Tories blamed for coming deficits

[kEiThZ]

Maybe you misunderstand. The Green Shift promised a significant reduction in taxation in net terms. The Liberals promised $50 billion reductions in corporate income taxes, in addition to the tax shifting for the Green Shift. That you believe otherwise is a testament to the success of Tory spin and the failure of the LPC to get their message out.

No I did not misunderstand. Look at the income levels that the green shift was targeted towards, even on the corporate side. Next, how can anyone argue that the platform was revenue neutral? Sure 50 billion in reductions, while taking billions more in revenue and tacking on 10-20 billion in new spending. Is that your definition of revenue neutral? Had the program been strictly a green shift, revenue neutral at most income levels (personal and corporate) and neutral at the macro level I would have voted for it. As it stands, I disagree that taking billions out for social programs during a recession is a good idea. When times are good, we'll talk.

"Find me a quote where Dion said he would run a deficit. Otherwise, he simply did what the other leaders did. It's not right, but sadly it's par for the course."

As I've said, Dion said that he would not 'cause' a deficit. Cagey, but honest. If you find this worse that Harper lying about whether he'd run deficits, while his government was planning to run a deficit, I'm astonished. That isn't cagey, that's dishonest. And you're cheering for his lies. I'm sure Dion had wanted to be more forthright, but he was unwilling to lie by saying something like "No deficit, ever".

I did not say I approve. Politics is a dirty business and Dion got out played. I agree that Harper's answer was deceptive and irresponsible, but I am not going to give a pass to Dion simply because he gave a less deceptive answer. I for one, fully expected a deficit (at some point in a year) regardless of which party was in power. And only an ignorant out of touch voter would have expected otherwise. Also, I would have supported the Liberals running a deficit as well. What I find annoying now, is that the Liberals are lambasting the government for running a deficit without suggesting an alternative. So tell me, what did Dion mean by saying he would not cause one. What would he have done differently to not cause a deficit a month in. Two solutions, raise taxes or cut spending. Which would it have been? Or would he have pulled a solution to a global economic crisis from his rear to make the upcoming deficit disappear. You want to raise the GST back up, then have the balls to advocate for it. Likewise, why don't they make suggestions for programs that should be cut to rein in spending. BTW, this rule equally applies to the Conservatives when they were in Opposition. I find it annoying when someone bitches without offering a solution. Put up or shut up.

"As to poor management, I am willing to give him a partial pass because he cut taxes, albeit the wrong one."

How about his increasing spending at nearly twice the rate he said he planned to, and faster even than the supposedly spend-thrift Martin government? He increased spending faster than any PM since before Chretien. Had he held to even the high rate of spending increase that Martin budgeted, we likely wouldn't be facing deficits.

Yes, and this is something that concerns me deeply. But given the choice I had as a voter between a party that raised spending (the real cause of our current situation) and a party that was proposing to raise spending even higher, all while re-jigging the tax code in the midst of a recession, I chose to play it safe. I shudder to think what the Green Shift would have done if it was being implemented right now....

 

[Whoaccio]

Which still makes the tax cut a stupid idea, no?

Well, neither spending increases or tax cuts are stupid ideas. But if it comes to determining which is responsible for a deficit, I think a spending hike worth 4x the tax cuts bears more responsibility.

 

[afransen]

No I did not misunderstand.

It seems you did. The CIT rates were to fall by 1% to compensate for the carbon tax. The Liberals further promised to reduce it by 5%, as the Conservatives have promised.

That is, even if the Green Shift would have slightly increased government spending (and it's not that egregious--we're talking about spending on refundable tax credits and capital cost allowances), they further promised to steeply reduce corporate tax rates--a promise matched by the CPC. Thus, overall taxes would have fallen.

What I find annoying now, is that the Liberals are lambasting the government for running a deficit without suggesting an alternative. So tell me, what did Dion mean by saying he would not cause one. What would he have done differently to not cause a deficit a month in.

That's the opposition's job. It is not their job to govern.

