Retail Giants vs. Small Businesses Competing in the US Market

Some have attacked the Trudeau government's new vow to discover $15 billion in fiscal savings over the next five years as insincere and disingenuous following years of massive spending growth. They have a point: annual government program spending has risen by 80 percent since the administration took office in 2015.However, if one has been critical of the Trudeau government's excessive spending record, he or she should support, at least in theory, its pledge to find budgetary reductions. It could be much worse, after all.We don't know anything about the review at this point. Treasury Board President Anita Anand has stated that it will defend transfer payments to other levels of government, as well as spending on Indigenous services and the Canadian Armed Forces. She has also stated that it will seek to reduce actual job losses through attrition and redeployment.Her key point has been that the government's review process will not be similar to the Harper government's expenditure review after the global financial crisis, which she argues featured "short-sighted cuts that had to be reversed."I may disagree with her assessment of those cuts (which I was personally involved in), but I believe that the Harper administration's post-recession spending review is not the best example for Minister Anand and the government to follow. The aptly named "Deficit Reduction Action Plan" sought to strengthen the government's own efforts to limit program spending in order to eliminate the recession-induced deficit. It must be clear that the primary goal was to reduce the deficit in the short term.

That is much less significant in the current environment.

The deficit is far too big, and the Trudeau government's savings target is too modest to have a significant impact on the annual deficit. It is mostly about mitigating the net expenses of the government's ongoing spending plans.A better comparable from the Harper era would be the government's Strategic Review process, which ran from 2007 to 2009 before being halted owing to the global financial crisis. Strategic reviews were not driven by deficit reduction objectives. They were primarily concerned with managing or reducing the increase of new spending by shifting departmental funding from low- to high-priority activities.They are an effective model for performing frequent evaluations of pre-existing government spending and assessing the utility of existing spending against the need for future investment. Individual ministers were given authority to carry out such a prioritization exercise on behalf of their respective departments. The method was primarily evidence-based and rigorous. Minister Anand should reinstate it to carry with the Trudeau government's apparent commitment to reducing program spending.Under the Strategic Review model, approximately 25% of government spending was examined annually during a four-year period. The participating departments for a given year were picked in early spring. The Treasury Board Secretariat assigned them a spending base and a 5% objective, and they were obliged to do a self-evaluation of where they were anticipated to accomplish these savings using a set of measures that included:

Increase efficiency and effectiveness.

Do these programs and services create meaningful results for Canadians while being cost-effective?Focus on core roles: Are these programs and services in line with the federal function, or is another level of government or organization (such as the market or civil society) better suited to supply them?Meet the priorities of Canadians. Are these programs geared toward the needs and priorities of Canadians?The findings of these evaluations were then given to the Treasury Board Cabinet committee in the summer or fall to help guide the budget process. Treasury Board Ministers were free to accept or reject their colleagues' suggestions, but the general preference was to accept them because individual ministers were fully responsible for the budget cuts they finally proposed.Remember, the purpose was not necessarily to eliminate spending, but rather to manage or limit the increase of new spending. Departments were required to identify their "lowest-priority, lowest-performing 5 percent of spending" for reallocation, although they could alternatively propose alternative spending plans for reinvestment.The 2007 experience is instructive. Seventeen federal entities (including departments and agencies) participated that year, accounting for $13.6 billion in direct program spending, or nearly 15% of all government program spending assessed for strategic review. (Because it was a new method, the participating departments and agencies represented a slightly smaller share of total government spending that year.) All identified savings were returned to the same departments or relevant areas (see Table 1). Essentially, the government was able to use the Strategic Review process to limit the increase of new spending through fiscal recycling.

The fact that the identified savings were generally. 

"reinvested" back into the departments provided an incentive for ministers and their departments to participate in the exercise. They knew that full engagement would be rewarded with partly or full money for their new goals.The crucial issue here is that the Harper government's economic objectives were not primarily the responsibility of the prime minister, finance minister, or Treasury Board president. Every minister made a consistent commitment to analyze his or her own spending and prioritize any new spending requests within the context of the government's overall objective.My previous experience in the prime minister's and finance minister's offices has shown me that system-wide buy-in is critical for such an endeavor to be effective in the long run. A government may be able to impose fiscal limitations on itself via a combination of public announcements, legislative targets, and internal processes. However, a system-wide commitment to controlling new spending necessitates dedication and effort from the Cabinet and even the governing caucus. It will not happen if Minister Anand pursues this agenda on her own.This is especially true for the Trudeau government, where ministers and agencies have been indoctrinated to believe that there are no fiscal trade-offs because new and increased resources may be taken for granted. Resetting such a spendthrift culture will take more than a top-down "weed-whacking" activity that extracts some marginal savings while maintaining internal expectations and norms. The concern is that such an outcome will be overshadowed by fresh, incremental spending in future budgets.What is required instead is a new bottom-up culture in which every minister believes he or she has a personal stake in the government's economic management. Implementing the Harper government's Strategic Review methodology can help to develop an organizational culture that values fiscal priorities and overall budget control.