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Wednesday, February 04, 2009

The Spectre Coalition and other scary stories

Anyone still standing up for free markets in Canada has heard the smug scolding of partisans. "Well just look at the alternative! Think about what would have happened if the COALITION had been in power! There would have been WAY MORE SPENDING and NO tax cuts!! You just have no idea what's politically feasible. Harper had to bring in a big-spending budget in the long-term interests of Canadians!!11one!"

Well, you've probably heard it with more foaming at the mouth, but that's the gist of it. It's time to stop the madness.

So let's look at these claims one by one:

First - what would have happened if the coalition was in power? Well, first let's assume that Ignatieff was ever willing to go ahead with the coalition and he wasn't just pulling a Quebec and threatening that he just might do it! if he doesn't get his way -- though I have my doubts -- it would have been political suicide -- it's not the biggest problem with this defense of the budget.

Would a Liberal-NDP coalition have shelled out even more deficit spending? Probably, but I seriously doubt it would be significantly worse than what we got from the Tories. Canadians might be in favour of deficit spending these days, but that doesn't mean they'll take as much as anyone would give them. I have a really, really hard time believing Canadians would have swallowed anything more than around 15% more spending (that is, I think the absolute highest deficit most would accept would be around $100 billion) than we had dumped on us already, even with Jack Layton taking a spot in cabinet.

When the Globe and Mail (not exactly a bastion of conservative thought) uses phrases like "Harper Shovels the Money," it is not big spending for a Conservative government, it's just big spending.

"Ah," say the Tories with a condescending air as they ignore everything the free market defender just said, "but what about the tax cuts? You wouldn't have gotten those from The Coalition."

Again, I'm not sure this is true. Maybe we wouldn't have gotten across-the-board, broad-based tax cuts from a coalition, but we almost certainly would have gotten something similar to what we saw -- cuts aimed at lowering the tax burden on lower income Canadians and the middle class. Besides, the cuts we got weren't as great as advertised.

"Anyone who thinks Harper and Flaherty should have just stuck to their guns and refused any deficit spending simply has no idea what's politically feasible and what's not." To some extent this is true -- Canadians probably would not have accepted a budget without some sort of bailout/stimulus spending, and a lot of free market advocates aren't willing to accept it because they know the effects it will have on the economy and believe that, as an economist, Harper ought to as well.

But this lack of political will is partly Harper's fault. Before the new year Canadians were largely opposed to big deficit spending. Perhaps if the Tories had stuck to anything since Dion decided to grow a pair in December we wouldn't be in the political situation we're in. (Though the picture might not be as bleak as we think.)

That aside, though, while spending might have been politically necessary (and I'm willing to concede that that's the case), certainly the volume of spending put forward last week wasn't politically necessary -- they could have gotten away with spending less. The fact that some spending was necessary doesn't mean that $85 billion dollars in deficit spending was necessary.

Further, Flaherty could have put forward some serious tax cuts instead of glamming up the scheduled increases in the personal exemptions. A further cut to the GST would have been politically popular and something that the average Canadian could see as an attempt to "stimulate" economic activity. And in the same way that most Canadians opposed to deficit spending will tolerate it, most Canadians opposed to trimming the fat from government would have tolerated some if only the will had been there.

"But! Think of the long-term interests of Canadians!" Tories will cry!

Yes -- let's!

Let's think of the fact that this budget has set fiscal conservatism back by a decade and thrown out any credibility serious small-government advocates have by tossing out the last support from any successful political party of their ideas. Let's think of the fact that if Harper had proposed more modest spending and fallen on the budget, even this would have been better for conservatives because when all the opposition's spending didn't produce recession-ending results, the Conservatives could stand on their record and bring in the dramatic cuts to government that will be needed after this spending orgy has passed. Let's think of the fact that when the spending doesn't produce results for Harper, either, the "alternative" on the table will be to ramp up spending even further.

Let's think of the fact that these days political discourse in Canada consists of four teams in the House of Commons trying to out-Liberal one another.

The long term interests of Canadians, indeed.

"Well, that's what you get when all you're quoting is the Liberal media," Conservatives will eventually sneer.

Ah, yes. The Liberal Media - almost as nefarious and spooky as The Coalition. How could I have forgotten them?

But apparently what "the Liberal media" is up to these days, according to partisan Conservatives, is accusing the government of not being fiscally restrained enough, supposedly because they want to turn conservatives on the Conservatives. But the Liberal media I know (and certainly the Toronto Star) wouldn't risk convincing Canadians that a tax cut is the way to go just to get in a few digs. They're reacting the way they are because this is a really. big. budget., not because it's some sort of conspiracy.

Besides, where should I be getting my news? Exclusively from Conservative Party press releases? Look. When you are calling Andrew Coyne a raging Liberal for his comments on the government's budget, you need to start considering the possibility that you've got the blinders a little too firmly in place.

And before any Tories go one step further and accuse everyone who criticizes the budget of jumping ship, let me point out the obvious and say that criticism of the budget and support of the Harper government are not mutually exclusive.

So there you go. Defenses debunked, so spare me the scare tactics. I won't lose any sleep condemning Harper up and down for this budget because condemning it is what anyone who believes we have to reduce the size of government should be doing.

Posted by Janet Neilson on February 4, 2009 | Permalink


So Janet, what do we do to stimulate the economy? Perhaps we can borrow something from the Irish. How about a lower corporate tax rate (perhaps 12%) and a lower income tax rate (flat at 15% including provincial. How about cutting the size of the civil service drastically (now that would move Jack Laytons mental bowels). Of course to do that we would have to cut government spending, quotas and subsidies. Pain- ensure it is short.

