Manitoba Parties Ignore Europe Debt Crisis: Spending and borrowing platforms out of touch with new reality

Commentary, Taxation, Joseph Quesnel

Europe’s debt crisis has already claimed Greece, Ireland and Portugal as victims.

Next in line is Spain, which, by the end of 2011, will have a public debt of 68% of GDP due to rising deficits. Unemployment is skyrocketing and the government is considering drastic measures. Amazingly, unemployment went from 8.3% in 2007 to a disastrous 20.9% in May, the highest in the European Union.

The age of high deficits, padded public sectors, and early retirement age is being challenged. When crisis hit, it was quickly discovered the fiscal model Europe was relying on was broken and needed fixing. Someone needs to pay the bills and you can’t survive in a society where takers outnumber makers.

Manitoba, however, seems to be caught in la-la land, ignoring these larger signs outside its borders at its peril.

The race between the three political parties seems to be more about who can hire the most health-care workers and add to our growing deficit the most.

Instead of a long-term vision for prosperity, Manitoba politicians are engaging in a bidding war for votes in a race dominated by appeasing interest groups. Voters have been segmented into groups and the name of the game is appeal to specific voters.

This lackluster election campaign comes on the heels of a recent Fraser Institute report ranking the fiscal management skills of Canada’s 10 provincial premiers. Premier Greg Selinger was third worst, bested only by Ontario’s Dalton McGuinty and Robert Ghiz of PEI.

Manitoba’s poor record was driven by deficits and debt, which is second worst in Canada. The auditor general recently placed our province’s core government deficit for 2010-11 at $490 million, higher than previous estimates. Manitoba also has the highest personal income taxes west of Quebec and very high corporate taxes.

So, we have European-style economic issues right here, but our politicians are completely oblivious to the international economic climate that is calling for fiscal restraint and cautious policy. That’s what happens when other provinces pay 37% of the provincial governments bills via transfer payments (up from 32% in 1999).

But to look for unsustainable financial models, we don’t even have to look across the pond. Right next door, the United States faced its first credit downgrading.

Contrary to what some say, the credit rating agency that issued the downgrading attributes it to unsustainable spending on government entitlements. Growth in entitlements will simply not keep up with slower economic growth and the declining number of contributors to the system.

To hear the conversation during Manitoba’s election, however, one would think Manitobans felt immune from these trends and events and insights coming from Europe and the U.S. did not affect them.

This is not to say these crises will reach Manitoba at the same level. As everyone is apt to point out, Canada has weathered through this economic storm in much better shape than other jurisdictions, but it would be foolish to pretend international economic trends have no impact on us.

The writer of Proverbs said where there is no vision, the people perish. For Manitobans, this could be the writing on the wall.