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What Does a Prudent Budget Look Like in these Challenging Times?

Prime Minister Justin Trudeau and Minister of Finance Chrystia Freeland speak to media as they arrive to deliver the federal budget to the House of Commons on Tuesday, March 28, 2023. THE CANADIAN PRESS/Justin Tang

I have been trying to sort out why I so dislike the recent federal budget. The loudest critics – the Conference Board, bank economists, much of the mainstream media – have complained about too much spending in this time of continuing inflation, about deficits and debt. How long will we have to wait to see a balanced budget, ask some. This is not the path to prosperity, declare others. My friend, Kevin Page, stated that prudence is imperative in these uncertain times.

So what does prudence mean when we confront the prospect of devastation from climate change and nature loss, when we know that the world is in the midst, however slowly and reluctantly, of a transition to a net zero future, when inequality, colonialism, racism, gender inequality and bigotry create human suffering and undermine social trust and the solidarity necessary to solve our shared challenges, when our commitment to democracy continues to erode? How does the desire for a balanced budget – which frankly most economists recognize as a misguided fiscal anchor – outweigh our commitments to social and environmental justice, to sustainability and equity and inclusion and democracy and peace?

How did fiscal health, so-called, come to trump human health and well being? Our fiscal health frankly stacks up pretty well against other advanced economies. Our debt to wealth ratio is in pretty good shape. Inflation, the result of a toxic mix of the consequences of climate change, the pandemic, fragile supply chains, terrible housing policy, war and greed will not be fixed by higher interest rates and restrained spending.

So what’s prudent? Surely it’s not a return to the costly and failed politics of austerity. But neither is it half measures in addressing our greatest challenges.

First, we need to help people now. What some see only as an inflation problem is better seen as an affordability problem, especially for those at the bottom of the income pyramid. That means we need – now – better income supports and universal access to essential services (pharma and housing, example) and strengthened collective bargaining and labour rights. And to attack inflation we ought to be attacking its real causes in the real world rather than what is set out in some 1960s economic texts. We need to be attacking the financialization of housing, the fragility of global supply chains, the unconstrained and relatively untaxed rise in corporate profits and accumulated wealth.

Second, (first really) we need more than half measure on climate and nature. As Seth Klein reminds us, if we really mean that we face a climate emergency, perhaps we should act like it. Public investment in a green future is not overhead or a drag on the economy. Quite the contrary. And as Mariana Mazzucato has shown us, mission driven government investment has always been the key driver of economic innovation and opportunity.

Third we will not make progress if we fail to make equity and inclusion a top priority. It is the right thing and necessary to build social trust and solidarity.

Finally we must stop treating democracy as a side issue. We have seen the dangers of taking democracy for granted.

In sum, what better mission – for society, for the planet, for the economy – than to invest in a just transition to a sustainable, equitable, inclusive, democratic, and peaceful future.

In that context I am reposting a piece I wrote a while back on what I think a prudent budget would look like in these uncertain times.

Editor’s Note: For those interested in exploring more of Alex’s thinking, we would also highly recommend this related blog on principles for a transformational budget.

Alex Himelfarb
Alex Himelfarb
Alex Himelfarb is a former Clerk of the Privy Council and currently chairs or serves on numerous voluntary sector boards. He was also the Director of the Glendon School of Public and International Affairs, leading the Centre for Global Challenges.  He is an Atkinson Foundation Board member as well as a Fellow of the Broadbent and Parkland Institutes, respectively.
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