Friday, March 22, 2013

The Simplest Budget Math

It seems to me that the defining characteristic of a budget is that it involves ...  numbers.

Surprisingly, the budget makes no mention of the Defence Department at all.  Recent government estimates project a major cut in defence spending to $18 billion next year from $20.7 billion.  That’s a 13 per cent cut, yet the budget does not address where this money will come from …. (source via

The Canadian "budget" was released yesterday, but it is only a "budget" and not a budget, as far as I can tell, since it does not actually say how many $ will be spent on defence, for instance.  While there was a big surprise that the Canadian International Development Agency was to be folded into the Dept of Foreign Affairs and International Trade, there were no specifics about what the defence budget would actually be.

I am taking more umbrage than usual because I was on TV this week talking about the estimated defence cuts, and will feel mighty foolish if they do not materialize.  I am also simply confused: how can the government make the media wait around all day long for the release of the budget and not include numbers?! 

So, this non-budget did highlight some policy changes.  First, the aforementioned merging of CIDA with DFAIT.  I am not as upset as my development friends since I never thought that development assistance could or should be  detached from the national interest.  Many CIDA $ went to Afghanistan, even though CIDA's priorities were elsewhere, as Canada's priority was Afghanistan.  Sure, that money might have fostered more sustainable development elsewhere, but the first job of Canadian tax dollars is to work for Canadian national interests.  Second, the big question is whether this will really save any money.  Since they are not reducing the number of Ministers (and thus overhead), it is not clear whether there will be much money saved.  My experience has been that when you cut one headquarters and merge its stuff with another, you just get a bigger headquarters with some modest cuts (I do feel bad for the middle level CIDA folks dwelling in uncertainty right now).  When the US cut Joint Forces Command, suddenly the Joint Staff more than doubled in size.  Hmmmm.  This one change will get heaps of play.

Another thing mentioned in the "budget" is more of an emphasis on using the defence budget (once one exists) as industrial policy--to focus spending on developing Canadian industries.  This sounds fine, but if Canada has been spending defence $ elsewhere, it has been because those producers have been viewed as less expensive and more efficient.  Sure, debatable.  Focusing spending on domestic producers makes sense for nationalism and for domestic politics (more pork at home), but does not make much sense at a time of austerity.  The domestic stuff will cost more, so you will get less bang for the buck, not more.  This is a point I made on TV.  Not a great time to be engaging in protectionism/industrial policy. 

But we really do not know what to think yet since the "budget" will remain a "budget" until we know the numbers. 


Vladimir said...

Steve, if memory serves me correct they took CSE out of the DND budget last year and made it a stand alone agency. Surely this would impact the level of defence spending. So is the problem cuts per se in actual spending or cuts from a base line or cuts in inflation adjusted terms? I am thinking about the immediate impact not the long term challenges.

Steve Saideman said...

I have no idea since we have no numbers. The speculation was that the cuts were not just cuts into projected spending but less than previous years by 10% or more. Given escalating costs for new tech (both buying and operating), not good without some real thought/decision-making.