Rites of Spring: The Municipal Budget-Cut Dance

 

By  James Winter

Besides watching for robins and crocuses, another rite of spring is the municipal budget-cut dance. Mayors and councillors clumsily step on each other’s toes, vying for favourable publicity. Fearful of the dreaded deficit, they compete for the prize of who can chop the most. Who can keep dreaded property taxes to a minimum?

Jobs are cut, programs deleted. Garbage collection is outsourced. Some municipalities introduce new user fees for cars ($120), garbage bins ($133) and pet licenses ($25), as Toronto did in 2008, to add to revenue without increasing the mill rate.  All in the name of the lowest increases possible, and to avoid the dreaded deficit.

This year has been no different. "Everything is on the table right now at the city," Vancouver Mayor Gregor Robertson recently told the media.  Montreal is struggling to cut $100 million from its budget. Toronto city council has so far cut its way back to just a 4% increase. Windsor city council is looking at outsourcing garbage collection, and laying off dozens of employees.

This spring ritual has gone on for so long now that we barely notice. But this year, does it strike anyone else as odd? The mayors and city councillors seem completely out of touch.

We’re officially in a recession, and headed for a depression. We know from the Great Depression that the only way out is through government spending. This is what became known as Keynesian economics. In fact, it took the massive spending of World War II to end the last depression.

 

Local governments need to spend more, not less. Cutting back now will only deepen and lengthen the recession, and cause more suffering.

 

This lesson was finally driven home to former U.S. President George W. Bush. Last summer, he sent out tax rebates of $300 to $600. In September, he bailed out mortgage guarantors Freddie Mac and Fannie Mae, to the tune of $200 billion. In the Fall, he introduced a $700 billion stimulus package/bank bailout. President Barack Obama added $825 billion to this, in the stimulus package he sent to the U.S. Congress in January. His administration and the U.S. Federal Reserve are now proposing to expand the lending program by up to $1 trillion.

 

This, in a country which is approximately $10.8 trillion in debt, or about $36,000 per capita. Canada’s debt, by comparison, is about $457 billion, or $14,000 per capita.

I’m not endorsing the specific actions taken by Bush or Obama: for example, the Bush Administration used the first half of the $700 billion to subsidize banks and CEOs, with little or no accountability. Nine banks each got $25 billion in cash.

For its part, the Harper government announced $25 billion during last fall’s election, to buy mortgages from the banks, ostensibly freeing up more mortgages and loans. After doing virtually nothing in their economic update announced in November, in their January ’09 budget, the federal Conservatives provided $35 billion over two years in economic stimulus. Although painfully inadequate, this was a major step for Prime Minister Stephen Harper, a die-hard free-marketer who believes in small government.

Alberta has gone from expecting an $8.5 billion surplus, to a $1.4 billion deficit forecast for 2009. Ontario’s deficit was pegged at $500 million for the fiscal year ending later this month, but it’s now expected to hit $5 billion this year and $15 billion next year. 

Those who defend municipal cutbacks use a number of arguments. A Vancouver city councillor recently complained that, "times are tough. Many residents are losing income or worse, losing their jobs," so the last thing they need is higher property taxes.

But municipalities don’t help matters when they cut back, let alone fire people and eliminate programs, adding to the unemployment lines. Private sector companies are going belly-up, which is precisely why governments need to spend more, not less.

We are in a severe economic crisis. Public sector cutbacks during private sector shrinkage is a formula for a long-term depression, just like the last one. We know better.

In tough times such as these, as individuals and even private companies, we need to cut back and tighten our belts. We can’t chance further debt because of the risk of unemployment or bankruptcy. Collectively, however, through our governments, we must stimulate the economy and provide more jobs, not fewer.

As billionaire investor George Soros recently noted, the free market mantra has been completely invalidated by the current crisis. Soros, economists Joseph Stiglitz and Paul Krugman, and even former fed chairman Alan Greenspan are calling for the nationalization of American banks.

If Greenspan and other ideologues like Stephen Harper and George W. Bush can get this message, why can’t our local mayors and councillors?

Dr. James Winter is professor of media, communications and film at the University of Windsor, Ontario Canada.

 

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