Wednesday, March 24, 2010

Budget notes

The new provincial budget introduced by Finance Minster Rosann Wowchuk is not particularly shocking. Like the federal government and virtually every other province, Manitoba is going to be running a deficit until 2014. Several governments, including the feds, will be running deficits for longer than that, so overall we're doing pretty well, and all efforts are being made to maintain front line services. To do this the government will need to amend Manitoba's balanced budget legislation to make it more flexible. The provincial Tories and their ilk will whine, but considering that the federal stimulus would not have been possible if the feds (you know, the folks Hugh McFadyen would presumably like to emulate) were constrained by similar legislation, I don't think they don't have a whole lot to complain about.

Interestingly, U of M economist Fletcher Baragar thinks that the balanced budget legislation should be scrapped entirely. I'm inclined to agree, though it might be hard to sell the public on the matter.


cherenkov said...

I have to partly disagree Mr Baragar. The referendum clause should be eliminated, but the intent of the legislation should be maintained and enforced. The gov't should be required to balance the budget when ever possible, face consequences if they don't, but have the flexibility to use all tools including raising taxes.

This government, unfortunately, did the opposite: they gutted the legislation so that it is now essentially meaningless, but kept the referendum clause.

It's good to see that Fletcher cut his hair.

nitroglycol said...

In principle I agree with the idea of balancing the budget "whenever possible", but the devil is in those details. No doubt it would be possible to balance Manitoba's budget right now, by slashing front line services or by raising taxes (probably both). But would that help with the recovery? I don't think so.

Perhaps a solution would be to require the budget to be balanced as long as the unemployment rate is below a certain point and/or the growth rate of the economy is above a certain point. I don't know where those thresholds should be set, however.