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The Harper budget: Always leave ’em wanting more


 

PostMedia columnist Michael Den Tandt is still struggling with last Thursday’s budget, which was a good deal less earth-shaking than one of his columns a couple of weeks ago predicted. This is to Den Tandt’s credit: many writers would have forgotten what they predicted and moved on, new day dawning, without a fuss. But why was it such a middle-of-the-road budget, given that a Conservative majority could pass whatever it wished?

Den Tandt indulges apocalyptic speculation:

At what point do red-meat conservatives, and Conservatives, begin to wonder if their chosen political vehicle has become all that it once despised? When do they grow tired of being taken for granted, while the Harper government curries favour with retired teachers, fans of the Canada Council and the like?

Harper “is beginning to look a lot like Chrétien, policy-wise” and “At what point do the most stalwart Conservatives… start thinking about making the Wildrose Alliance a federal party?”

I’m going to guess “not yet.” But Den Tandt is hardly alone. Ezra Levant didn’t like the budget either. And at Hy’s, before everything went weird the other night, a veteran former member of this government confessed to me that he was disappointed with this budget’s timidity. “I hate to agree with Andrew Coyne, but…”

Any one of three things could be happening here. The first is that Stephen Harper is a great big chicken, buck buck buck-AW. I throw that out for discussion. I don’t believe it.

I think it’s a mix of the second and third things. The second thing is that Harper has an overriding strategic objective, not too dissimilar from the one he faced when he was first elected. In 2006 he had to bury the notion that once Conservatives won government they would bring in wrenching and radical change most Canadians could not stomach. In 2012 he must bury the notion that once Conservatives won a majority they would bring in wrenching and radical change most Canadians cannot stomach.

So maybe it’s more effective to boil the frog: incremental change over time. This view contradicts the classic rule of thumb, that a newly-elected majority government gets a year, two tops, to do its fancy stuff before it must start preparing for the next election. That’s how Reagan and Mike Harris rolled. But what if Harper shaved a bit off expectations every year? Then projections of direct federal spending would look the way they have looked in the last three budgets: a bit more fiscally conservative with every pass. (Linked graph courtesy of Globe Economy Lab economist Stephen Gordon.)

Note that the latest budget, passed with a stable majority, continues a trend set by the last two, even though the 2010 budget and the first draft of the 2011 budget were brought in by a government that was supposed to be highly unstable because it commanded only a minority in the Commons. Spending projections get a shave every year. Soon enough the billions add up. If Harper could do that job during the last years of a minority madhouse, he can do it during the middle years of a majority, greatly aided by the monumental inattention of most observers. And he’ll be helped in that incremental conservatism if he avoids a centre-left backlash while leaving conservative itches perpetually unscratched.

 

 


 

The Harper budget: Always leave ’em wanting more

  1. From a “progressive” point of view, death by a thousand cuts.

  2. Mostly agree with PW.  Another log on the fire: PMSH has seen financial projections that are BETTER than anticipated.  Harder to fire civil servants if Gov’t running surplus.  So incrementalism also makes matching Civil service cuts with ( increase revenues + tax cuts) easier.

  3. Harper and Carney are aiming for the economic sweetspot…a smooth transition from unsustainable stimulus-led recovery to sustainable private sector investment led economic growth.

    Too much austerity too quickly, and you lose economic confidence and private sector economic growth and you lose tax revenue, and you lose progress on the deficit. 

    Not enough austerity, and one ends up on a deficit and debt spiral downwards.

    The ideologues in the opposition and on Harper’s right flank don’t understand economics.

    • Agreed. Personally I think he’s moved a little too quickly in that regard.. economic indicators lately haven’t been up to the snuff I’d like to see before moving more heavily in the austerity direction. Some 19k federal employees, an unknown number of employees from charities which will become defunct, plus all the ripple effects, at this point just strikes me as too much.  Especially as it seems inflation is starting to increase even though jobs aren’t.  

      Tack on austerity measures with interest rate increases to combat inflation and things could get very bad very quickly.

      Hopefully I’m wrong, though.

      • Nah. Realistically, the Bank of Canada is who really tugs the levers of demand through interest rates. Relatively small changes in government spending won’t be too much for them to handle. I don’t agree with employing 19,000 fed employees just as an economy-stimulating measure.

        • I somehow doubt they received paycheques for sitting on their couches at home.

          And considering some of those cuts are coming from the RCMP and Corrections Canada, I really doubt employing them was just “an economy-stimulating measure”

          • That’s a better argument. Further, no time is the right time to cut jobs that are providing a worthwhile service. Your argument before was that they should have waited to cut. 

