The federal government is fiscally constrained to an extent not seen since the fiscal crisis of the early 1990s.
Eugene Lang argues that given the close federal race, almost all the probable outcomes of the October election will produce major policy changes: “Canadians will be in for significant public policy change in Ottawa, whoever wins the election and independent of the parties’ platforms. In other words, fairly big and unexpected policy change is probably in the air.”
He may be right, but more likely than not it will be a case of new faces, same gene pool when it comes to policy change at the federal level.
The likelihood of a minority government is high, meaning that there will be little radical change. In addition, all three parties and their leaders are remarkably similar when it comes to their fundamental views of what government in Canada should be doing. Even the NDP is now quite middle-of-the-road in terms of its approach to economic policy, given that Thomas Mulcair has moved the party to the political centre. Do not expect a revolution in public policy.
More importantly, if one is going to engage in evidence-based policy, the evidence is that the federal government is fiscally constrained to an extent not seen since the fiscal crisis of the early 1990s. While the budget is balanced and federal program spending is sustainable, in terms of expenditures or revenues to GDP the overall footprint of the federal government is where it was in the 1960s. The government has been shrunk in terms of both its tax and its expenditure footprint, and this shrinking began in the 1990s. Given the economic slowdown currently underway and in the absence of a new spurt of economic growth, governments of any stripe will be hard pressed to implement new initiatives without making major tax changes or spending reallocations. Tinkering with marginal changes in personal or corporate tax rates will not produce a cornucopia of resources, and unless party leaders say one thing during the election and do something completely different thereafter, there will not be a major change to either taxation or spending at the federal level. It is not as if any party is promising to establish a royal commission to reform the tax system, given that the last major set of tax reforms was in the late 1980s.
Therefore, if the Conservatives form the next government, it will be business as usual. If the NDP or Liberals form the next government, expect the inspirational rhetoric of a new era, but in the day-to-day operations government will quickly settle into business as usual after one or two high profile announcements. The only major change will be in the style of government, and that is simply a function of the public personas of the party leaders.
Livio Di Matteo is professor of economics at Lakehead University.