Howard is an old friend.  Smartest man I ever met.  Intellectual/learned/academic beyond comprehension. More doctorate degrees than a hospital.  Published more papers than the pentagon.  Probably the only person I shut up around.  He seems to know chapter and verse about everything all with footnotes to back it up.  

That does not mean I always agree with him – just that I keep mute.  I usually agree with him but I keep mute about that, too.  What’s there to say to someone who already knows?

Anyway, as you also know, I don’t like Harper.  And I have good foundations for that.  But my foundation is paper mache.  Howard’s is solid granite.  Here (with his permission) is HIS blog on Harper and his ‘supposed’ $1.9B surplus.  Warning: it’s long

Last night I came home and listened to the late night news. The big news: the Harper government had posted a surplus, the first in Harper’s eight years running the government. I had become used to the government playing games with refugee figures – announcing in 2013 that the government would take in 1,300 Syrian refugees in the next 12 months and then taking 20 months to do so. Further, most were privately sponsored refugees. When Canada announced it would take 10,000 Syrian refugees over three years, this really meant that Canada would take in 1,300 government-assisted refugees per year and private sponsors would be allowed to bring in just over 2,000 per year. After the election campaign started, Harper announced that Canada would take an additional 10,000 Iraqi and Syrian refugees and take them in over four years. That meant a total intake of 2,500 additional refugees per year, or 1,250 additional Syrian refugees. Of these, the number of government-assisted Syrian refugees would be about 500. Clearly a pittance. The spin is how to make 500 sound like 10,000 and almost 2,000 sound like 20,000. The basic figures are accurate; the spin given to those figures is misleading.

Was the government doing the same with the budget? According to figures released by the finance department yesterday, after seven years of running deficits, the federal government had a $1.9 billion surplus in the 2014-2015 fiscal year. Canada had produced a surplus one year ahead of Jim Flaherty’s prediction. The original prediction for 2014-2015 had been a $2 billion deficit rather than a $1.9 billion surplus. Further, the April, June and July figures reinforced the picture of the trend towards surpluses.

There is an old saying: figures don’t lie; politicians do. I think this is a misrepresentation. Spin is not lying. But to understand spin you have to unpack the figures. There are a number of ways to produce a surplus. First, you can budget less than the previous year; in effect, cut a department’s budget. Second, you can download expenditures onto the provinces. Third, you can spend less than you even projected in your budget. The options are many.

Let me offer an example. In the Department of Aboriginal Affairs, the projected expenditures for 2014-2015 on primary and secondary education for aboriginal youth was $1,445 billion. In 2015-2016, the projected expenditures were set at $1,431 billion. How could the expenditures possibly go down when the rate of increase of the aboriginal population was much higher than that of the rest of Canada?

When you read the hundreds of pages of documents just in that one department, one policy stands out. There is the noble intention begun in 2014 of bringing success rates of aboriginal children up to those of the rest of the population. How is this to be done? You get bands to vote to join regional school boards so that now the province bears the burden of the costs, not the federal government, and the expenditure on aboriginal children’s education is immediately boosted by about a quarter. This “push” in this direction is helped when you recognize not only that aboriginal children receive at least 20% less support than the equivalent cohort in the provincial school system, but that over the last eight years, the educational support deficit has grown so that the differential is moving towards 30%.

The message to band leaders: you want better education for your children, vote to become part of the provincial educational system, thereby relieving the federal government from the obligation to pay for the education of aboriginal children and teens.

Look at a number of departments where the Harper government was determined to cut. In northern economic development, the main estimates were $53,442,608 in 2013-14; in 2014-15, they were $30,945,766, an enormous cut. In 2012-2013, expenditures for the chief electoral office were 119,580,193. In the 2014-15 estimates, they had dropped to $97,110,432. It is any wonder that we have increased our democratic deficit. In the department that I know best, Citizenship and Immigration, budgeted expenditures dropped from $1,655,418,818 in 2013-2014 to $1,385,441,063 in 2014-15, a 17% cut. No wonder Canada lacks the visa officers on the ground to process Syrian refugee applications to come to Canada.

