With the popularity of the B.C. Liberals dropping like a stone, I wonder if this government will ever be re-elected. That question would have been unthinkable 11 months ago with their historical sweep to power.
One problem is that the B.C. Liberals find themselves caught between ideology and an hard place.
The ideology says that if you put money in the hands of the rich, wealth will trickle down to the less deserving masses. The theory is that if the rich get richer, so will the poor, and governments revenues will rise.
The hard place is called the Budget Transparency and Accountability Act. The Act was originally introduced by former Premier Ujjal Dosanjh as the Balanced Budget Act but it was repealed by the B.C. Liberals. Dosanjh proposed a 20 per cent cut in pay for 12 months for the premier and all cabinet ministers if the budget was not balanced by 2004.
The B.C. Liberals said that they would go further with their version of the Act. “We promised to introduce real balanced-budget legislation in our first 90 days in office, and we’ve delivered,” said Minister of Finance Gary Collins. The B.C. Liberals must now deliver on their bravado.
To his humiliation, Campbell is now forced to use NDP tactics to avoid being punished by an Act originating with the NDP. The predicted economic stimulus from tax cuts to the rich didn’t work and now he must increase taxes.
The B.C. Liberals are struggling to blame the current mess they find themselves in on the NDP. The slogan “ten years of NDP mismanagement” swept them to power but it’s wearing thin.
It turns out that the last decade was not mismanaged. The Auditor General shows that the Liberals came into power with a $1.5 billion surplus. British Columbians have the highest average income in Canada according to the Canadian Centre for Policy Alternatives. Government expenditures dropped 4 per cent in the last decade compared to Gross Domestic Product.
Campbell has come up with a new slogan, “structural deficit,” as another way of saying that the current deficit is not their fault. But unlike “ten years of NDP mismanagement,” which can mean just about anything, “structural deficit” has a specific meaning.
A structural deficit exists when government expenditures and revenues are such that, no matter where we are in the business cycle, the budget cannot be balanced.
There is no structural deficit. B.C. had a balanced its budget in 1999/2000 and ran a $1.5 billion surplus in 2000/01. The reasons for the current deficit are fairly straightforward and not all the B.C. Liberals’ fault.
1) Premier Campbell spent the surplus on tax cuts that benefited mainly the rich. Those earning more than $100,000 received a tax break of $2,857 (a 3 per cent cut). Those earning less than $20,000 received a tax break of $236 (a 1.2 per cent cut).
2) The Softwood Lumber Dispute with the U.S. has reduced revenues to the province. This is not the fault of the B.C. Liberals. If anyone is to blame, it is the federal Liberals who naively think that Americans will abide by the North American Free Trade Agreement when it doesn’t suit them.
3) The downturn in the American economy has reduced the sale of our hydroelectricity to (mostly) California. Once things pick up, that market for our hydro will exist again. And even if the U.S. builds electrical generators, those generators will be fuelled by Canadian natural gas from Alberta and B.C.
When we emerge from the downturn, revenues will increase and the cyclical deficit will disappear. When it does, it will not be because of any B.C. Liberal voodoo economics. Those economics didn’t work for ex-president Reagan and they won’t work here.
The economic picture for B.C. will improve from the sale of resources belonging to all British Columbians: wood, natural gas, electricity. At least, the last time I looked they hadn’t been sold to private corporations at fire-sale prices.
Things aren’t all gloomy for the neophyte B.C. Liberals. The timing of economic recovery and the next provincial election could be fortuitous for them. They can then claim that their bad medicine worked and they deserve another try. An economic recovery can make any government look good.