Canada’s Fiscal Spending Out of Control: G20 and Now F-35 Planes?

“By the next decade, Harper insinuates that the military will need these planes and that they will be of huge benefit to the Canadian aerospace sector”

By Pawan Shamdasani, Staff Writer

The Conservative government announced plans in July 2010 to purchase 65 new F-35 Lighting II jet fighters for $9 billion from Lockheed-Martin, a US-based manufacturer, to replace its stock of 80 CF-18 Hornet planes. The deal, including maintenance of the planes, will cost taxpayers over $16 billion until 2016. However, the acquisition of these jets is under huge debate as Canada is currently suffering from one of its largest federal deficits in history.

The Liberal party has been unsupportive towards the deal from the start and questions its lack of transparency. Yet the biggest argument is that one of Canada’s largest military deals will be executed without a single competing bid. This has resulted in furious protests by rival manufacturers. Meanwhile, the Conservatives insist that the F-35 satisfies the operational requirements of the Canadian Forces and continue to support their case that the planes will protect Canada’s arctic sovereignty in the near future.

So is this purchase of F-35’s justifiable?

According to Liberal leader, Michael Ignatieff, the Harper government has dampened their own fiscal credibility due to fiscal incompetence and money wasted on “unnecessary” expenditures. This includes plans to spend $16 billion for “fifth-generation” stealth fighter jets and another $9 billion for new jails. In other words, Ignatieff believes that Prime Minister Stephen Harper has all his economic priorities mixed up. In my view, this is a completely valid statement, considering we are in a lengthy recovery path from the 2008 financial crisis.

“We are not convinced we need this number of planes, and we are not convinced that, at the moment of a $54-billion deficit, this is the priority for the Canadian economy,” said Ignatieff at a news conference in Cape Breton. He suggested that we should focus on issues of economic security such as pensions, the public health system, child care and post-secondary education, because this is what Canadians value most and want from their government. At a critical time like this, what is more important is that Canadians have a sense of economic security and financial well-being.

By the next decade, Harper insinuates that the military will need these planes and that they will be of huge benefit to the Canadian aerospace sector. But the government has not been clear regarding what purpose these new jets might serve to the country. They did imply that the main rationale for acquiring these planes would be to defend Canadian and North American airspace. But what does this mean? This has left critics to argue that the use of these aircrafts would have been more plausible during the Cold War against the Soviets.

Terminating the deal will also be detrimental towards the Canadian economy and affect the country’s relationship with their allies – the US, Britain and Australia. Blowing up the plan would only lead to drastic implications for Canadian defense contractors who have earned $375 million worth of contracts on the jets. It will especially anger allied nations such as the United States who have signed existing agreements since 1997.

It was in 2002 that the previous Liberal government signed a memorandum of understanding, committing Canada to developing F-35 aircrafts but not to buying them. In my opinion, the Harper government should not purchase F-35 jets when they are at a $54 billion deficit. The health of our economy must be given top priority, and this deal will only further burden the deficit. Perhaps, once the economy has reached recovery and the government has reduced their debts, these jets could be considered.

The deal will be examined in the following months by the House of Commons defense committee and by the Liberal party, who have described the contract as secretive and unaccountable. Hopefully, the decisions made by the conservative government will serve to our advantage in the following years.

By Pawan Shamdasani, Staff Writer

ARB Team
Arbitrage Magazine
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