Ever since
the epic world economic meltdown of 2007-2008, the public has been introduced
to the consequences of bad government management. Indeed, massive overspending,
sometimes coupled with big tax cuts in the 80’s and 90’s, led to unmanageable debts
in otherwise rich countries and their subsequent descent into insolvability
hell. This unfortunate yet completely predictable consequence of government hubris
has led to many countries imposing draconian changes, some countries deciding
to increase revenues by raising taxes and some by massively cutting in government
spending. While balancing a budget is a very necessary goal, one should be
extremely careful about what is being taxed or what programs are being cut.
When is a
subsidy a bad thing?
Simply put,
using a meal-partaking allegory, there are two kinds of government spending:
those that ‘pay the groceries’ and those that ‘enlarge the garden’. While
spending to buy food is very important, it doesn’t add to our future capacity
to eat. Financing day-to-day government activities with debt is unhealthy,
because without proper structural changes in managing public funds, it will only
get worse. But if spending goes towards creating greater riches in the future,
then our ability to pay back what we borrowed today will be easier and more
affordable. That’s investing, not spending. And this is where governments err:
they cut (and fund) programs not only (and not often) on a serious analysis of
the overall long-term consequences of such actions but on short-term, heavily
influenced partisan and ideological, often dogmatic, politics.
Take for
example the government of Québec’s subsidy of the video-game industry. The
Couillard government has decided it will reduce the financial benefits it now
gives to companies that do business in the province. Is it a good thing? Sure
it will help to balance the budget for the next few years, but what about the
long-term consequences? What about the indirect effects to other parts of the
economy? Does anyone know? Where is the
research? Where is the evidence? We have heard in recent weeks that the
video-game industry is one of the few parts of the economy at large that has
actually thrived in the past 7 years, creating thousands of well-paying jobs,
sustaining thousands of others indirectly, creating revenues for the government
and giving Québec a massive amount of exposure worldwide with the quantity and
quality of the products churning out of all its studios. And it is still
growing.
I do think
balancing the budget is a necessity, but it needs to be done the right way:
with facts, data and research. Not with popularity, polls and trends. It’s time
for a change.
