On Feb. 27 of this year federal finance Minister Bill Morneau will introduce the federal government’s latest budget. The previous budget, presented on March 22, 2017, projected total revenue of $304.7 billion and expenditures of $330.2 billion, leaving a deficit of $28.5 billion.
The release will no doubt be accompanied by extensive analysis. Much of this scrutiny will try to examine the political consequences of the spending the minister outlines in his most recent budget. There are however a number of ways in which documents like this can be evaluated.
Revealed Preference Theory, pioneered by American economist Paul Samuelson, is a method of analyzing choices made by individuals and groups. It is a technique commonly used when comparing the influence of policies on consumer behavior.
Revealed preference theory makes the assumption that the preferences of consumers can be revealed by their purchasing habits.
Previous theories of consumer demand were based on concepts which assumed consumers would make consumption decisions to maximize their utility. This seems self-evident but it became apparent that not only could utility not always be measured accurately but that consumer decisions could not always be reconciled with stated intentions.
In other words, people may say one thing but in some cases their real preferences are better shown by their actions. Preferences revealed by this theory can sometimes show more accurately how consumers measure utility. In other words, we can determine more accurately what people really value.
One of the stated goals of a modern government is to provide security, in all its many forms. To do this they must acquire and manage the resources they deem necessary to create and maintain security. In other words, governments could be described as consumers of security.
It follows then that analyzing the choices, the purchasing habits if you will, made by the government should reveal their actual preferences as opposed to their stated priorities and help us to determine the values of that organization.
According to the Annual Financial Report of the Government of Canada government spending in Fiscal Year 2016–2017 broke down as follows:
Major transfers to persons in millions
Elderly benefits $48,162
Employment Insurance $20,711
Children’s benefits $22,065
Major transfers to other levels of government
Support for health
and other social programs $49,405
Fiscal arrangements $17,145
Gas Tax Fund $2,102
Direct program expenses
Other transfer payments $41,580
Consolidated Crown corporations $8,436
National Defence $25,576
All other departments and agencies $51,974
Total other expenses $85,986
Total program expenses $287,156
Public debt charges $24,109
Total expenses $311,265
Based on these figures it can be inferred that the Government of Canada believes that, regardless of rhetoric to the contrary, the national defence of Canada ranks at about 8 percent on their list of priorities. It will be interesting to see if the new budget reveals any greater interest in this most basic of societal functions by the government or people of this country.
Annual Financial Report of the Government of Canada