Monday, June 8, 2009

How to build a structural deficit (or where will we cut so Suncor can keep another billion?).

This is a no brainer.

At some point - likely with little help for the Conservatives' stimulus - the economy will begin to show signs of stabilizing.

And when it does the knives will truly come out for the $50 billion federal deficit.

You can already hear Ignatieff Liberals chortling that Canadians are dying to give the Red Team another chance to re-live their dubious "glory days" of the 1995-98 era in which they brought down a $42 billion deficit by heroically slaughtering transfers to the provinces for health care, education and social assistance.

Canada has already lost $140 billion in corporate taxes becasue of an unprecedented reduction of the business tax rate from 28.12% in 2001 to 19% today. Incredibly, both the Conservatives and Liberals say they are committed to lowering it a further 4% by 2012!

A cut of that magnitude will cost the federal treasury another $8 billion a year. A hole that size would leave precisely the structural deficit every party says they don't want. This will put health care, the CBC and countless other Canadian institutions on the chopping block. This suits the Tories just fine, but there was a time when Canadains could expect better from the Liberals.

It's like volunteering for a pay cut while you are trying to pay down the mortgage and take care of a sick family member. No sane person would agree to it.

Enter the Harper Conservatives and Ignatieff Liberals.

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