Back during the Devine era, I listened to Grant Devine give an impassioned speech about the deficit. The point was “yes we have a deficit but where do we cut back. You can’t close hospitals, you can’t have crumbling highways, you can’t cut essential services”. At the time the speech stuck with me (obviously as I remember it today) but history shows that he was wrong.
Roy Romanow came into power and closed hospitals, cut healthcare services, stopped fixing and cut back on plowing the highways and he cut services we used to think was essential in order to balance the budget. People talk about the draconian cuts made by Ralph Klein but Romanow’s were deeper. The unions were angry, the NDP caucus was angry, the rural municipalities were angry, the urban municipalities were angry. No one liked the cuts.
Today Brad Wall broke a promise to the urban municipalities on revenue sharing agreements and they are understandably upset. No one likes having money taken away from them. My response to them is “oh well”, this is only the start.
- Whoever is going to fight the federal deficit will have to cut services (and probably raise taxes). We call the transfer payments and I expect Brad Wall and other provincial premiers to be on the other end of the cutbacks. Even for those of us who are “have” provinces, federal funding cutbacks will have to be picked up by provincial departments or the programs will end. Money that used to be earmarked for services and tax reductions will have to be used to pay off the debt and fight the deficit. In case you don’t know how this works, watch Till Debt Do Us Part. It’s not going to be fun being the next finance minister, no matter which jurisdiction you are in as you will be facing cutbacks of your own and passing them down to the next level of government. Let’s hope they don’t have a need for friends as they won’t have many.
- In case you haven’t noticed, the $1.56 trillion deficit proposed by Obama isn’t sustainable, look for higher interest rates to convince China to purchase American debt. Higher interest rates will push many highly leveraged North American’s over the brink into personal bankruptcy. That’s going to hurt earning on many consumer companies which will in turn cut back on spending and mean less tax dollars flowing around.
- If many economists are correct, oil prices will rise (and are rising) as we crawl out of this recession. As we do that, higher oil prices will push us back down again. This morning I was listening to an economist call this the “new normal”. In Saskatchewan we are a commodity based economy which means that we will forever be riding the wave of potash, wheat, natural gas, and oil revenues.
I would hope for a better level of political discourse then what we saw when Romanow’s government made his cuts. There really is no concept of we are in all of this together, which of course we are. I know lobbying the government is an important part of the job but in the end let’s accept that this is going to get worse before it gets better. Of course that isn’t going to happen so brace yourself for political stunts designed at short term gain over long term stability. Grant Devine’s legacy will probably live again.
Update: Sean Shaw has a look at what this cutback will mean for the city.
