The best thing about a fall election...

[kEiThZ]

To be fair, the Liberals polled 49% in the last majority election from what I remember.

Wrong. Never more than 42% in the last 20 years.

 

[afransen]

I think he meant in Ontario. They garnered 49.5% in 1997, and 51.5% in 2000.

I could be wrong, though.

 

[kEiThZ]

I think he meant in Ontario. They garnered 49.5% in 1997, and 51.5% in 2000.

I could be wrong, though.

Fair enough. Does not prove the point though about the Liberals having a strong national mandate. The Conservatives garnered 36% of the vote in 2006 and the Liberals about the same in 2004. Likewise, this would also challenge your assertion that the Conservatives didn't have a right to implement their agenda because they got 36% of the vote of 60% of eligible voters.....no different than the Liberals in 2004. You wouldn't argue that the Liberals had no right to implement their agenda because they did not get a strong plurality, would you? That's the nature of our first-past-the post system where a few percentage points translates into a large swing in the number of seats.

 

[kEiThZ]

Yes its CTF but it does give good stats on taxation and spending....

IDNUMBER 200809120142
PUBLICATION: National Post
DATE: 2008.09.12
EDITION: National
SECTION: FP Comment
PAGE: FP15P C
ILLUSTRATION: Table: Finance Canada And Budget Documents, Andrew Barr,National Post / THE BIGGEST SPENDERS: Average annual increase in federal program spending (fiscal year). ; Black & White Photo: Chris Wattie, Reuters / Prime Minister Stephen Harper. ; Chart/Graph: OECD ECONOMIC OUTLOOK, NO. 81 (JUNE 2007), ANDREW BARR, NATIONAL POST / GOVERNMENT TOTAL OUTLAYS. ;
BYLINE: John Williamson
SOURCE: Financial Post
WORD COUNT: 1599

--------------------------------------------------------------------------------

Harper's challenge

--------------------------------------------------------------------------------

We forget the tremendous progress Canada has made to its economic standing over the last 20 years. We were a high-taxed, heavily regulated nation and government had become too large, too bureaucratic and too wasteful. Our turnabout has been more dramatic than that of any of the G7 advanced industrial nations.

Canada began the 1970s with total government spending accounting for 36% of the country's economic output. The United States stood at 32.3% and the G7 average was 32.6%. Yet, the ravenous appetite of the state grew and grew, taxes increased and deficit spending became routine. By 1992, government activity in the U. S. accounted for 38.5% of all economic activity and 42% in the G7, increases of 19% and 29% respectively.

The growth of government in Canada meanwhile was even more stunning. Total government outlays at home devoured an astounding 53.3% of GDP. The state had grown by 48% and, rather than playing a helpful role in the economy, had instead become the problem. In 1992, Ottawa's deficit was $39-billion and one-third of all federal tax revenues was spent on interest payments. The Wall Street Journal subsequently declared Canada an "honorary member of the Third World in the unmanageability of its debt problem" in an editorial entitled "Bankrupt Canada?"

Canada got serious about cutting government spending, selling Crown assets, eliminating deficits, limiting government involvement in the economy and eventually lowering taxes. By 2006, government's take of the economy was 39.5%, a decrease of 13.8%, and is now less than the G7 average of 40.4%. It is also only 3.1% higher than the size of the U. S. government relative to its economy, which today stands at 36.4%. Back in 1992, government in Canada was 14.8% larger than government in the U. S. (The spread between all government revenues remains higher at 6.2% because Canada is running surpluses and the U. S. funds spending with massive budget deficits.)

Government is still too big and consumes too many tax dollars. But the hard work is paying dividends as government has improved its balance sheet and loosened its grip on taxpayers, businesses and the economy. Today, unemployment is low, inflation contained, the dollar strong and home ownership high. It has been an era of greater prosperity and opportunity.

At a campaign rally this week Prime Minister Stephen Harper told Canadians that our country will remain a bastion of economy strength. This is true, provided Ottawa does its part and does not again muck-up the economy by growing and spending excessively. So where might be Canada going?

