Conservatives Against Deficits

April 1st, 2016 | R. Rados 


In a recent article at another website, Jeff Hodgson decided to give one of the most basic and definitive conservative values a shake. In a piece entitled “Give The People What They Want”, Hodgson suggests that conservatives should embrace deficits, spending and debt. He makes the bold proclamation that we should not demonize debt, but wallow in it. Almost immediately, Danielle Smith invited him onto her radio show to defend and explain his position. Although he made a lot of concise and vivid points, I'll need to take this time to completely disagree and explain why fiscal restraint and prudence are the most important and non-negotiable tenets of conservatism.

To put it simply, fiscal conservatism is one of the few things the Conservative Party has left to define itself. The party settled the gay marriage debate and the abortion debate almost a decade ago. When it comes to social issues, Conservatives have veered into libertarian waters and blurred the lines that separate them from Liberals and socialists. On economic policy, the Conservatives still stand for fiscal prudence and balanced budgets. The natural consequence of fiscal conservatism and minimal public spending is smaller government. If we do away with this fundamental tenet, the Conservative Party would no longer be a legitimate advocate for small government.

If deficits are inevitable they may as well be directed toward conservative purposes. Tax cuts fit the bill, as conservatives of all stripes believe keeping more earned wealth encourages independence, hard work, and individualism....Better to run deficits for tax cuts now rather than wait for future left-wing governments to run deficits for green schemes or Soviet-style daycare programs.” – Jeff Hodgson

The bigger our public debt gets, the higher our taxes will be in the future. Even in a booming economy, taxes are required to pay for public debt. Whether it's business tax, corporate tax, income tax or sales tax – taxes pay public debts. Without taxes, governments risk going into default. The natural consequences of massive public debt are tax hikes. This isn't an economic theory, it's a simple fact. Deficit spending for tax cuts today will guarantee higher taxes tomorrow.

It's true that public debt eventually hits a ceiling. In some countries, that ceiling can be raised, making it pointless but not inconsequential. In other countries, the ceiling is decided only by the laws of sustainability, markets and the willingness of creditors. In a lot of cases, public debt can even stifle economic growth and create a crisis that requires devastating cuts to services, massive tax hikes and bailouts. During poor economic conditions and debt crises, taxes get diverted from the public services they were meant to sustain in order to pay down the national debt, leaving taxpayers with nothing to show for their sacrifices.

At a time when Liberals are taking a gamble by adding billions to Canada's national debt, Conservatives should be the voice of reason. The Liberal deficit plan is predicated on the theory that massive spending today will create long term economic benefits tomorrow. If the economic growth doesn't become self sustained or gain the traction Liberals think it will, Canadians will be strapped with a massive debt and nothing to show for it.

They need to allow deficits to grow into debts and then govern permanently on the razor's edge of solvency. Should an election be lost, incoming progressive governments will be left with empty cupboards, little opportunity to expand the state, and bleak re-election prospects. Just ask Alberta Premier Rachel Notley.” – Jeff Hodgson

The idea presented by Hodgson that deficits and debt restrict future governments is enticing, but it's not necessarily accurate or always beneficial for conservatives. In Rachel Notley's case, her NDP government has done the exact same as Trudeau's Liberals. When Jim Prentice left office, he left behind a reasonable, balanced plan and a deficit that barely compares to Notley's $6 billion. Alberta's NDP government has taken risks by expanding public spending and public hiring during an economic downturn. Jim Prentice's plan involved service fee hikes and a new progressive tax system alongside safe spending cuts without corporate or business tax hikes. Unfortunately, decades of PC corruption overshadowed what was the most reasonable platform in Alberta's election campaign.

Leaving cupboards empty for future governments can also work against incoming conservative governments. If incoming conservatives are left with a maxed-out line of credit, a poor economy and high taxes, they'll end up being stuck having to make massive service cuts without being able to cut taxes significantly enough to have a positive economic impact. If the debt is too high, conservatives wouldn't be able to increase spending or expand government, but they wouldn't be able to make meaningful and immediate tax cuts either. This could diminish their prospects for re-election, especially if they can't keep most of their original promises.

Centre-right politicians need to stop thinking about paying down debt and focus instead on building it up. Run those deficits right up to the brink of a credit downgrade and then back off just enough to allow some leverage for transitory crises like recession or natural disaster.” – Jeff Hodgson

High taxes kill economies. High taxes result from high debt. High taxes combined with high debt and a poor credit score result in poor economic confidence. Poor economic confidence dissuades businesses and investors. Therefore, high debt almost always results in economic collapse. Eventually governments reach a dangerous threshold that prevents them from cutting taxes, improving the economy and paying down their debt fast enough to reinvigorate and attract investments. 

Maxing out our credit and leaving a little bit of room for disasters and recessions is dangerous. What if there are several disasters in a short period of time? Conservatives who are entertaining this idea should think about what happens if there is a natural disaster and we use up the remaining "leverage". What then? 

On the other side of the spectrum, governments should also not be in the business of allowing crises or creating crises with deep cuts during dark times.

In the Alberta provincial election, the Wildrose promised to make cuts across several government sectors without increasing taxes. Unfortunately, their plan was just as risky as the NDP's big spending and deficits. At the time, Alberta's economic forecast was darkening and the price of oil was nearing rock-bottom. Some economists believed that oil would rebound within months, while others saw a darker reality – the reality Albertans are living in right now. Had the Wildrose won a majority and implemented their cuts during the economic downturn, they would have added to Alberta's unemployment rate, taken more taxpayers out of the workforce, reduced consumer buying power and created a much larger crisis. Chances are that the Wildrose would have realized this and been forced to break most of their promises. 

You don't need to take my word for it. You only need to believe that debt is rarely a good thing. Debt is a necessary evil in this day and age for anyone looking to create jobs and secure long term investments, but it's not something we should relish or wallow in. Debt is not something any government should be eager to create. What conservatives should be wallowing in is debt-free dollars and the long term prosperity and confidence that comes with a good credit rating. Conservatives can win elections based simply on their fiscal restraint and common sense. If they start embracing deficits and debt, conservative voters won't have anyone left to represent them in the House Of Commons. If conservatives are known as the grumpy old janitors tasked with cleaning up progressive messes, so be it.

Every school needs a janitor. Every neighbourhood needs a garbage man. If Conservatives cease being the janitors, Canadian voters will look elsewhere and give the janitorial duties to someone else.