Throw money around and hope crisis abates

Budget de MJF - mars 2009

Last year's Quebec budget, Finance Minister Monique Jérôme-Forget claimed when she introduced it, was "marked by prudence and discipline." What a difference a year makes.
Today, budget prudence and discipline are as deeply unfashionable as sub-prime mortgages. The Quebec budget unveiled yesterday thrusts us into the abyss of deficit spending, $3.9 billion in the fiscal year about to begin, $3.7 billion the year after.
Added to the $34 billion federal deficit announced in January, this means Quebecers will be living far beyond our means in the new fiscal year, and subsequent ones. We are all Keynesians now, whether we like it or not.
Many of the budget's measures which look good in headlines are painfully short on detail.
We can't help suspecting that our leaders, federal and provincial, are almost literally throwing money at the crisis, without much in the way of rigorous planning. The auditor-general, we fear, will have a busy few years untangling all of this in hindsight.
Take for example yesterday's $500 million emergency fund to help "medium and large private and public enterprises." But how? Loans? Equity? The details are to follow.
There's a chunk of money for tourism and forestry; details later. There's more money, as always, for the regions; this time including deferral of scheduled payback of previous loans. Good years and bad, money pours into the regions, but their problems never diminish.
There's $125 million for high-tech "seed funds." Details later. There'll be a big new fund for financing venture capital funds, too. Details not yet available.
There are, in fairness, some items with more specifics, notably an incentive program for purchase of stock in Quebec firms.
But Jérôme-Forget is also distressingly vague on how we will sober up again, once the spree is over. Quebec will return to balanced budgets, she claims, by 2013-14. Sure we will.
Starting in 2010-11, it says here, growth in program spending will be held to 3.2 per cent, sharply down from the 4.6 per cent average increase these last six years. Yes, 2012 will be an election year, but don't worry, the government will be disciplined then. Uh-huh.
One of the measures to rebuild revenue, the indexing of fees and user charges to inflation, starting in 2011, is eminently sensible, although $7-a-day daycare, that vast lottery, has been left out. But the other specific measure, raising the sales tax by one percentage point to 8.5 per cent, may well be a problem, not a solution. Economists love the sales tax in theory, but we'll see if they like it two years from now, when the increase kicks in, if there's a recovery in progress and inflation is climbing.
The other revenue measures are mere pipe dreams. We're told that hundreds of millions will come from tighter tax-law enforcement. Oh yes? If Jérôme-Forget had a dollar for every time that promise has been made, she could cover the deficit herself.
A further $8 billion in "other measures" over several years are to be identified later. Translation: darned if we know.
The conclusion is hard to avoid: The magnitude of the financial crisis has out-run the ability of governments to cope. No longer fighting deficits, they are now fighting a more fearsome but less visible foe, and don't quite know how to do it. The result is half-baked plans to shovel money out the door, with the details to follow. We're having trouble seeing how this can turn out well for taxpayers.

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