The federal budget for the fiscal year of 1958-59 was brought down to the Commons on June 17. This is the first budget of the Diefenbaker government, of which Donald Fleming is the minister of finance.
The Budget's total expenditure will be $5,300,000,000.; the total income, $4,660,000,000. So there will be a deficit of $640,000,000."
Many are the politicians, economists, businessmen, commentators who are dismayed at the deficit and have hastened to castigate the government for it. We cannot take sides with them. In fact, we are deeply gratified at this turning of the back upon the sacred canons of high finance. We only wish there had been a complete break with them. After all, the primary consideration of a humane economy should be man's needs and the physical (not financial) possibilities of filling these needs.
If the capacity to pay matched the capacity to produce, finance and production would be on the same level. But such is not the case. The government will spend $5,300,000,000.; in other words, the country is able to furnish products and services to meet public needs to this value. And there is no reason why the people should be deprived of these products and services. If the country were able to pay only $4,660,000,000., then obviously the answer would be to increase the means of paying and not to decrease the supply of goods and services needed by the people.
This much the Conservative government understands, at least to the extent of 640 million dollars. And we congratulate the government. It is an escape from the stranglehold of finance — a temporary relief while we are awaiting permanent freedom — a necessary escape if we are to exploit fully our productive potentiality, which far surpasses the limits set by finance.
This is the first time in peace that a Canadian government has permitted itself a deficit budget of such proportions. Hitherto such deficit budgeting was limited to times of war. As Roosevelt remarked, financial nonsense must not be permitted to hinder the nation in devoting all its resources to the prosecution of war. But, in time of peace, this financial nonsense is devoutly adhered to; and in bowing before the dictates of finance our productive capacity is not fully utilized. The result — unemployment and hardship.
This year the government is breaking through the peacetime ceiling set by finance, in order to alleviate the hardships of the people. Diefenbaker promised, during his electoral campaign, to do this. Speaking in Nova Scotia, before a gathering of which many were either totally or partially unemployed, he said: "I will not permit the Canadian people to suffer for the sake of a balanced budget". He is, therefore, unwilling to let our production be paralyzed to the extent of 640 million just to balance the budget.
Very good, Mr. Diefenbaker! Let your sense of duty find fulfillment in seeing to it that Canadian families attain a decent standard of living rather than in paying respects to the laws of high finance which are completely at odds with the realities of economics and human society.
You could have gone still further. Your minister of finance could have allocated another 400 million dollars to the ministry of Health and Welfare in order to double family allowances. A deficit of one billion would have constituted no more of a strain on national production than a deficit of 640 million dollars.
In reality, of what will there be a deficit? If it were a deficit in produce there might be reason for alarm — as would be the case if a drought, or an invasion or a plague of locusts were to invade the land, and cause a famine. And we mean a true famine, not a famine of those items known as dollars or francs or lira, or whatever other name money goes under.
But a deficit of figures with which to pay is no obstacle when the necessary authority is had to deal with it and when there is determination to fill a want which should never have existed.
Now, the government might have cut out 640 million dollars from its expenditures in deference to the regulations imposed by the financial system. But this would have been just so much production suppressed, production which would have been possible thanks to deficit budgeting. New production to the value of 640 million dollars will far from exhaust the productive capacity of the country. Every producer would be overjoyed at the chance to contribute to it. They could produce even more with the greatest of pleasure. And if you add to this new demand 400 million more for children — which would be an average of 25 cents a day per child — are the farmers going to exclaim in dismay: "Impossible! we cannot supply this extra demand for meat, milk and butter"? Will the producers of shoes and clothing exclaim: "We cannot possibly supply more than we are making at present"? Obviously not. We can reproach the Fleming budget only on the score of having been too timid; of having stopped at a deficit of 640 million when there is still vast productivity untapped.
The word "deficit" conveys a false impression. It would be more correct to say, "the reserve of wealth available", wealth which is made available to Canadians in spite of the very erroneous accounting methods employed by the existing financial system. The deficit, in fact, lies with the accounting of our money system, not with the country, its natural resources, its brains or its strong arms.
In ignoring the balanced budget we come closer to a balance between wealth available and wealth utilized. And this is to march forward, not haltingly, but with a firm step.
However laudable this ignoring of financial traditions might be it is still not freedom from the dictatorship of money. The government will not reach into the pockets of the taxpayers this year for the 640 million it will lack in revenues. But as far as the financiers are concerned the reckoning has only been postponed. As with the war time budget, the deficit of the 1958 budget will be inscribed as a debt owed by the country — to be paid later if not this year. In fact, the financial system is looking forward to ever greater revenues from taxes which will result from the upsurge of an economy boosted by this temporary concession of 640 million dollars.
All of this simply adds up to the fact that even though a deficit has been conceded — without which the declining economy would have affected adversely even the financiers — the grip of the money system on society has not been loosened. Even this temporary concession is going to involve interest rates which will add to the national debt just so long as the deficit remains unpaid. Legislation more radical than a deficit budget is needed if finance is to be put definitely in its proper place.
In restricting credit the banking system has put brakes on our economic progress, has diminished industry's revenues, from which the government draws a large part of the money it spends. Because of this we are obliged to pay huge interest rates to the very system that is responsible for the decrease in revenues all around. We kiss the hand that strikes us.
What we have said above is true of other expenditures mentioned by Mr. Fleming which do not pertain to the budget but are related to national public works such as the St. Lawrence Seaway project. This year the government will have to borrow not only the 640 million which is in deficit, but some 800 million more for such public projects, and one billion four hundred million more to pay off a debt which is maturing and for which there is no ready money (we exchange one debt for another). In all, three billion four hundred million dollars will have to be borrowed. We shall have to pay interest on this for years in addition to repaying, eventually, the capital sum.
In this, the present government is merely following in the footsteps of previous governments — something for which we certainly cannot thank it. Such a system condemns the people, who produce, to pay huge fines to the money makers, who not only do not produce but are incapable of making their accounting system accord with the production and consumption of real wealth.
It is a country's people who make developments possible by means of their natural resources, their hands, their intelligence, through science and technical progress. Some work directly on these projects; others work to produce sustenance for the project workers. Logically, once the project is finished, it should have been paid for by what was contributed to its execution. If this contribution comes from the country itself (material and labour) the people of the country should owe nothing; only what might, by exception, come from outside the country. Why then should the people be taxed for something they themselves have accomplished?
True enough, these are individuals who are employed on projects and they must be paid. And the producers of sustenance who sell their products must also be paid. But all this is, from a financial point of view, merely a matter of accounting; and when the project is finished it is illogical to make the people, as a whole, pay, through taxes, for what the people, as a whole, have produced. The accounting methods of the present financial system simply need adjustment since they do not reflect realities.
This situation could be corrected through Social Crēdit. Unfortunately the Diefenbaker government, whatever its merits, hasn't as yet reached this stage of development.
(Translater. by EARL MASSECAR)
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