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New Red Scare: deficits and debt

Nova Scotia's Alternative Budget, Part II

by Bruce Wark

Years ago, people feared the Red Menace --- that Reds or communists were coming to get them. Now, it's the fear of Red Ink --- that government deficits and debt will ruin us all. Dalhousie University economist Mathieu Dufour says that in the current provincial election campaign, the Conservatives, NDP and Liberals are all trying to fight the irrational fear of red ink by promising to balance the budget.

"All three of them believe that the way to win an election is to pander to the fear that has been created artificially," he says. "It doesn't really make any objective sense."

Dufour and the rest of the working group that drafted Nova Scotia's latest Alternative Budget argue it's more important to fight the recession by stimulating the economy, than it is to balance the provincial budget. Their Alternative Budget recommends spending nearly $436 million in the coming year improving social programs, alleviating poverty and funding such environmentally sustainable projects as rail line improvements and upgrades to the municipal transit system in Cape Breton.

Christine Saulnier who headed the Alternative Budget working group says it makes sense to fight the recession by putting money in the pockets of people who need it most and who will spend it immediately on goods and services. "We're looking at stimulating the economy," she says, "but we're doing it through social infrastructure, social programs and strengthening public services which is something we haven't been hearing much about."

What we have been hearing about, says Mathieu Dufour, is the politicians' obsession with balancing the provincial budget. The Alternative Budget on the other hand, proposes to run a deficit in the coming year of $236 million. That money, combined with funds from the federal government, would help raise stimulus spending to two per cent of the total provincial economy --- a step recommended by international bodies such as the Organization for Economic Co-operation and Development (OECD) and the International Monetary Fund (IMF).

Dufour criticizes the provincial budget the Conservatives brought in this week, for focusing its stimulus spending on improving highways and cutting business and personal income taxes. "Giving tax cuts to people who have a lot of money isn't going to keep the economy rolling because they save a lot of that money," Dufour says. "Whereas if you actually focus the spending and government transfers on the poorer part of the population, they will spend everything that you give them. Not only do we believe it's more fair, but it's also, in a very utilitarian way, a better way to stimulate the economy."

When asked why the three main political parties are preaching the need for balanced budgets, Dufour can only shake his head. "Frankly, I don't quite understand it," he says. "It's really bizarre to me." He adds that temporarily adding to the size of the provincial debt won't bring on the financial catastrophes that politicians, mainstream journalists and pundits are constantly warning about. It's not the size of the debt that matters, he argues, but the province's ability to manage it. Dufour points out that as a percentage of the overall provincial economy or GDP, Nova Scotia's debt is much lower than in most of the rich, industrial countries. Yet politicians from the main provincial parties continue to warn about the menace of red ink.

"For a decade, different parties, both at the federal level and the provincial level, have done a big advertising job to scare people about the size of the debt and to explain that they have to cut here, they have to cut there," Dufour says. "Now, the interesting part is that once the debt is reduced, money is not put back into the social programs that were cut. Instead the politicians cut taxes."

Dufour contends that the whole exercise is aimed at reducing the size of government. "But you can't advocate that government should be smaller. That doesn't fly in Canada and especially not in Nova Scotia. So you advocate it on the basis that well, we have to cut because we have this debt."

Dufour suspects that Nova Scotia politicians are now prisoners of their own rhetoric. "My only guess, because it doesn't make any objective sense, is that they've cornered themselves in the position where the public is now very preoccupied with debt and now, they have to pander to that fear."

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3 major parties

Anyone know if any of the 3 major parties have made any comment on the alternative budget?

Hi Ben

Hi Ben: I haven't seen any comments from the parties. That's not surprising because politicians like to stick to their own pre-scripted messages especially during election campaigns. The only way of getting them to react is to ask them directly, then use their answers to write a follow-up story.

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