Winnipeg Free Press Newspaper Archives Sep 2 2015, Page 7

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Winnipeg Free Press (Newspaper) - September 2, 2015, Winnipeg, Manitoba C M Y K PAGE A7 T HE rhetoric and gnashing of teeth about deficits and balanced budgets lately may just be that. Basically an accounting/ economic term, political use of “ deficit” has confused its meaning. Somehow, a deficit has become a bad thing. A balanced budget, apparently, is always good. These terms simply reflect a financial state at one point in time. Whether they are bad or good depends on economic circumstances and the nature of programs and projects receiving the borrowed money. There is a general sense people and governments should “ live within their means.” Should families forego buying a house until they can own it without a mortgage? Should governments follow the same principle? The answer in both cases is no. In an economic context, “ It depends on how the money is spent.” There is a clear distinction between individual debt and government debt. Individuals have a very clear life expectancy, so they need to manage debt according to their income and stage of life. Governments, however, have no such limitation, so they can feel comfortable borrowing as appropriate over the long term. Governments borrow money almost daily for specific purposes. Sometimes it’s just to even out revenue blips. ( For example, the $ 5- billion surplus Canada reported for the second quarter of this year is normal expectation offset by net losses later). Most Canadians pay a balance on their income tax in April, while expenses are low early in that quarter. Government borrowing often funds large infrastructure projects and is occasionally necessary to stimulate the economy during a recession, such as 2008 to 2010. All are legitimate economic reasons to “ go into deficit.” Paying down the deficit in good times, as was the case around the turn of the century, is essential. Counterbalancing revenue variations over the short run makes obvious sense. Building needed infrastructure makes sense, too: it’s an investment for future returns from the economic foundation it provides. Deficit spending in the late 1930s and during the Second World War led to a dynamic economy and established a solid base for the social programs Canada values today. Consequently, deficit, surplus and balanced budgets depend on the circumstances and expected returns. Programs that address causes of unemployment and underemployment deserve consideration at all times, but particularly during recessions. Beyond physical infrastructure, human capacities need consideration. Improved education and work skills also underlie a vibrant economy. Education options for veterans returning from the Second World War did much more than improve their personal situation — they were a key element in raising the capacity of the Canadian workforce. Veterans today deserve similar consideration, as do underemployed groups including indigenous people, those whose skills have been leapfrogged by technology, and many new immigrants to Canada. An educated labour force with skills appropriate to economic needs is critical. Spending on physical infrastructure can be effective in economic terms under two conditions. The project must assure a foundation for solid economic growth and be of a design that is functional without being excessively costly. For example, the Bipole III line that circumnavigates western Manitoba may not even be needed, and could have saved in excess of $ 1 billion for construction and another $ 1 billion to fairly compensate farmers impacted if a shorter route been chosen. Moreover, competition from solar and other energy projects could make future Nelson River generating stations uneconomic. Second, infrastructure should be designed according to projected need: there is no doubt Brandon needs a new airport terminal, but is $ 8 million really necessary given the limited current use? A design facilitating future expansion as needed makes more sense. Infrastructure replacement needs adequate thought regarding whether a simple replacement is needed, if it is needed at all, or if it should be of a different capacity or location. For example, given the increased rate of melting discontinuous permafrost in northern Manitoba, does the Churchill rail line really have a long- term future? Climate change infrastructure is needed to accommodate excess water and occasional droughts. These investments will pay generously. Examples include on- farm adaptations to hold some excess water back from downstream flooding ( while concurrently replenishing aquifers and absorbing nutrients that would otherwise lead to pollution and algae growth in, for example, Lake Winnipeg). Larger impoundments upstream of the Portage Diversion would protect Lake Manitoba and downstream communities and lands. In this case, a system to pump water from Lake Winnipegosis to Cedar Lake clearly warrants consideration over channel improvements downstream of Fairford. The latter is vastly more expensive and would negatively impact fish habitat and Lake Winnipeg turbidity. Both federal and provincial governments would benefit from working together on such projects. Borrowing for infrastructure of the right kind in the right place is a public investment that provides a return over time by facilitating economic activity, which in turn generates dividends ( government revenue, often indirect) over time. It does not place a burden on future generations. Rather, it rewards them with economic growth. Jim Collinson consults on the complexities among energy, environment and economy, and was assistant deputy minister for the Department of Regional Economic Expansion ( Western and Northern Canada) and Parks Canada. IDEAS œ ISSUES œ INSIGHTS THINK- TANK A 7 Winnipeg Free Press Wednesday, September 2, 2015 A SMALL, temporary deficit is just what Canada needs, according to Liberal Leader Justin Trudeau. That promise is a shock in this seemingly endless federal election, but Manitobans have heard it before. That experience sheds an important light on Trudeau’s plan. The Canadian economy shrank by 0.2 per cent and 0.1 per cent in the first two quarters of the year, which qualifies as a recession. To turn it around, the Liberals promise to run deficits of up to $ 10 billion each year for up to three years. They’ll use that stimulus money to build infrastructure. That will create investment and jobs so we can pay off the new debt in the future. It sounds good. Too bad it doesn’t work. And Manitoba is proof. “ Most jurisdictions in Canada will fund stimulus through deficit,” NDP Premier Greg Selinger said in 2009, when he was finance minister. He went on to say he would only be “ implementing initiatives that are sustainable within a balanced budget.” The stimulus happened, but the balanced budget was not sustained. In the wake of the recession, Manitoba had 5.2 per cent unemployment and the provincial GDP declined by 0.9 per cent in 2009. The NDP responded by sending spending skyward with a deficit of $ 555 million that year. Rosann Wowchuk became finance