Monies for the Library and Archives of Canada were reduced from $118,923,232 2013-14 to $95,864,788 in 2014-15. In the arts and research field, the National Film Board, National Museum of Science and Technology and the Natural Sciences and Research Council suffered cuts. Statistics Canada, once upon a time the pride and joy of Canada for the rest of the world – we provided a paradigm for other nations to imitate – expenditures dropped from $519,891,309 in 2012-13 to $379,555,524 in 2014-15. The cuts were so drastic, not only effecting the long form census that was made voluntary, and, therefore, useless for research, but the whole basis for economic and social research in Canada was decimated.

This is a government that is not interested in the knowledge base on which prudent planning depends. The library in the Department of Immigration and Citizenship was packed up and sent to a warehouse in Quebec. The policy unit was eliminated. Harper reduces expenditures through micro-management, requiring the smallest expenditures be approved by his office – except when it comes to his Senate appointees. This government has saved money by running the civil service into the ground in many areas.

I am not saying that some areas should not have been cut or that all expenditures have been sacrosanct. However, the Tories cannot even bring in more refugees if they wanted to; they are unwilling to spend the money even though, in the long run, such expenditures are a tremendous investment in human resources, especially when the population intake consists of skilled tradesmen and professionals who can contribute to economic growth.

When you add to these policies the practice of not even spending the money allocated, it is not that hard to produce a surplus. In 2014-15, actual expenditures were $800 million lower than projected. Some of the costs have little to do with Canadian policy, however important prudent fiscal policies are. Carrying charges on debt are at record lows so that actual expenditures on debt were $100 million lower than projected. But there are other ways to produce a surplus. Focus on the revenue side.

In June, for example, the government brought in $1.1 billion more than it spent following the May/June surplus of $3.9 billion. And this was when we were officially in a recession. One way to increase revenues is to sell off assets. So the Canadian government sold its last block of 73 million shares in General Motors in April, increasing the government coffers by $2.7 billion. So if we sell off assets to increase revenues, and since surpluses are seasonal and the surplus in June dropped from $1.6 billion in the previous year to $1.1 billion, the optimism for this year has to be muted somewhat. 

Don’t get me wrong. I am a fiscal conservative. I believe, in normal circumstances, we should stay within our budget. But I also believe that some savings, such as cutting our repairs to infrastructure, is indeed penny wise and pound foolish. Cutting programs that provide valuable service is an imprudent way to balance the budget. Further, there are times, as David Dodge has said, when interest rates are low that it is imprudent not to borrow and invest in infrastructure – roads, sewers, public transit. Spending $125 billion in this area over ten years may be the height of prudence.

Pensions are a case in which taxes and investments get confused. Harper decried the Ontario pension plan for increasing taxes. But these were not tax increases. These were increases in forced savings that in turn could be invested in economic growth. Whereas the Conservatives began their term of office by cutting the sales tax by two points, the government has not reduced the taxes for the employment insurance fund. The employment insurance fund is now in surplus and normally premiums should be reduced. They have not been, providing an important source for ensuring that income exceeds expenditures. An employment insurance cut would benefit both individual workers and businesses, especially small businesses.  

So has the Harper government been a prudent manager of our economy? In some ways it has. Some cuts were warranted. But so were increased expenditures in other areas – aboriginal education for example. By cutting two points from the sales tax, government funds for needed areas, such as infrastructure or aboriginal education, were unavailable.  The cuts were imprudent.  So were many of the cuts in various department budgets.

There is another area where the Harper government has been prudent. Canada’s debt-to-GDP ratio is 40.4 per cent, including the debts of local, provincial and territorial governments, the lowest among G7 nations where the average is 86.8%. This is commendable. However, flying higher and taking a longer overview, Canada really escaped going into recession in the economic shock of 2008 because the Harper government inherited a government with financial surpluses, $13.6 billion in 2006 and $9.6 billion in 2007. It took on an enormous deficit in 2009 of $61.27 billion. Simply cutting expenditures and micro-managing the government is a way to save money, but also to cripple services that Canadians need – especially veterans.  Areas requiring investment also suffer.

I do not know why the Harper government has a reputation as a prudent manager of the economy. It has not been. It has operated the government as if tax revenues were like money dropped in a piggy bank and your job was to ensure that you not spend anymore than had been dropped through the slot. The real economic job of a government is to spend and invest money wisely and prudently and allow future generations to inherit a better and better Canada.

The Harper government has been more imprudent than prudent on this scale of measurement.