Harper’s Reckless Economics

Throughout the election campaign Stephen Harper claimed the political high ground on the management of the economy. The surprise is that the opposition has pretty much let him get away with this. During the English Language debate the first question focused on $6 billion tax cuts to corporations. Harper said there were no tax cuts ‘right now,’ something that was only true for the second. Corporate taxes were cut from 21% in 2008 to 16.5% now and will be further cut to 15% in 2012.

Layton and Ignatieff more or less abandoned the issue and did not press Harper about the inefficiency of these cuts. The week before the debate both the Globe and Mail and the Canadian Centre for Policy Alternatives studies showed that corporations mostly hoard the money they save from the tax cuts and don’t use it to reinvest in the economy or create new jobs, the supposed reason for the tax cuts.

Munir Sheikh, former head of Statistics Canada and of tax policy at Finance Canada, showed this week that the real winner of the Canadian corporate tax cuts is the U.S. Tax cuts here give corporations bigger profits and because the US corporate tax rate is about twice as high as ours, US corporations in Canada then just pay more American tax on their Canadian profits. This transfer from the Canadian to the US treasuries amounts to between $4 and $6 billion a year.

Harper talks economic conservatism, but the record doesn’t show it, either in deficit reduction or spending actions. When the Conservatives took office they inherited a $13 billion surplus. Cutting the GST by two points turned this into an almost $6 billion deficit by 2008. Now the deficit is over $55 billion.

A deficit isn’t always a bad thing, particularly when a country goes through an economic downturn as we did. But cutting government income during a recession is asking for trouble and that is what we have. Both the IMF and the Parliamentary Budget Office have warned that Canada now has a structural deficit. This means that without big revenue increases the deficit becomes permanent. Since Harper is promising a balanced budget by 2014 cutting programs is about the only solution for him.

Harper is also a big spender and is committed to some expensive projects in the future, including something on the order of $35 billion for new fighter jets and $9 billion for prisons. It’s the kind of economic conservatism typical of the Bush presidency, one that cut taxes at the same time it spent lavishly on the military. But at least with Bush the money was spent in the country, with the F-35 spending the money will mostly go to the U.S. That’s economic stimulus, but not for Canada.

[This was published in The Province in BC today.] Marjorie Griffin Cohen


  • A “Comprehensive, Riding-By-Riding “Surge and Strat Voting Guide” to stopthe Conservatives in British Columbia can be found, here.


  • Really, it’s not much of a surprise. It doesn’t matter what the facts are, other parties and particularly the NDP have gotten used to the idea that the media will portray corporate or investment-income tax increases as bad for the economy, along with nearly any other measure good for actual people (e.g. higher minimum wages, which will be job killers regardless of whether they kill jobs).
    It doesn’t matter what the truth is if you’re trying to get elected and you know those you depend on to tell the public stuff will do your opponent’s spinning for him. You try to change the subject to something with less of an official media consensus.

    The US religious right (and the Tea Party) has a similar problem–they want to tell their base a whole lot of stuff that’s too dangerous and ridiculous for the more respected media even in the US. Aside from starting their own media, they’ve also responded by adopting coded language, oblique references that the base understands but that outsiders mostly do not.

    It’s uncertain whether equivalent approaches (for hiding good rather than evil) would be worth while for the NDP . . . the religious right has the advantage that while, say, CNN or the New York Times pretty much have to criticize their more stomach-churning beliefs if they express them directly, such media outlets would prefer to let sleeping dogs lie, so they’re perfectly willing for the most part to pretend such coded language isn’t referring to anything. But if the reds under the bed start referring obliquely to stronger leftist policies, we can be pretty sure the media will be enthusiastically interested in ferreting it out.

  • John Peters also has an op-ed critiquing Harper’s economic record in today’s Toronto Star.

  • Marjorie Cohen

    To the Purple Guy — You’re right — no argument from me. However, both opposition parties did say they would restore the corporate taxes, so they were open to media comments already. Explaining why Harper’s tax cut strategy hasn’t worked would have bolstered their argument and certainly didn’t seem much of a risk.

  • All Harper has proven the Gorge W Bush of government spending while cutting taxes, will not work. Erin’s work on tax cuts show without offsetting reductions, increases the deficit.

    Those on left are getting ahead of themselves. The argument in the years to come now that it is successfully proven:increasing spending while lowering taxes is gone.

    The arguments going forward will either be to increase taxes to match spending; or decrease spending to match tax revenue. Social Conservative have successfully proven you cannot have low taxes without giving up spending.

    Keynes for WW2 argued to raise taxes while spending. He did not argue keep taxes low, while ramping of deficits. Which means & be honest; everyone taxes will have to be raised. The majority of voters in the US or here, are not for their taxes raised given the election of “low tax;high spend” candidates.

    I can live in high taxes for government services; or very little services for low taxes. You can label me an extremist, but Im honest.

  • True enough, Brandon L., although the question from the left is also: Who pays those taxes? The right has worked for decades now on reducing taxation on the rich and large corporations while leaving it pretty much untouched or higher on the rest. Often it’s by stealth–consumption taxes, user fees and so forth. The revenue created by restoring decades-ago levels of corporate taxation and progressivity of income taxation would be huge.
    So personally, I’m all for increasing taxation on those other guys. Soak the rich, and all that–the economy grew faster back when we did that anyway.

    Ms. Cohen, you certainly have a point. And with the arguable rise of alternative media forms, there may be more chance than ever to make a serious argument of it. The mainstream claim that Conservatives are good economic managers is nonsense and certainly deserves challenging. The fact is that the dichotomy between doing good things for ordinary people and doing good things for “the economy” is a false one–as a rule, it is the policies that are good for ordinary people which also lead to a healthier economy, whether in the short or long term. It is the wealthy-coddling policies which we have seen creating instability.

  • “Explaining why Harper’s tax cut strategy hasn’t worked would have bolstered their argument and certainly didn’t seem much of a risk.”

    Exactly right, but on the economy they scared of their own shadow when it comes to econ 101.

  • “Explaining why Harper’s tax cut strategy hasn’t worked would have bolstered their argument and certainly didn’t seem much of a risk.”

    Exactly right, but on the economy they are scared of their own shadow when it comes to econ 101.

  • Psst, pass it on…..make sure to vote today and tell all your friends.

    If just 10% more people had voted last election, Harper would never have been elected!

    This is by far the most important election of our lives!

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