One persistent problem in politics everywhere is that politicians know that spending equals votes, while tax increases tend to cost them. There is always a pressure to spend unsustainably and then leave the bill for somebody else to deal with. Some people have even called this a strategy for shrinking governments they believe to be too large by ‘starving the beast’ with spending that exceeds tax revenues.
There is a case to be made for deficit spending in times of deep financial uncertainty. Government spending can reduce the suffering associated with job losses and help to maintain confidence in the economic system. That, in turn, can reduce the force of feedback effects where lack of confidence in the financial system produces weakness which then further reduces confidence.
In the long term, though, government revenues and expenditures must be balanced. Given the fondness of politicians for spending, their aversion to raising taxes, and the ever-present appeal of passing on the difficult choices to others, there ought to be political and legal mechanisms in place to encourage that an adequate array of government services are provided and that they are funded in a sustainable way through taxation. Perhaps one way to curb the tendency to spend now and ignore the cost would be the creation of more automatic mechanisms to raise taxes in the face of persistent deficits. If you have gotten beyond the period where Keynesian deficit financing is justified by economic weakness, the onus should be on government to either fund new initiatives through existing funds or raise taxes promptly to cover them. Governments that are aware that their spending projects could generate future tax increases may be a bit more disciplined in deciding where dollars out to be directed (not at local hockey arenas, perhaps?).
There is nothing wrong with obligating people to pay taxes to provide necessary services, including assistance to the least advantaged members of society. In addition, there are many circumstances where taxation-funded government services are the most efficient way to provide something. Canada’s single-payer health care system, for instance, produces demonstrably better outcomes than the semi-private system in the United States, and does so at a lesser cost. This is partly because health care is an industry rife with market failure, where the profit-maximizing behaviour of private firms does not serve the general good of the populace, in the absence of substantial regulation.
Of course, tax dollars can also be spent in inefficient or corrupt ways. There is no simple single mechanism that can ensure good economic and social policies. Rather, maintaining world class standards in governance requires the effective operation of a whole collection of institutions, acting in concert. These include federal and provincial legislatures, the courts, and the bureaucracy. Legislatures may have the most legitimacy, on the basis of their electoral mandate, but they also have the most short-term perspective. Their sneakier and more spendthrift tendencies must be curbed by oversight from elsewhere.