Motivations for politicians versus businesspeople is why Canada continues to overspend, writes Peter Watson.
What strategy is needed to create a budget for the Canadian government versus a budget for a large Canadian company?
We will consider the Canadian government first. The motivation for politicians is to stay in power. You cannot implement your good ideas of governing if you lose the next federal election.
Voters like to receive benefits. You might help Canadians with two of their main priorities by spending on housing and medical care. Do not worry about financing those costs by cutting costs elsewhere, because that is far more challenging than just adding to our ballooning national debt.
Running a budget deficit can be seen as negative to some voters, so the wording of these expenses can be changed to frame overspending as investing. That is the wording of past years of overspending.
For politicians, the reality of mounting debt is secondary to the political goal of retaining power, making budget discipline less relevant.
Unlike a politician whose reward is getting re-elected, the company profits are what fuel your ability to keep your job and hopefully earn a year-end bonus.
Politicians must wait until the next election to lose their jobs. In business, that can happen in an instant.
Given the motivation of a politician, is there ever going to be a period when the federal government will spend our money responsibly?
Peter Watson, of Watson Investments MBA, CFP®, R.F.P., CIM®, FCSI offers a weekly financial planning column, Dollars & Sense. He can be contacted through www.watsoninvestments.com.