Posted by: DML | 2009-02-03 11:05:57 PM

I like it when you're worked up, Janet. More! More!

Posted by: Kalim Kassam | 2009-02-03 11:56:46 PM

Great article. So damn sick of the excuses. Even Ezra, a long time defender of conservatism, is pleading that Harper had no choice. No choice? Did he not already give us 3 budgets with no deficits? No one MADE Harper do anything. The fact he has no backbone tells me why he won't even touch Section 13. P-U-S-S-Y

Posted by: Faramir | 2009-02-03 11:57:13 PM

His mistake was hubris. If he hadn't threatened to destroy all four opposition parties he could have passed any kind of budget he wanted.

Posted by: Mont D. Law | 2009-02-04 7:51:20 AM

Janet, excellent analysis.

Posted by: Gerry Nicholls | 2009-02-04 8:04:17 AM

Dear Janet,

You're first assumption that I take issue with is that a Coalition Government would not have exceeded the 100 Billion deficit. This assumption is weak at best, and since your entire argument is built from this assumption your conclusions are weak also.

We can all agree that 85 Billion in deficit (over 5 years) is not a good thing.

But I believe that a Coalition government would have far exceeded this number. I believe that under a coalition government the 10% rule would have been used. 10% of what the Americans are spending.

I believe that assumptions could easily be made that a Coalition government would have spent 300 Billion over 5 years.

Look at what Newfoundland and Quebec alone would have been able to pull out of the Coaltion.

Though I would agree with you that the Conservative Party has done a poor job with their communications, and that Stephen Harper wears the blame for this - he is the Leader with a big L for Leader. I cannot agree with you that this is a terrible budget and I cannot agree with you that all is lost.

Progress has been made in previous budgets on tax relief for individuals, families, and real tax cuts for businesses. Canada is in much better shape than any of the G20 nations, our future looks bright in this sense.

What is troubling is that Canada relies so heavily on the US for trade and the US is going down very quickly.

Perhaps you and others who have the ablility to make impressions on Canadians should focus your energy on Obama and his reckless spending which will hurt Canada far more than Harpers 85 Billion or the Coalitions 300 Billion.

Posted by: Stop the Carbon Tax! | 2009-02-04 10:28:00 AM

First: It would not have been Michael Ignatieff as the Coalition's prime minister. It would have been Stephane Dion. Second: While the short-term dollar amounts of a Coalition budget may have been similar, there is little doubt that the structure of a Coalition budget would have been much more damaging. It's more than likely that a Coalition budget would have included Stephane Dion's carbon tax, would have created large & permanent new entitlement programs like "universal" child-care, and would have reversed most if not all of the cuts to bureaucratic pet projects and administrative boondoggles that the Tories have managed to get through over the past three years. The idea of a Coalition budget really does send shivers up my spine, and I'm surprised how many pundits honestly think a Coalition budget would have been "no big deal".

Posted by: anonymous | 2009-02-04 2:21:55 PM

I believe that assumptions could easily be made that a Coalition government would have spent 300 Billion over 5 years.

Posted by: Stop the Carbon Tax! | 2009-02-04 10:28:00 AM

You might as well be working for the Liberals in the 2006 election, running around, wide-eyed and panicked, warning Canadians that Harper was going to cut every social program known to man, let poor people die in the streets and firebomb the CBC. And there will be SOLDIERS!! You know the drill.

A coalition government might (--might--) have *wanted* to spend $300 billion dollars (though 10% of US bailout spending would be more like $800 billion at this point - doesn't matter because it wouldn't be any more politically plausible) but that doesn't mean they *could.* Members of a coalition government would still be subject to public opinion when election time came around again, and the Liberals aren't looking to see if they can increase Layton's vote count under Iggy more than they could under Dion.

(And again, you're assuming that Ignatieff would have done the political equivalent of jumping off a bridge by actually forming the coalition.)

Posted by: Janet | 2009-02-04 2:36:46 PM

anonymous - your points on the structure of the budget are fair enough, though I believe the fact that they wouldn't have an ability to spend whatever they wanted without consequence (Canadians don't have a stomach for a much bigger deficit) would have put some sort of a damper on this compared to what the worst case scenario would be, and I think the damage would have been offset by the small government movement not having been set back by 10 years.

That said, I didn't say it would be "no big deal," I just said it wouldn't be "that much worse." I already think it was a big deal as it stands. And also I still don't believe Ignatieff would have gone through with it - especially if Stephane Dion would have been PM, so thanks for helping me out there.

Posted by: Janet | 2009-02-04 2:41:34 PM

Where are you getting your numbers. The coalition was asking no more than what Harper provided? Saying they would have spent 100 billion is a just a wild guess.

Posted by: Faramir | 2009-02-04 11:34:09 PM

Janet, I still do not understand why Michael Ignatieff has anything to do with the issue. If the government had fallen in November and the Coalition had been allowed to form government with Stephane Dion as the Prime Minister, whatever Michael Ignatieff thought of the matter would have been largely moot. His choices at that point would have been to accept a cabinet position (if invited), to refuse a cabinet position and sit as a backbencher, or to resign. Whichever option he chose, the potential that he could have influenced the outcome of the budget in a positive manner would have been little-to-none. Any public prestige he enjoyed would have been erased, and Bob Rae (not to mention Justin Trudeau) would have become the next big Liberal star as they would have certainly been given plum cabinet posts. Iggy would have probably gotten Foreign Affairs, which is where leaders send you when they want to get you out of the country and out of party politics.

Posted by: anonymous | 2009-02-05 11:59:04 AM

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