Let’s show a little fiscal restraint here

Will it be hard to cut $4 billion? Andrew Coyne gives it a try.

Let's show a little restraint here

Dave Chan/Reuters

The first signs of what was to come appeared in the Globe the previous week. “Public sector layoffs may be the tip of the iceberg,” teased the headline, leaving the story to convey the grim news: “The federal government’s bid to curb spending amid a multi-billion-dollar fiscal shortfall has delivered some of its first job casualties of the year.” Brace yourself, it gets worse. “Five curators at the country’s pre-eminent art gallery have been given layoff notices, while about 50 Environment Canada term employees, including scientists and scientific support staff, have been told they’ll no longer have jobs by the end of the month.”

OH MY GOD, they’ve—wait, what? Five curators? Fifty Environment Canada employees? Nobody likes to see anybody lose their job, but how exactly is this evidence of a bid to curb anything? Some perspective: the federal public service, not counting uniformed military or police, employs more than 280,000 people. That’s an increase of about 33,000 since the Tories took power in 2006. Those unfortunate gallery curators and weather forecasters make up about one-sixth of one per cent of the extra employees the government has taken on over the last five years. If this is the “tip of the iceberg,” and if, as every schoolboy knows, four-fifths of an iceberg is below the surface, then we can look forward to reductions in the public service roughly equivalent to about two weeks’ worth of new hires.

Nevertheless, when at last it was “revealed” that the federal government would, as it said it would in its first attempt back in March, and as it repeated it would every day of the election campaign, cut $4 billion out of federal spending by fiscal 2015, well, you could knock us over with a feather. “Budget on the table, public service on the chopping block,” the Globe told readers the next day, while the Star screamed: “Cuts loom as Harper vows to slay deficit.” It would be, the Globe story said, “the most aggressive period of government restraint since the mid-1990s.” Which is fair enough, since it would be the only period of government restraint in that time: since 2000, spending has more than doubled.

Well, unless you count the period of restraint that happened toward the end of last year, when spending mysteriously dropped $4 billion below forecast. That’s right. As recently as the March budget, program spending for fiscal 2011, the year just passed, was projected to come in at $245 billion, yet here we are three months later, and it comes in at “only” $241 billion. So the target to be achieved four years out by the grandly named Strategic and Operating Review might well be achieved by September, for all we know, just through forecast error.

Mind you, you’ve probably heard it more often expressed as $11 billion, as in the government’s planned “$11 billion in cuts.” Eleven billion is what you get if you add up the targeted cuts over four years: $1 billion the first year, $2 billion the second, and $4 billion in each of the third and fourth. But those figures are cumulative: each year’s cut builds on the previous year’s. If you eliminate a program that costs $1 billion in year one, you don’t have to eliminate it again in year two. So adding them together is a little like adding the temperature together on different days (“over the month of February, it was a cumulative 400 below”). Or to put it another way: over those same four years, total program spending before the cuts is projected at $1.022 trillion. After the cuts: $1.011 trillion. Chopping block? More like nail clippers.

Mind you, $4 billion is not nothing. It is more than twice as much, for example, as the savings claimed from four previous Strategic Reviews combined. And to be fair, since the government has declared transfers to provinces and people off limits, the cuts will come out of a much smaller envelope of operating expenses, worth about $80 billion annually. So that means a reduction of about five per cent. Factor in inflation and population growth, and by fiscal 2015 overall program spending will have declined 12 per cent from its 2010 peak.

Well, yes: from its 2010 peak—a year in which spending increased by $37 billion. Never before in our history had spending exceeded $6,200 per capita, in 2010 dollars. In that one magical year, it leapt to $7,200. To be sure, the coming era of austerity will cut it back—to $6,300. But spending will still be nearly 10 per cent higher, after all that heaving and groaning, than it was before the Tories took power.

Will it be hard to cut $4 billion? Here, let me try. We give about $8 billion annually in subsidies to Crown corporations like the CBC, Canada Post, Atomic Energy of Canada Ltd., and Via Rail—it ought to be possible to find a couple of billion there. We hand out another $1.5 billion through just five departments in subsidies to private industry, plus about $700 million through a cluster of regional development agencies: cut those and we’re done.

Too harsh? The federal government will spend nearly $40 billion this year in “other transfers,” that is, neither to provinces nor to people, but to organizations: big businesses, small businesses, native bands, social clubs, in fact just about anything with a business card and a mailing address. Just to list the “grants and contributions” over $100,000 takes up 280 pages in the Public Accounts, in six-point Helvetica.

So cut every tenth grant and we’re done.

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