Political Inflation |

Political Inflation |

But how ironic.

Posted yesterday at 7:00am

Split

The Auditor General’s report on public finances should prevent overspending and campaign promises. But judging by the reaction of the parties on Monday, that is possible.

That wasn’t the goal. And the report is not intended to encourage that, if you take the trouble to read everything.

In 2014, Philippe Couillard said he had spotted a “hole” left in public finances by the PQ government. He relied on this to justify the rapid tightening of spending. A bit like Jean Charest in 2003.

To put an end to this bad film, Mr. Couillard proposed that the Treasury publish its forecasts before each election campaign and that the Auditor General validate them afterwards.

This should force the parties to base their budgets on the same numbers. In other words, don’t justify your promises with unrealistic sales forecasts.

In 2018, however, the Coalition avenir Québec stretched the rubber band by predicting that growth would be greater thanks to a mysterious “CAQ effect.” This time she doesn’t have to invent a miracle. Reality did the work. The $6 billion deficit has dwindled, in large part because of inflation, which is bloating government revenues.

However, inflation has a serious downside: it also increases the cost of living. The parties compete for election promises. They want to finance more public services and at the same time lower the tax burden.

Almost everyone is happy. But that comes with two risks.

The first is the uncertainty. The word appears no fewer than 64 times in the Auditor General’s analysis. She describes it as “very high”. International monetary policy, the level of inflation, the war in Ukraine, the development of the pandemic, all of this remains “highly volatile,” she writes in passages that were not emphasized by the parties. …

In addition, the Treasury Department’s report is based on forecasts made at the end of June, which have since been revised. And financial institutions continue to adjust their crystal balls frequently.

A recession is anything but impossible. Treasury Secretary Eric Girard puts the probability at 35%.

The other risk is political.

She was rejected several times during the election campaign.

There is short term. Unlike economics, demographics are easy to predict. But even if population aging puts severe pressure on public finances in the long term, parties will be tempted to propose solutions only by assessing their costs over the next electoral cycle. Again, the budget planned for the end of a mandate is never very precise. Numbers are rounded to get the desired result. Retirement homes are a prime example. Will this model be viable for the next 20 years? The CAQ does not seem to be happy to answer this question.

Another pitfall is consensus. The Auditor General’s report will allow the parties to promise anything and everything. More money for education? you will for. Also healthy. And tax cuts for everyone, why not? Of course, without neglecting targeted help for the poor. The values ​​are reflected in the selection, but the CAQ’s strategy is not to get wet. This chameleon party claims to be for a little bit of everything at the same time. Suffocating debates are his plan, but they do not serve democracy.

Finally, there is a risk that the expected return to balanced budgets will divert attention from a serious problem: budget increases do not necessarily lead to improvements in services. It’s more complex…

There are more than 37,000 vacancies in health and social care. And even if we budget for hiring these people, that doesn’t mean they’re going to come. Better care is not just about “how much”. It is also the “how”. For example, the organization of work.

The improvement in public finances undoubtedly remains good news. But it’s more fragile than it says. And it shouldn’t prevent as awkward debates as necessary.