Balanced Budget Bozos
BC politicians keep passing, then changing, laws against deficit spending. Are we nuts?
Cartoon by Ingrid Rice.
Are British Columbians crazy?
According to one popular definition, a lunatic is someone who performs the same action, over and over again, yet each time expects a different result. By that explanation, and in the context of our province's balanced-budget legislation, B.C. residents -- all 4.3 million of us -- must be crazy, indeed.
Premier Gordon Campbell and Finance Minister Colin Hansen have announced that B.C. will incur fiscal deficits in each of the next couple of years.
Of course, B.C. has a balanced-budget statute that specifically prohibits the government from planning a shortfall at the beginning of any fiscal year, and punishes cabinet ministers should a deficit appear at the end of the period.
To get around the law, Campbell also admitted that the legislature would be recalled in a little over a week so his government can repeal (or fundamentally amend) the balanced-budget legislation his own administration enacted not quite eight years ago.
A decade before that, in 1991, B.C. became the first province in Canada to pass balanced-budget legislation. In fact, we seem to like them so much that over the last two decades we've also passed more of them -- three -- than any other province.
Still, because provincial budgeting often has proved to be a difficult task, our politicians have quickly discarded each balanced-budget statute when faced with economic challenges. So, British Columbia also has repealed more balanced-budget laws than any other jurisdiction in Canada.
Three balanced-budget laws up, and three budget-balanced laws down.
If doing the same thing over and over again, and expecting a different result each time, qualifies as crazy, well, maybe its time to put padded walls around the legislature.
The first go at it
Social Credit Finance Minister Mel Couvelier took the initial step towards balanced-budget legislation in B.C. 18 years ago. "In planning our operating budgets, we intend to incorporate a longer-term framework," Couvelier told the legislature on April 19, 1990, during his budget speech.
It fell to Couvelier's successor, John Jansen, to introduce B.C.'s first balanced-budget law with the 1991/92 budget. "Families have to balance their budgets and carefully plan their financial futures," Jansen said. "Government's must do the same."
The Taxpayer Protection Act not only was the first in B.C. to require a balance between revenues and expenditures, but also the first in Canada.
Sadly for Social Credit, Jansen's budget was the last the once-mighty political party ever would introduce in the legislature because in October 1991, the Socreds were turfed from government by Mike Harcourt's New Democratic Party.
Still, Social Credit's balanced-budget legislation appeared safe because after it was introduced by Jansen, every single NDP MLA present in the legislature voted in favour of the bill.
Moreover, during the 1991 election campaign, NDP leader Harcourt had unveiled his very own "Fiscal Framework," which showed B.C. voters how a New Democratic Party government would balance revenues and expenditures over a five-year economic cycle.
Call it a 'tax freeze'
In the spring of 1992, mere months after winning election to government with a commitment to balanced budgets, the Harcourt New Democrats repealed the Taxpayer Protection Act.
"This act was passed only last year," Finance Minister Glen Clark told the legislature on April 8, 1992. "It was apparently an attempt by the previous government to stop tax increases by legislation." Clark, who a year earlier had voted in favour of the Taxpayer Protection Act, now belatedly seemed to confess that he hadn't understood what he voted for.
He added: "The government has concluded, after review of the province's financial position, that continuing the tax freeze would be unrealistic and financially irresponsible."
Instead, Clark said, the Harcourt government opted "to produce a balanced package of controlled spending growth, greater efficiency and revenue increases."
Those "revenue increases," were undertaken immediately, as Clark boosted taxes by about $800 million annually in his first budget, and then by another $800 million in his second.
Still, despite these enormous tax lifts, government spending continued to climb ahead of revenues, and the result was an on-going succession of budgetary deficits.
Suicide by deficit
Finally, in 1995, bare months before an expected general election, Clark's successor as finance minister, Elizabeth Cull, unveiled a budget with a razor-thin surplus. While a far cry from the NDP's 1991 promise of balanced revenues and expenditures over a five-year economic cycle, a single balanced budget at least pointed in the right direction.
But instead of going to the polls in the fall of 1995, Harcourt quit politics over a party scandal, and the New Democrats were forced to hold a leadership convention. Clark won that contest -- and thereby became premier -- as B.C.'s economy, among the best in Canada during the early years of the decade, faltered.