Taxpayers are already aware of the Liberal's proposal to lower income taxes on business and personal income but impose a carbon tax on traditional energy sources. Opposition leader Stephane Dion calls his plan revenue-neutral because "every dollar raised by the carbon tax will be returned to Canadians in tax cuts." But this is not accurate. A revenue-neutral tax plan matches a tax hike with a dollar for dollar reduction in other tax rates.

Mr. Dion will instead levy a $15-billion carbon tax on traditional energy sources. The revenue will be used to lower personal and business income taxes by $9.5-billion. Low-income families will receive payments totaling $4.5-billion and the remaining $1-billion spent on research and development. In other words, for every $2 in income tax relief there will be $3 in additional taxes and another $1 in spending. This plan will grow the size of government, drain more resources from the economy and make middle-class families poorer.

So what about the governing party? Unlike the Grits, they have yet to release a platform. The Conservatives' first campaign promise was a small, but agreeable $600-million reduction to the federal tax on diesel. Whatever else they offer on the campaign trail many taxpayers will evaluate the Conservatives on their tax and spending record. That review is decisively mixed.

First the good news: taxes. The Conservative government got off to a rough start in 2006 by providing tax relief with a one-point GST reduction but took much of it away by raising personal income taxes. A series of micro tax cuts in the 2006 and 2007 budgets -- such as tax credits for regular transit riders or for tradesmen that purchased tools -- benefited some but certainly not all taxpayers. Then came the decision in October, 2006, to reverse its guarantee not to tax income trusts. Although it was the correct policy prescription, it nonetheless hurt the government's standing among investors -- anger that was somewhat dampened by allowing seniors to split pension income for tax purposes.

Finance Minister Jim Flaherty finally found the right track in the fall of 2007. His mini-budget eschewed boutique tax cuts and delivered significant broad-based tax relief. The GST was reduced along with business and personal income taxes.

Each one-point reduction leaves $6-billion in the hands of consumers. The Tories have chopped the hated tax by two points and transferred $12-billion a year to consumers, fulfilling a marquee campaign promise. The Minister also reversed his income tax increase of 2006 by lowering the first tax bracket back to 15%. This was an acknowledgement from Mr. Flaherty that it was a mistake to raise this tax in the first place. The government reserved his boldest policy with a 32% cut to the corporate tax. The rate will tumble to 15% in 2012, down from 22.12% in 2007. The reduction will help Canada's competitive position and help ensure more good jobs are created here.

Finally, the 2008 budget included a novel tax-free savings plan. Beginning this January, Canadians will be able to invest up to $5,000 of after-tax income each year. Future investment gains will not be subject to tax nor will earnings trigger clawbacks on government entitlement programs that are income-tested. This new tax-free savings account is a pro-growth policy that will encourage Canadians to save, rewarding individuals and benefiting the entire economy. All and all, a good start on taxes.

Government spending, however, is another story. Voters were initially assured a Conservative government would be fiscally responsible. The Tories have instead been reckless, embarking on a spending binge that hamstrings their ability to lower personal income taxes and reduce debt in the future. They have even managed to best Liberal Paul Martin's spending levels.

While in office, Mr. Martin grew Ottawa by 14% over two years. The first two Conservative budgets increased the size of the federal government by 14.8%. This makes the Conservatives even bigger spenders. While the 2008 budget promised to moderate spending growth to 3.4% this fiscal year, it seems bribing voters with their own money remains a higher calling. The department of finance reported last month that expenditure receipts swelled an eye-popping 8.4% in the first three months of the year. This is two-and-a-half times the 2008 budget plan.

Although they continue to claim they will hit their 3.4% expenditure target, the Conservatives have proven throughout their term in office that they cannot control spending. Consider the government's first budget: It called for Ottawa's expenditures to grow by 5.4% in fiscal 2006-07. At the end of that year, government receipts had jumped by 7.5%. The 2007 budget plan announced an additional 5.6% spending hike. The real amount in 2007-08 was a 6.9% increase. So much for responsible budgeting.

