How Much Will Harper Cut?

Some progressives worry that the new Conservative majority will dismantle the Canadian state. Hard-nosed economic conservatives like Andrew Coyne and Terry Corcoran worry that the Conservatives will not actually cut government spending. I have suggested that the Harper Conservatives will cut, but not as much as the Chretien Liberals.

This debate would benefit from some numbers. Chretien slashed federal program spending, as a share of GDP, from 16.8% in 1993-94 (when he took office) to 12.7% in 2003-04 (when he resigned).

From peak to trough, it plummeted from 17.4% in 1992-93 to 12.1% in 1999-00 and 2000-01. Depending on which comparison one prefers, the Liberal majority slashed federal program spending by 4.1% or 5.3% of GDP.

The last Conservative budget (see Table 5.6), which Harper will now enact, projects cuts from 14.4% this fiscal year to 12.9% in 2015-16. The recent stimulus-boosted peak was 16.0% in 2009-10. The same two comparisons indicate that the Conservative majority is poised to cut federal program spending by 1.5% or 3.1% of GDP.

Of course, the Conservatives are free to cut more in future budgets. However, they would have to go much further to match the depth of Liberal cuts. Indeed, it is an open question whether Harper will even touch the minimum level of federal program spending reached by Chretien (12.1% of GDP).

None of this is good news for those of us who believe that the federal government should invest more in healthcare, education, social welfare, infrastructure and economic development. And the Conservatives could do substantial damage to democratic institutions that would not show up in budget numbers. But in fiscal terms, Harper’s majority is looking like the lame sequel to a movie that Canadians have seen before.

12 comments

  • The Conservatives can put an extra 6, 7, or 8 percent in health care through provincial transfers. However, they can cut an extra 9, 10, or 11 percent elsewhere.

  • Erin, you have a point. But that analysis masks other aspects of Conservative government. For instance, where Liberals might be expected to generally avoid cutting small, cheap programs which have a disproportionate impact, giving important social benefits for very little money, Conservatives have a track record of deliberately targeting such programs because they specifically dislike programs which give social benefits.
    On a larger scale, Conservatives may not cut absolute dollars spent by the federal government–indeed, their claim to be “fiscally conservative” is largely a mirage–but may still have a huge impact by shifting their spending from useful things to useless ones, and from things which have a larger impact on jobs and the broader economy per dollar spent, to things which have a smaller impact; i.e. which create fewer jobs and have a worse multiplier.

    Specifically, prisons and the military. The Conservatives are very enthusiastic spenders on this sort of thing, and on the military side they seem to embrace the US “maximum toys” paradigm, without even the minor jobs justification it may have in the US. Taking for instance the F-35s, even in the US such projects create very few jobs relative to the billions spent–but in Canada, buying these things creates a couple of hundred jobs for pilots and mechanics (maximum–they’re replacing existing planes so there may be no net new jobs at all), and that is all, for an expenditure of $40-60 billion (I know the parliamentary budget office estimate is lower, but the track record of cost overruns for advanced US military machinery suggests they are still deeply underestimating the eventual cost). But for the Conservatives, this one program is just one specific example of their general spending preferences. If Conservative program spending remains the same in %GDP as previous governments, but they divert an initial $10 billion/year expanding with GDP from useful programs to useless military/prison ones, how much of a cut in social spending, and drag on the economy, does that represent?
    It’s actually worse than cutting spending–if they cut spending, at least they would either pay down debt or reduce taxes. But in fact, Conservatives tend to take large amounts of money and effectively throw them down a hole. Indeed, given the distortions that then follow to the country’s political economy from strengthening the military/prison industrial complex, it would not only be better if they just cut spending, it might actually be better if they took the money and burned it in a huge bonfire.

  • Good points. It is certainly more complicated than aggregate federal expenditures.

  • Actually, it gives me a notion of how to attack the Conservatives at the “logic of household finance” level. Imagine a sketch along the lines of
    Harper: Honey, I’m home! You’ll never guess what I did with the rent money!
    Wife/Canada: I guess that means you didn’t pay the rent.
    Harper: No, I bought a brand new motorcycle!
    Wife/Canada: You did what?!
    Harper: You’ll love it! It’s the latest model. Has cool new technology.
    Wife/Canada: So are you going to use it to drive to work instead of the car?
    Harper: Well, no. Uh, not yet anyway. See, what I bought was based on seeing a concept model at the motorcycle show. They’re not actually in production yet.
    Wife/Canada: But what about the rent?!
    Harper: Well, you’ve got some savings, right? You can dip into them.
    Wife/Canada: Those are for the kids to go to college!
    Harper: I don’t like your tone. I’m an economist, you know. I know what’s important to spend money on.
    Wife/Canada: I give up. (Sigh) Did you bring home the groceries?
    Harper: Well, about that . . .
    Wife/Canada: I gave you the grocery money and the list! What did you do now?
    Harper: Well, I’ve been thinking about the danger of burglars and there was this beautiful rifle at the gun shop.
    Wife/Canada: This is a safe neighbourhood! We’ve never been burgled!
    Harper: Better safe than sorry. It has an infrared scope!
    Wife/Canada: We already own three guns. And the kids are living on instant noodles because you keep spending what we need to eat!
    Harper: It’s good to be sure. Actually, ever since I saw that movie I’ve been thinking what we really need is a danger room.
    Wife/Canada: You’re always doing this! You say you’re an economist, but we’re always going hungry because you can’t resist shiny things! I’ve had enough. I’m leaving, and I’m taking the kids.
    Harper: Oh, come on. You’ve got nowhere to go.
    Wife/Canada: Jack will take me in.
    Harper: That deadbeat hippie!
    Wife/Canada: That deadbeat hippie has a nice house and my allergies are always better when I visit. And there’s always food on his table. And he’s got to be a better lover than you!!!!
    (Canada leaves)

  • I concur with Purple Library Guy at 11:24.