It would have been suicidal, politically-speaking, for the NDP to unveil a pre-election deficit in 1996 after having introduced a balanced fiscal plan in 1995. And so, Cull brought in a second consecutive balanced-budget, which, like her first, also boasted an exceedingly slim surplus. One month later, Clark's New Democrats scored a surprising re-election victory.
Within weeks, new NDP Finance Minister Andrew Petter (Cull had lost her seat in the election) confessed that both pre-election fiscal plans, for 1995/96 and 1996/97, would end with deficits. A new phrase soon entered the province's political lexicon -- Fudge-it Budgets.
'This bill has teeth'
Four years later, after the Fudge-it Budgets had spawned a lengthy investigation by the auditor general, the B.C. Supreme Court had rejected a suit alleging election fraud, and a couple of government-appointed advisory panels prepared lengthy proposals for reform, the New Democrats brought in their own balanced-budget law.
"This bill has teeth," NDP Finance Minister Paul Ramsey insisted. "There are consequences for failure to meet the targets set out in this bill." Those targets included a steady reduction in B.C.'s annual deficit until 2004, at which time it was to be completely erased. The teeth came as a promise to levy a 20 per cent pay cut on cabinet ministers should a deficit appear on the province's books.
Notably, the NDP balanced-budget law had a couple of significant exemptions. As Ramsey described it, the government's obligation to avoid deficits would be abandoned in "an emergency of unexpected circumstances that imperils health or safety of British Columbians, or if revenue is declined by more than $500 million year over year."
Gary Farrell-Collins, the BC Liberal finance critic, responded by insisting that his party, too, endorsed a balanced-budget law. "This side of the house has always supported balanced-budget legislation," he said. "We continue to support balanced-budget legislation."
Still, when the NDP's balanced-budget bill went to second and third reading, the entire BC Liberal caucus -- Gordon Campbell among them -- voted against the measure.
BC Libs take a whack at it
To the surprise of nearly every British Columbian, the provincial deficit was eliminated well before Ramsey's 2004 target. Thanks to a sharp spike in revenues (primarily from personal income taxes and energy exports), B.C. recorded a tiny surfeit in 1999/2000, and then a gargantuan $1.4 billion surplus in 2000/01.
The latter arrived too late to save the New Democrats, however, and in May 2001 Campbell's BC Liberals won a massive electoral majority. One of the new government's first priorities, of course, was to repeal the NDP balanced-budget law and introduce one of their own.
But despite inheriting the biggest surplus in provincial history, the Campbell government's balanced-budget law would not require a surplus until 2004!
Why the delay? For reasons that forever will defy rational explanation, Campbell and Collins decided to slash the province's revenues by about $2 billion (through tax cuts), while at the same time boosting government expenditures by a comparable $2 billion.
The result was to transform Victoria's books, seemingly overnight, from the biggest surplus in history (in 2000/01) to a series of the largest deficits ever seen in the province -- $1.3 billion in 2001/02, $3.2 billion in 2002/03, and $1.3 billion in 2003/04.
By then, the global commodity boom was well underway. Federal transfers to B.C. (and all provinces) skyrocketed, corporate income taxes soared, and natural resources revenues (especially from natural gas) headed for the stratosphere. Consequently, over a four year period, from 2004/05 until 2007/08, B.C. enjoyed some of the largest surpluses in provincial history.
Throwing in the towel
Today, the commodity boom seems to have ended, the global economy is in the early stages of a severe downturn, and across the world, governmental revenues have plummeted.
After a handful of budgetary surpluses, Gordon Campbell has thrown in the towel: B.C.'s third balanced-budget law will be gutted, and the BC Liberals will return to the massive deficits that marked their early years in office.
What, then? Should British Columbians expect a fourth balanced-budget statute in the not-too-distant future? Then, later, maybe a fifth and a sixth? More to the point, what value has a balanced-budget statute when governments can repeal, amend or gut it whenever economic and fiscal challenges prove difficult?
Simply, we must be crazy to keep enacting balanced-budget laws when the utility of such legislation is non-existent. Or, at least crazy enough to keep electing politicians who claim that balanced-budget legislation will ensure their government's fiscal responsibility.
