Deficit spending a risky proposition

The Yukon Party dynasty may be gone but the new Liberal government has opted to continue the trend of spending down our financial reserves.

The Yukon Party dynasty may be gone but the new Liberal government has opted to continue the trend of spending down our financial reserves.

The government may be predicting a small surplus for the 2017-2018 fiscal year, but as has been noted in the past, it can only make that claim because it will acquire some new capital assets, not because it spent less than it brought in. The government’s net financial assets — meaning the amount of money it has available — will decline by $84 million this year.

Assuming everything goes according to plan we’ll finish the upcoming fiscal year with only $9 million in the bank and, if current projections hold, we’ll go into the red shortly after that. That is a far cry from the hundreds of millions we had available just a few years ago.

The Liberals can’t shoulder all the blame for our declining fortunes. This is a train that has been in motion for a while. While boasting of surpluses, the Pasloski-led Yukon Party government presided over a precipitous drop in our fiscal situation, and it can’t wash its hands of all the blame the day it leaves office (as much as the new Opposition’s statements would imply that it would like to do just that).

Nor can it pretend that matters would be significantly different today if it were in power. There was nothing in its platform last fall to suggest that it had a plan to deal with the gap between revenues and expenditures.

But nor can the new government perpetually blame the last one for where we go from here. It is in the drivers seat now. Spending more money than you bring in is a choice. A defensible choice perhaps, but a choice nonetheless. What concerns me most about what we heard last week wasn’t the budget in the annual sense of the word. It was the lack of any meaningful plan to turn things around with deficits and a continued financial decline through 2021.

Simply hoping that things will turn around some day has been tried and has failed elsewhere. It has been the reigning orthodoxy of the Ontario Liberal Party – to name just one prominent and concerning example – for more than a decade, although the province just tabled its first balanced budget since 2008, it still faces a debt of more than $330 billion.

That may well be because debt reduction typically doesn’t present many politically appetizing solutions.

The Yukon government finds itself in the same difficult position that governments in much of the developed world find themselves. They face the demands of their citizens for more spending on new and better schools, hospitals, roads and other programs on one hand. And on the other they face the demands of capital to create an “attractive investment environment” (meaning low taxes) combined with the populist wrath visited upon any politician who suggests that we might need to contribute more to the functioning of government.

For the first part of the 21st century some governments were able to have their cake and eat it too: economic growth for increased spending and reduced taxes all while balancing the books. The spinoff of growth elsewhere spilled over to the Yukon in the form of perpetually rising transfer payments that Ottawa could easily afford.

But since the “great recession” of 2008, that has become increasing difficult. Canada as a whole was able to buck the trend of sluggish growth to some extent thanks to a petro-boom in certain regions of the country.

But that’s over now and it is reflected in significantly lower growth in our transfer payments. Ottawa is dealing with challenges of its own and that puts constraints on how much it can increase the amount it doles out year after year.

To the extent that you can separate the two, ours is a problem of revenue, not expenses.

It may fit conveniently into some narratives that the problem is simply that big spending Liberals are in charge now. But spending isn’t increasing any more than it has in years past. In fact it is less. The government is projecting that its annual operations and maintenance spending will increase by about $138 million through 2021, which is a slower rate of growth than we witnessed under the ostensibly conservative Yukon Party government.

Premier Sandy Silver’s much-vaunted financial advisory panel will spend the next year coming up with a plan. As with so many other expert panels and inquiries I am skeptical that this one will come up with anything we don’t already know. After all, the government already has legions of staff devoted to studying these issues, and the question of how to grow the territory’s economy has been the central point of discussion in the public discourse forever.

There is certainly some waste that can be trimmed to help close the spending gap but our practical ability to extract savings in this manner shouldn’t be overstated.

Ultimately our choices are to bring our expectations about what government can do for us more in line with its capacities at this juncture in history, and our willingness to pay tax. Or we can pin our hopes on the renewed boom times that are just around the corner and will rescue us from the hole we are digging.

