Every year of the Second World War the federal government presented a budget. In 1939, it presented two budgets, one in April and one on Sept. 12. In case you went to school after they stopped teaching events and dates in history class, or stopped teaching history class at all, I’ll mention that Parliament had authorized a declaration of war on Nazi Germany on Sept. 9, 1939. So the government presented a budget just three days after the declaration of war.
If you think the world is upside down now, imagine what it was like on Sept. 12, 1939. Yet in the midst of the maelstrom, a government led by one of the most calculating, conniving politicians in Canadian history (Mackenzie King), felt it only right and proper to ask the Commons to approve its budgetary approach, which included three new tax initiatives. In reviewing the outlook for revenues and expenditures, Acting Finance Minister J. L. Ilsley told the House: “You will not, I am sure, expect me to deal with these matters in the detail which is usual in an ordinary budget address … No one can predict with any measure of confidence precisely what lies ahead of us, and the estimates which I will give you should be regarded merely as rough approximations based on our view of the probable course of events.” Still, give the estimates he did.
It was an adult approach. It treated parliamentarians and Canadians as adults, capable of understanding that no one knew how events would unfold or what the gathering storm would ask of the country and its governments. But, to coin a phrase, they were all in it together and the government felt an obligation — no doubt a solemn one — to share its plans with Canadians’ elected representatives.
There’s an old Bob Dylan song (1964’s “My Back Pages”) whose refrain is “I was so much older then I’m younger than that now.” In 1939 we must have been much older and more trustworthy if our government believed it could confide in us in a time of mortal crisis. I guess we’re much younger than that now, infantile really, and unable to accept uncertainty or understand that at a time like this budget numbers can only be provisional (as if they are ever not). And so, three months into our own emergency, we haven’t had a budget or even an economic update.
Maybe a people insufficiently adult to be trusted with self-government should hand things over to the OECD. In its latest “Economic Outlook,” this organization of 37 rich countries, which in fact consults with our own Department of Finance, presents two versions of the future, one where the virus hits only once and the other where it returns at the end of the year.
The government felt an obligation — no doubt a solemn one — to share its plans with Canadians’ elected representatives
There, Canadians, that wasn’t too hard, was it? The OECD talks about two possibilities. I know math classes have been cut back, too, but most of us might even be capable of thinking about three or four or even more possibilities.
For the record, under the single-hit scenario, the OECD sees our economy contracting 8.0 per cent this year (compared to an OECD average of 7.5 per cent), with a rebound next year of 3.9 per cent (vs. 4.8 per cent for the OECD). Under the two-hit scenario, the numbers naturally are worse: a contraction this year of 9.4 per cent (compared to 9.3 per cent for the OECD) and a rebound next year of only 1.5 per cent (compared to 2.2 per cent OECD-wide).
Each scenario has implications for the “general government financial balance,” i.e., the combined surplus or deficit of our government sector: in the single-hit scenario the deficit reaches 7.5 per cent of GDP, in the double-hit, 9.2 per cent. Similarly, in the single-hit scenario “general government gross debt” goes from 94.5 per cent of GDP in 2019 to 104.8 per cent in 2021—but in the double-hit to 110.1 per cent.
The one thing we know for sure about these forecasts is that only by fluke will any turn out to be exactly right. This is a time of “extraordinary uncertainty,” the OECD’s chief economist warns — and she’s got that right. Even so, looking at scenarios helps “frame the field of possibilities and sharpen policies to walk such uncharted grounds.” (Refreshing, isn’t it?, to be walking uncharted grounds rather than sailing uncharted waters. Some of us have been getting seasick.)
You’ve got to think, with all that our governments have spent these last years on innovation and research, that they have spreadsheets in Ottawa. In fact, I know they do. I’ve been to presentations where bureaucrats have made presentations that clearly relied on spreadsheets.
If you have spreadsheets and you have rules-of-thumb or even educated guesses about how much spending rises as more people take advantage of a service and how much tax revenues fall as people’s incomes decline, then you can estimate what happens to the public accounts under different assumptions about economic growth — or contraction. In other words, you can budget. I bet they’re doing it in Ottawa this very minute. They’re just not telling us about it.
We are smarter than our governments have been giving us credit for recently. In many places, phone data suggest, lockdowns began before governments declared them. The same data show people are still being cautious, even after lockdowns are lifted.
We’re not infants out here. It’s our money and our lives. We can handle complexity and uncertainty. If we could handle them in 1939, when our median age was a little over 25, we can certainly handle them now, when it’s 40.8 years. Dylan was wrong: We were so much younger then, we’re older than that now.