Writing in the Globe and Mail, Macdonald-Laurier Institute Managing Director Brian Lee Crowley says that the federal government’s proposed balanced-budget legislation would leave members of Parliament with discretion to respond to unforeseen circumstances while still reining in unfettered spending.Brian Lee Crowley

By Brian Lee Crowley, April 17, 2015

To balance or not to balance? That is the question.

In the hoopla surrounding the federal government’s proposed balanced budget legislation, editorialists and others have rightly drawn attention to the need for politicians to have discretion in budgetary matters. This goes to the heart of parliamentary democracy: the ability of the current parliament to decide what taxes to impose and how to spend the money according to the conditions of the day and then to be answerable for their decisions at election time. From this need for discretion many of them (including this newspaper’s editorial board) conclude that any fettering of that discretion is wrong in principle.

Rules and discretion are not incompatible, however, but are indispensable complements to one another. Nowhere is this truer than in democracy.

Much of the history of parliamentary democracy has been about taming arbitrary discretion, people in power making up the rules as they go along. Charles I was the last guy to think his untrammelled will was the principal safeguard of the interests of the realm. Look how well that worked out for him.

Because the power we entrust to politicians is both necessary but can be abused, successful democracies look for ways to establish guideposts for how we think that power ought to be used. Having those standards of what sensible and thoughtful stewardship of power looks like both constrains the decisions of the powerful and gives us good guides to judging the government’s record when election time arrives.

Sometimes it might be useful for public authorities to be able to arrest us because they think we might be engaged in criminal activity. But because such discretion can be abused, we subject their powers of search and arrest to rules and hold them accountable for abuses.

Central banks used to have enormous unfettered discretion to adjust interest rates, a power they thought was indispensable to their effectiveness. We’ve largely tamed that power too, requiring increased transparency in their plans and decisions.

In Ottawa the discretion that political parties enjoyed to accept corporate and trade union funding is gone. The resulting transparency in party finances has been a boon, although there were plenty who predicted devastating consequences for our political parties.

In international affairs, Ronald Reagan famously summed up the principle at work when discussing whether the Soviet Union could be trusted to follow through on its nuclear disarmament commitments. Trust, Reagan said, but verify. In other words, get the Soviets to agree to certain targets and objectives and give them some discretion in how to achieve them, but at the same time make sure you have the means to establish objectively if they’re following through. Shine a spotlight on their actions. Hold them accountable for progress or its absence.

The problem of a lack of formal yardsticks of budgetary discipline is not a theoretical one for Canada. On the contrary, we had a long experience of what politicians, empowered by a vaguely grasped Keynesian juju, did with their unfettered budgetary discretion.

Yes, they borrowed and “stimulated” in bad times, but the political benefits of spending without taxing felt so good that they could not stop in good times.

We got 22 years of deficit budgets between the 70s and the 90s, by which time we were spending 30 cents of every tax dollar simply to service the interest on the money we’d already borrowed. That money was not available for needed public services.

We were only able to fix that when Jean Chretien and Paul Martin decided voluntarily to renounce budgetary discretion and to subject everything to the balanced budget rule. When they drove through the thicket of established interests that loved Ottawa’s spending and didn’t care if future generations were mortgaged to pay for it, the results were stellar. It kicked off a decade in which Canada outperformed its G7 peers on virtually every measure that matters: growth, job creation, investment and poverty reduction, for instance.

Yes, politicians should have discretion to respond to unforeseen circumstances, but that does not mean that the discretion should be absolute. We should make clear that our baseline assumption is governments should impose the taxes needed to pay for the services they propose to provide. We should similarly make clear that deviations from this baseline are permitted where circumstances warrant but that politicians must be transparent about it and have to justify publicly their decision and their plan for returning to balance as soon as practical. It may be hard to get the rules just right, and we may need to experiment with them. That, however, is not an argument against having rules governing budgetary discretion, but rather for getting on with establishing what they should be.

Brian Lee Crowley (twitter.com/brianleecrowley) is the Managing Director of the Macdonald-Laurier Institute, an independent non-partisan public policy think tank in Ottawa: www.macdonaldlaurier.ca.

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