Skip to content

The Monitor Progressive news, views and ideas

The imaginary deficit

March 18, 2015

1-minute read

The last elections have ushered in a fresh input of creativity and imagination in Quebec's political life. Not content with exaggerating the budget deficit by cooking the books, Couillard's government invented a so-called "structural deficit" between the state's expenditures and revenues.

The logic is quite simple: spending growth is greater than revenue growth. The problem is that that's just not true. For instance, between 2008 and 2012, the government of Quebec's revenues grew 15.6% whereas its basic running costs (healthcare, education, social services, interests, etc.) grew 15.1%.

So what's going on in Quebec City? Faced with a government living in a world of imaginary deficits ($3.2G this past winter, $5.8G in June and a $7.3G peak in December), it's worth going over a few essential facts.

In recent history (let's say the last 15 years), the same trends come up over and over again. After having eliminated the deficit in the late 1990s, what did Lucien Bouchard's PQ government do? Did it choose to reinvest in public services? Of course not!

The fiscal effort which enabled Quebec to return to budget surpluses around the year 2000 was not spent where one would expect. Indeed, it was not an out-of-control state apparatus that took hold of the surpluses, but populist tax-cutting policies.

As early as 2000, then-Finance minister Bernard Landry announced $4.5 billion in tax cuts. Shortly afterwards, Jean Charest was in his turn elected based on his promise to reduce Quebeckers' "tax burden" by $1 billion each year over the course of his term. In 2007, the then-Premier doubled down by using a federal transfer to fund a $950 million tax cut just in time for the upcoming elections.

Every single time, those benefitting from the tax cuts are neither the poor nor the middle classes, but the wealthiest. For the majority of the population, a tax cut only translates into a few dozen dollars more in one's pockets. The price to pay is in fact much higher than the benefit: decreasing service quality, longer waiting lists, fee hikes, etc.

It would be much more relevant for Leitão, the current Finance minister, to stop coming up with deficits where there are none. If anyone is to blame for the current state of our public finances, it's the successive governments that have been in power since the year 2000. The main culprit regarding the current deficit, along with the 2008 financial capitalism debacle, is none other than our elected officials' obsession with confusing tax cuts and societal projects.

In 1852, Marx described thus the pathetic spectacle of French political life: "all great world-historic facts and personages appear, so to speak, twice (…) the first time as tragedy, the second time as farce." Will we have the opportunity to innovate the third time around and leave behind the comical effect of the farce?

This article was written by Philippe Hurteau, a researcher with IRIS—a Montreal-based progressive think tank.

Topics addressed in this article

Related Articles

Canada’s fight against inflation: Bank of Canada could induce a recession

History tells us that the Bank of Canada has a 0% success rate in fighting inflation by quickly raising interest rates. If a pilot told me that they’d only ever attempted a particular landing three times in the past 60 years with a 0% success rate, that’s not a plane I’d want to be on. Unfortunately, that looks likes the plane all Canadians are on now.

Non-viable businesses need an"off-ramp"

Throughout the pandemic, many small- and medium-sized businesses have weathered the storm, thanks to federal government help. In his deputation to Canada's federal Industry Committee, David Macdonald says it's time to give those businesses an "off-ramp".

Truth bomb: Corporate sector winning the economic recovery lottery; workers falling behind

This isn’t a workers’ wage-led recovery; in fact, inflation is eating into workers’ wages, diminishing their ability to recover from the pandemic recession. Corporate profits are capturing more economic growth than in any previous recession recovery period over the past 50 years.