kingston & the islands' NDP Blog

Friday, January 13, 2006

NDP: Balanced budgets, and honesty about spending

On Wednesday, the 10 o'clock news on CBC carried a story about the NDP budget. The CBC is usually straight-up, so I was surprised to hear the newscaster do his best to make it sound like the NDP budget was imbalanced. The segment was overflowing with rhetoric like "How can the NDP afford $71B in spending?" Only at the end of the short segment did the newscaster reveal the NDP's answer: the NDP budget, unlike previous years' Liberal budgets, doesn't include an unallocated chunk of money. The Liberals have effectively been ignoring their own revenue projections, bringing in budgets that deliberately don't account for all the revenue the government is projected to earn. The unallocated money is designated as "surplus," and it's the root of the outcry you may remember before the election was called. Since the Liberals didn't include a big chunk of revenue in their past budgets, that chunk was free for them to spend on any area they like -- without revealing their intentions for that money at budget time, when they release their budget for the year. In the past, they've applied it to the debt, which is fine. But just before the election was called, the Liberals were mulling splitting 2005's unallocated chunk of money between debt, tax credit and maybe some social program. Who knew how they would've used it? They didn't declare their intentions for that chunk of money at budget time, so they were free to use it for whatever was politically expedient, whenever they needed a political boost. This isn't a good trend. Imagine that the government sets aside more and more money like this, every year. That's a greater and greater proportion of our country's budget which is not declared at budget time, which is not part of the main budget that is voted on in Parliament, which is open to being used like a political poker chip whenever the government needs a shot in the arm. The Liberals' reasoning has been that they do this so that they won't have to go into deficit if revenues aren't as high as forecasted. Sounds good, until you realize that there's another option: if revenues aren't as high as forecasted, cut spending. That's the NDP plan. The NDP budget spells out exactly where all of the federal budget is going to go. And the NDP guarantees a balanced budget for five straight years, with a promise to delay new programs in the event that finances don't reach projections. That's the honest way to do a budget. That's the NDP way.


Blogger Optimus said...

Well said.

I had a conversation with a friend recently who was arguing that unbudgeted surplusses were a positive thing because they would buffer against uncertainty.

She (and I think a lot of other people) aren't aware that a contingency reserve (somewhere in the $3bn range) is already a part of federal budgeting, including a clear precident about where unused contigency fund cash goes to (paying off the national debt). The 'fiscal dyslexia' of Goodale et al. just leaves a big slush fund of cash for application towards whichever policy areas happen to be politically expedient for the Libs. That's no way to run a country.

11:01 a.m.

Blogger Natalka said...

Hi, Optimus,

Thanks for the positive feedback, and the informative comment. I wasn't aware of this either, so I looked into it more deeply. I downloaded the NDP costing and found out that this is the situation: The NDP do not explicitly set aside $3bn/year in their platform. However, they do explicitly plan for a surplus, which comes out to $2.3bn in the first year, up to $5bn in subseqent years. Then, they plan explicitly for disposition of the surplus: it is split (with specific dollar amounts) between repayments to the EI fund, infrastructure/housing, and payments on the debt.

From the costing, it seems the main reason the NDP platform has more spending than the Liberal platform and is still in balance, is because the NDP are using more accurate estimates of revenue and spending -- the Liberals use estimates that are consistently low for revenue and high for spending -- and because the NDP promise to tighten up tax administration, giving a 1% increase in revenue.

Basically, the Liberals' strategy has been to underestimate revenues, overestimate costs, and set aside an unbudgeted "contingency fund". This is pretty much a sure-fire way to get a large "unforeseen" surplus 9 years out of 10. The NDP takes the opposite tack: use accurate estimates, come out to an accurate estimate of what the surplus will be, and spell out explicitly how that surplus will be used.

2:30 p.m.


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