When the Ontario voters threw Mike Harris’s Conservatives out of office in 2003, finance minister Jim Flaherty left the province with a hefty $5.6-billion deficit.
Today, Flaherty is in the process of doing the same for the budget of the Government of Canada. And it’s no accident.
The Harris government swept to power on the promise of a “Common Sense Revolution,” essentially a war on government spending.
As it turned out, only certain kinds of government spending were to be curtailed.
The Harris gang, many of whom are now senior members of the Harper gang, slashed social programs while feasting themselves on thousand-dollar dinners at the publics’ expense.
Cut as they might, the Harris government couldn’t manage the budget well enough to avoid that great conservative bugaboo, a whopping deficit.
It held power at a time when US consumer demand was at its highest, unemployment at record lows, and the dollar strong, but not so strong as to harm exports.
In short, the Conservatives had it made, and they blew it.
So wouldn’t you know it? Flaherty’s incompetence was rewarded with promotion.
The voters of Whitby-Oshawa, for reasons of their own, elected him to the federal Parliament, and Stephen Harper put him in charge of the money. Flaherty immediately set out to give it all away.
In an economic statement dated October 30, 2007, Flaherty announced a cut in the corporate tax rate from 22.1 per cent to 15 per cent, “giving Canada … the lowest statutory tax rate in the G7 by 2012.”
This and other measures will result in a “total tax relief over this period of $190 billion.”
Coupled with ever-increasing military spending and a commitment to make huge extra payments on the national debt, these tax cuts effectively gut the federal treasury for years to come. In the likely event of an economic downturn, the government will be forced to choose between raising taxes, incurring a deficit, or cutting spending, or some combination of the three.
If you’d like to see a model of where the Harper-Flaherty approach to fiscal management can lead take a look south of the border, where their heroes, the Bush Republicans, have been running things on exactly the same principles for two terms.
The US federal debt, as of April 30, stood at $9.4 trillion, and is increasing at a rate of $1.44 billion a day.
Ronald Reagan ran up the US debt at an unprecedented rate, and so did Bush senior.
It stabilized under Carter and Clinton and began to grow exponentially under Bush junior.
The same has happened in Canada, where the great deficit-basher Brian Mulroney ran up record deficits, reaching $42 billion the year the voters finally cried “enough.”
Why is it that conservative governments, with all their talk of debt and deficit reduction, have been the worst accumulators of debt?
The answer lies in the boasts of Harper’s top advisor, Tom Flanagan, who told Canadian Press last year, “(The Harper government politicians) are boxing in the ability of the federal government to come up with new program ideas. The federal government is now more constrained, the provinces have more revenue, and conservatives should be happy.”
In other words, conservatives don’t cut federal spending to control debt and deficit as they’ve led us to believe.
They do it for ideological reasons. They are opposed to what they call “big government”, a principal which applies to the departments responsible for social spending, but not to cabinet expense accounts, the military or the construction of prisons.
Clearly, it’s not the money spent on social programs that they object to, but the programs themselves.
Today, with a high loonie and weak markets in the US, the Ontario economy is slipping badly.
The Ontario Liberals have turned to the federal government for help, and Flaherty is very happy to be able to say that the money just ain’t there.
They’ve spent it all on war and tax cuts.
According to Flaherty, the solution to Ontario’s woes is simple. Cut corporate taxes to stimulate the economy.
It’s hard to know why anyone would follow Flaherty’s financial advice, but if they did, Ontario would be forced to gut programs, which would make Flaherty and Harper smile.
Having seen where these policies lead, are we really in that big a rush to become an over militarized, under funded debt-ridden basket case?
Why does Canada need to have the lowest corporate taxes in the G7? If we’re collecting less taxes than the other big industrialized nations, who’s going to pay for our health and education in the future?
Will future governments have the financial flexibility to cope with the increasing and unpredictable costs associated with global warming and other environmental disasters?
Flaherty has never demonstrated any great grasp of economic principles.
He’s an ideologue, with one solution for everything: no matter what goes wrong, it can be fixed with corporate tax cuts.
It’s the same solution Bush has used to drive America to the precipice.
Just this once, let’s not follow along.
Al Pope won the 2002 Ma Murray Award for Best Columnist in BC/Yukon. His novel, Bad Latitudes, is available in bookstores.