Mr. Harper is likely going to win this election on the weakness of the opposition. Yet, the governing party is squandering an opportunity to further advance our position in the world. A lower taxed, better governed country than other G7 nations, including the U. S., would be a magnet for investment and skilled workers. For that to happen Ottawa will need to control expenditures and cut personal income taxes, which remain the highest of all G7 nations.

It remains to be seen whether Mr. Harper will be a transformative leader that keeps Canada out in front on the road to growth and prosperity, or if he instead reverses course and ushers in a new era of big government. Canada's standing could easily fall.

If this seems preposterous consider how George W. Bush grew spending at twice the growth rate of his predecessor, blew the surplus and ballooned Washington's budget deficit. U. S. government spending has already increased by 59% this decade. That is an annual average of 8.4%. Over the same period Ottawa increased its expenditures by 54%. That is a yearly growth rate of 7.7%. If Mr. Bush's fiscal diet consists of a supersized Big Mac, fries and a Coke, Canada is similarly gorging itself -- only downing it all with a diet Coke instead. If Prime Minister Harper is to preserve our country's fiscal advantage over G7 nations, he'll need to trim spending the day after the election is over. Based on his record today, the likelihood of that happening is not promising. - John Williamson is federal director of the Canadian Taxpayers Federation. He will be leaving the watchdog organization today to undertake graduate studies at the London School of Economics.

 

[afransen]

Fair enough. Does not prove the point though about the Liberals having a strong national mandate. The Conservatives garnered 36% of the vote in 2006 and the Liberals about the same in 2004. Likewise, this would also challenge your assertion that the Conservatives didn't have a right to implement their agenda because they got 36% of the vote of 60% of eligible voters.....no different than the Liberals in 2004. You wouldn't argue that the Liberals had no right to implement their agenda because they did not get a strong plurality, would you? That's the nature of our first-past-the post system where a few percentage points translates into a large swing in the number of seats.

The Liberals behaved in a way much more consistent with a minority parliament, building coalitions with each of the three opposition parties on an issue by issue basis. They did not use political brinksmanship to push an agenda through.

 

[afransen]

By 2006, government's take of the economy was 39.5%, a decrease of 13.8%, and is now less than the G7 average of 40.4%. It is also only 3.1% higher than the size of the U. S. government relative to its economy, which today stands at 36.4%. Back in 1992, government in Canada was 14.8% larger than government in the U. S. (The spread between all government revenues remains higher at 6.2% because Canada is running surpluses and the U. S. funds spending with massive budget deficits.)

It's probably worth noting that most of health care is funded by government. Strip health care out of both, and Canada probably spends less.

Opposition leader Stephane Dion calls his plan revenue-neutral because "every dollar raised by the carbon tax will be returned to Canadians in tax cuts." But this is not accurate. A revenue-neutral tax plan matches a tax hike with a dollar for dollar reduction in other tax rates.

Mr. Dion will instead levy a $15-billion carbon tax on traditional energy sources. The revenue will be used to lower personal and business income taxes by $9.5-billion. Low-income families will receive payments totaling $4.5-billion and the remaining $1-billion spent on research and development. In other words, for every $2 in income tax relief there will be $3 in additional taxes and another $1 in spending. This plan will grow the size of government, drain more resources from the economy and make middle-class families poorer.

My perspective: the $4.5 billion for low-income families isn't government spending any more than the GST rebate is. The two instruments are essentially identical, and both are designed to reduce the regressivity of the tax.

The final $1 billion is something I'm less pleased with, but isn't quite so bad as it sounds. It will largely be dedicated to tax incentives and rebates on capital expenditure for farmers, fisheries, forestry and transportation. It seems like it was a bone they had to throw to the usual rent-seekers and for some of the more command-and-control lefties for whom this plan might seem too right-wing.

So what about the governing party? Unlike the Grits, they have yet to release a platform. The Conservatives' first campaign promise was a small, but agreeable $600-million reduction to the federal tax on diesel. Whatever else they offer on the campaign trail many taxpayers will evaluate the Conservatives on their tax and spending record. That review is decisively mixed.

