The Rising Tide of Red Ink

I was going to title this blog “Can we part the Modern Red Sea to reach the fiscal balance promised land?”, but apart that it is maybe too long for a blog title, I really couldn’t see who would play the part of Moses. Though there exist a good set of fiscal rules (aka: the 10 commandments) it seems that most have been discarded during these economic times.

Fiscal balance has gone out the window as stimulus spending by governments in Canada and around the world are the order of the day to try to get out of this made in Wall Street greed based recession. In the USA, there have been bank bailouts, auto bailouts, mortgage lender bailouts, Wall Street investment firm bailouts…it is a wonder that there are any pails left to bail out all the companies under water. In Canada, what was once a land full of fiscal surpluses has turned into a sea of red ink. The federal Government is projecting a deficit of over of $50 Billion. the Ontario government is updating its forecast in its upcoming Fall statement – the last official deficit number was $18.5 B this fiscal year. Watch for it to be easily north of $20 B. Alberta is swimming in red ink ($7 B deficit) instead of oil and gas revenues.

In the first battle against the deficit of the mid-1990’s, the Federal government substantially reduced transfers to provinces as one of their deficit reducing measures. Provincial governments, in turn, reduced spending on health care, education, infrastructure and “non-core” government activities. Many governments reduced the internal administrative and policy functions in their operations and outsourced or eliminated public service positions and froze the hiring of new staff. Municipal governments, in many cases, had their funding from the provincial government reduced and thus had to reduce services to their population or increase property taxes (the most regressive forms of taxation in my opinion, but the subject of a future blog).

We are all cognizant of the impact of these measures………deterioration of our infrastructure, increased wait times for health care, reductions in social supports to the most vulnerable in Canada, elimination of cultural grants, and the list goes on.

Well, I guess we are at that point again. Though governments are presently in a spend mode, you can be sure that the guardians of the public purse are developing strategies and options on how to return to fiscal balance. At the political level, some have ruled out tax increases and reductions in spending. Logically all that remains to achieve balance is economic growth. But how long and sustained must that economic growth be before balance is achieved, especially given the fiscal pressures for more investment in health care (aging boomers) and in education and in maintaining our infrastructure. And this does not include government support to help develop the nirvana of the new economy.

Others will want to cut "fat, waste and inefficiency" in government and in the broader public sector. But governments have been through these processes ever since the 1990's. Many times, governments just implement across the board reductions (while exempting health care & education) that yield little in terms of sustainable savings.

What we need in this country is a new way to look at what government spends the taxpayers money on. We need to take a systems approach to programs and policies; determine what is the exact role of government; and coordinate between the different orders of government by taking a "citizen-based" view. Let me give you a small example. In British Columbia, the Provincial Health Authority has implemented a program called imProve that is looking at the processes in the hospital to make sure that they are focused on the patient. They have been able to streamline processes throughout their hospitals resulting in better patient safety and better quality. At they same time they are able to deliver more services to more patients with the same level of resources.

The old approach to budget constraints will not work. Now is the time for new innovative and bold approaches. Within an efficient and citizen centred provision of services, Canadians must decide what they want from their government and be prepared to pay the appropriate level of tax to sustain those programs and services.