I could make the typical sectoral balances analysis about the new Canadian budget. I could point out that, in a situation where there’s a business sector surplus and a household sector deficit, there’s going to be an increasing debt load, putting the stability of the financial system at risk. I could point out that this could be made up for by increasing government sector deficit, which transfers money to people generally in ways different than lending. I could also point out that at a time where the trade deficit is big ($13 billion as of the last quarter), that government deficits have to be bigger than ever to counter this outflow of money. But the thing about the new budget is, it’s a deficit budget. The Tories can’t square their election year tax cuts with a surplus, so they put on their best David Stockman impression and bullshitted their budget. Employment Insurance is a closed system, paid for by money flowing in from a specific (regressive) payroll tax, moving out directly via cheques, and needing no other source of financing. It has a $3.4 billion surplus this year, money that could be going to the 60% of unemployed Canadians who aren’t receiving benefits. Instead, there’s a liability on the EI balance sheet as the Tories just decided to include that surplus on the spending side of their balance sheet. They also raided a rainy day fund that’s supposed to be used for times of low liquidity for $2 billion, and sold their shares in General Motors for $2.1 billion. As a result, this is a $6.1 billion budget deficit in reality, because what’s written on paper doesn’t matter. Now, none of these actions make any sense from a surplus-minded viewpoint. Keeping the GM shares for instance would gain dividends that would certainly outnumber the amount of money gained from a one-time fire sale. We can conclude that deficit-mania is low on the Tories’ list of priorities. Instead, this is a normal Neoliberal budget, in line with business class expectations for the state set at the end of WW2. Typically, the state is needed periodically to intervene in markets in order to prevent Capitalism from tumbling in on itself. At the same time, the business class views any sort of state interference in the markets, no matter how pro-business, as intrinsically evil. It contradicts their idealistic vision of themselves as self-made entrepreneurs pulling themselves up with their bootstraps. This was the crisis that created the Great Depression.
At a time where the business class was the most powerful in the entire 20th century, it was able to prevent the state from taking the actions needed to save Capitalism because it viewed them as too onerous. It was only with a massive destruction of the capital of the rich and a vast campaign of class warfare by the poor that the state was persuaded to restore Capitalism to functioning order. It’s like somebody who gets wounded and then refuses to treat the sore with anti-septic fluid because it’s too painful, and then complains profusely when it festers. After WW2, a compact was built with the rich, even more powerful than the Keynesian social contract, that the state would always undertake those actions even if the business class didn’t consent, and in return, the state would then take every action possible to win back the business class’s trust. It’s like promising that person earlier that you would definitely give them anti-septic fluid even if they didn’t want it, but you’d then profusely apologize for putting them through such a horrible experience and take them out for ice cream and a trip to the fucking circus. The 30-year Keynesian effort to restore Capitalism to health in a world where free trade had disappeared and then the Neoliberal turn in the 70s can be viewed through this lens. So too can the bailout of GM.
The government of Canada was forced to take ownership of GM in order to ensure its survival. Now, it has to sell GM shares to show the business class that, at a time of record levels of dividends, the budget will be balanced only through tax cut attrition to shift the burden of paying for services onto the backs of the working class. To unfortunately mix my metaphors in order to give one that seems more relevant: Imagine a group of protesters peacefully occupying a businessman’s lawn. The city would first have to send in the riot cops and smash some skulls to ensure the businessman’s constitutional rights were respected. The mayor then has to go to the businessman’s house and apologize to him for getting blood all over his lawn, for forcing him to see people in pain, etc, and to say that the city will cover all costs. Finally, things can go back to normal, and the businessman can continue to operate in an environment built by the city for his benefit but where he doesn’t notice anything the municipal government does because its atrocities have now gone back to happening in poor neighborhoods, as usual.