I took Dion's statement to mean that they would not worsen the fiscal course of the federal government, as the CPC has done ever since they took power in 2006. If the current course had us spiraling toward deficit, they wouldn't attempt a sudden change through steep, sudden cuts in spending or increases in taxes.

It can't be said enough that whatever fiscal difficulties we face right now are due to the poor management of the present government. And the same Finance Minister continues to set policy. Given their ideological disregard for economic theory, I don't feel particularly comfortable with that crew manning the oars.

Yes, and this is something that concerns me deeply. But given the choice I had as a voter between a party that raised spending (the real cause of our current situation) and a party that was proposing to raise spending even higher, all while re-jigging the tax code in the midst of a recession, I chose to play it safe. I shudder to think what the Green Shift would have done if it was being implemented right now....

Do you have any reason at all to believe CPC promises to reign in spending? The have broken every previous promise to contain spending.

And shuddering to think what the Green Shift would do.....

You do realise that is was a gradually phased in tax, which wouldn't see the taxes for most fuels rise until after the second budget. Also, it's probably worth noting that the price of oil has dropped by ~$80 a barrel in the past few months. And yet you 'shudder' to think what $67 a barrel oil would do to our economy, four years out?

You still haven't let me know what you think about Harper's commitment to opening up the Senate for reform, which was one of the few things he promised in concrete terms in the Throne Speech. Clearly a high priority item for strengthening the economy and promoting national unity--probably only uniting everyone in dissatisfaction with any proposed change.

 

[kEiThZ]

It seems you did. The CIT rates were to fall by 1% to compensate for the carbon tax. The Liberals further promised to reduce it by 5%, as the Conservatives have promised.

That is, even if the Green Shift would have slightly increased government spending (and it's not that egregious--we're talking about spending on refundable tax credits and capital cost allowances), they further promised to steeply reduce corporate tax rates--a promise matched by the CPC. Thus, overall taxes would have fallen.

No guarantee of that. From, what I read in the green shift documents, total spending would have increased with the carboon taxes raising more revenue than the lost revenue from tax cuts. In my books, that's a net increase.

That's the opposition's job. It is not their job to govern.

First, they want the government to take their views into account because it's a minority. Next, the government is completely responsible for the fate of governance. Which is it? The opposition can't have it both ways.

I took Dion's statement to mean that they would not worsen the fiscal course of the federal government, as the CPC has done ever since they took power in 2006. If the current course had us spiraling toward deficit, they wouldn't attempt a sudden change through steep, sudden cuts in spending or increases in taxes.

Well, given that the election was happening a month ago and they had access to records from AG, it is rather spurious to make the claim that they would have ended up in a situation any different, unless they intended to do something different.

Do you have any reason at all to believe CPC promises to reign in spending? The have broken every previous promise to contain spending.

We'll see. If they keep at the present rate, and there is no commitment to balance the books in 4 years then I probably won't be voting for them next time.

And shuddering to think what the Green Shift would do.....

You do realise that is was a gradually phased in tax, which wouldn't see the taxes for most fuels rise until after the second budget. Also, it's probably worth noting that the price of oil has dropped by ~$80 a barrel in the past few months. And yet you 'shudder' to think what $67 a barrel oil would do to our economy, four years out?

Like I have discussed before, what concerns me was the change in the taxation regime in the midst of a recession. Even now economists are still predicting $100/b by next summer. I did not want industry to be hit with declining economic conditions while being compelled to adjust to artificially inflated energy prices. Were times better, I certainly would have entertained the Green Shift. In today's economic environment, forcing a transition would have been onerous. Businesses can't simply change their processes over night particularly in industry with long capitalization plans.

You still haven't let me know what you think about Harper's commitment to opening up the Senate for reform, which was one of the few things he promised in concrete terms in the Throne Speech. Clearly a high priority item for strengthening the economy and promoting national unity--probably only uniting everyone in dissatisfaction with any proposed change.

Obviously, that's bewildering. But it was one of many commitments in the speech. I took away from the throne speech other important commitments ie. reducing inter-provincial trade barriers, creating a national securities regulator, etc. These are all solutions that are important and can be achieved in a non-partisan manner.

