Those who cannot remember the past are condemned to repeat it. --  George Santayana, 1905

When B.C. Premier Gordon Campbell said, "I hate budget deficits, I think they take away from future generations," he was right. As we've experienced in the past and see even today, deficits can spiral out of control, creating an even bigger burden for future taxpayers. So why has Premier Campbell abandoned his principles and brought back deficit spending?  Have the economics changed, or just the politics?

Stimulus spending, or deficit spending by another name, is now all the rage. However, it has a very telling track record. The idea that government spending binges could stimulate a stagnant economy originated with the economist John Maynard Keynes in the 1930s. Governments have used his theory time and time again to justify their spending binges with the same result -- little if any extra growth and a bigger debt burden for future taxpayers.

Will it be different for Premier Campbell?

History says no. Richard Nixon said “we’re all Keynesians now” just as Keynesian stimulus policy led to the inflation and economic stagnation of the 1970s. Since 1992, the Japanese government has had budget deficits and spent on infrastructure to "stimulate" the economy, but the economy has never fully recovered. In 2008, the US government tried to "stimulate" the economy with a $170-billion package and then a $700-billion package, yet the economy continued to tank. Now, the US government is considering an even bigger stimulus package. If history is any guide, it won't work either. What they have in the US, though, is a deficit spiraling out of control, from $162-billion in 2007 to an estimated $1-trillion dollars in 2009.  Not exactly a shining example for Campbell to follow.

Stimulus spending doesn't make the economy grow because what the government spends has to be picked from somewhere, and that somewhere is the taxpayer's pocket. Once picked, the taxpayer no longer has that dollar to spend, or lend to a company to spend on investment. Every dollar the government picks means one less dollar of private spending.  At best, jobs created by stimulus spending are offset by jobs lost from the decline in private spending. We can build roads instead of computers, but deficit spending won't let us do more of both.

Perhaps Campbell’s reason for deficit spending is to protect social programs during difficult times. Indeed, the B.C. government defends its deficit decision by saying spending needs to stay high to protect "health care and education." But debt costs money as well. We already pay more than $6-million per day to finance the current debt. As the debt climbs, so too will debt servicing costs, leaving less money for health care and education. Campbell was right -- deficits take away from future generations, both with higher taxes and lower spending.

So, if running deficits doesn’t work to “stimulate” the economy, and it doesn’t work to protect social programs what is the real reason for the return to deficit spending?

Following in the footsteps of the federal budget deficit, B.C.'s budget deficit appears to be an election deficit. The Campbell government seems to believe the fiscal prudence they preached in 2001 – the one that helped them sweep into office with 77 seats – is no longer a political winner. 

Our so-called leaders have flushed years of work down the toilet for politics, not economics. Big spending today with consequences tomorrow may indeed help election outcomes, but they don't help the economy or the taxpayer.