March 13, 2013 – In today’s Globe and Mail, economist Don Drummond calls upon the government to seize the opportunity to turn budget-making into a more coherent planning process. A longer version of this commentary can be found in the latest issue of the Macdonald-Laurier Institute’s Inside Policy magazine.
By Don Drummond, The Globe and Mail, March 13, 2013
Federal budget speculation season is in full swing. While budgets are typically viewed as vehicles for announcing new initiatives and setting out economic and fiscal prospects, the 2013 budget presents an opportunity for the government to use the vehicle for higher purposes – such as bolstering the transparency and accountability of fiscal planning – and to demonstrate there’s a comprehensive and coherent plan for the future of Canada’s economy and the well-being of its residents.
The Conservative government of Stephen Harper has been active on many fronts since 2006 and, in many respects, there’s a compelling overall story to be told. Many Canadians are rightfully concerned about economic conditions and prospects. While far from the country hit worst, Canada did suffer a serious recession in 2009, and the pace of recovery has been lacklustre. The traditional economic model of hitching Canada’s wagon to the U.S. locomotive is straining as the United States drowns in a sea of public and private debt of its own making.
The 2013 budget should acknowledge the challenges in areas of concern such as trade diversity, income distribution, wage pressures, productivity, unemployment, immigration and pensions, and set out a narrative on how the government is responding. It maintained fiscal sanity in a world of crazies. After a long period of relative inactivity, it’s engaged in several free-trade negotiations. It has revolutionized the way capital is taxed. It’s beginning to make important changes to immigration selection and settlement. It has taken some preliminary steps to address our innovation gap. And it’s introducing pooled registered pension plans as a supplementary tool to help Canadians plan for their retirement.
These and many other measures have been described individually but never tied together as elements of a broad plan. Speeches from the Throne or election platforms are typical vehicles for setting out plans. But, barring the unexpected, there won’t be one of either for several years. So why not use the budget for such a purpose? Budgets have grown to a standard of hundreds of pages long, but there will be little “news” content for the 2013 edition. So why not fill the blank pages with a compelling economic and fiscal storyline?
A plan set out in the 2013 budget could also allow the government to address the residual disappointment of many with aspects of fiscal policy in 2012. Many were disturbed over the dominating focus on numbers in last year’s budget. The government was clear on how much money was to be taken out of various programs but much less clear on how that would be done and the implications for operations and the ultimate objectives of the programs. The focus for the CBC, for example, was on the reduction of its budget. Little was said on what, if any, role the government envisioned for the public broadcaster and how that might be met with lower funding.
Ideally, policy should start with the objectives. Then funding could be adjusted to respect fiscal circumstances. When that’s the case, the government should explain the implications. There’s a chance in the 2013 budget to address such shortcomings from last year. This would be far preferable to watching this play out with the Parliamentary Budget Office and the courts.
As part of a plan, the 2013 budget could have a special section addressing retirement issues. The government has recently said with some confidence that the introduction of registered pension retirement pools will address any shortcomings of the existing situation. Many experts have raised legitimate challenges to this position.
A tally of recent tax changes would also be in order. It still amazes me how many Canadians, including CEOs, are not aware of how much more competitive our tax system has become. Without that awareness, Canadians will never reap the benefits from the revenues foregone to get to this state.
At the broadest, macro level, the budget could set out the strategy for driving the Canadian economy through this global shift away from developed to emerging economies. If not played properly, it could leave the Canadian economy further and further behind because we don’t do emerging very well. But, here, too, action is under way, including trade deals and trade missions.
The 2013 budget need not be a staid recounting of numbers and measures. It could tell Canadians a story that would squarely address legitimate questions of where Canada is going as the global tides shift.
Don Drummond is the Matthews Fellow in Global Public Policy at Queen’s University and a former associate deputy minister in the Department of Finance. A longer version of this commentary can be found in the latest issue of the Macdonald-Laurier Institute’s Inside Policy magazine.