 

[unimaginative2]

We'll see. If they keep at the present rate, and there is no commitment to balance the books in 4 years then I probably won't be voting for them next time.

Well, there was a commitment to not run a deficit at all. I'm very sure there will be a commitment to not run a deficit in 4 years.

 

[299 bloor call control.]

Harper ponders 'unprecedented fiscal stimulus'

Reuters and Globe and Mail Update
November 23, 2008 at 3:03 PM EST

LIMA, Peru — Canada could dip into a technical recession later this year or early 2009, Prime Minister Stephen Harper said Sunday, vowing to use fiscal stimulus if needed.
He said the government may have to consider an "unprecedented fiscal stimulus," noting any package must be effective and avoid long-term budget deficits.
“The most recent private sector forecast suggests the strong possibility of a technical recession at the end of this year, beginning of next,” he told a news conference in Lima.
Mr. Harper said he has been "further surprised, more importantly, by the deflationary pressure that we're seeing around the world."


http://www.theglobeandmail.com/serv...123.wharperstimulus1123/BNStory/National/home

So much for fiscal restraint. Harper demonized the opposition parties for proposing to spend our way out of this mess, and here he is proposing something "unprecedented". What are we gonna get? Harper statues in every urban centre? Maybe he'll put his personal portrait gallery on tour.

 

[kEiThZ]

So much for fiscal restraint. Harper demonized the opposition parties for proposing to spend our way out of this mess, and here he is proposing something "unprecedented". What are we gonna get? Harper statues in every urban centre? Maybe he'll put his personal portrait gallery on tour.

I don' recall him demonizing the opposition for proposing a fiscal stimulus. This is exactly the correct move. I hope this prompts more federal participation in infrastructure development, etc.

 

[Hydrogen]

Well, neither spending increases or tax cuts are stupid ideas. But if it comes to determining which is responsible for a deficit, I think a spending hike worth 4x the tax cuts bears more responsibility.

The government cut taxes while increased spending. This is bad policy.

As they knew they were increasing their spending, they should not have cut taxes. Cutting taxes while increasing spending assured that the the surplus would be greatly reduced in the light of that increased spending, so cutting the GST was a bad idea. Now with an economic downturn, tax revenues will shrink further. This means that existing programs and budgets alone could push the government into deficit. Any stimulus efforts would be an additional cost burden on top of that.

Since we are probably heading into a recession now, there is no way that consumption taxes can be increased. Doing so would do great damage to consumer confidence.

 

[afransen]

I don' recall him demonizing the opposition for proposing a fiscal stimulus. This is exactly the correct move. I hope this prompts more federal participation in infrastructure development, etc.

I seem to recall Harper saying that his opponents were 'panicking', 'reckless', 'irresponsible', etc. for proposing same. Maybe you can't recall what he said ~8 weeks ago.

 

[unimaginative2]

Critics fears economic crisis gives Harper excuse to slash government


Sun Nov 23, 4:48 PM

By Joan Bryden, The Canadian Press


OTTAWA - Opposition parties fear the Harper government intends to use the global economic crisis as an excuse to carry out ideologically-driven spending cuts.

They'll be scouring the supplementary spending estimates, to be released Monday, for evidence that the government is using the meltdown to justify reductions that might otherwise be too politically explosive to touch.

But much as some Tories would like to take advantage of economic chaos to downsize government, insiders doubt Prime Minister Stephen Harper's minority regime has either the clout or the desire to tackle contentious budget cuts.

Still, hope springs eternal among bedrock Conservatives.

"I'm hopeful there will be some ideologically-driven, neo-conservative cuts to government," political scientist Tom Flanagan, a former chief of staff to Harper, said in an interview.

Such cuts, he added, would be consistent with Harper's long-term goal of reducing the size and scope of government.

"I think that's always been sort of the long-term plan, the way that Stephen was going about it of first depriving the government of surpluses through cutting taxes . . . You get rid of the surpluses and then it makes it easier to make some expenditure reductions."

