Friday, May 25, 2007

10 in a row -- and decision time in Québec

For the tenth year in a row Canada ran a surplus ... $9.7 billion. As usual it's been applied to the debt which now stands at $467.8 billion or 37.9% of GDP. No question a lot of the cuts have been done on the backs of Canadians, but we're in considerably better shape than the United States whose current burden stands at 64.7% and climbing rapidly.

The question is where we go from here. The Harper government, having inherited a positive balance sheet from the Liberals has decided piecemeal tax breaks plus a cut in the GST is the answer. I personally think it would have made more sense to have kept the sales tax at 7% while having broader based tax relief as well as increased social spending. But at least until the fall, we're sort of stuck.

It is with that in mind that one thinks about yesterday's proposed budget plan in Québec. No question the province's tax burden is huge and bringing in the tax brackets there to be more in line with the other provinces makes sense. However, I don't think Harper gave billions to the provinces to cut taxes but to fix the social deficit. Thus one should not be surprised that the ADQ and PQ are threatening to topple Charest as early as next week. And the fact is the province has a crippling debt and needs to make some tough choices to bring its burden to a more managable level first before even considering it.

The argument can be made that the proposed tax cuts in the province are broad-based and will put more money in the hands of families. Of course, they will. The question is will they spend the money or hoard it? We tried trickle-down economics under Mike Harris in Ontario. The only thing that trickled down was arrogance and the belief that the tax cuts alone stimulated the economy. In fact, the only reason why the revenues went up as taxes went down was that we just got lucky by riding the American coattails -- until 9/11, that is.

It is apparent that Charest is trying to stop the brain drain -- more skilled people will mean more revenues. But tax cuts don't make sense without getting rid of the red tape too, and the bureaucracy in Québec is bloated. Some programs were privatized yesterday but little else was done to bring the public service in line.

If there is a no-confidence vote in the National Assembly one might assume Mario Dumont might be asked to try to form a government. Or there will be a snap election just a couple months after the last one -- and Québecois will really be in an unforgiving mood. Whether it's the ADQ or the Liberals that receive the wrath remains to be seen.

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