“Spending” Fundamentals

Canada’s Finance Minister, Bill Morneau, donned his new pair of designer shoes last Tuesday and delivered the government’s budget. For clarity it ought to be called the government’s spending plans, larded with lots of “feel good” spending initiatives that have nothing to do with practical finance or economics.Shoes

To many of us the hoopla that surrounds the government’s budgeting process and the endless commentary that follows release of the budget itself is mind-boggling. Lawyers, accountants, journalists and various pundits on television are engaged in analyzing the government’s budget.

It is easier to understand what’s going on if you identify and keep the fundamentals in mind as you try to follow the responses.

To start, consider that on a personal level, whether your means are modest or extravagant, one thing is certain: you can’t spend more than you earn. Even if you do, you must eventually repay the resulting debt from your future earnings.

You have a method, formal budget or not, for deciding what you can afford to spend.

You have limits.

Now consider your agent, the government, the proper and fundamental role of which is to protect your rights. Agents don’t work for free so you pay some amount in the form of taxes to secure this service.

Lately, your agent’s fees have gone up and it seems there are no spending limits.

To be frank, the government is spending like a drunken pothead. And, there’s a lot of frivolous spending going on, nearly $20 billion per year over the annual tax levies.

The government, to make matters worse, has no earnings. It doesn’t produce anything so adds no economic value. The Canadian government, like all governments, only spends the wealth taken from the productive in society.

Let’s keep this fundamental set of facts in mind as we consider some commentary.

Andrew Coyne, writing for the National Post criticizes the budget in a lengthy piece for favouring “equality” over addressing spending and economic growth.

Probably true, but this level of critique does not address the fundamental, which is only spending.

Anthony Furey, for the Toronto Sun calls it the first “social justice budget” and criticizes it in that context. He points out that the budget mentioned “gender” 358 times as it focused on this and other issues of “identity politics”.

This too is fair criticism but leaves the spending fundamental for you to decipher.

A Bloomberg News analysis published in the Financial Post challenges the government for possibly missing its last chance to balance the budget.

Bloomberg essentially maintains that Canada’s in a good growth position now but it may not last. The government in other words is too optimistic and has no contingency plan if an economic downturn happens.

One of the best headlines for an article about this budget comes from a Toronto Sun editorial which states it’s equally bad for all genders.

All these concretes and associated analysis distract from the fundamental however.

Guess what? It’s spending.

No matter how many specific bits of nonsense are addressed the fundamental problem is that our government can’t control its spending.

I didn’t buy a new pair of shoes to present these observations. My budget doesn’t permit such extravagance.

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