Harper government promise of balanced budget law panned by critics

PM Harper in Whitby (Photo courtesy of PM Stephen Harper’s official Facebook page.)

TORONTO – Cabinet ministers would see their pay docked five per cent if the federal government fails to balance its books under proposed legislation critics denounced Wednesday as symbolic at best, hypocrisy at worst.

In a politely received pre-election speech, Finance Minister Joe Oliver announced plans for a balanced-budget law promised by the Conservatives in the 2013 throne speech.

“The only acceptable deficit would be one that responds to a recession or to an ‘extraordinary’ circumstance – that is war or a natural disaster with a cost exceeding $3 billion in one year,” Oliver told the Economic Club.

“The proposed bill would acknowledge the potential need for deficits to counter economic decline.”

In addition to the ministerial pay cut, a deficit would spark an automatic operating freeze, Oliver said.

Observers, however, suggested the Tories were looking to score political points by appealing to their constituents.

“It’s largely symbolic,” said Ian Lee, a business professor at Carleton University in Ottawa. “They have all kinds of ways of getting around it.”

Such legislation – already in effect in many provinces and American states – is popular among conservatives trying to show themselves to be sound fiscal managers.

Oliver, in fact, made several references to the “reckless” spending in the 1970s under then-Liberal prime minister Pierre Trudeau, and warned against a government under his son, Liberal Leader Justin Trudeau.

“Trudeau-era debt clung to Canada like a bad flu,” Oliver said. “(And Justin Trudeau) wants to spend money we do not have, increase taxes Canadians cannot afford, and repeal tax cuts families depend on.”

Both Opposition parties were scornful of what they called a death-bed repentance from a government that has racked up seven straight budget deficits since Prime Minister Stephen Harper promised in 2008 he would never run a shortfall.

The Liberal leader, who refused to say whether his party would oppose the legislation, called it “fairly ridiculous” the government would now be talking about balanced budgets – five years after the recession and just before an election.

“It’s a great example of how this government simply cannot be taken seriously,” Trudeau said in Saguenay, Quebec.

Liberal finance critic Scott Brison noted Harper came to office running a surplus but has added $150 billion to the national debt and accused him of demonstrating “toxic levels of hypocrisy” by touting the proposed legislation.

The NDP’s Matthew Kellway called Oliver’s announcement “full of bitter ironies.”

Kevin Dancey, head of the Chartered Professional Accountants of Canada, said fighting deficits requires discipline and tough choices.

“Balanced budget legislation can help instill a culture of fiscal prudence,” he said.

Wayne Simpson, an economics professor at the University of Manitoba, said balanced-budget legislation in general has little impact.

Staying out of the red ” particularly if the legislation demands balanced budgets every year as opposed to averaged over several years ” means squirrelling away large sums of cash to weather bad times.

“It does indicate the kind of fiscal prudence that you might like to see in a government but it kind of puts them in a straitjacket,” Simpson said. “I don’t think it really means very much.”

Manitoba had pioneering legislation that docked ministerial pay by 20 per cent for running a shortfall, Simpson said. However, the legislature suspended the law in 2009 because of the recession, even though the province probably didn’t need to do so, he said.