Economist Werner Antweiler of the UBC Sauder School of Business says talk of balanced budgets is just political showmanship and Canada is in excellent shape when it comes to federal debt.

Election 2015: Economist calls balanced budget argument political showmanship

UBC professor says Canada is in good shape when it comes to federal debt and debates about balanced budgets is purely politics

  • Oct. 15, 2015 7:00 p.m.

A senior economist with the UBC Sauder School of Business says talk of balanced budgets vs. running a deficit in the federal election campaign is just a political red herring.

Werner Antweiler, an associate professor at the Sauder School at UBC, says Canada is doing exceptionally well in the area of federal debt when compared to the other G-7 countries of France, Germany, Italy, Japan, the UK and the USA.

“There is really no reason to be concerned about balanced budget plans or the small deficit proposed by the Liberals,” said Antweiler. “Earlier this year Canada became yet another country to adopt legislation for balanced budgets…this is not based on sound economics but on political showmanship.”

As the federal election campaign has wound its way toward the Oct. 19 vote, the three main parties battling for seats have become situated on opposite sides of the balanced budget issue with the Conservatives and NDP saying they will balance the budget and the Liberals proposing to run a deficit and spend money on infrastructure needs across the country.

“This is not something I would lose any sleep over,” said Antweiler “What is more important to look at is the overall debt picture. How big is our federal debt compared to where it was a few years ago and it has been relatively stable since 2009. If you compare to the other G-7 countries we are doing exceptionally well, especially when you compare to other federal states like Germany and the US.”

In fact, Antweiler says many of the past governments of Canada have done a good job managing our federal debt, dating back to the Paul Martin Liberal government and through the Stephen Harper Conservatives.

“The Conservatives have done a good job keeping the debt in check and so did the Liberals so neither party is better at managing our public debt,” said Antweiler. “They have all done exceptionally well, especially Paul Martin. When the Liberals came in (taking over from the PC in 1993) they had a debt of almost 70 per cent of domestic growth and when they handed over the government to the Conservatives the debt load had decreased from 70 to 30 per cent.”

In terms of this federal election, Antweiler says the Liberals plan to run deficit budgets out of the gates if elected would be considered good debt to add, especially with interest rates at all-time lows.

“There is good debt and bad debt,” he said. “When governments spend money there are good things to spend it on. When you invest in things like infrastructure and borrow money to build bridges or roads, where future generations will continue paying for this infrastructure and the use is spent across many decades, this is perfectly sensible. Borrowing money at these low interest rates is easy because you can lock in the rate for a very long time. Bad debt is when you borrow money to give goodies to voters like tax breaks. Then you are just shifting the burden to the next generation.”

Antweiler was critical of all parties promising tax breaks to small segments of the population, calling them boutique tax credits that are more electioneering than sound economic policy.

“All the parties have announced boutique tax credits, whether it be various child benefits or tax credits for childhood activities,” he said. “This is not good public policy. This is electioneering. It would be much better to give money directly to organizations and schools and provide support to everyone that way. That money could be much better spent.”

In terms of the balanced budget laws, Antweiler says government accountability on fiscal policy should be left to the voters, who will hold government accountable at election time.

 

 

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