Why Canada can't afford Stephen Harper

By: Daniel D. Veniez
Dec 19th, 2010
Vancouver Observer

It’s a good time to debunk the biggest Stephen Harper myth there is: “We are good economic managers”. Repeating a lie does not make it true.

We need to spend $15 billion on jails because unreported crimes are rising? Don't believe them. We need to stop the long-form census, because the census-takers are going to send you to jail? Don't believe them. We need to kill the long-gun registry, because the police are leading a cult conspiracy to take away everybody's guns? Don't believe them. We awarding a $19 billion untendered contract for new jets because the Russians are coming? Don't believe them. This is a government that is counting on fear, driven by lies, to earn the votes it needs to win again.

Is it true that only a Harper Conservative government can bring sound management to the economy? Don't be fooled. Look at the record.

In recent months, we’ve been treated to more stellar economic and fiscal management, such as a double-digit increase in spending for Harper’s own office, shutting down downtown Toronto for 72 hours for a cost of well over $1 billion, not to mention the ignored Charter rights of Canadians, and triggering an unprovoked conflict with the United Arab Emirates that will cost us at least $300 million.

In their first year in office, the Conservatives blew the $13 billion budget surplus they had inherited. They did that through an old-fashioned combination of massive double-digit spending increases and imprudent tax cuts.

After promising in their written platform not to touch income trusts, Harper did just that and cost investors, many of them retirees, billions. The 2 per cent decrease in GST was a political gimmick that cost the treasury tens of billions with no discernible economic benefit.

Every mainstream economist argued for cutting personal income taxes to improve productivity and standards of living. But to pay for the GST cut, the Conservatives actually raised personal income taxes. This was in comparison to prior Liberal government polices, which favoured multi-year reductions, removing low-income earners from the tax rolls, and helping Canadian families with real measures, including doubling the duration of maternity and parental leave under the employment insurance program and strengthening the Canada Child Tax benefit.

While taking down government revenues just before the recession, Harper was driving annual increases in government spending to double-digits. In the summer and fall of 2008 – in the midst of the most severe and dramatic economic meltdown we’ve ever seen – Harper urged Canadians to seize this “buying opportunity” and buy stocks. During the election campaign that followed, he proclaimed that a Conservative government would never run a deficit. In Harper’s own words just four days before the Oct. 14 vote: “This country will not go into recession next year".

After the general election of 2008, as the world economic system was collapsing, Finance Minister Jim Flaherty tabled an economic statement that all presumed would recognize the unfolding global reality, including the failure of key U.S. financial institutions and unprecedented emergency measures being adopted by the European and U.S. administrations.

Instead of summoning the country to action against the backdrop of an unfolding global financial cataclysm, all the Harper Conservatives could come up with was terminating the right to strike of public sector unions, ending pay equity, and eliminate the subsidy to political parties. Hardly an intelligent response, and well short of the leadership that Canadians were looking for, as confidence dropped like a stone and jobs were lost at a dizzying rate. The denial and rank incompetence was breathtaking.

Real leadership can be seen in the prior Liberal governments' decision not to relax the rules for the Canadian financial services industry and the determination to maintain strong regulatory standards for Canadian banks. Real leadership was in the prior Liberal governments' success in reducing the national debt from more than 70 per cent of GDP to almost 30 per cent of GDP in less than a decade. Harper and the Conservatives have been surfing on the Liberal legacy for almost five years.

After the launch of a stimulus program to protect jobs and the economy, the February 2009 budget unveiled the largest deficit in Canadian history and “Canada’s Economic Action Plan” was born. It soon became painfully clear that Harper had no credible long-term plan to modernize Canada’s crumbling infrastructure. So in the rush to show that it was doing something, it developed the most egregious example of old-style pork-barrel politics the country has ever seen. Since then, federal tax dollars have funded swimming pools, gazebos, tennis courts, curling rinks, nature trails, snowmobile trail equipment, outdoor bathrooms, and hockey arena roofs.

At a time when such huge stimulus investment could have been directed to infrastructure that would have improved Canada's pensions or badly lagging productivity and competitiveness, transforming Canada's ability to meet 21st-century economic challenges and creating real wealth and long-term jobs for Canadians, the Harper stimulus boondoggle proved once again that the Harper Conservatives are more interested in scoring cheap political points than introducing sound public policy. They blew the opportunity of a lifetime, and their legacy is a low-growth economy where productivity is slipping, full-time high-skilled jobs in industry are being replaced with part-time, low-skilled jobs in services, and the Canadian standard of living, especially for the poor and middle income Canadians, is slipping.

To make matters worse, Harper bribed British Columbia and Ontario with the cash incentive for the HST. Whether this is sound long-term policy or not is beside the point. Imposing a tax shift from corporations to the hard-hit consumer in the middle of the worst economic downturn since the Great Depression is dumb economic management.

From a trade perspective, Harper has been patting himself on the back for trade deals with countries like Columbia while spending three years insulting China and ignoring South East Asia and India, Canada’s most important emerging markets.

Harper has started calling us “tax-and-spend Liberals,” stealing yet another line from U.S. Republicans and their radical right-wing cousins in the Tea Party. The problem with that cute line is that Liberals under the Chrétien/Martin regime have a record of over a decade of aggressive debt and deficit reduction, trade expansion, and investment in research and innovation, all the while steadily reducing taxes for both businesses and consumers.

When Harper assumed office, he inherited the healthiest balance sheet and income statement in the industrialized world. He then squandered much of it, ballooning the government and spending recklessly, instead of putting it towards productivity- and competitiveness-enhancing investments to improve the long-term standard of living for all Canadians.

As part of that, Liberals reduced the corporate tax rate to one of the most competitive in the G8. Liberal Leader Michael Ignatieff said that his government would put a pause on further corporate tax cuts until our fiscal house is cleaned up. We don’t believe that borrowing money to fund further corporate tax cuts makes much sense, particularly when the middle class will be have the burden of repaying that debt.

Has Harper really been a strong economic manager?

Hardly. Like so much else in Harperville, the horrendous myth of this government's claim to be fiscally responsible is exactly that – a myth. With our economic future at stake, Canadians cannot afford this “good manager” any more.