- Simon Enoch explains why the Sask Party's plans to inflict an austerian beating until economic morale improves is doomed to failure:
It is now abundantly clear that the Saskatchewan government’s “transformational change” agenda is in reality a not-so-subtle euphemism for provincewide austerity in response to the current economic downturn. Premier Wall’s recent comments suggesting “very deep cuts” to education, health care, municipal revenue sharing and civil service salaries make it clear that the government’s plan for the economy is to “cut its way to growth.”- Meanwhile, Jeff Labine reports on some of the effect of the Sask Party's cuts - including limiting the ability of school divisions to work on ensuring higher graduation rates.
The problem with this plan is that it is exactly the worst possible course of action to take while the province is still mired in economic stagnation.
As a latecomer to economic downturn, Saskatchewan has the advantage of being able to assess the efficacy of policy responses by those who have gone before us, as national and state-level governments across North America and Europe have sought to effectively respond to the economic downturn inaugurated by the 2008 financial crisis. What this wealth of examples clearly demonstrates is that austerity measures undertaken during an economic downturn have the perverse effect of prolonging economic stagnation, increasing unemployment, exacerbating deficits and hindering economic recovery.
In addition to the economic argument against austerity, there is also a moral one that governments must consider. Austerity assumes that everyone shares in the pain of cuts equally. This is simply not true. Given that austerity measures primarily target public spending for programs and services, the effect will be to punish those who rely on these programs and services far more than those who do not — in particular the poorest and most vulnerable in the province. It seems particularly cruel to put the burden of cuts on those at the bottom of the income distribution who were least likely to have shared in the province’s prosperity during the boom period, and may have even been negatively impacted by the rising living costs associated with the boom years.
The sad truth is that the government relied far too much on inflated resource prices as a major source of revenue during the boom period. These resource revenues were effectively used to subsidize tax cuts that with the end of the commodity boom now appear unwise and unsustainable. The decline of revenues now has the government contemplating certain tax increases. As the government considers new sources of revenue, we would ask the government to consider the moral argument of austerity — ensuring that those least able to absorb tax increases are not asked to bear the majority of the burden for the rest of us.
The Saskatchewan government is in its current fiscal position because it made certain choices during the economic boom that have now come back to haunt us. The government needs to seriously consider the available evidence on austerity and recognize that the path it has set upon — while perhaps politically the easiest — is not necessarily the wisest.
- But Geoff Leo's latest revelations about the Global Transportation Hub scandal signal that good advice to the Wall government from anywhere - including from officials pointing out the foolishness of lining donors' pockets at the public's expense - tends to be ignored and buried.
- Marc Lee highlights B.C.'s giveaway of natural gas resources. And Brad Plumer points out that solar energy is new far outperforming coal in generating jobs, while being well on its way to doing the same in terms of power sources.
- Finally, Thomas Walkom notes that Bill Morneau seems to be following the all-too-familiar pattern of confusing the concept of free money for rich people (and an attitude of "let them eat cake" for everybody else) with a viable economic plan. And Michal Rozworski goes into more detail about the bad ideas on tap from Morneau's hand-picked advisory council.