DON'T FORGET JOBS AND GROWTH
The 2015 election is at serious risk of being highjacked by tax cut promises made by Prime Minister Harper during the 2011 election campaign; promises that will do absolutely nothing to strengthen economic growth and job creation. Add to this government’s attempt to play on Canadian’s fear over terrorism.
Last month’s budget devoted 152 pages to “Creating Jobs and Economic growth”. There were lots of words summarizing what the government had done in previous “Action Plans”, not very much, but there was very little in the way of new commitments aimed at helping a struggling economy grow over the next five to ten years.
Over the next five years, the government will devote a grand total of $9.2 billion in new funding to support jobs and growth. Despite a struggling economy, two-thirds of this will not occur until 2018-19 and 2019-20, assuming of course that all of the budget’s “fantasy” assumptions, with regard to economic growth and oil prices actually occur.
When it comes to “Helping Families Make Ends Meet”, however, the sky is the limit.
Between 2014 -15 and 2019-20, $28.5 billion will be allocated to helping families. Most ($26.4 billion) of this will be taken up by the Family Tax Cut (i.e., income splitting, $12.7 billion) and enhanced Universal Child Care Benefits ($13.7 billion after eliminating the Child Tax Credit). The Prime Minister announced all these measures last October.
In other words, over the next five years, this government is planning to spend more money on income splitting for a small number of well off families, a promise made during the 2011 election, than on supporting economic growth and job creation through new spending on research and infrastructure and lowering taxes on investment.
Putting money back “in the pockets of “some” Canadians” is apparently more important than modernizing our infrastructure; increasing our productivity; improving or competitiveness; and creating jobs.
For Harper and Oliver having a job is not considered very important in “helping families make ends meet”.
It would be nice to unwind these tax cuts and reallocate the funds to modernizing the economy, but that is not going to happen. It is more important in sending cheques out to families in advance of the fall election. All political parties will half to come up with competing tax cut strategies.
Does this mean that jobs and economic growth should be ignored because the entire surplus has been used up on unnecessary tax cuts? Canadians don’t think so. Economic growth and jobs still ranks number one in their priorities. President Clinton was right in 1992 and it worth repeating, “It's the economy stupid”.
Given global economic uncertainties, and growing concern that recovery in the U.S. is stuttering, shouldn’t we expect our federal government, whoever that may be, to implement a domestic-led strategy for jobs and growth? Have we not learned that building a growth strategy on a volatile commodity price is not a good idea?
So what is the problem? The problem is the word “deficit”. Stephen Harper has created a belief among Canadians that all deficits are bad and all debt is bad. Finance Minister Oliver in his own “Pavlovian” way continues play on this fear in his speeches, and no doubt it will be big part of the Conservative election campaign.
The leaders of the Opposition Parties are also in fear of the dreaded “deficit” and they continue to state categorically that they would never run a deficit. They seem to believe that they could never win over Canadians to accept that running small deficits will allow the government to boost jobs and growth.
Of course not all deficits are bad and not all debt is bad. It depends on the circumstances and the underlying purpose of the deficits.
No credible economist would recommend a return to the 1980s. But claiming as the Conservatives would that, if the federal government were to run a deficit, Canada would soon become like Greece is just utter ‘bull crap’. Canadians know this is complete nonsense.
Consider the following.
A deficit of 1 per cent of GDP would be about $20 billion; a deficit of 0.5 per cent of GDP would be about $10 billion; a deficit of 0.25 per cent of GDP would be about $5 billion.
A deficit under 0.5 per cent of GDP is relatively small, if not trivial, by any statistical fiscal standard. A deficit under $20 billion will still result in the ratio of debt to GDP to continue to decline from its current level. Indeed, even if the deficit ratio was held constant (implying increasing deficits), the debt burden would still fall.
Now is a good time for the federal government to borrow and to help the provinces to invest in modern infrastructure.
Right now the federal government can borrow using thirty-year bonds at about 2.5 per cent. This is dirt-cheap borrowing and is much cheaper than what the provinces would have to pay.
The federal government could provide leadership and become the “borrower” for the provinces and municipalities. The borrowed funds could then be lent to the provinces and municipalities through a number of different funding arrangements. This would allow the provinces and municipalities to ‘benefit’ through considerably lower borrowing costs.
Mr. Oliver likes to talk about not wanting to leave debt to our grandchildren. Mr. Oliver is either being purposely very simplistic and misleading or he doesn’t know what he is talking about. What we don’t want to leave our grandchildren is a higher debt burden.
We also don’t want to leave them an uncompetitive infrastructure that they will have to rebuild in the future at a much higher cost than if we make the infrastructure investment now.
We should do our grandchildren a favor and start borrowing to invest in their future.
I am sure Stephen Harper’s “granddaughter” would appreciate it.
I know ours would.
If only we had some political leaders who would do it.