Kyle Carruthers is a born-and-raised Yukoner who lives and practises law in Whitehorse.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Whitehorse and Carcross will be among seven northern communities to have unlimited internet options beginning Dec. 1. (Yukon News file)
Unlimited internet for some available Dec. 1

Whitehorse and Carcross will be among seven northern communities to have unlimited… Continue reading

Willow Brewster, a paramedic helping in the COVID-19 drive-thru testing centre, holds a swab used for the COVID-19 test moments before conducting a test with it on Nov. 24. (Crystal Schick/Yukon News)
An inside look at the COVID-19 drive-thru testing centre

As the active COVID-19 case count grew last week, so too did… Continue reading

Conservation officers search for a black bear in the Riverdale area in Whitehorse on Sept. 17. The Department of Environment intends to purchase 20 semi-automatic AR-10 rifles, despite the inclusion of the weapons in a recently released ban introduced by the federal government, for peace officers, such as conservation officers. (Crystal Schick/Yukon News file)
Environment Minister defends purchase of AR-10 rifles for conservation officers

The federal list of banned firearms includes an exception for peace officers

Yukonomist Keith Halliday
Yukonomist: The K-shaped economic recovery and what Yukoners can do about it

It looks like COVID-19 will play the role of Grinch this holiday… Continue reading

Fossil finds at Mt. Stephen. (Photo: Sarah Fuller/Parks Canada)
Extreme hiking, time travel and science converge in the Burgess Shale

Climb high in the alpine and trace your family tree back millions of years – to our ocean ancestors

Black Press Media and BraveFace have come together to support children facing life-threatening conditions. Net proceeds from these washable, reusable, three-layer masks go to Make-A-Wish Foundation BC & Yukon.
Put on a BraveFace: Mask fundraiser helps make children’s wishes come true

From Black Press Media + BraveFace – adult, youth and kid masks support Make-A-Wish Foundation

Colin McDowell, the director of land management for the Yukon government, pulls lottery tickets at random during a Whistle Bend property lottery in Whitehorse on Sept. 9, 2019. A large amount of lots are becoming available via lottery in Whistle Bend as the neighbourhood enters phase five of development. (Crystal Schick/Yukon News file)
Lottery for more than 250 new Whistle Bend lots planned for January 2021

Eight commercial lots are being tendered in additional to residential plots

The Government of Yukon Main Administration Building in Whitehorse on Aug. 21. The Canada Border Services Agency announced Nov. 26 that they have laid charges against six people, including one Government of Yukon employee, connected to immigration fraud that involved forged Yukon government documents. (Crystal Schick/Yukon News file)
Charges laid in immigration fraud scheme, warrant out for former Yukon government employee

Permanent residency applications were submitted with fake Yukon government documents

Whitehorse City Hall. (Joel Krahn/Yukon News file)
City hall, briefly

A look at decisions made by Whitehorse city council this week

Karen Wenkebach has been appointed as a judge for the Yukon Supreme Court. (Yukon News file)
New justice appointed

Karen Wenckebach has been appointed as a judge for the Supreme Court… Continue reading

Catherine Constable, the city’s manager of legislative services, speaks at a council and senior management (CASM) meeting about CASM policy in Whitehorse on June 13, 2019. Constable highlighted research showing many municipalities require a lengthy notice period before a delegate can be added to the agenda of a council meeting. Under the current Whitehorse procedures bylaw, residents wanting to register as delegates are asked to do so by 11 a.m. on the Friday ahead of the council meeting. (Crystal Schick/Yukon News file)
Changes continue to be contemplated for procedures bylaw

Registration deadline may be altered for delegates

Cody Pederson of the CA Storm walks around LJ’s Sabres player Clay Plume during the ‘A’ division final of the 2019 Yukon Native Hockey Tournament. The 2021 Yukon Native Hockey Tournament, scheduled for March 25 to 28 in Whitehorse next year, was officially cancelled on Nov. 24 in a press release from organizers. (John Hopkins-Hill/Yukon News file)
2021 Yukon Native Hockey Tournament cancelled

The 2021 Yukon Native Hockey Tournament, scheduled for March 25 to 28… Continue reading

Most Read