Tuesday, January 6, 2009

Structural deficits anyone?

For most of the fall and even after Harper pad-locked Parliament, Conservatives vowed against a return to structural deficits.

Jim Flaherty proudly told a business audience, "Ongoing, unsustainable budget deficits are quite rightly unacceptable for Canadians. These structural deficits must never return."

On this point the Conservatives would find little disagreement -- at least among New Democrats. Budgeting over the long term to spend more than you take in isn't smart for households, businesses or governments (incidentally, a point Jack Layton has been living and saying long before he was elected leader of the New Democrats).

Yet while the Tories have talked the talk, they are walking the walk right back into the kinds of structural deficits we saw over the 1980s and early 1990s. What Flaherty is musing about today is code for hobbling the federal treasury for years to come. More permanent tax cuts is precisely a recipe for a return to year-over-year deficits. In the post-Economic Statement-era, is it now too much to ask that the Conservatives at least be honest about that?

If Stephen Harper and Jim Flaherty were honest, they would be reexamining the scheduled corporate tax cuts for 2010, 2011 and 2012, given what little those cuts have done to help forestall the current economic downturn. After all, what good is a tax cut to GM, or the larger economy, when the company isn't making a cent to be taxed?

Though if they were honest, Harper and Flaherty would have to admit that their predisposition towards larger and larger tax cuts has more to do with parochial ideology and constraining the federal government to provide infrastucture investment or child care than either with economic stimulus or preventing a return to deficits.

If nothing else, Flaherty's tax cut musings make the point that the Conservatives have learned little since the near-death experience of the Economic Statement. Because budget making through ideological lens has done so much to create jobs and secure their precarious position so far.

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