Charest is right to focus on paying down the debt

Fiscal responsibility pays off in the long run

2006 textes seuls

The Gazette (Montreal) March 21, 2006 Tuesday
As the father of a 13-year-old, I'm big on encouraging responsibility. So it was heartening that Premier Jean Charest emphasized responsibility in last week's inaugural speech.
Charest wants to focus on five things. Focus is smart and five is a good choice of number. The party that favoured five things won January's federal election. The party with 36 priorities did not. The only trouble is that Charest's five are pretty vague: health, education, economic development, sustainable development and responsible management of the public finances. And he's got a bunch of initiatives under each, so he still has a touch of Martin-itis.
But the headline-writers tended to home in on fiscal responsibility and, in particular, on Charest's plan to reduce the province's debt, the details of which we will learn in Thursday's budget.
A focus on the debt seemed to strike most commentators as deadly dull and sure confirmation that the Charest government will never catch the public imagination and so will be driven from office at the next election.
I don't know. We parents of 13-year-olds, or anyone who has ever been the parent of a 13-year-old, or for that matter anyone who remembers what it was to be a 13-year-old might like a dull-as-dishwater focus on responsibility, even fiscal responsibility. The province's debt is currently $110 billion, fully 44 per cent of provincial product, the highest in the land.
True, Charest offers what seems an irresponsible rationale for trying to get the debt down. It costs $7.5 billion a year in interest payments, he says, and that's $7.5 billion that isn't available for other spending. Is he really suggesting we control the debt so we can, er, spend more? My 13-year-old does enjoy running up his bank balance with the view of running it down again as quickly as possible. But that's not everyone's idea of responsibility.
To be fair, Charest is being a little more disciplined than that. With the baby boomers approaching retirement, he foresees lots of spending for health and home care. Should we put the burden of all that spending on tomorrow's taxpayers? Or should boomers and others take some responsibility, do a little saving and get the public sector's books into better shape before the fiscal avalanche comes?
In fact, Charest doesn't favour obsessive responsibility. He's not doctrinally opposed to government debt. He just wants to be sure any debt that's incurred is for real investment. Quebec won't borrow any more to pay for the groceries, he says. Good! Of course, the danger is that he or his helpers will redefine parts of the grocery list to be investments - muscle-enhancers, say - instead of trimming borrowing to make sure the grocery bill really is paid out of current income.
A usual criticism of politicians who think that the state of the public finances matters is that focusing on the fiscal deficit means giving up on the social deficit. That needn't be so. Encouraging responsibility anywhere in society might have ripple effects everywhere.
And seeing a government establish and hit fiscal targets is a confidence-builder all around. In the early 1990s, the Mulroney government's deficit-fighting efforts turned into a bit of a joke - it kept fighting but the deficit kept rising - and that wasn't good for anyone, least of all fans of government. It's not easy persuading people they should hand over more and more of their lives to an institution they regard as a laughingstock.
Moreover, federal fiscal responsibility in the 1990s - the lasting legacy of Jean Chretien and Paul Martin - proved to be consistent with sustained economic growth. And a recent Canadian Tax Journal study found our governments were actually doing more income redistribution in 2000, after the deficit had been beaten, than they had in 1994, when it was maxed out.
Yes, there's clearly more to life than dollars. But dollars are stubborn things. Say what you will about the bottom line. It is a bottom line.
William Watson teaches economics at McGill University.

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