We all should remember the words of Gordon Campbell, then leader of the Opposition, when he voted in 2000 against the NDP's balanced-budget legislation: "It's amazing how rewriting laws can work for a government that doesn't really care about the law."
Related Tyee stories:
- Deficit budgets planned for BC
- Ready for a Slump?
As BC's economy cools, how well are we prepared? - Campbell Misled Public on NDP Finances
In 2001 the incoming premier called NDP finances "worse than we anticipated." His briefing binders, gained by The Tyee through an FOI, told him the opposite.
![[Tyee]](http://thetyee.cachefly.net/ui/img/ico_fishie.png){kind=small}
Luke Skywalker
03-02-2009
Another Budget Balancing Angle...
In ~1992/93:
Then 10 years later in ~2002/03:
There's an angle on how to potentially balance the budget. Re-institute the previous tax regime.
quarry bay
03-02-2009
Gordon Campbell......
Breaks his own deficit record.
Gordon Campbell tables 9 billion dollars in deficits over 2 years to break his own DEBT Record.
http://billtieleman.blogspot.com/2009/02/bc-business-leaders-back-campbell.html
And not be out done,gordon Campbells 2.3 billion dollar tolled bridge jumps to 3 billion before 1 stick is in the ground,and,the money will be borrowed and is not part of the 5 billion dollar deficit.
http://www.vancouversun.com/Port+Mann+price+billion/1249988/story.html
Gordon Campbell,the BIGGEST DEBTOR IN BC HISTORY
Stump
03-02-2009
$2 billion
You can do a lot with $2b. Or you can waste it on a big snow party. Either way, that lost revenue would sure look good on the prov. books right now.
quarry bay
03-02-2009
Well.......
It sure is a good thing that we are a "Have" province,not like the giant "Have Not"province of Ontario"
Ontario is tabling a 4 billion dollar deficit,BC is tabling a 5 billion dollar deficit?
How did that happen?
Campbell and Hansen went from a 1 billion dollar surplur in september,to a 700 million dollar surplus in october,to a small surplus 2 weeks ago,to a 5 billion dollar deficit today with a 4 billion dollar deficit next year!
Didn`t George W Bush do the same thing on his way out of office, (rob the public purse)
Famous Campbell statements. "I wont sell BC Rail,I won`t tear up the HEU contract,400 million dollars on the convention center,not a penny more,5000 long term care beds,NO MORE DEFICITS,I wrote a law.
Luke,can`t wait for the next Angus Reid Poll
I hear Wif Hanni of the BC Conservative party are making hay over this one.
I am sure Wilf Hanni and his Conservative team will do better than the 6% of the vote they got in the last BC bi-election.
Cqampbell is no longer a conservative, too bad Campbell read this one all wrong.
Cheers
deeby
04-02-2009
So much for....
...the frequently repeated but asinine claim that budgeting for a large political jurisdiction is analagous to managing a household budget.
They should just quit passing these silly laws in the first place....
Van Isle
04-02-2009
Isn't that a trend of these
Isn't that a trend of these wonderful Liberals; create a law which allows them to break another law. These bandits in Victoria have utter contempt from Law, Order and Good Government.
sunshine coast girl
04-02-2009
Nuts!
Absolutely crazy.
lynn
04-02-2009
Unbalanced Inc.
I'm just wondering what difference it makes....the ever-changing "laws" over so-called "balanced" budgets?
Because despite inheriting the "biggest surplus in provincial history" Gordon Campbell, through the help of preferential tax cuts to his corporate friends managed to:
" transform Victoria's books, seemingly overnight, from the biggest surplus in history (in 2000/01) to a series of the largest deficits ever seen in the province -- $1.3 billion in 2001/02, $3.2 billion in 2002/03, and $1.3 billion in 2003/04."
It's worth noting that during those "deficit" years the UN singled out BC from all other provinces in Canada in regard to the BCLiberal government's massive assault on the social and economic rights of the poor.
The Gordon Campbell Liberals have been cited no fewer than seven times by the UN for their international human rights violations against women, children and the poor of BC.
It's also worth noting what happened during the commodity boom, high "surplus" times of 2004-2008:
While Finance Minister Carole Taylor clicked her ruby red Gucci heels and smiled on and on over her government's supposed "good times budget"...BC posted then....and continues to post the highest child poverty rate in Canada.
