Let’s Talk Taxes
Private-sector economists and the Parliamentary Budget Officer are forecasting deficits into the foreseeable future. To deal with this problem, they all say, there are three possible solutions: spending must be cut, taxes must be raised or some combination of both. To the relief of tax-weary Canadians, Prime Minister Stephen Harper recently ruled out tax hikes, calling them “a dumb idea.” Unfortunately, in the same breath, he also dismissed the idea of spending cuts. With those words, Mr. Harper may have doomed this country to a repeat of the deficit and debt crisis of the 1990s.
During that decade, members of the Reform party and Mike Harris’s Common-Sense Ontario Conservatives argued that budgets should be balanced — Harris even passed legislation making deficit budgets illegal. The road to prosperity, fiscal conservatives argued, lay in smaller and less costly government. They believed that for society to properly prepare for the future, we need to make difficult spending decisions in the present.
Harper has a strong history as a fiscal conservative; and, to be fair, his government has made many good fiscally conservative decisions. To name a few: reduced business taxes, a lower GST, tax-free savings accounts, the new Employment Insurance tribunal and the partial privatization of Atomic Energy Commission Ltd. On the other hand, even before the recent budget, spending had been growing at unsustainable rates — more than twice the rate of inflation and population growth combined. The recent federal budget ushered in the largest deficit in history, new and increased spending on regional development programs and a massive increase in corporate welfare.
Harper is not the only fiscal-conservative backtracker: The current government caucus contains many MPs who were once elected representatives or staff members of parties with strong fiscally conservative stances, including Reformers and former Harrisites. The Harper caucus has 143 Members of Parliament. Of those, 18 were elected Reform party MPs in 1993 and 1997, four were Reform party staff members, three were Cabinet ministers in the Mike Harris government and one is a former president of the Progressive Conservative Party of Ontario.
These 26 MPs hold a great deal of power in the Harper government — they include Harper himself, seven Cabinet ministers, the government House leader, one minister of state, three parliamentary secretaries and the chairman of the standing committee on finance. As well, many of the key roles in the Prime Minister’s Office are occupied by former Reform party or Harris staff, including the chief of staff, principal secretary, director of communication, deputy chief of staff, press secretary, director of policy and director of issues management. Clearly, the prime minister and his staff have the needed bench strength to get back to their balanced-budget roots. But they haven’t.
Two disastrous prime ministers — Pierre Trudeau and Brian Mulroney — ran long-term deficits. Each man led Canada into a crisis that threatened the viability of the nation’s finances. In order not to get lumped in with their ilk, Mr. Harper will have to return to his roots as a strong fiscal conservative. The country is not yet in a financial crisis, but without corrective action, Canada may get there again.
Strong fiscal conservatives will be needed to deal with this looming mess. The question is: Where have they all gone? Are they hibernating during a minority parliament and a global recession, or are they gone for good?