Friday, September 28, 2007

Harper's surplus change of heart

During his time in opposition, and before that as head of the National Citizen's Coalition, Stephen Harper had us believe that surpluses were an evil thing and that if a government spent less money than budgeted -- or if the revenues turned out to be higher than forecast, that meant there was mismanagement going on. Yet the Trudeau and Mulroney Administrations made the fatal error of making deficit predictions that turned out to be even worse. It was mere prudence than anything else that Paul Martin Jr., finance chief under Jean Chrétien, wrote budgets based on the worst case scenario -- zero based budgeting.

And it was the proper thing to do.

So what to make of Harper's way off the target budget for his first full fiscal year? He predicted $3 billion. It turned out to be a whopping $14.1 billion.

Now he's saying surpluses aren't such a bad thing after all.

Of course they aren't. We've now eliminated the financial legacies of the first two mentioned PMs, adjusted for inflation and population. Our debt-to-GDP ratio is now down to 36.2% -- in dollars, $467.3 billion. The bad news -- it's in Canadian dollars. A $500 billion debt didn't look too bad when the dollar was only 62 cents. Now it's above parity. And we still have to pay it down, ideally all of it off; but at least to a level where the debt can finance itself, around 25%.

So to the tax back guarantee -- interest savings will go into tax cuts. Good idea -- we've earned the windfall. But remember, this is the same guy who once believed we should just balance the budget, period. One could do that if he or she were to invest in megaprojects, or claw back social programs like Old Age Security. And at one point, the former Reform Party actually flip-flopped on the issue; first proposing a flat tax, then opposing any income tax cuts.

My feeling is the only reason for his change of tune is because of a possible fall election. Canadians are sick and tired of tax and spend.

But they're also fed up with non-authentics. They want someone who'll be consistent, through thick and thin.

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Oldschool said...

So Harper has a surplus . . . you should be cheering!!!
But Harper's surplus is different . . . Martin created a surplus by raising taxes, raising payroll deductions EI and CPP, downloading federal responsibilities to provinces, cutting Medicare Transfers and raising taxes again.
This is called being "Progressive" by LPC fans.
Harper's surplus is caused by a booming economy which has dramatically increased revenues.
If the cons cut taxes significantly as I believe they will, it will probably lead to more surpluses.
Libs don't believe that, but JFK said many times, lower taxes = higher revenues. That of course was back in the day before libs became socialists/marxists.

BlastFurnace said...

Two points, oldschool:

First, I'm not against surpluses, I'm for them. The issue is, as was the case for most of the Liberal administration, lowballing the estimates whether on purpose or by serendipity. If the numbers were off by a few percentage points I don't think Canadians would mind. But when it's off by a factor of 4, then people start asking questions, as they should.

As for tax cuts, I have been consistent in saying relief should primarily go to families, especially with young kids; and to seniors.

I'd start by making the $1200 taxable Harper Bucks TAX FREE and adding it to the base amount of the Child Tax Benefit -- the part that provinces by agreement can't claw back. This would take a lot of families off the tax rolls all together, something that can't be stressed enough.

And EI rates should be cut to a break-even level -- having $50 billion in the slush fund over and above what's needed for no apparent reason is obscene. The same with the CPP/RRQ -- premiums should also be based on break-even.