Puzzling. The Conservatives have committed to installing a cap-and-trade system that would force emissions reductions of 20% from 2006 levels by 2020. If they are sincere about this policy, I think it has the potential to cause more economic disruption than the carbon tax. Such a plan would likely see highly volatile prices for emissions credits...

The government reserved his boldest policy with a 32% cut to the corporate tax. The rate will tumble to 15% in 2012, down from 22.12% in 2007. The reduction will help Canada's competitive position and help ensure more good jobs are created here.

This is probably my favourite policy of the Conservative government. I am pleased the Liberals pledged to adhere to it as well.

While in office, Mr. Martin grew Ottawa by 14% over two years. The first two Conservative budgets increased the size of the federal government by 14.8%. This makes the Conservatives even bigger spenders. While the 2008 budget promised to moderate spending growth to 3.4% this fiscal year, it seems bribing voters with their own money remains a higher calling. The department of finance reported last month that expenditure receipts swelled an eye-popping 8.4% in the first three months of the year. This is two-and-a-half times the 2008 budget plan.

Yet given the political discourse in this country, you'd hardly know it.

For that to happen Ottawa will need to control expenditures and cut personal income taxes, which remain the highest of all G7 nations.

I think that restricting comparisons to the G7 is less informative than people think it is. The healthiest of a bunch of sickly economies isn't a very good title. Comparisons to the OECD gives better perspective.

 

[afransen]

A good survey of the parties policies by economist Stephen Gorden, from his blog:

Climate change policy and the Conservative-NDP Axis of Dimwits

For reasons I'm going to explain shortly, the Conservatives and the NDP are unlikely allies in the debate on climate change policy. I'll be ripping into the idiocy of their positions pretty hard, so in order to balance what follows, I'm going to make a separate point as a sort of disclaimer. For more than a decade, the Liberal position was one of rank hypocrisy: sign the Kyoto Accord, scold people who questioned the wisdom of signing the Kyoto Accord, do absolutely nothing the meet the terms of the Kyoto Accord, and - after the 2006 election - harshly criticise the Conservative government for not being able to defuse the noxious stink-bomb that the Kyoto Accord had become. Right now, the Liberals have the most sensible climate change policy of the three major parties, but their record on this file up until the past few months is nothing at all to be proud of.

There are several levels at which this debate plays out:

1. The first-order question about the relative merits of a carbon tax and a cap-and-trade model isn't really much of a debate at all: as I've explained in the Econ 101 version of the problem, the two approaches are basically equivalent. In both systems, there will be higher prices for activities that generate greenhouse gases, and in both systems, quantities will be reduced.
2. The next issue is how to handle the redistributive effects of these higher prices. It's pretty clear that low-income households will be hit (relatively) harder by the increase in the prices of such basic goods as gasoline, natural gas, heating oil and electricity. The more concerned you are with income inequality, the harder you will argue the case for using the revenues generated - either from the carbon tax or the sale of emission permits - to offset the hardships that climate change policy will impose on low-income households.
3. Adding uncertainty to the Econ 101 model provides another source of genuine debate. If we don't know for certain just how sensitive demand is to changes in prices, then a case can be made for preferring one policy over the other. If you're less concerned about the effects on prices, then a cap-and-trade system will provide an assurance that the target for quantities will be met. If you're more concerned about the economic disruption associated with uncertainties about prices, then a carbon tax would provide more certainty on that front.

If the debate on climate change policy revolved around those last two points - that is, around differences of opinion on the importance of inequality and on whether or not we wanted to live with uncertainty about prices or about levels of emissions - then I would be proud to be living in a country where grown-ups discussed important issues in a sensible manner.

But I don't. And the reason why I don't is that significant elements in the electoral bases of both the Conservatives and the NDP have certain knee-jerk reactions that make it almost impossible to conduct a sensible dialogue:

* Those who have a visceral hatred of taxes will reject the carbon tax model, simply because the word 'tax' appears in it.
* Those who have a visceral hatred of corporations will jump at the chance of imposing caps as a way of 'Sticking It to The Man'.

