According to Dr. Beaulieu, the economic evidence suggests that Manitoba has a strong, growing, stable economy. There is no financial crisis; there is no dire need. While there is a budget deficit that should be managed, Dr. Beaulieu did not see anything that indicated that extreme measures were necessary.
And he would characterize the Public Services Sustainability Act as an extreme measure. Why? Because it is harsh (hard on public sector employees), and because there are other more moderate and prudent ways of reducing the deficit. Steering a government’s economy is like steering a ship. You don’t want to try to stop on a dime. You take slow, well-thought out, small corrective actions in sequence so that you gradually get there.
You can cut expenditures and you can increase revenue or both, but whatever you choose, those choices should be balanced and implemented in a moderate and timely fashion.
Dr. Beaulieu acknowledges that there are always political issues that may intrude on the process, but says that even so, political choices should be made by looking at the economic options, and selecting the best (most economically sound) course of action.
It is true, of course, that deficits aren’t good and fiscal responsibility requires that you take steps to manage them. But you don’t have to engage in harsh cuts in order to do so. For example, Quebec went from a deficit of $695 million in 2017, and by 2019, they were in a significant surplus. Dr. Beaulieu says that they did this through textbook ways of managing the deficit – cautious and measured actions.
While Dr. Beaulieu agrees with Dr. Di Matteo that you do not want to keep running deficits and therefore adding to your debt (this makes people like the IMF nervous), he points out that you don’t have to do it through legislated wage freezes. You can raise taxes, and reduce other expenditures, which is exactly what the Government of Canada did when they reduced the Debt to GDP ratio from 62% in 1997 to 37% in 2004. (Hey, I remember that. Thank you Paul Martin.)