The folly of balanced budget legislation
In a column in The Tyee, former BC Socred cabinet minister Will McMartin reviews the ups and downs of BC’s three strikes at balanced budget legislation. Each time this legislation has been repealed, although when the latest BC legislation is “amended” next week it will mark the first time this has been done by the same government and premier that brought it in.
Basically, balanced budget legislation is a gimmick that works during good times, when revenues are robust, but fails the moment a recession rears its head. The unseemly alternative is tax increases or spending cuts precisely when they would be least welcome.
The Quebec govt has a zero-deficit law, and it makes it all that much more difficult to conduct sensible policy. Worse, too much energy is spent trying to pretend that there isn’t a deficit, and gaming the accounting rules to get the result they want.
Apparently, there’s a clause saying that deficits are okay under certain circumstances. Hopefully, the govt will decide that those circumstances are in fact in effect this year.
Mark Thomas has a good post de-bunking the burden of the debt argument which helped produce the anti-deficit hysteria:
http://economistsview.typepad.com/economistsview/2009/02/bogus-arguments-about-the-burden-of-the-debt.html