Shh! Don’t call it austerity

Carlos Leitão
 
Quebec’s Finance Minister Carlos Leitão has some strange ideas, but the strangest is his ongoing pretence that his Liberal government has not implemented a program of financial austerity. He repeated it again this week, talking to reporters about the conflict over how to deal with the Greek debt situation in Europe.

Although he recognized that severe austerity measures imposed on Greece have contributed to its economic crisis, Leitão said Quebec doesn’t need to worry about that because a) our finances are in good shape and b) we aren’t engaging in austerity.

“Absolutely not. Because what we’re doing in Quebec is budgetary rigour. If you look at public expenses in Quebec … they are increasing.”

Well, some are and some aren’t. In his last budget, Leitão cut the budget for the essential but long-winded Ministry of Sustainable Development, Environment and Fight Against Climate Change by $37.9-million, or 19.4 per cent. Public Security was cut by $74.5-million, Employment and Social Solidarity lost $92.5-million, Transport saw a trim of $18.7-million, etc.

What Leitão calls “budgetary rigour” is still austerity, although it obviously isn’t as deep as what Greece has experienced.  Economist Tejvan Pettinger calls the type of program Quebec is pushing “austerity light. Here, government spending may have not fallen in real terms — or the fall may be very marginal. However, in these countries pursuing austerity light, there has been an attempt to reduce spending government commitments; the net impact of the government’s fiscal position has been to reduce aggregate demand and limit the growth of real GDP. During austerity light, government spending may not fall across all departments, but usually the changes in the government’s spending plans leads to a loss of public sector jobs and lower public sector investment.”

We’ve already seen a first wave of job losses in the health and education sectors and Treasury Board President Martin Coiteux is hoping to put the brakes on public sector salaries by offering just a three per cent increase over the next five years to 550,000 workers.

All this spells austerity to any objective observer, which clearly excludes Leitão, who has apparently traded in his McGill Economics degree for a certificate in Couillard Newspeak.

The other interesting thing about Leitão’s reaction to the Greek situation is his acknowledgment that the state of Quebec’s finances pale in comparison to Greece, where the state’s debt represents 177 per cent of its annual economic output (Gross Domestic Product), versus 55 per cent for Quebec. Even when you tack on the federal deficit, the combined debt is 87 per cent of GDP, a far cry from debt ratios of 245 per cent in Japan, 130 in Italy and 108 in the United States. Even the economic darling of the European Union, Germany, is only marginally less indebted than we are, at 80.4 per cent (2013 figures).

The bottom line is that Quebec is in better shape than five of Canada’s six partners in the G7 alliance of the world’s most advanced economies. This doesn’t mean we should start spending like crazy to catch up to Japan, but we certainly don’t need to ratchet back on public expenditures, especially now that the Canadian economy already appears to be heading into a recession, according to the Bank of America and the TD Bank.

Ah, but federal Finance Minister Joe Oliver is denying we’re there yet, even though the economy has contracted for four months in a row. Meanwhile, Leitão has been bragging that the economic storm won’t reach us here in la Belle Province. “No question of a recession in Quebec,” he told reporters in a conference call last week. “The economy is doing better than last year. We see an acceleration in growth.”

He also announced that Quebec’s 2014-15 budget deficit was actually $539-million less than he had forecast just four months earlier.

Apparently, then, we are doing so well that neither “rigour” nor austerity are proving to be very critical in reaching Quebec’s goal of a balanced budget by next year.

If we keep it up, though, maybe we can rigour our way into the recession that Leitão says won’t happen. ■
 
Peter Wheeland is a Montreal journalist. His sardonic observations about the city and province appear on Cult MTL every week. You can contact him by Email or follow him on Twitter.