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

Liberal leader Sandy Silver speaks outside his campaign headquarters in Dawson City following early poll results on April 12. (Robin Sharp/Yukon News)
BREAKING: Minority government results will wait on tie vote in Vuntut Gwitchin

The Yukon Party and the Liberal Party currently have secured the same amount of seats

Yukonomist Keith Halliday
YUKONOMIST: The Neapolitan election

Do you remember those old bricks of Neapolitan ice cream from birthday… Continue reading

Chief Medical Officer of Health Dr. Brendan Hanley. (Crystal Schick/Yukon News)
Exposure notice issued for April 3 Air North flight

Yukon Chief Medical Officer of Health Dr. Brendan Hanley has issued another… Continue reading

Crystal Schick/Yukon News file
Runners in the Yukon Arctic Ultra marathon race down the Yukon River near the Marwell industrial area in Whitehorse on Feb. 3, 2019.
Cold-weather exercise hard on the lungs

Amy Kenny Special to the Yukon News It might make you feel… Continue reading

Whitehorse City Hall (Joel Krahn/Yukon News file)
This week at city hall

A look at issues discussed by Whitehorse city council at its April 6 meeting.

lwtters
Today’s Mailbox: Rent freezes and the youth vote

Dear Editor, I read the article regarding the recommendations by the Yukon… Continue reading

Point-in-Time homeless count planned this month

Volunteers will count those in shelters, short-term housing and without shelter in a 24-hour period.

The Yukon’s new ATIPP Act came into effect on April 1. Yukoners can submit ATIPP requests online or at the Legislative Assembly building. (Gabrielle Plonka/Yukon News file)
New ATIPP Act in effect as of April 1

The changes promise increased government transparency

A new conservancy in northern B.C. is adjacent to Mount Edziza Provincial Park. (Courtesy BC Parks)
Ice Mountain Lands near Telegraph Creek, B.C., granted conservancy protection

The conservancy is the first step in a multi-year Tahltan Stewardship Initiative

Yukon RCMP reported a child pornography-related arrest on April 1. (Phil McLachlan/Black Press file)
Whitehorse man arrested on child pornography charges

The 43-year-old was charged with possession of child pornography and making child pornography

Team Yukon athletes wave flags at the 2012 Arctic Winter Games opening ceremony in Whitehorse. The postponed 2022 event in Wood Buffalo, Alta., has been rescheduled for Jan. 29 to Feb. 4, 2023. (Justin Kennedy/Yukon News file)
New dates set for Arctic Winter Games

Wood Buffalo, Alta. will host event Jan. 29 to Feb. 4, 2023

Victoria Gold Corp. has contributed $1 million to the First Nation of Na-cho Nyak Dun after six months of production at the Eagle Gold Mine. (Submitted/Victoria Gold Corp.)
Victoria Gold contributes $1 million to First Nation of Na-cho Nyak Dun

Victoria Gold signed a Comprehensive Cooperation and Benefits Agreement in 2011

Most Read