education hardly stands up to scrutiny.

“Furthermore, as the mix of spending reveals, this government has restored maintenance budgets, which was truly a disturbing perturbation, shall we say, immediately after the election but which has since been remedied, and is launching all-day kindergarten, both of which are strategies which one expects to be greeted with acclaim, not complaint. All-day kindergarten — I mean, this is big stuff, ladies and gentlemen. We should acknowledge it. It is wonderful.

“Now, statement of special nonsense No. 3: "Not a nickel for social housing." Again, let's go to the blue book on pages 141 and 143. It's a little bit confusing, because housing and social development are all wrapped in together under one ministry, but the operating expenses go from $2.68 billion up to $2.73 billion wrapped together. While I would concede the majority of that increase is representing the social spending side as opposed to the housing side, if we go to page 143, we still see housing voted appropriations, last year $357 million, this year $348 million. Okay, I'll grant you, a very smidgen of decline, but to say we're not spending a nickel…. Well, come on, give me a break.

“The Finance Minister says, nevertheless, and makes no apologies that this is, in fact, a budget of restraint. It's a budget of belt-tightening appropriate to the times. There's not a lot of loose cash rolling around, and there has, in fact, been restraint in all directions. It would be fair to ask: has there been too much constraint? Is there too much restraint? Are we under-spending, as the NDP seems to be alleging?

“Here's an interesting contrast. The NDP would have us believe this is kind of a slash-and-burn, fire everybody and shut down government services. As one of my colleagues pointed out this morning, on the far right we have outfits like the Fraser Institute and the Canadian Taxpayers Federation berating us for just the opposite, as being out-of-control, reckless spenders. Maybe we're getting something right in the middle.

“A more objective assessment would be…. In fact, I look at this very interesting report produced by, what else, the economics department of the Royal Bank of Canada. How about that. It says here: "Program spending in proportion to the economy for all the provinces of Canada, for all the years going back to 1981, projected into the future to the year 2014 for each of the provinces and for the federal government." The column shown for British Columbia is very interesting. This is program spending in proportion to the economy — okay? In other words, how big is government relative to the economy?

“Now, in the year 2000-2001, which was long before this place was taken over by the other team, the percentage was 19.4 per cent, Program spending in proportion to GDP, 19.4 per cent. What was it this fiscal year just ending? It was 20 per cent. The government has grown in proportion to the economy under the B.C. Liberals. That's a striking although small gain, but to those who decry the fact that we are shrinking government…. Well, not according to this particular table, although I hasten to add, for those who would attack us on the grounds that we've been too expansionary, that it is projected in the budget to drop to 19.3 per cent and back down to 19 per cent by 2011-12, more or less back to where it was when the NDP left office.

“It certainly does undercut the argument that we have been shrinking government excessively. In fact, up until the end of the fiscal year, which hasn't happened yet, we've been growing the size of government in this province.

“Let's turn to the other big issue of the day, which is deficits and debt. It's very much in the news. We can't pick up the popular press, even, without hearing people expressing great concern about what's going on, and we are criticized for being in a deficit position ourselves. Again, the relevant measure the popular press, even, without hearing people expressing great concern about what's going on, and we are criticized for being in a deficit position ourselves. 

“Again, the relevant measure is how big is our budget balance relative to the economy? So again, thanks to our friends in the banking world, who don't have any particular axe to grind — and I'm sure they could hardly be accused of trying to massage the numbers to somebody's advantage — comparing British Columbia to other provinces and Ottawa, the Royal Bank reports our projected deficit next year at minus 0.9 percent of GDP — not quite minus 1 percent. 

“In that regard, we are projected as performing better than Alberta, which is minus 1.8, a bigger deficit; Ontario, minus 3.6, an even bigger deficit; Quebec, inveterate big spenders, minus 1.5. We're doing better than Quebec next year. We're doing better than all the Atlantic provinces. We're beaten only by Saskatchewan and Manitoba, and I've always maintained we need a budget transparency and accountability act in Manitoba before I really fully believe those numbers. But for the moment, let's give them credit for good management. 

“In fact, if you go down the London Economist magazine list of all the countries that they track every week, of the 43 nations and currency areas reported in the latest edition, B.C. does better than all of them but three. So we can bemoan the deficits that we are facing — and certainly they are significant and frankly nothing to be encouraged. We are doing a way lot better than all of these other provinces of Canada and other countries around the world.

