With the unveiling of Prime Minister Stephen Harper’s latest budget, conservative columnist David Frum has declared Canada to be the best governed country in the world.
Talk about an overstatement.
Frum reasons that Harper’s new budget, which looks to cut close to 20,000 public sector jobs, is a good attempt at a government winding down its spending after it stimulated the economy following the financial crisis.Â From the National Post (my emphasis added):
Canada has been seeking to move at a pace thatâ€™s just right â€” and with the 2012 budget, Canada continues to succeed. Barring an unexpected slump into renewed recession, Thursdayâ€™s budget moves Canada to budget balance over the next three years. There will be no tax increases. Federal spending growth will be restrained, but outlays will still rise: from $272.9 billion in the year just ended to a projected $296.6 billion in 2015-2016.
This is Frum’s idea of success.Â On one hand he claims that “by 2015-2016, Canada will have reduced both spending and debt to pre-recession levels” yet also states that outlays still rise in 2015 and 2016 compared to today.
Talk about misleading statistics.
What Frum seems to conveniently forget is that, first, Harper’s budget is just a recommendation.Â It still needs to pass parliament.Â Using Frum’s logic, the United States could claim to be the best governed country in the world because President Obama put together a budget and submitted it to Congress.Â It was shot down by an overwhelming majority in the House of Representatives but, hey, we are talking about proposed budgets only aren’t we?Â Though Harper’s party holds a majority in Parliament, nothing is written in stone.
And that is the key- nothing is written in stone.Â Government budget proposals are notoriously overly optimistic.Â As Frum writes:
(Finance Minister) Jim Flahertyâ€™s plan allows spending to rise by 11.65% over 5 years. Over those same five years, revenues are expected to surge by 26%.
The old bait and switch.Â Bureaucrats promise that increased spending will be paid for by increased tax revenue.Â The truth is that no econometrician, no matter how educated and highly recommended, can develop a model based on lifeless assumptions to accurately predict how much the government will pilfer from the public in any given year.Â Markets are dynamic and full of life because they are the sum of actions by beings who are dynamic and full of life.Â Government economists who fiddle around with various formulas and models will never be able to mathematically calculate where unpredictable human action will lead.Â In seeking to retain their jobs as barnacles on the public purse, these economists are often beholden to telling their bosses what will make them happy.Â Murray Rothbard describes this trend perfectly:
As we all should know by this time, economists and politicians are expert at submitting glittering projected future budgets that have only the foggiest relation to the actual reality of the future year.
Such projections usually involved the following pleas
- Let us raise your taxes by X amount and we will have enough revenue to pay for (insert pork barrel boondoggle)
- If we cut spending by X amount, it will bring in X amount of tax revenue
- Taxing or cutting X amount will result in X amount of economic growth
None of these projections are based on anything but models assuming a static economy.Â Â Yet these types of announcements are often lauded in the headlines of major news publications as definitive truths.Â Despite decades of wrongful projections, government budget proposals are still taken seriously.
The success of Harper’s budget will depend on its passage and only looking back at its effects after the fact.Â Given the propensity for optimism in growth and tax revenue and low balling of government spending, Harper’s budget will likely fail to make a significant dent in the country’s debt.
Not to mention the fact of the country’s still looming housing bubble.Â Should the bubble burst anytime between now and 2015-2016, tax revenues will plummet and the Canadian Mortgage and Housing Corporation, which guarantees a large portion of the mortgage market, will likely need a bailout to stay solvent.Â This one two punch will dash any dreams of Harper bringing government spending under control.
Politicians make a career out of short term vote buying and long term debt enslavement.Â Their focus is not on the future but on present satisfaction by looting taxpayers in the now.Â Their mentality is always “we must do something now.”Â This is why the pain of tax increases are pushed to the future while the doling out of pork is always done immediately.
If Frum is to believed, the one must believe in the sanctity of politicians to keep their promises.Â This, of course, is pure fantasy.Â The political class lies, cheats, and steals.Â It puts forth grand plans to keep the public placid and believing.Â Only former insiders (Frum was George W. Bush’s economic speech writer) like Frum keep the narrative of trustworthy lawmakers going for the sake of profiting off the non-existent concept of partisanship.