October 23, 2019

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Delayed gratification isn't the Conservative way

Opinion

Conservative Leader Andrew Scheer has proven once again, when it comes to tax cuts, fiscal conservatives are complete and utter strangers to the concept of delayed gratification.

In this, the first full week of the 2019 federal election campaign, Scheer demonstrated his own personal estrangement from the notion by delivering a dizzying array of tax-cut pledges.

A few days ago, the Tory leader promised a 1.25 per cent cut to the lowest of the income tax brackets (that would save an average Canadian taxpayer a little more than $400 a year).

He then pledged to bring back the most notable of the niche tax credits introduced during the years Tory prime minister Stephen Harper was in power: transit passes and children's sports/arts activities.

And the carbon tax, which, under a Conservative government, would be a thing of the past.

Conservative Leader Andrew Scheer shakes hands with a supporter while at a campaign stop in Brampton, Ont. on Friday.

THE CANADIAN PRESS/PAUL CHIASSON

Conservative Leader Andrew Scheer shakes hands with a supporter while at a campaign stop in Brampton, Ont. on Friday.

The Parliamentary Budget Officer says the income tax pledge on its own would cost the federal treasury more than $14 billion over the first two years, and an average about $6 billion a year in unrealized revenue every year after that.

The other Tory-proposed tax credits and cuts announced to date would cost about another $1.5 billion annually.

As is almost always the case with these kinds of pledges, Scheer was confident he could balance the budget within five years and cut all those taxes. That confidence did not, however, come with any details.

Why is it, you may ask, that fiscal conservatives have no delayed gratification when it comes to tax cuts? Surely, even the most strident fiscal hawk would have to concede balancing a budget and putting core government services on a sustainable path are precursors to tax cuts.

Except, it doesn't work out that way.

Fiscal conservatives, the people who are supposed to know best how to run a government in the black, are more than willing to run deficits and grow debt to fund tax cuts.

U.S. President Donald Trump cut personal and corporate taxes by a whopping $1.5-trillion.

AP PHOTO/CAROLYN KASTER

U.S. President Donald Trump cut personal and corporate taxes by a whopping $1.5-trillion.

Immediately to the south, U.S. President Donald Trump's $1.5-trillion cut to personal and corporate taxes came at a time when the federal treasury was still reeling from record stimulus spending to restore the American economy to working order. No matter, a Republican-dominated Congress rushed to approve the tax cuts with all the unbridled enthusiasm of a five-year-old ripping open a present on Christmas morning.

Trump argued the tax cuts would spur economic growth. Most non-partisan economic think tanks are confident the tax cuts had virtually no impact on GDP. However, it did have a huge impact on the federal deficit and debt.

In 2021, the U.S. budget deficit will rise to more than $1 trillion and the federal debt to more than $22.3 trillion.

The situation in Canada has never been as grave as that faced by Americans, but this lack of delayed gratification has reared its head.

When Harper came to power in 2006, he inherited a budget that had been in surplus for more than a decade, thanks in no small part to the steady and unprecedented period of economic growth that blessed the previous Liberal government.

Despite growling about how his government would never deficit finance, by the 2009-10 budget year, Ottawa racked up a $55-billion shortfall — the largest single-year deficit in history. In the decade he spent in office, Harper ran a deficit six times and added nearly $167 billion to the national debt.

Andrew Scheer, left, with then-Prime Minister Stephen Harper in 2011. Harper ran a deficit six times as prime minister and added nearly $167 billion to the national debt.

THE CANADIAN PRESS/ADRIAN WYLD

Andrew Scheer, left, with then-Prime Minister Stephen Harper in 2011. Harper ran a deficit six times as prime minister and added nearly $167 billion to the national debt.

Of course, the GST cuts alone were not responsible for Harper's fiscal record; the 2008 recession and the increased need for stimulus to bring Canada's economy back to life were certainly the biggest issues. However, the Harper experience does raise another curious concern about conservatives and tax cuts: why do they never plan ahead?

Harper had no way of predicting the 2008 meltdown; on the other hand, there is always another global economic crisis coming down the pike. Tax policy must take into account the need for government to protect itself from future economic woes. Lamentably, that has not been a prime feature of governments in this country, regardless of partisan affiliation.

One could say with total justification the Liberals' inability to get the deficit under control during the last five years is also a poor way of preparing for the next recession, which some believe could come next year.

Tax cuts? By all means, but let's make sure we're approaching it in the right order.

A government must be able to identify the expenditure savings necessary to cover the cost of proposed cuts, and this would involve full transparency on the reductions in, or eliminations of, certain government services.

Then, three more boxes to check off: ensure the budget is in surplus; there is a plan to reduce government debt; and there are built-in contingencies for rainy days.

If you can satisfy all those requirements, you can go directly to tax cuts and indulge, with the knowledge you got the horse firmly in front of the cart, and the confidence of knowing it's no longer necessary to delay your tax-cut gratification.

dan.lett@freepress.mb.ca

Dan Lett

Dan Lett
Columnist

Born and raised in and around Toronto, Dan Lett came to Winnipeg in 1986, less than a year out of journalism school with a lifelong dream to be a newspaper reporter.

Read full biography

History

Updated on Monday, September 16, 2019 at 9:37 PM CDT: fixes typo

9:44 PM: Updates headline

10:03 PM: Updates headline

10:08 PM: Updates numbers

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