Politics works in cycles and we are repeating some history along with the lessons we should have learned from it. .The parallels are almost chilling..A Trudeau is Canada’s prime minister, Western resource development is under attack, government spending is out of control, inflation is harming citizens and interest rates are on the rise..The current economic path is unsustainable and it will come to a crashing halt eventually..Conservative governments are usually little better than Liberal ones in times such as this..Mulroney continued with spending increases and deficit budgets when Pierre Trudeau exited the scene. In Alberta, the Progressive Conservatives under premiers Lougheed and Getty borrowed heavily while pouring tax funds into a series of failed corporate welfare schemes..The bubble finally burst in the early 1990s..Debt servicing costs were taking a massive bite from government budgets and citizens weren’t ready to accept more tax increases. Governments at all levels and with every political stripe had to cut spending..Federally, the Chretien government balanced the budget while provincially, Ralph Klein and Mike Harris brought spending under control in Alberta and Ontario. Even the NDP in Saskatchewan had to face economic reality as Roy Romanow cut spending by 10% in one budget and balanced the books by 1994..Unions and lobby groups screamed bloody murder through the 1990s as the cuts were applied across the country but their protests were unheeded. Canadians wanted to see balanced budgets and they wanted to see governments cutting spending..Eventually though, the cycle turned..With balanced budgets, times became good again. Economies picked up and governments began to open the spending floodgates again..Even in Alberta under Klein, the spending began to rise quickly by the end of the 1990s. Ironically, it was when Klein began increasing expenditures when his provincial support began to flag..Citizens were fine with low government spending, but politicians just can’t resist increasing the budgets. It’s an easier way to manage the government than being fiscally responsible. That administrative sloth comes with a price over time..In 1999 the federal government returned to deficit budgets and while it took until 2008, Alberta started deficit financing as well and hasn’t managed to balance a budget since..Low interest rates allow governments to get away with deficit financing for a time, but as we are seeing today, the rates won’t stay low forever..Just servicing the federal debt alone will cost an estimated $34.7 billion in the 2022/2023 budget period. That’s assuming interest rates stop rising of course. Every province is flushing money down the toilet on debt servicing too..The Trudeau government recently called for departments to find $15 billion in savings. They quickly pivoted to say they wouldn’t be cutting $15 billion in spending. They would just shift it to other departments. They won’t even consider cuts..The hard reality governments and citizens need to face is that governments spend too much..I am including citizens in that statement because they are the ones who keep turning to government for every service or problem..People want every pet project funded, every foreign cause supported and every industry subsidized or they will take their votes elsewhere..Whether we like it or not, people tend to vote for whatever politician blows the most sunshine up their arse at election time and shy away from supporting politicians offering a realistic fiscal platform..People won’t change their demands of governments until they start directly seeing the cost of the spending. They are starting to see it now..Deficit spending is fostering inflation while taxes increase to try and keep up with spending..The rising cost of living is hurting everybody along with taxes. Taxes alone now eat up 45.3% of the average family’s income while food, clothing and shelter only make up 35.6%..Citizens are loath to admit it, but they can’t hide from it forever. When enough people realize the government is their largest expense in life and they can’t afford it, they will demand spending cuts..The question with spending cuts and austerity isn’t a matter of if, it’s a matter of when..The laws of economics are as immutable as those of gravity and the spending will have to be brought back into check eventually. We can’t keep living on the credit cards..The longer we wait to cut spending, the harder it will be when it comes..An increasing segment of the population has become dependent upon government jobs and programs. That segment will suffer most directly when government spending contracts end and it will be ugly as they try to adapt..We are on a slow-motion collision course with an inevitable fiscal reality check..The more we can ring the alarm bells now, the sooner we can start reining in spending and reducing future pain..It feels like the warnings are falling upon deaf ears right now. Hopefully citizen’s get the wax out and start listening soon. The politicians will then follow..They always do.
