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Rob Shaw: Should the NDP government go big if it is pushed into a deficit?

VICTORIA — Finance Minister Carole James is scrambling behind the scenes to keep B.C.’s budget from slipping into the red.

But some New Democrat supporters must be wondering if it’s even worth the hassle, in light of the recent federal election.

Voters there issued a collective shrug to the idea of years of government deficits, as long as the money would ease the cost pressures they are facing on all sides, from housing affordability to child care and health care.

Parties that had no plans to curtail deficit spending captured more than 55 per cent of the popular vote collectively. And only three per cent of uncommitted voters in an Angus Reid poll before voting day last month said debt and deficits were a top issue.

But back in B.C., James and the New Democrat government are still scrounging for every penny to keep their budget in the black.

The province’s second quarter financial results, to be released later this month, are expected to show James’s razor-thin $179-million surplus forecast under siege by a softening economy, slowing housing market, collapsing forestry sector and the roaring financial dumpster fire that is the Insurance Corp of B.C.

It may still be possible to keep the books balanced this year by blowing out contingency funds and cutting discretionary spending.

But what about next year’s budget, set to be tabled in February?

James is scraping that together right now as well. You can imagine what kind of miserly money management will be required to eke out a small surplus in the current circumstances — not to mention with the looming threat of a $1-billion court challenge to ICBC caps on minor injury claims.

It’s going to be ugly.

NDP supporters hoping to see accelerated $10-a-day child care, more money for unionized workers, and big boosts to core services like education, health care, welfare, disability and shelter rates can kiss those dreams goodbye. 

All of which presents a dilemma for the government.

Does it want to spend the final two years of its mandate talking about prudence, caution, AAA credit ratings and all the other budgetary catchphrases famously uttered by the previous Liberal government as it wrestled away bus passes from the disabled and maternity benefits from low-income mothers in the name of modest surpluses?

Or does it embrace a deficit?

On its surface, that’s dangerous territory for New Democrats who have spent 16 years being painted by the B.C. Liberals as reckless financial managers for deficit budgets in the 1990s.

But again, look to last month’s federal campaign. Polls pointed to voter priorities of affordability, cost of living, climate change and health care — coincidentally, many of the central planks of the B.C. NDP’s 2017 election promises that won over urban voters in Metro Vancouver.


Finance Minister Carole James delivers the last provincial budget in the legislature. She’s struggling to keep it balanced as economic growth cools.

CHAD HIPOLITO /

THE CANADIAN PRESS FILES

Perhaps there is a third option for the B.C. NDP government.

It doesn’t just slide into a small deficit while kicking, screaming and cutting the same services it promised the last election to increase. It uses the deficit as an opportunity to unshackle itself and make strategic investments in affordability programs with tangible benefits for cash-strapped British Columbians.

One option could be to immediately implement the $10-a-day child care plan that was a centrepiece of the last election but is set to be phased in over a decade.

That could cost as much as $1.5 billion. Would thousands of parents care about a $1.5 billion provincial government deficit if they stood to save hundreds of dollars a month in child care fees?

The same could be asked about a radical housing affordability plan. Or a resurrected renter’s rebate, aggressive electric vehicle subsidies, major boosts to transit, or funding for new family doctors.

Besides, the NDP knows that no matter what it does it’s going to be attacked by the Liberals for “killing the economy,” as Liberal leader Andrew Wilkinson recently tweeted.

At least by picking an issue to hang the deficit on, the NDP would be daring the Liberals to campaign against it in the next election — whether that be scrapping the $10 a day child care program, or something else.

If Premier John Horgan is actually considering bold deficit spending, he’s not letting on.

“We have a downturn in the economy that is affecting the global economy, not just B.C.,” Horgan said when asked earlier this month.

“But I have read two banking reports this week that continue to show B.C. leading the country in economic growth.

“We are going to continue to do our best to protect services, first and foremost, and ensure that we can continue to keep our books balanced.”

Economists are split on the idea.

“Even if you get up to a deficit of a couple of billion of dollars, in the context of the B.C. economy, you’re looking at less than two thirds of one per cent of GDP and that’s still a relatively modest deficit that is not something to worry about,” said Alex Hemingway, an economist at the left-leaning Canadian Centre for Policy Alternatives.

In the long-term, government should find additional revenue, said Hemingway. But some immediate deficit spending on key items like housing and child care could actually produce economic returns, he said.

“Those are investments that can actually pay off in a big way in the long term,” said Hemingway. “So I think you can just as easily argue that it’s economic folly not to not to make those investments where those social needs are real.”

Jock Finlayson, executive vice-president at the right-leaning B.C. Business Council, said the NDP’s budgets are already “poised on a knife’s edge” and the real solution is to craft an economic development plan.

“If you have a severe economic downtown, then running a budget deficit is much more defensible,” he said. “We’re not in that position. We have an economy still growing. It’s not growing as fast as it was two or three years ago, but it’s still growing above the Canadian average.

“The second conundrum is that you’re talking about things like forest revenue being down, ICBC financial challenges, these are sort of transitory, they are not permanent necessarily. But to start enriching ongoing social programs and the social safety net, then you are hardwiring permanent cost increases into what government does.”

Difficult choices for an NDP government staring at the back half of its mandate. But choices that may ultimately determine whether voters give the party a second term in control of the provincial purse strings.

rshaw@postmedia.com

twitter.com/robshaw_vansun

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