So it seems that in times of deficit, or surplus, balanced budgets or not....for women, children and the poor in BC, a deficit or surplus budget didn't make one iota of difference.
For no matter what the economic terminology, and the lies disguised within, the outcome remained always.....disturbingly always.... the same:
If there were some who had to suffer because of the "so-called changing" economic times...it was always women, children and the poor in BC.
And if there were some who had to profit from the "so-called changing" economic times.......?
hmmmmm...answer found in Will McMartin's final paragraph.
morechatter
04-02-2009
No Accountability
As wasn't that the whole point of putting in the balanced budget to make Ministers accountable by making them pay. What kinda planning was done for the future you know money for a rainy day, as come on now we live in BC and these guys have been rolling in the money but obviously not as fast as government is spending the surplus. Government went in and hacked up the programs and put CEO's in charge which nuts is right as no competition just all the coruption that comes with business as they beat back citizens from benefits and receive the golden handshake when caught you know silence is golden. So Money from everywhere but none to spare as laws are put into place for pan handlers but non for politicans who leave many looking for spare change.
Frank
04-02-2009
lynn
Great post, those are the salient points. Beating up on women, children and the poor has become something to be cheered by the Right. Stories of their plight is used for nothing more than to sell papers and airtime as the media tells us there's nothing we can do, the people at the top must come first and there just isn't enough left over for those at the bottom.
Cynic
04-02-2009
Pile on the debt. This is
Pile on the debt. This is how the elite do it. Just look at the Port Mann bridge announcement today, $3b instead of the previous $1.5b. So what? The ignorant taxpayer will foam and rant and ultimately just shrug. She and he will knuckle under because you know, there's a crisis. There's a shortage. There's not enough.
There is no scarcity. Wealth is everywhere. We're being conned. Yes, we're nuts.
quarry bay
04-02-2009
The Campbell Strategy......
Keep screwing the people,make each turn of the screw more painful then the last one.
I mean who remembers the tearing up of the HEU contract,or BC Rail/ The Campbell Gas tax/ his private jet rides,the 500 million over budget convention center/ bankrupting the Cambie merchants
No funding for diabetic kids/ cut off funding for autistic adults/ treat our seniors like garbage/let kids starve/have 20.000 people live on the streets/massive pay raises for Gordon Campbell and his suckretary.
Stop paying injured workers/outsource ship building/corrupt the courts/write gag laws/change laws at will/cancel the legislature/gerry-mandering/
Does anyone have a score card?
Gordon Campbell the biggest debtor goverment in BC history.
Ya think the media has been asleep or is it just my imagination.
alive
04-02-2009
who calls the tune here?
Did I hear it correctly, that the government decided to make a brand new Port Mann bridge because the P3 investors decided it was in their best interest?
Since when are decisions made on behalf of investors?
The idea was that government is elected to serve the people of this province, maybe we need to remind them?
Luke Skywalker
04-02-2009
Port Mann Bridge...
Let's see... both Vaughn Palmer and Keith Baldrey, both moderate and reasonable media politicos, agree that the PMB is BC's major transportation bottleneck. Same here.
And as a result of constructing a new (as opposed to twinning), 10-lane, express/collector PMB bridge as well as reconstructing 37 km of Hwy 1, the capital cost is ~$2.46 billion.
Add over 40 years of operating, maintenance, rehabilitation, and interest costs it's ~ $3.3 billion under the hated P-3 model.
Heck, it's the most talked about bottleneck in Metro Vancouver. Even moderate Mike Harcourt categorically stated last year that "the horses has left the barn door" and he supports same.
Damn.... please Carole James.... please continue your opposition to the PMB!!! :::)
verso
04-02-2009
Skywalker
"Let's see... both Vaughn Palmer and Keith Baldrey, both moderate and reasonable media politicos..."
That's the same Vaughn Palmer who wrote this article a couple days ago:
"Campbell's record on reform falls far short of his ambitious agenda"
http://www2.canada.com/vancouversun/columnists/story.html?id=93179f39-87fb-4d15-b724-1a21566e7c2e&p=2
Correct?
ME2
05-02-2009
Spin?