At a minimum, Flanagan said: "I think there's certainly room for some incremental cuts to useless programs."

The government has already used the economic crisis to put off plans for a national portrait gallery, citing the need for fiscal restraint in uncertain times.

From Flanagan's perspective, the government would do well to scupper a host of grants, contracts and business subsidies and to pare a lot of what he considers wasteful spending on cultural and aboriginal programs.

Opposition MPs fear the CBC - deeply distrusted by many Tories who consider it a hotbed of Liberal sympathizers - may be targeted as well. The Tories have seemed to be softening up public opinion recently by highlighting allegations of lavish executive spending at the public broadcaster.

"It would be absolutely consistent with the Conservatives, particularly now when they can use the foil of an economic downturn, to cut programs and institutions they don't like," said Liberal finance critic Scott Brison.

"The CBC would certainly be one of those national institutions that the Conservatives clearly don't like."

As well, opposition MPs are suspicious the government will try to downsize the public service and sell off Atomic Energy of Canada Ltd.

Flanagan said a five-per-cent cut to the CBC's $1-billion budget might be in line, much as the previous Liberal government imposed reductions during the last era of restraint in the mid-1990s.

Flanagan wishes Harper would go even farther and slap a for sale sign on the public broadcaster - but doubts anything so radical is on the agenda.

"Not with a minority government," Flanagan said.

"It would require legislation. I can't imagine the other parties approving legislation to privatize the CBC, much as I would support at least selling off parts of it, or the Post Office."

In any event, Flanagan said Harper appears to have long since given up a "strongly ideological approach" to reducing the size of government.

"I think you'll see them do what governments have done in the past when they've had to downsize, which is they do what's politically possible. Rather than being driven by some clear vision of a smaller government . . . I would guess that it will be sort of ad hoc based on what's politically possible."

However, Ralph Goodale, a former Liberal finance minister, argued that long before the current economic crisis the Conservatives had been "pursuing a very ideological agenda, a very neo-conservative point of view that slashed the role of the government of Canada in the lives of Canadians."

He predicted that agenda will escalate now that the government can use the global economic crisis as cover.

"(Harper) will blame it on the international situation but in reality he only has himself to blame," said Goodale.


I don't really see critics fearing anything. The headline should be "Supporters hope economic crisis gives Harper excuse to slash government."

 

[jswag]

I agree that was a boneheaded promise. But find me another party that said they were open to running a deficit. Did Stephane or Jack say they were?
And what do you think would have happened had Harper come out and said he was open to a deficit?

Yeah, I know no one else made a contrary remark. But personally, if Harper had been honest about running deficits, I would have been more inclined to vote for him. I'm not certain how many people would have been with me. Any fool could see he (and Dion, Layton) were lying through their teeth as they talked about deficits.

And government was getting addicted to increased revenue. The huge surpluses were simply prompting calls for higher and higer spending instead of smarter spending on national priorities.

That being said, the argument that this deficit was caused entirely by this government's finance policies is spurious. If there was no slowdown, we would not be having this debate. We had a 10 billion dollar surplus that was wiped out by the 2% GST cut. Each point cut off the GST costed about 5 billion in revenue. The deficit, however, was entirely a result of the slowdown.

Entirely a result of the slowdown? I'm not so sure. This government has slashed taxes (as you have illustrated) which eliminated the surplus. In co-ordination with these tax cuts they also increased spending at a rate of about 6% per year, (see here) and relied on rosy economic forecasts to keep the budget forecast balanced. Now that those forecasts are not so rosy, we find ourselves in deficit. So it's not entirely the government, not entirely the economic slowdown.

Have a look at more up-to-date stats. We aren't all that bad. About OECD average on debt/gdp.

You're right about the more up-to-date stats (my bad), however I don't think the provinces and federal government should be considered separately. In the past, many provincial deficits and debt have been caused by federal cuts and vice versa. And while we may be "average" among the OECD countries I have higher ambitions than that for my country.