minister the next year, and the tone changed. She committed to stimulating the economy “ by investing nearly $ 1.8 billion in infrastructure and capital renewal.” But she insisted the deficits would be temporary and the government would “ restore balance by returning to surplus within five years.” The NDP ran a deficit of $ 467 million in 2010. The results were mixed. The province’s GDP grew by 2.5 per cent, but unemployment increased slightly to 5.4 per cent. In 2012, the NDP introduced an innovation: the PST hike. “( The PST increase) will enhance productivity and innovation, and create good jobs in the short term — and the long term,” said then- finance minister Stan Struthers. “ It will allow us to protect key services and deliver a balanced budget by 2016.” Manitobans certainly paid more PST, but the budget was not balanced. The deficit for 2012 came in at $ 583 million. But the results were virtually unchanged, with unemployment at 5.3 per cent and GDP growth at 2.2 per cent. The numbers remained largely unchanged for 2013 and 2014. And deficits are projected for years to come. “ Our government also has a long- standing commitment to return to a balanced fiscal position,” Finance Minister Greg Dewar as he announced the 2014 results and outlined his 2015 budget. “ Industry tells us not to take our foot off the gas. Cutting now would devastate our economy. Families tell us to protect the jobs and services they rely on. Mr. Speaker, that means we will not make massive cuts to front- line services or put thousands of Manitobans out of work.” Balanced budgets gave way to temporary deficits that evolved to become an absolute necessity without which apparently “ thousands of Manitobans” would be out of work. And so, Manitoba continues to speed further into debt, with no realistic repayment plan in sight. Reporters asked how Trudeau would keep his commitments if the economy falters. In other words, would the Liberals actually balance the budget after three years if the stimulus doesn’t work? Trudeau’s answer: he would be “ open and transparent” with Canadians. In other words: “ just watch me.” We have watched this before. We’ve watched it year after year. It hasn’t worked for Manitoba. Todd MacKay is Prairie director of the Canadian Taxpayers Federation. The high cost of good intentions TODD MACKAY Making the right choices Debt financing, balanced budgets both have their place JIM COLLINSON S ASKATOON — What makes people sick? Infectious agents such as bacteria and viruses and personal factors such as smoking, eating poorly and living a sedentary lifestyle are factors. But none of these factors compare to the way poverty makes us sick. Prescribing medications and lifestyle changes for our patients who suffer from income deficiency isn’t enough; we need to start prescribing healthy incomes. Decades of studies have shown health care accounts for less than 25 per cent of health outcomes. The upstream factors that affect health such as income, education, employment, housing and food security have a far greater impact on whether we will be ill or well. Of these, income has the most powerful influence, because it shapes access to the other health determinants. Low- income Canadians are more likely to die earlier and suffer from more illnesses than Canadians with higher incomes, regardless of age, sex, race or place of residence. No wonder doctors and policy- makers are beginning to line up behind the notion of a basic- income guarantee. Basic income is an approach to poverty reduction that is much simpler and more streamlined than existing programs. Every year, Canadians file taxes. With basic income, if their incomes fall below a certain level, they get topped up to an amount sufficient to meet basic needs. Basic income is a smart alternative to costly social assistance programs, helping overcome the welfare wall that traps too many people in the cycle of poverty. Earlier this month, 194 physicians in Ontario signed a letter calling for a basic- income pilot program. Delivered to Ontario Health Minister Eric Hoskins ( also a physician), the letter outlines how poverty leads to higher rates of heart disease, depression, diabetes and scores of other illnesses. In the same month, a new report has brought forth the most official look at basic income in Canada in a generation. The Government of Saskatchewan Advisory Group on Poverty Reduction, which included community members and high- level public servants, reviewed the evidence and consulted key groups that work with people experiencing poverty. Recommendations included the ambitious goal of reducing poverty in Saskatchewan by 50 per cent by the end of 2020. To reach such a goal requires putting in place a policy with the power to do so, and the group came to the consensus a basic- income pilot project would be an effective and achievable means of doing so. A growing body of evidence shows allowing poverty to continue is far more expensive than investing to help improve people’s economic well- being. Currently, $ 3.8 billion dollars — five per cent of GDP — is lost from the Saskatchewan economy each year because of increased health and social costs and decreased economic opportunities. In Ontario, this cost of poverty has been calculated to be more than $ 30 billion per year. Where more extensive basic income pilots have been tried, both internationally and in Canada, the results have been impressive. The Mincome experiment in Dauphin, Man., in the 1970s resulted in higher school completion rates, and a reduction in hospitalization of 8.5 per cent ( largely because of fewer accidents, injuries and mental- health admissions). According to the Canadian Institute for Health Information, Canadians spent $ 63.6 billion on hospital services in 2014, meaning a decrease of 8.5 per cent would result in savings of $ 5.4 billion. This is just one of the many areas where the return on social investment saves public funds and improves the lives of Canadians in the bargain. Some policy changes happen slowly, with incremental movements in public opinion. But every once in a while, an idea that seemed outside the realm of possibility quite suddenly gathers momentum. The concept of basic income is on course from the margins to the mainstream. If political leaders have the health of Canadians as their first priority, they’ll turn advice into action and implement basic income. Danielle Martin is a family physician and senior fellow at the Women’s College Hospital Institute for Health System Solutions and Virtual Care. Ryan Meili is a family physician, founder of Upstream: Institute for A Healthy Society and an expert advisor with the Evidence Network. — distributed by Troy Media It’s time to prescribe healthy incomes By Danielle Martin and Ryan Meili Bipoles I and II ( above) were good and necessary decisions, but can the same be said of Bipole III? A growing body of evidence shows that allowing poverty to continue is far more expensive than investing to help improve people’s economic well- being. A_ 07_ Sep- 02- 15_ FP_ 01. indd A7 9/ 1/ 15 7: 45: 42 PM

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