Politics works in cycles and we are repeating some history along with the lessons we should have learned from it. .The parallels are almost chilling..A Trudeau is Canada’s prime minister, Western resource development is under attack, government spending is out of control, inflation is harming citizens and interest rates are on the rise..The current economic path is unsustainable and it will come to a crashing halt eventually..Conservative governments are usually little better than Liberal ones in times such as this..Mulroney continued with spending increases and deficit budgets when Pierre Trudeau exited the scene. In Alberta, the Progressive Conservatives under premiers Lougheed and Getty borrowed heavily while pouring tax funds into a series of failed corporate welfare schemes..The bubble finally burst in the early 1990s..Debt servicing costs were taking a massive bite from government budgets and citizens weren’t ready to accept more tax increases. Governments at all levels and with every political stripe had to cut spending..Federally, the Chretien government balanced the budget while provincially, Ralph Klein and Mike Harris brought spending under control in Alberta and Ontario. Even the NDP in Saskatchewan had to face economic reality as Roy Romanow cut spending by 10% in one budget and balanced the books by 1994..Unions and lobby groups screamed bloody murder through the 1990s as the cuts were applied across the country but their protests were unheeded. Canadians wanted to see balanced budgets and they wanted to see governments cutting spending..Eventually though, the cycle turned..With balanced budgets, times became good again. Economies picked up and governments began to open the spending floodgates again..Even in Alberta under Klein, the spending began to rise quickly by the end of the 1990s. Ironically, it was when Klein began increasing expenditures when his provincial support began to flag..Citizens were fine with low government spending, but politicians just can’t resist increasing the budgets. It’s an easier way to manage the government than being fiscally responsible. That administrative sloth comes with a price over time..In 1999 the federal government returned to deficit budgets and while it took until 2008, Alberta started deficit financing as well and hasn’t managed to balance a budget since..Low interest rates allow governments to get away with deficit financing for a time, but as we are seeing today, the rates won’t stay low forever..Just servicing the federal debt alone will cost an estimated $34.7 billion in the 2022/2023 budget period. That’s assuming interest rates stop rising of course. Every province is flushing money down the toilet on debt servicing too..The Trudeau government recently called for departments to find $15 billion in savings. They quickly pivoted to say they wouldn’t be cutting $15 billion in spending. They would just shift it to other departments. They won’t even consider cuts..The hard reality governments and citizens need to face is that governments spend too much..I am including citizens in that statement because they are the ones who keep turning to government for every service or problem..People want every pet project funded, every foreign cause supported and every industry subsidized or they will take their votes elsewhere..Whether we like it or not, people tend to vote for whatever politician blows the most sunshine up their arse at election time and shy away from supporting politicians offering a realistic fiscal platform..People won’t change their demands of governments until they start directly seeing the cost of the spending. They are starting to see it now..Deficit spending is fostering inflation while taxes increase to try and keep up with spending..The rising cost of living is hurting everybody along with taxes. Taxes alone now eat up 45.3% of the average family’s income while food, clothing and shelter only make up 35.6%..Citizens are loath to admit it, but they can’t hide from it forever. When enough people realize the government is their largest expense in life and they can’t afford it, they will demand spending cuts..The question with spending cuts and austerity isn’t a matter of if, it’s a matter of when..The laws of economics are as immutable as those of gravity and the spending will have to be brought back into check eventually. We can’t keep living on the credit cards..The longer we wait to cut spending, the harder it will be when it comes..An increasing segment of the population has become dependent upon government jobs and programs. That segment will suffer most directly when government spending contracts end and it will be ugly as they try to adapt..We are on a slow-motion collision course with an inevitable fiscal reality check..The more we can ring the alarm bells now, the sooner we can start reining in spending and reducing future pain..It feels like the warnings are falling upon deaf ears right now. Hopefully citizen’s get the wax out and start listening soon. The politicians will then follow..They always do.