I am fairly sure that running a 13 billion dollar deficit (about 1% of GDP) would hardly put us in the same league as many of those countries. We are certainly doing better than the US, UK, Germany, France, Japan, etc. to name a few power houses. Heck, running that 50 billion dollar deficit (averaging less than 1% of GDP per annum) over 5 years would still prove to be better management than most of the OECD.

You have greater trust in government than I do then. I can't see any party doing that responsibly.

So what would you do if the recession was deep? Policies have to consistent regardless of the depth of the ups and downs in the economic cycle. And how do you judge how deep a recession is going to be? If we had that good a crystal ball, we would not be in this mess to begin with.

You misunderstood my comment. I was referring to the depth of the deficit that the government would run, not the depth of the recession. Obviously that is unpredictable.

So what's the cause of this deficit? Well, in a sequence of events: 1) overspending by governments in the 70s and 80s; 2) Paul Martin's somewhat overzealous cushioning of the federal budget; 3) a newly united and contrarian Conservative party that fed on a vibe from the electorate that surpluses were getting ridiculous; 4) bad timing from the economy.

Might I add to that list Jim Flaherty. Either he's terrible incompotent or terribly unlucky.

 

[afransen]

Critics fears economic crisis gives Harper excuse to slash government


[snip]

I don't really see critics fearing anything. The headline should be "Supporters hope economic crisis gives Harper excuse to slash government."

Indeed. It bears remembering the Tom Flanagan is Harper's mentor and they continue to work very closely. This is part of Harper's strategy to have right-wing commentators hector him from the right to make him seem more moderate. Flanagan, his mentor and campaign director does it, as well as the head of Canadian Taxpayer Federation and his replacement as the head of the NCC.

Anyone who has any doubt to whether Harper has a 'hidden' agenda need look no farther than the brazenly spoken words of his closest allies.

 

[kEiThZ]

I doubt the government is going to be scaling back government. There has been no talk here in Ottawa regarding job cuts for one. And the PM has made pledges to the premiers, to the international community, etc. to keep spending up so as to get through the recession. My fear is that constant criticism from the Opposition regarding a deficit might well prompt a reactionary decision to cut spending. The Opposition is entitled to criticize, as is their purview, but I sincerely hope that they will help the government do the right thing and pass a deficit budget.

 

[Whoaccio]

Long story short, Coyne:

Went to hear Paul Martin speak at the Canadian Club today. He was impassioned, articulate, and compulsively boastful, as all former politicians are — an endless recitation of his many achievements and visionary ways, all the good works he was performing before, you know…

On one point I sort of agreed with him, though: the present government cannot escape blame for the coming deficit, having raised spending at such a reckless pace since it came to office. (I would not be so churlish as to point out that spending rose even faster in the last years of the Martin government.) Still, I am stuck on one point: Martin also said he favoured running a deficit, as a means of “stimulating†the economy in this time of worldwide economic crisis.

I wanted to ask him, but didn’t: So if you were prime minister today, would you run a deficit or not? If not, then what becomes of any putative Keynesian stimulus? If so, then what’s your beef with Harper? If deficits are what’s on order, that’s what he’s fixing to deliver.

It’s one thing for green-eyeshade types like me to grump about the Harper spending record, since I don’t actually think deficits stimulate anything, except a lot of hurried, ill-thought-out “infrastructure†schemes: the bureaucrats have already been given their marching orders by the current Finance minister, namely to “get the money out the door.â€

But it makes no earthly sense to be attacking the govenment for running a deficit in one breath, and calling on it to do so with the next.

CONTRARIWISE: Mind you, this sort of incoherence is rampant these days. The problem is that consumers have been spending too much — unless it’s that they’re saving too much. Banks lent far too freely, but under no circumstances should they lend less. The United States has been living beyond its means for far too long. So we’ll pitch the US government headlong into trillion dollar deficits in the name of stimulating more consumer spending, much of which will go to suck in imports. I guess this is that “pragmtism†we’ve been hearing so much about…

 

[afransen]

It's probably also worth saying that since Dion was obligated to resign, it leaves the Liberals quite headless and Dion as a lameduck leader. He is in no position to be doing anything besides criticising the government.