Now, everyone has their irrational biases and blind spots: Liberal supporters have a tendency to be unable to recognise hypocrisy. But the problem here is that the Conservatives and the NDP are not even able to get to the point where they understand point 1) above, let alone engage in a serious discussion of points 2) and 3).

It's important to understand just how goofy the Conservative and NDP positions are. Both of them seem to think that their preferred variation of the cap-and-trade model will not inconvenience consumers, for really no better reason than the fact that they cannot - or will not - understand the basic economics of climate change policy.

 

[kEiThZ]

The final $1 billion is something I'm less pleased with, but isn't quite so bad as it sounds. It will largely be dedicated to tax incentives and rebates on capital expenditure for farmers, fisheries, forestry and transportation. It seems like it was a bone they had to throw to the usual rent-seekers and for some of the more command-and-control lefties for whom this plan might seem too right-wing.

I think it was more basic than that. It's pretty hard to sell this tax in many rural ridings that are Liberal....ie Atlantic Canada and outside the GTA in Ontario, where energy costs are a bigger concern. He would have been up the creek without a paddle if he didn't alter the policy to address rural concerns.

Puzzling. The Conservatives have committed to installing a cap-and-trade system that would force emissions reductions of 20% from 2006 levels by 2020. If they are sincere about this policy, I think it has the potential to cause more economic disruption than the carbon tax. Such a plan would likely see highly volatile prices for emissions credits...

A 12 year time frame to achieve that much of a reduction is not overly steep I would think. If the Green Shift promise that gradual a reduction, I'd be sold. Other than the issue of implementation, I am concerned by the lack of projected data on how much the Green Shift will actually reduce GHGs.

This is probably my favourite policy of the Conservative government. I am pleased the Liberals pledged to adhere to it as well.

Don't let BrandonTO416 catch you saying that.... I wish Canadians got out more.... then they would understand how tough the outside world is. We'll have to compete with the likes of China, Hong Kong, Singapore, Taiwan, the UAE, Ireland, etc. in this new era of freer trade. Lowering corporate tax rates should be priority 1 so that we can keep the jobs in Canada.

Yet given the political discourse in this country, you'd hardly know it.

And this has been my point all along. The article shows that the Conservatives are actually not conservative enough. All they did by cutting the GST was reducing the surplus, which was supposed to impose discipline by creating tigher budgets. Instead they spend like drunken sailors. Yet, I understand why. It's really hard I would think for a Conservative government to cut spending without accusations of them trying to implement some kind of right wing agenda. That's why we needed the Liberals in the 90s. They were the only ones who could make Canadians stomach cuts to social spending.

 

[afransen]

"A 12 year time frame to achieve that much of a reduction is not overly steep I would think. If the Green Shift promise that gradual a reduction, I'd be sold. Other than the issue of implementation, I am concerned by the lack of projected data on how much the Green Shift will actually reduce GHGs."

See, this is what I don't understand: as Stephen aptly explained in his blog, people who want a predictable effect on the economy tend to prefer carbon taxes while those who are more concerned with meeting hard caps prefer cap and trade. I think you may be underestimating how disruptive a hard cap would be in terms of predictability of costs in the economy. Fossil fuel consumption is pretty inelastic in the scale of a couple months, so there is potential for enormous spikes in prices during periods of economic expansion (think prices for hydro on hot summer days, when the marginal cost is in dollars per kWh, not cents). Unpredictable prices also make it hard to create offsets for low income Canadians that are fair and reasonable.

 

[kEiThZ]

"A 12 year time frame to achieve that much of a reduction is not overly steep I would think. If the Green Shift promise that gradual a reduction, I'd be sold. Other than the issue of implementation, I am concerned by the lack of projected data on how much the Green Shift will actually reduce GHGs."

