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Public Expenditure in a Tough Economy: Spending Smart in Hard Times

Published on 23/01/2012

The great challenge for governments in these hard economic times is reducing spending without doing harm. National, provincial and municipal governments are all considering how to economize, and are looking at cuts to programs and services.

Those who think it will be easy point to reports of auditors general as popularized in the commercial press, and believe that there are great inefficiencies to correct. They imagine pots of money being spilled daily, and scads of unworthy recipients of government supports and services who can otherwise cope without public assistance.

Promises of fiscal rectitude just around the corner have been made from time to time in recent decades, and have almost never proven out. It turns out that our governments are not cesspools of lavish spending and profligacy. Much of the federal expenditure goes to programs like the Child Tax Benefit, supports for seniors and the disabled, and others who cannot participate successfully in the labour market. Provincial expenditures go for health care and education in large part, two of the fundamental pillars of economic competitiveness and well being. Municipal expenditures go to clean water, sewage and waste management, roads and transit, and other necessary hard services.

However, there is a frontier of smart public expenditure that can produce bang for the buck. It would be tempting to call it a New Frontier, but it is in fact an old idea to which government has been oddly resistant.

It is the idea of spending on prevention rather than the cure. Preventing something from happening rather than paying to remediate its negative effects is almost always a lot cheaper. Like the old Fram oil filter ad used to say, “You can pay me now, or you can pay me later,” with “later” being the more expensive alternative of major engine work.

The late Fraser Mustard told us decades ago that paying systemic attention to a child’s development in the early years would pay immense dividends later in their ability to grow into productive and well adjusted people. “Participaction,” the federal government fitness campaign from the 1970’s, promoted fitness and healthy living. Supportive housing advocates have for years told us that giving disabled people stable housing increases their functionality enormously, reducing their dependence on the medical system, welfare, and other supports. Public transit is known to boost civic engagement, labour market attachment, and pollution reduction. And numerous other early interventions have shown they can prevent people from expensive engagements with the health, criminal justice, and welfare systems.

Yet we remain publicly addicted to old ways, and have governments wanting to spend on prisons rather than housing, roads rather than rail, hospitals rather than parks and recreation. And we pull back funding for kids’ breakfast programs at schools, or leave them sparsely funded. There are some points of light, like the Ontario government’s commitment to early childhood education.

What if governments really wanted to reduce public expenditures, and decided to focus on preventing expensive late stage interventions? What could they do right now?

  • The Caledon Institute has recently raised the idea of a Jobseeker Loan, a new temporary income measure to fill the gap between Employment Insurance and welfare, which would prevent unemployed Canadians from having their assets stripped and from falling into poverty.
  • In New Zealand, work funded by The Tindall Foundation is developing a social housing bond to support low income housing in the rebuilding of earthquake devastated Christchurch. The bond would combine a government guarantee of principal with private capital, underwritten by the real estate value, to fill the low end of the housing market which the market does not serve. Stable housing helps prevent people from slipping below the poverty line.
  • The Toronto District School Board conducts Faith Walks and Community Walks for teachers to explore the dimensions of their school’s community. Teachers go on organized walks to discover the community, and go into the faith institutions to learn about different faiths, all of which can increase their awareness of and sensitivity to their students. This helps prevent isolation with all its attendant later costs.
  • Governments can follow the recommendations of The Workers’ Action Centre to hire a relative handful of workplace inspectors to end employer abuse of contingent workers, making sure the workers are paid what is due to them and not terminated unreasonably. Lost wages from abuse result in many people falling into poverty and relying on welfare and other assistance programs. Complaints filed amount to over $40 million per year, but the real abuse is very much more because most victims don’t file complaints.

These are examples of experiments or ideas governments could adopt to avoid downstream problems of poverty, isolation, and misunderstanding, which usually lead to more costly interventions.

Creating an orientation to prevention requires new architecture of government, never an easy task. But rather than opting for a general squeeze everywhere to reduce expenditure, which can harm good things and marginally restrain bad things, redesigning government to focus on avoiding expensive downstream or late-stage interventions would be a smart approach.

And there are no times like hard times to wring out a mandate for change.

Summary

Spending on prevention rather than the cure is almost always cheaper; here are some examples of what they could do, right now.

Topic(s)

Poverty