Since When is Running a Deficit Left-Wing?
If it is on the front page of the Globe and Mail, it must be true. The Globe and Mail reported that, by pledging to run deficits of up to $10 billion over the next three years to pay for infrastructure programs, the Liberals are “putting forward a plan that is clearly to the left of the New Democrats on key issues.” Other pundits, like Chantal Hubert and Ian MacDonald, soon echoed this analysis.
Yet, there is nothing inherently ‘left-wing’ about running deficits. In fact, fiscal responsibility has been a hallmark of social democracy since its inception.
The Fabian Society is generally considered to be among the founders of social democratic ideology. It’s Fabian Essays in Socialism, written in 1889, advocates for the creation of a rudimentary welfare state to alleviate poverty in Great Britain. However, since these new government programs would be financed through new taxes on businesses and the rich, the Fabians held that government debt and deficits should be “easily and sternly restricted.”
Early Canadian social democrats, who took many of their ideas from British thinkers like the Fabians, were also firmly against running deficits to pay for expanded social programs. One of the first social democratic thinkers in Western Canada was E.A. Partridge who created the short-lived No Party League to challenge the ‘old line’ parties of the Conservatives and Liberals. In my book, Remaining Loyal: Social Democracy in Quebec and Saskatchewan, I illustrate that, starting with the No Party League’s founding manifesto in 1913, early Saskatchewan social democrats were firmly against the running of deficits and increasing government debt. They had seen Eastern bankers foreclosing on Saskatchewan farmers and driving them off their land when the farmers took on too much debt. They did not want their social democratic government to be beholden to anyone- especially, bankers living in Toronto and Montreal.
This agrarian fear of debt was deeply engrained in Saskatchewan’s first CCF government elected in 1944, under the leadership of Tommy Douglas. The first thing that the CCF government did was to balance the provincial budget after years of fiscal mismanagement by the Liberals. The CCF then adopted a ‘pay as you go’ philosophy that increased taxes on business to raise spending on social programs while never running a deficit and paying down the public debt by 10% per year. Douglas consistently argued that it would be folly to run up government debt because public money would end up going the bankers in the form of debt servicing charges instead of being used on programs that could aid citizens. Subsequent Saskatchewan NDP governments under Blakeney, Romanow, and Calvert all balanced the budget while continuing to build up Saskatchewan’s welfare state.
As we can see, history teaches us that being fiscally responsible does not somehow make a political party instantly right-wing. Similarly, promising to run a deficit does not guarantee a political party left-wing bona fides.
If we look at what the federal NDP is proposing in the 2015 federal election, we can see that it is very much in line with social democratic ideas going back to the Fabians, Partridge, and Douglas.
Mulcair and the federal NDP are proposing to increase corporate taxes and scrap Conservatives’ scheme for income splitting, which amounts to large tax reductions for high-income families. The revenue that is generated from these two measures will be used for increased spending on social programs, like health care and childcare, so that a deficit will not have to be incurred. Any money that a NDP government subsequently saves on servicing its debt gets plowed back into expanding the welfare state further.
A government that increases taxes on corporations and scraps tax cuts for the rich to pay for new social programs to help the vulnerable while avoiding paying interest charges to foreign capitalists to finance its deficit and debt- that sounds pretty 'left-wing' to me!
David McGrane is an Associate Professor of Political Studies at St. Thomas More College, University of Saskatchewan. He is the principal investigator of the Canadian Social Democracy Study, President of the Prairie Political Science Association, and author of Remaining Loyal: Social Democracy in Quebec and Saskatchewan.