See, this is what I don't understand: as Stephen aptly explained in his blog, people who want a predictable effect on the economy tend to prefer carbon taxes while those who are more concerned with meeting hard caps prefer cap and trade. I think you may be underestimating how disruptive a hard cap would be in terms of predictability of costs in the economy. Fossil fuel consumption is pretty inelastic in the scale of a couple months, so there is potential for enormous spikes in prices during periods of economic expansion (think prices for hydro on hot summer days, when the marginal cost is in dollars per kWh, not cents). Unpredictable prices also make it hard to create offsets for low income Canadians that are fair and reasonable.

You can estimate the impact of cap-and-trade using simple supply and demand calculations. While it doesn't offer the exact price certainty of a carbon tax, I doubt it's as unpredictable as you suggest. The other issue here is that we don't actually know how much a carbon tax will reduce emissions. Whereas, there is more certainty with cap-and-trade.

I will admit that the more I read, the more I am leaning towards a carbon tax. The problem for me here is like I said one of timing. The four year time frame is a little too quick, especially when we are starting in an economic downturn. I say the Liberals ditch the 2012 Kyoto deadline and plan a policy that sharply reduces GHG by 2020. That long a time frame will allow virtually every capital and energy intensive industry to plan ahead.

 

[Brandon716]

Don't let BrandonTO416 catch you saying that.... I wish Canadians got out more.... then they would understand how tough the outside world is. We'll have to compete with the likes of China, Hong Kong, Singapore, Taiwan, the UAE, Ireland, etc. in this new era of freer trade. Lowering corporate tax rates should be priority 1 so that we can keep the jobs in Canada.

I can speak for myself, but thanks.

 

[MetroMan]

NDP + Liberal Coalition?

I'm getting quite fearful of a Harper majority. He doesn't represent my view and opinions in the slightest little bit. He ignores the plight of cities and most of Eastern Canada in fact. He kisses Quebec's ass because without it, he wouldn't get elected.

The Toronto Star published polls today that raise the possibility of the NDP surpassing the Liberals in this election.

Conservatives 38
Liberals 23
NDP 18

With the building momentum, it is quite possible that Jack Layton could pull in some of the anti-Liberal voters away from the Conservatives.

With a scenario where Jack Layton gets the 2nd place, with the Liberals holding the balance to form a majority, does anybody think we might get an NDP-Liberal majority with Jack Layton at the helm?

I find that much more exciting than a Liberal majority. It would be a real opportunity to get government to work.

The current polls allow for a Liberal-NDP coalition already: 23+18=41 beats the Conservatives 38. Harper would try to form government but the coalition on the Left would defeat it and form a majority government itself. We could get some exciting politics in Canada... finally.

 

[afransen]

Unfortunately, you can't just add up popular vote shares in our electoral system.

I'll eat my hat if the NDP wins more seats than the Liberals. I honestly can't see that happening unless Dion announces he eats babies for breakfast before his daily yoga.

The last two elections have indicated that the Conservatives will likely lose a couple points in the last few days, for whatever reason. I don't know how much of an issue strategic voting will be. Maybe fairly large, if progressives are concerned about a Harper majority.

 

[MetroMan]

^ How about if the Liberals + NDP have more seats than the Conservatives? Wouldn't that allow the coalition an attempt to form government?

 

[kEiThZ]

He ignores the plight of cities and most of Eastern Canada in fact. He kisses Quebec's ass because without it, he wouldn't get elected.

Funny that sounds a lot like the two last two Liberal administrations....that's the reality of Canada. The Harper Conservatives are just wising up to the game now....if you want a majority ignore TO and suck up to Quebec. It's a tried and tested Canadian formula. That's cause Quebecers understand self-interest, Torontonians don't.

Harper would try to form government but the coalition on the Left would defeat it and form a majority government itself. We could get some exciting politics in Canada... finally.

^ How about if the Liberals + NDP have more seats than the Conservatives? Wouldn't that allow the coalition an attempt to form government?

A Liberal-NDP coalition? HA. Would never work. Layton would be trying to score points against the Liberals and undermining the very government he was a part of. And the Liberals suddenly threatened by the NDP would likely open a second front in the political war for Canadian votes.