Monday, 25 April 2016

Yes, service cuts are possible with higher than inflation spending increases

Image Source: Twitter

So some snark is being flung around by the centre-right pundit class on #MbPoli twitter over leftwing concerns about austerity and service cuts under the incoming Pallister CON administration. Solidarity Winnipeg was organized under the belief that a Conservative Government on Broadway would result in policies harmful to vast swaths of working people and that push back to said policies are needed. Events like the April 23 post-election workshop on what's next for progressive activists are setting a tone of vigilance. More established progressive organizations, like the Canadian Centre for Policy Alternatives Manitoba Office, have taken note too.

There is a clear rationale for the defensive measures of many progressive organizers. Left-progressive activists don't have the funding and ability to set up issue-based opposition campaigns as quickly as a lot of the deep pocketed rightwing groups do. The left can't muster up an astroturf campaign like rightwing groups such as the Canadian Federation of Independent Businesses or the Canadian Taxpayer's Federation does in response to regulations or tax policies they dislike such as the PST hike. Even labour unions have limitations on how quickly they can mobilize members and on what issues. The money lubricated media machine on the Right is just a lot better at snap responses than the volunteer labour powered organizing of leftwing activists.

Setting up the ground game for a likely fight over public social investments and labour policy early on, therefore, makes quite a bit of sense for left-progressives. When it comes to what "austerity" actually means, obviously the fear is that given enough leeway and not enough pushback the Pallister CON government will implement service cuts like, or greater than, those of the 1990s and drastically change labour relations in this province. "Right to work" and other anti-labour organizing legislation incubated in the US is picking up steam in Canadian rightwing think tanks. In the homestretch of the campaign, Brian Pallister ratcheted up his anti-labour rhetoric and accused unions of running the province.On social services, Pallister stuck to ambiguously talking about cutting "waste" - but "waste" cutting is often a euphemism for cutting services one says to assuage voters.

I have no idea in what context the activists Brian Kelcey tweeted about argued that spending increases above Consumer Price Index increases plus 1-2 % count as "austerity". It can be the case, depending on the demographic makeup of users of certain programs, that even increases above the rate of inflation in spending can result in service cuts, however. This is most obviously the case in healthcare.

Consider the Manitoba mining town of Thompson. Shortly after it was established it had a very young population of blue collar workers and next to no senior residents. I've heard anecdotes of  how in the early days of the Thompson any senior in town meant somebody was visiting from elsewhere.

Now, over time the proportion of older residents of Thompson increased as founding residents aged and more white-collar, industry support jobs developed in the town. It's possible to imagine the growth in seniors being as high as 120% during a five year period in the early days of the town. If we suppose, just to illustrate the argument, that healthcare spending in the area in 1965 was $8000 and there were 100 users we would get spending of $80 per user. Now suppose that spending increased with the rate of inflation plus  3% real growth per year. In five years healthcare spending would be up to $9274.19 in constant dollars*. Let us assume the town had 30 seniors at the start of the five year period and that 70% of seniors use healthcare services. At the end of the five year period the town would have 36 additional seniors and of those about 25 would be healthcare users. Even with the above inflation increases, spending per user and potentially service levels have gone down to $74.19 per user.

This numerical example, completely made up to illustrate the point (I haven't looked at the demographic data over time for Thompson), shows that spending can actually result in service level cuts. This could take the form of longer wait times or less quality care per visit. Obviously, there are other complications (depending on what's the optimal amount of hospitals in the area there can be economies of scale - in which less spending per user doesn't matter - or diseconomies of scale - in which less spending per user would be a big concern and the intensity/cost of care required by seniors may differ from non-seniors).

 The main takeaway point is that Brian Kelcey's subtweeted activists may not be completely out to lunch. Within the context of certain programs, such as healthcare spending, even if funding increases above the rate of inflation there may be cuts in service levels.


*$8000x(1.03)5 = $9274.19

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