“If we look at the accumulated debt that we've managed to accumulate by running deficits in the past — both ourselves and our friends across the aisle, who are particularly skilful at that — B.C. is at 17 per cent. Ontario is at — wait for it — 36 per cent, and Quebec's at 46 per cent. Atlantic Canada, 33 to 40 per cent. Alberta's a special case. They really don't have any debt at all, so we won't count them in the contest. So we look very good. 

“You might say: "Well, that's all very interesting, but are deficits and debts really that important?" — because it's certainly the absence of any mention of them that seems to me to mark the commentary on budgets from the other side of the House. I would argue that they are, in fact, very important. When we talk about whether school budgets have been cut or the health budget has been maintained, we should also insert into our consideration what, in fact, is happening on the deficit and the debt side.

“I would remind you of what you have been reading on the financial pages recently, how out of control it can get and with unfortunate consequences. I have what I call the terrible ten or terrible 12. My meaning is not ten countries, but they are running deficits at 10 to 12 percent of their GDP. And we have such super performers as Greece at 12, the U.K. at 12. What happened there? The United States, with their $1.56 trillion announced yesterday as a plan, at least, at 10 to 11 percent. 

“Then we have what I'd call the 100 club, the countries whose accumulated debt is now equal to the total size of their economy. It's a 100 percent ratio, so they owe as much as they produce in the whole year — Japan, Italy almost, Greece. And the United States is around 68 percent or so. But if you add 10 percent a year, here's a puzzle for you. How many years will it take to get to 100 percent? Well, at the rate they're going, they'll do it in less than three years, and they will have joined the exalted ranks of Greece and Italy. Let's hope they don't. 

“However, the IMF — the International Monetary Fund — predicts that the average debt-to-GDP ratio of the advanced countries in the G-20 will climb to 118 percent by 2014 from its current level of 78 percent. A chilling forecast.

“Well, who cares? What are the consequences of debt being equal to GDP? Well, it has to be serviced. You have to pay interest on it. You pay interest to those dastardly bankers and those rascally bond holders and those capitalists that our friends across the aisle don't particularly appreciate, and if you are giving every year a perpetual — let's assume a low interest rate, a low-inflation environment prevails, which may be a bit optimistic — 3- to 4-per cent service charge on debt which equals 100 percent of your GDP, guess what? You just knocked three or four percentage points off the GDP that could have been spent on health care or better education or lowering tuition fees for our university students or better security and law enforcement, whatever.

“To knock 3 to 4 per cent — let's say, a year's growth in a good year — off the GDP and pay out to some little coupon clipper somewhere else I think is unfortunate, regrettable and not to be admired.

“So debt matters a great deal. It's a perennial drag on the economy, and countries and provinces such as B.C., which have significant debt — but nothing like all of these other jurisdictions — have to think about it.

“To conclude, we have a budget here which preserves the core functions of government. In fact, it even increases the funding for those core functions moderately — health care, education and, in distressed times, looking after those unable to adequately care for themselves on the social side of the ledger.

“We have a budget with, let's be candid, a troubling deficit, but which stands as a hallmark of fiscal virtue in comparison with most other jurisdictions both in Canada and internationally. In fact, I'd say — in my words here, I get a bit florid at night — a towering example of fiscal rectitude in comparison with the multitude of advanced economies outside of this country.

“Well, I'll stick by that. In that respect, we're admired and praised by those from outside our borders, and in a world marked by financial turbulence, insolvency, murky transactions, which no one — least of all sophisticated bankers — can figure out.... What in the heck is going on? All we know is that we've lost all our savings, the banks aren't lending money to get small businesses going, things are, in fact, a big mess, driven in the first instance by a collapse of the financial system and all those bright MBAs that I helped educate at one point.

“We don't want to go there, and we are not there. We are in the almost unique position of having fiscal virtue, and we should cling to fiscal virtue stubbornly because of all of the fringe benefits it brings, even though there are disappointments and some degree of pain along the way. Believe me, in my opinion, that rather modest discomfort is nothing compared to the difficulties these other countries are facing because they haven't got their books in order.

“I disagree with those who trot out the venomous list of adjectives to describe this budget. I don't agree with them. It's a competent budget. It's a budget appropriate to the times. It's a budget which turns away from the reckless temptations of the moment to spend and load those spending appetites on to the shoulders of our children and others yet unborn. I will not hesitate to vote in support of this budget.”

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