          • If resources were limitless, then yes. No time is the right time.

            Resources aren’t. And since we can’t have everything, sometimes we need to pick and choose what we have.

            The problem we’re having is you were speaking to the nature of the cuts (hired just for stimulus) whereas I was speaking as to the level of them. It’s entirely possible for the services they provided to be worthwhile, but of lower priority than other services being provided.

            Since we can’t afford everything, at some point we have to decide what goes. And I’m saying that this point is a bit too soon yet.

  4. Heh….Cons used to call this being ‘Ottawaized’, but it’s what happens when ideology meets reality….

  5. I believe you have a point.  I’ve been thinking about this myself.  Is it fiscally conservative or not?  I’ve seen figures for debt projection and revenue projection.  Both look good. But spending is the real issue for fiscal conservatives.

    I had not seen the figures for spending projection until now.  The charts you linked to are useful, I’ve been looking for exactly that. A 1 percent drop of spending vs GDP every two years is indeed fiscally conservative, IMO.

  6. It runs counter to the common meme that Canadians are the highest taxed people on earth, and that government spending is skyrocketing along with taxes. I’m astonished when I run into people who honestly believe this. I don’t know where they get their info, but I wonder if it is a deliberate misinformation campaign to keep them engaged and supporting certain parties.

    • I work in the income tax preparation business, and this phenomenon has almost made me scream today.  THREE times, I heard people say, “Well, they just don’t want me to work” or variations of same.  I felt like calling their bluff and say, “so don’t.  Work just enough to be at the top of the lowest income bracket, then stop.  That’ll fix them!”  Because of course they won’t.  But the killer for me is that of these three people today, not a one of them paid 25% in taxes.  Oh, yeah, I’m pretty sure they are the 1% as far as income goes, but the more you make capital gains taxed at 50% instead of 75%, bring the marginal rate from 70% to whatever it is now, etc. the more they complain, not the less.  Because its cool to complain about taxes, apparently.

      • I hear you!  Also, a complete misunderstanding of what “being in a higher tax bracket” actually means (only the amounts above the threshold are taxed at the higher rate.)

  7. During the election, Harper was asked what he would do with a majority.  I believe his response was … the same thing we’ve done with a minority, but we’ll have the ability to plan, etc.  For the most part, he seems to do what he says he’ll do.

    • Like not appoint unelected senators?
      Like support the BC forestry industry against the illegal US tarriffs?
      Like not tax income trusts?

      For the most part?  For the least part.

  8. Reading this article and the Prime Minister’s remarks in Washington today, I’m left with the feeling that I could support these guys….if only they weren’t such a bunch of childish jerks.

  9. As a longtime deficit hawk , I remember being deeply disappointed by Mulroney’s first budget: tax and tax, spend and spend. Now this. It would be nice (if a bit scary) to believe that Harper is manipulating every damned thing, slyly and slowly applying a long-term master plan. But Occam’s Razor tells me he’s just getting buried in “events, dear boy, events” and can no longer see the forest for the trees.
    And didn’t I read somewhere just last week that Harper wanted a budget of fundamental change but that Flaherty and the sharp-pencil crowd in finance didn’t?

  10. Thomas Sowell ~ The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.

    People like to vote for competitive parties – our 3 main parties are likely to remain for long time yet – and Cons/cons will continue to vote Cons. I have never voted for one of our main political parties because I think they work against Canadians interest and I hear similar complaints from many other people but Canadians continue to vote for established parties. Canadians reward bad behaviour and will continue to support our corrupt public sector. 

    Economic conservatives are a great example – lots of people claim to be economic conservatives but where is that reflected in our debates?  Cons are fiddling while Rome burns until they take on the unions. Harper is making boutique cuts to a few agencies but government spending is increasing – Canadians are paying more $$$ for fewer services and bureaucrats. Government spending increases annually, and we think of it as a natural law, but we are getting fewer services for our money.

    Government motto is ‘pay more for less’.

  11. I have said for Harper for quite some time, that as PM, this is as good as it gets. Objective: PM and power for as long as possible.

    A little song, A little dance, A little spritzer down your pants

    – Chuckles the Clown

  12. Then projections of direct federal spending would look the way they have looked in the last three budgets: a bit more fiscally conservative with every pass. (Linked graph courtesy of Globe Economy Lab economist Stephen Gordon.)

    Of course, the denominator in the ratio (pct of GDP) is based upon continuing and growing resource revenue – why he is on his all out offensive to make sure he gets his tax revenue from this sector.

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