Well verso, this sceptical observer of the Sun's performance over the years thinks we are once again seeing the long slow "moderate and reasoned" pre-election curve in the Sun's content before the fast break about two months from now, when suddenly it will start editorialising [and columnising) with "Sure, Campbell has made a few leetle mistakes, but here's a list of all the really great things he's accomplished"
"Why?", they will thunder from their previously demonstrated moderate and reasonable Mount, "Would you abandon this proven administrator and replace him with the Socialists who have proven they are incapable, economic wastrels?"
And what then will Baldrey and Palmer be saying to that?
Ed Seedhouse
05-02-2009
I know, let's pass a law
I know, let's pass a law that requires all future laws that outlaw deficits to also outlaw at the same time the rising and falling of the tides. Both laws will be equally effective after all.
G West
05-02-2009
Port Mann
Good laugh to start the day...Thanks!
verso
05-02-2009
ME2
"Well verso, this sceptical observer of the Sun's performance over the years thinks we are once again seeing the long slow "moderate and reasoned" pre-election curve in the Sun's content before the fast break about two months from now..."
I'd argue that the Sun is already into that fast break (if not always there). Palmer's column is the only thing I read in the Sun despite, imo, that he's gone kind of soft.
But now that Skywalker is on record saying Baldrey and Palmer are "moderate and reasoned," then surely he agrees that Vaughn is being "moderate and reasoned" when critical of Campbell and the BC libs, too.
G West
05-02-2009
ME2
That's LUKE skywalker my friend; I doubt we'll see Skywalker in either Baldrey or Palmer's cheering section anytime soon....
quarry bay
05-02-2009
The Macquarie fraud machine......
Lets do a little simple math boys and girls.
presently 127.000 vehicles cross the port Mann daily
The tolls, Campbell and Falcon state very carefully "Tolls will be 3.00 eachway on opening day" STOP/ That is a pretty funny statement,read between the lines,also the toller,we be raising tolls against inflation.
Lets call the tolls 10.00 a day for easy math.
127.000 X 5.00 = 635.000.00 per day
635.000.00 X 365 days = 231.775.000.00 per year
231.775.000.00 X 40 years = 9.271.000.000.00 billion dollars
So this super deal will cost over 9 billion dollars,and that is with no increase in traffic or tolls not rising past 5.00 eachway
10 lanes,traffic will increase lots,tolls are out of our hands and they will go up.
so in theory,this bridge will cost 12 billion to 16 billion dollars before we finish paying for it.
quarry bay
05-02-2009
Gordon Campbell is the worst money manager..
Campbell is the worst economic manager(premier) in BC history.......
Lets look at this scenario,Stephen Harper has just announced a 40 billion infrastructure deficit spending over 2 years.
To access this money there is a catch
All three levels of goverment have to come up with funding,well, Campbell is borrowing 1.2 billion for this project(to go to bed with the Macquarie group)
Now we get 1.2 billion from Stephen Harpers and the conservatives
Now we are left with 1/3rd that the municipilaties come up with (Surrey,langley,etc etc etc etc)
You keep the tolls in place and pay of the municipalities first,province second, and guess what?We don`t have to pay the feds back!
Tolls will bring in 237 million a year,or more.
So in 5 years the municipalities are paid back all their monies and the provinces is paid off in another 6 years after that.
Gordon Campbell by going this P3 route, is washing his hands of 1.2 billion dollars of Federal Money coming to British Columbia.
I will repeat that last line........
Gordon Campbell by going this P3 route is washing his hands of 1.2 billion dollars of federal money coming to British Columbia.
This by far is the absolute worst financial move he has made,he has options to save BCers 5 to 6 billion dollars.
Nobody knows the future when it comes to the economy,but Campbell has a way to access 1/3 rd of the cost and he is throwing it away based on "Ideology" or idiocy.
Just wait until this deal is really examined and the shit will hit the fan.
Can anyone,any economist,spin doctor,can anyone tell me why Gordon Campbell isn`t accessing 1.2 billion dollars at his disposal?
Name one business man with credit to borrow money,not take the option of getting 1/3rd free(paid for) and for that privaledge all He has to do is borrow 2/3 instead of 1/3rd
Yes,this deal will be turned on it`s head.
Tieleman
06-02-2009
Tieleman - Stop Making Sense!
Will McMartin - if you don't stop making sense you will simply have to leave this island!
Ha-ha-ha!