Get ready for a heated debate! Leading economists are calling for a shift in focus from the federal budget watchdog, and it's all about numbers and objectivity.
In Canada, the Parliamentary Budget Officer (PBO) is under the spotlight. Interim PBO Jason Jacques has sparked controversy with his strong language, describing Canada's fiscal situation as 'stupefying' and 'unsustainable'. This has led to a call for a more neutral approach, with economists advocating for a reduction in commentary and an increase in hard data.
But here's where it gets interesting: while the PBO's office is being scrutinized, the Organization for Economic Co-operation and Development (OECD) is also reviewing it. And the feedback so far? Positive, according to Jon Blondal, head of the OECD's public management division. He believes Canada is fortunate to have the PBO, an office respected by all stakeholders.
Economists, however, argue that the PBO's solid reputation doesn't mean it can't evolve. They suggest a greater emphasis on numbers and peer review to enhance its objectivity and accuracy, especially in a politically charged environment.
Trevor Tombe, director of fiscal and economic policy at the University of Calgary, highlights the complexity of policy analysis and the potential for disagreement. Don Drummond, former chief economist at TD Bank, agrees, emphasizing the difficulty of analyzing big numbers and economic models, which can lead to mistakes. But he adds, 'The initial error is rarely a big deal. Everything hinges on what comes after.'
The controversy surrounding Jacques' comments has brought attention to the role of adjectives and commentary in the PBO's reports. Kevin Page, Canada's first PBO, reacted strongly to Jacques' language, stating that there should be no policy or analytical commentary outside the report. He believes the PBO should remain neutral regarding policy implications.
And this is the part most people miss: while the focus is on the PBO's language, the underlying issue is the interpretation of sustainability. Christopher Ragan, founding director of McGill's Max Bell School of Public Policy, argues that Canada's finances appear sustainable for now, but a major shock like the COVID pandemic could push the country close to its debt limit, affecting its credit rating and ability to borrow.
Jacques himself acknowledges that he went too far with his language, stating that the numbers in his analysis stand on their own. He aims to emulate the U.S. Congressional Budget Office (CBO), where the focus is on the institution and the numbers, not the individual leading it.
The OECD's review will assess the PBO against nine key principles, including external evaluation and peer review. This brings us to the carbon pricing debate, where a 2022 PBO report and its updated version in 2024 caused a political storm. The report analyzed the impact of the carbon tax on households and the economy, but economists argue that it omitted key benefits of mitigating climate change.
Jacques admits that the methodology for these reports was not peer-reviewed until they were updated in 2024. He is open to expanding the use of peer review, especially for politically sensitive topics, but notes that controversy is inevitable when dealing with debated issues.
When the OECD report is published, it will provide insights into the PBO's use of peer review, offering an opportunity for further discussion and improvement. Jacques, with his extensive experience at the PBO, plans to continue supporting the office, regardless of his future role, to ensure independent costing for government programs.
So, what do you think? Should the PBO focus solely on numbers, or is there a place for commentary and analysis? Let's discuss in the comments!
