This week, former anti-deficit Reformer Stephen Harper unveiled a 2009-10 budget that will see Ottawa spend at least $34 billion more next fiscal year than it takes in.
The next year, if his Conservative government still is in power, it will put the country at least another $30 billion in the red.
Through the next five years of economic turmoil and possible recovery, the Conservative government could spend up to $100 billion more than it takes in as revenue, wiping out the national debt paydown made in the past 12 years of Liberal and Conservative governments.
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Deficit spending, justified by finance minister Jim Flaherty and prime minister Harper as a necessarily extreme response to an extreme financial crisis, stood in contrast to the Reform party wave that brought Harper to Ottawa in 1993.
The argument then was that deficit spending had to be eliminated at all cost.
As the Liberals produced a dramatic cost-cutting budget in 1995 to eliminate 25 years of deficits, Reform MPs including Harper complained they were not cutting enough.
This week, the Conservative descendents of Reform embraced the views of 1920s British economist John Maynard Keynes that government spending in economic downturns is a useful economic tool as long as deficits are repaid when the economy is expanding.
Last week, as government sources were setting the stage for this week’s $34 billion deficit, one of the original Reform MP deficit fighters said he would hold his public comments until the number was official in a budget.
“No doubt running huge deficits for four years would be contrary to everything we stood for,” he said in an e-mail message.
But he also said some Reformers like him did not object to the Keynesian ideas of deficits in hard times offset by surpluses in good times.
The objection was that Liberal and Progressive Conservative governments ran deficits in both good and bad times.
“They stood poor old Keynes on his head.”
Meanwhile, new Liberal leader Michael Ignatieff said last week poor financial decisions during three years of Conservative government are the real reason the projected deficit is so large.
Tax cuts and spending increases converted a healthy surplus inherited from the Liberals, including a $3 billion annual rainy-day fund reserve, into a deficit when the economy cooled, he told a business audience in Toronto Jan. 23.
“They scrapped that reserve. They spent rashly. They cut taxes rashly. They brought Canada to the red line when times were good,” said Ignatieff.
“Now the cupboard is bare. We face hard times, headed towards a deficit which may top $100 billion before we see the other side of this.”
The United States is heading for a $1.5 trillion US deficit. In Canada, that level of spending would represent a 2009-10 deficit of $150 billion.
