Sunday March 01, 2015

Why balanced budgets aren't always good budgets

Premier Christy Clark (left) listens as B.C. Finance Minister Mike de Jong tables the provincial budget in the Legislative Assembly Tuesday, February 18, 2014 in Victoria, B.C.

Premier Christy Clark (left) listens as B.C. Finance Minister Mike de Jong tables the provincial budget in the Legislative Assembly Tuesday, February 18, 2014 in Victoria, B.C. (The Canadian Press)

Listen 3:18

Last week, the BC government did something few provinces will likely do this year: tabled a balanced budget. With a struggling Canadian economy, BC's could be the only balanced budget across the country this year. 

But people who watch budgets closely say there's something we need to remember-- balanced budgets aren't always a good thing.  Lisa Philipps is one of those people.  She's a professor at York University's Osgoode Hall Law School, specializing in tax law and fiscal policy. We gave her 180 seconds to explain why balanced budgets aren't always best. 

"We've come to sort of fetishize that zero balance, or modest surplus"

Lisa Philipps says a balanced budget is not an achievement in and of itself. When a government tables a budget, she says you need to ask questions before you know whether it is a good or a bad thing: questions like what was cut to balance the budget, and how the math was done. 

Government should exercise fiscal responsibility over an economic cycle 

Philipps says annual balance should not be the ultimate goal, and governments are forced to make bad decisions if they restrict themselves to yearly balance. In times of downturn, or in the face of economic shock (like plummeting oil prices), she says governments should be more focused on supporting the economy, through measures like stimulus spending, than balancing the books. 

Should the federal government balance the budget this year? 

The federal government has promised a balanced budget for 2015/16, but Philipps thinks it should reconsider. She says things have changed, and they should take that into account before going ahead with old plans. But, she knows politicians can get in a bind when they promise balance, so she's not sure what they'll actually do: "We seem to have this notion of handcuffs, that if you said that you are going to balance the budget, then you have to or somehow there's been a failure of leadership."