    It is most likely the Conservatives will follow the example of the Republicans in the US. High spending on the military, prisons, etc, to maintain aggregate demand, jobs, and profits, but cut back on social programs to allow for more privatisation and increased insecurity. It works quite well in the US.

    It is our job to show that social programs and spending on environmentally friendly infrastructure can still go ahead and need not be constrained by belief in the Government Budget Constraint, at least until an inflationary limit is attained.

  • rentier fungicide

    The question is not how much they will cut, but what they will cut. Short-term hardships, even exacerbated by hysteresis in unemployment, as terrible as they are to contemplate, can eventually be overcome, but fundamental changes to the structure of Canadian fiscal federalism, associated to reduction in national social programming and the end-of universality in health and social programming, which is what the NDP’s appeal to asymmetric federalism abets, will be near impossible to overcome even in the medium term. And then good luck dealing with climate change. Thanks Jack!

  • Addendum to my previous comment at 10:00am:

    Since most social programs are paid for directly by the provinces, a clever Conservative tactic would be to have the economy run at a tepid pace by reducing the deficit AND squeezing down the federal share of social program funding. The slow economy would put financial pressure on the provinces by increasing their expenditures and reducing their revenues, and the lower social spending would demonstrate ”fiscal responsibility” by the feds and ”fiscal irresponsibility” by the provinces.

    So the federal government that could easily spend more would not, and the provinces that are indeed limited in their ability to spend would be squeezed and seek to reduce program spending and pay to workers. A victory for household finance reasoning!

  • My feeling on this is FLUX.

    Now that could be because I am watching the Lady Gaga Monster Ball world tour, her music is not the greatest, but there is something to her that catches on within the culture more than the sex. Something else.

    Which brings us back to how much Harper will cut? It is highly correlated to what I will call the Lady Gaga union activist effect.

    That is – how much can the labour movement, and broader progressive movement catch fire and like Lady Gaga, jolt the culture over pretty much nothing but everybody wanting to get on the train to curtail the HArper cuts that are indeed coming. The first cuts are coming and most likely focused on the fed Public service- go figure Ottawa area put in 3 tories!??? What is up with this city?

    Anyway after watching a bit of the CLC conference it is apparent that unionism, and the broader social movement needs to do a whole lot more over the next 4 years to have the citizenry ignite the torches and get to the gates. The more that happens, the less the medium to longer term cuts and privatization of public services will we experience. You can be assured of this one- all provinces will have to offer private sector options for healthcare or lose partial transfers. Put that one on the books right now!.

    The flux is yet to be determined and therefore whether Harper goes further than Chretien and Martin is still an open question.

    So in a nutshell. If Lady Gaga fails to show up and show the labour movement and broader social movement how to get a new message across to the wider public, then Harper will swing deeper. If she does show up then maybe Harper will start singing her songs instead of stealing Lennon.

    Imagine the nerve of that prick singing Imagine. Wow he sure is lost in the great land of Steve.

  • The culture thing is complicated, what I mean is something like the following.

    Many people avoid, are misinformed, or otherwise misguided about the truth and their political interests. As Lady gaga says, “I hate the truth so much I prefer a large dose of bullshit any day’ classic denial, avoidance, euphoric addiction, whatever, but there is something lurking within modern democracy that well for lack of a better example, allows Steven Harper to get elected in 3 ridings in Ottawa, where he campaigned on cuts to the public service. Doh!

    Something profound, that allows hot buttons to be figured out and made issues to get those too busy with the untruth to vote, I.e. Gun registry. or allow a party to spend millions turning a Harvard university professor into an egotistically glory seeking arrogant immigrant, evil doing warlock?

    The question I raise, similar to what was raised at the clc conference, how does the left get into this game of culture war. It needs to get a whole lot better at it and fast. How do we translate economic disaster into a wider truth that people will not just avoid or buy into some other half truth.

    So how does the left do this without the kind of massive resources

  • Hopefully Harper will soon start cutting non essential services that are currently over bloated like the CBC etc.
    If cuts are done soon at least there will be an offset for things like the health care services. There are too many bogus polls out there that ask the public …”do you want to keep ….?” but they don’t tell the public what it will cost to actually keep these services. If you want to ask the public if they want to keep CBC or whatever…at least tell them what that money would do to help healthcare or defense etc. if redirected!

  • HARPER wants cut? Stop using our taxpayers dollars for Government Defined pension plans.This is billions of dollars annually.

  • John Baird recently stated after being reelected:
    “It’s incredibly important, not just for our local economy, but for our government to have a strong and effective public service,”
    Companies like the CBC are no longer strong or effective. They may still be important Canadian symbols but need to be re sized to match their current relevance. Rather than waiting for reduction through attrition they need to buy out the extra staff. It would save more in the long run to do this immediately because Government workers don’t tend to leave cushy jobs early!

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