Canada’s new deficit plan is trouble
Yesterday Federal Finance Minister Bill Morneau announced the projected deficit for 2016-17 is now $18.4 billion. This amount does not include $10.5 billion in new spending promised by the Liberals during the election campaign. When the budget is delivered in one month’s time it is foreseeable the total deficit could be in excess of $30 billion. During question period Prime Minister Trudeau defended the proposed financial course of action as something the Canadians want and voted for, while the Leader of the Opposition, Rona Ambrose, alleged that increased federal spending will amount to waste. (Ms. Ambrose is likely well aware of the wastefulness of government programs after having served for three years as Minister of Public Works and Government Services. In that role and other portfolios she has held she is not innocent herself of producing and perpetuating waste.)
In their book Free to Choose, Milton and Rose Friedman exposed, among other things, the fallacy of the welfare state and the disappointing nature of all government programs. This is an unavoidable consequence of the spender spending someone else’s money on yet someone else. It is like paying for someone else’s lunch out of an expense account. The spender has little incentive either to economize or to try to get his guest the lunch that he will value most highly. Moreover, as Hayek (1945) explained in the “Use of Knowledge in Society”, spenders do not have and cannot obtain the information necessary to spend money on other peoples’ money on yet other people as effectively as when you spend your own money on yourself. This is the crux of why government spending is so wasteful. Legislators vote to spend someone else’s money. Bureaucrats who administer the spending programs do the spending someone else’s money on yet someone else.
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