The Liberals show their work - Macleans.ca

The Liberals show their work

Aaron Wherry on the Liberal party’s ‘fiscal plan and costing’

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Not counting explanatory notes, the Liberal party’s “fiscal plan and costing” includes 15 tables comprised of some 314 numbers, some of them big ($1.68 billion for public transit infrastructure), some of them small ($5 million to enhance the flexibility of the RRSP Home Buyer’s Plan). Generously, the Liberals have left you, the voter, a full three weeks to complete the actuarial analysis and comparison you’ve no doubt been waiting to complete since this campaign began so many days ago.

The Liberals presented this as a “credible plan” for “investment” and “real, immediate change.” If they are lucky, it will at least be “a document that does not include a glaring and consequential error of math.”

The platform costing is a requirement of the modern political campaign. The more detailed, the better. Though the more detailed, the more likely that one of the details will be challenged. In this regard, the patron saint of platform costing is poor Tim Hudak, the former leader of the Ontario Progressive Conservatives, whose “one million jobs plan” turned out to be something rather less after economists discovered “an inexcusable and elementary mistake in mathematics.” There but for the grace of Archimedes goes anyone with a hope of forming government. However much its particulars might not be scrutinized by the majority of voters, the costing remains a basically useful test of credibility. But social media is now lousy with economists and so the public release of a costing is now made just a bit more exciting by the acute potential for peril that is the thought of a dozen hounds with economics degrees baying at the door.

Three hours after releasing their plan, the Liberals were happily distributing the flattering words of Kevin Page, the former parliamentary budget officer. “I think it’s a good document,” Page was said to have said. “It’s a substantive document.” Eight days earlier, Page had been less kind in regard to the NDP’s costing. In that case, the New Democrats had relied on the economic projections of last spring’s federal budget. The Liberals, conversely, used a PBO report from July as the basis for its numbers—a baseline that takes into account more recent developments in the economy. We will never know whether the Liberals planned all along to use the PBO’s report, but they have at least the advantage now of satisfying Kevin Page.

The bottom line numbers for the Liberals are $9.89 billion, $9.52 billion, $5.72 billion and $1 billion—the first three being deficits, the last a surplus. (There is also the fun of a promise to announce a couple billion in surprises over the next few weeks.) But the Conservatives are particularly eager to fuss over other numbers: those listed to the right of the heading “Tax expenditure and Harper spending review.”

    The Liberals claim here that they will review the “tax expenditures”—the accounting phrase for the various tax credits and exemptions that the federal government grants for the purposes of encouraging or rewarding certain behaviours—and general spending of the government and find measures that should be discontinued. Government advertising would be reduced, as would the use of outside consultants, while “an overdue and wide-ranging review of the over $100 billion in increasingly complex tax expenditures that now exist, with the core objective being to look for opportunities to reduce benefits that unfairly help those with individual incomes in excess of $200,000 per year.” So, for instance, the Liberals suggest they would cap the amount that be claimed through the stock-options deduction.

    The Conservatives, in response, allege that this review will result in a “$6.5-billion dollar increase in taxes.” To get to that number the Conservatives would seem, while ignoring the spending aspect of the review, to have added together the projected savings—$500 million in 2016-17, $1 billion in 2017-18, $2 billion in 2018-19 and $3 billion in 2019-20.

    Using a similar approach in 2011—adding together several years of projected savings—the Liberals alleged that there was an $11-billion hole in the Conservative party’s costing. In that case, the Conservatives pointed out that the figures were cumulative. That is, the figures were not to be understood as unique to each year, but rather part of ongoing effort that would ultimately amount to $4 billion per year. And so it is with the Liberals now: the party confirming to me that the savings are to be understood as cumulative and ultimately amounting to $3 billion.

    Of course, it was also back in 2011 that Stephen Harper was basically unable to explain his $4 billion—something I like to think of as setting a precedent whereby every party gets a free $4 billion from now. By that standard, even if the Liberals are basically unwilling to fully account for their $3 billion, they would seem to be able to vaguely promise another $1 billion before anyone on the Conservative side is permitted to complain.

    That the Liberals have specifically raised the issue of “tax expenditures” will likely delight economists—who view many of the Harper government’s tax credits as ineffective and wasteful—but will possibly inspire some fussing over which trinkets and coupons they might eliminate. Ideally, that might mean a debate about the utility and dispersement of those credits.

    Not quite buried in the Liberal plan is a promise that would cost relatively little, but might bring some order to the exercise of costing. “We will also,” the Liberals write, “add the costing of political party platforms to the PBO’s mandate, as is the case in Australia and the Netherlands, so that starting in the next federal election, Canadians can review the fiscal plans of political parties from a credible and comparable baseline.”

    The Liberal costing thus becomes a sort of meta-costing: a costing to improve costings. Here would seem to be a wise investment.