(Written for Root Issues in the Barrie Examiner, published under the title "Reckless tax cuts and spending add to tough times")
My series on ministers against portfolio continues with the Minister Against Finance, Jim Flaherty.
The Minister of Finance has two key jobs: keep the federal government’s budget in order, and use the regulatory system to protect Canada from harmful boom-bust cycles. Sadly, our current Minister seems intent on ignoring both of these duties in pursuit of political ideology.
What does one expect from a Conservative budget? Lower taxes, lower spending, balanced budget, paying down debt. Yet under Flaherty the only thing we’ve seen is the tax cuts. By following a political promise but ignoring economic advice, his drop of two points from the GST threw us into a structural deficit. And this was before the recession hit. He had a good chance to reverse this course with last week’s budget, and a number of economic experts and think-tanks, from both the right and the left, advised him to raise the GST to balance the books. Too wedded to his ideology, he refused. Instead he continues with a raft of other tax cuts going forward, dashing dreams of a balanced budget under his watch. I like tax relief as much as the next person, and don’t object to needed government spending. But I don’t like turning a surplus into a deficit outside of a recession while we still have a sizable debt to pay down. It’s just not responsible. Contrary to voter expectations, government spending has continued to rise under Flaherty at unprecedented rates.
Despite promises not to raise taxes to balance the budget, the Minister’s future budget plans include a major tax hike of the worst sort: EI premiums. As he stated himself in 2006 and 2007, lowering EI premiums creates jobs. Logically, raising them kills jobs, and that’s the last thing Canada needs right now. And the minister, like his predecessors of other governments, is ignoring the huge $57 billion EI surplus. That money belonged to workers to pay for unemployment benefits, but was used by the previous government to pay down general debt. Instead of raising rates, we should have an EI payment holiday until this debt is repaid. Not only is that fair, it would spur major job creation, something we very much need.
So after mismanaging government finances, how has Flaherty approached our national system? Recklessly.
In 2006-7 he threw open our mortgage market to foreign competitors like the infamous AIG, allowing such things as zero money down, 40-year amortization, and interest-only payments. Spurred by private lender competition and loosened regulations, our government-owned Canada Mortgage and Housing Corporation dived into the sub-prime mortgage business. The problem? The taxpayer is on the hook for any CMHC mortgage meltdown.
Luckily this risky deregulation came late enough that little damage was done before the American housing collapse. Flaherty realized his mistake and start backing out the changes. In every announcement, he took credit for his prudence without admitting it was his own tinkering which had brought us to the brink.
Balancing a budget in a recession is tough, perhaps impossible. But it’s a lot tougher when reckless tax cuts and spending increases turn a $13 billion surplus into a $19 billion structural deficit. Even the end of the recession won’t save us. And we still face the terrifying prospect of a taxpayer-backed housing bubble.
I hereby award Jim Flaherty the title of Minister against Finance.
Erich Jacoby-Hawkins is a teacher, father, volunteer, and politician.
You forgot the infamous reversal on Income Trusts that cost the market tens of billions in investments, opened many of these Trusts to foreign ownership/takeover and the various markets and industries will continue to suffer as the remaining Trusts convert over to different business models (personally know of one person laid off due to "restructuing").
ReplyDeleteOn the GST cuts side, a previously planned Liberal income tax cut was cancelled to pay for the first point of GST cut. It was then later re-introduced with the second GST cut as a Conservative income tax rate cut.
I didn't forget it, I'm just limited to about 550 words per column (print version) and the more points I try to make, the less effectively I can support each one. For sake of integrity, I currently avoid significantly revising or expanding my blog version (besides adding hyperlinks) from the print version except to revert any revisions by the newspaper editor.
ReplyDeleteBut of course the Income Trust "reversal" (aka lie, aka betrayal) is yet another reason why Flaherty should be titled "Minister Against Finance" and is worth mention, so thanks for doing so.
Certainly the net effect of the 2% GST cut was to go ahead with the planned Liberal cuts, plus GST cuts (plus myriad other cuts) that were not balanced with new revenue or spending cuts.
I have noticed that both Conservatives and Liberals like to cancel a previous party's action or plan, then re-introduce it later and claim it as their own.