In the B.C. government's second quarter update on November 24, finance minister Colin Hansen committed to keeping the budget balanced. Rejecting deficit financing is a good sign. When the government was first elected, it made a strong commitment to balanced budgets. In fact, it made it illegal to forecast a deficit. Balanced budget laws create strong incentives to spend responsibly. Yet, there is no shortage of examples where those same laws are circumvented.

Politicians of all stripes talk about their commitment to balanced budgets, at least before elections, because the public wants spending restraint and tax cuts before tax hikes or a return to red ink. An Ipsos-Reid poll released October 28 showed that with a slowing economy, 82% of Canadians favour federal spending cuts to keep the budget balanced, over deficits (43%) or tax hikes (17%). In B.C., 68% want to see the provincial government cut spending to keep the budget balanced, versus 42% in favour of running a deficit and 14% in favour of raising taxes.

This sentiment is not new. The Social Credit government passed B.C.'s first balanced budget law, the Taxpayer Protection Act, in 1991. The NDP repealed it the next year, ran a deficit every year and by the end of that decade, pushed the province into have not status. The current Liberal government legislated balanced budgets with the Balanced Budget and Ministerial Accountability Act in April 2002. That law states the government must not forecast a deficit for a fiscal year. It ties ministers' salaries directly to budget targets and withholds 20% of those salaries. There is no legislation preventing an actual deficit, but not even the NDP supports running a deficit.

Ontario also had a balanced budget law. The 1999 law made budget deficits illegal, except in extraordinary circumstances such as war or natural disaster. In the event of a deficit, Ontario cabinet ministers' salaries would drop by 25%. In the Ontario election of 2003, the Liberal candidate Dalton McGuinty promised to balance the budget if elected and even publicly signed a Canadian Taxpayers Federation pledge. McGuinty was elected in Ontario in 2003, but by 2004, the province had a $2.2 billion deficit. The government circumvented the balanced budget law with the Financial Transparency and Accountability Act. This allowed the government to avoid financial penalties when it tabled budget deficits. Now, Ontario, with a new health tax and out of control spending, announced a $500 million deficit and is a have-not province for the first time ever.

Balanced budget laws are a necessary control on politicians' natural tendency to run deficits to buy votes and avoid confrontations with special interest groups, such as public sector unions, with big spending demands. Undermining balanced budget laws can undermine the economy.

Of course, there are still strong calls for budget deficits, particularly from those still enamoured by the welfare state. Even in the face of overwhelming evidence to the contrary, more than a few people still believe a government can spend its way to prosperity.

The wisdom of that thinking was on display recently when the US Congress and President approved a $700 billion "market stimulus" package. It stabilized markets, for about a day. The US just announced another $800 billion bailout, which probably means even more money tossed into a black hole, continued market gyrations, and delayed economic recovery. Now is not the time to lose the fiscal prudence that brought B.C. back from have-not status.

Governments don't spend their way to prosperity, they spend our way to penury. It's never easy to stop spending other peoples' money. Balanced budget laws help governments stay accountable to the people who pay the bills -- the taxpayer. Balanced budgets are only one part of the puzzle -- a strong commitment by the government to stick with them ensure the laws they passed are honoured.