On coalitions, budgets and deficits

Note that I write this without having read or listened to any coverage of the throne speech, or the throne speech itself. That will come tonight. Going into the throne speech though, as I continue catching-up on my blogging here are a few thoughts on the next few days, and the way forward.

* The phrase Coalition if necessary, but not necessarily coalition has come to make more sense during the weeks since perogy madness. The fact is, things have changed a great deal since then.

Last year, based on the economic update, bringing down the government and replacing it with an opposition coalition was absolutely a justifiable play, and the right thing to do. The Conservatives had shown themselves unwilling to be reasonable and to address the real economic concerns of Canadians. They escaped that judgment by the skin of their teeth, and bought themselves time.

Now with the budget we’ll have an entirely different set of circumstances to judge than we did last time, and just because a toppling/coalition was right then doesn’t necessarily mean it’s right now. And we need to frame the question correctly. Do I think a coalition government would be better for Canada that the Conservatives? Sure. But that doesn’t mean we should go ahead and topple Harper, budget be dammed. Canadians won’t accept such a move.

Only if Harper comes in with a budget that, like the economic update, fails to rise to a level of action and seriousness needed can we contemplate bringing them down. And even if the budget doesn’t do everything we want can't just bring it down. It won’t be a Liberal budget. But if it moves far enough in the direction we want then we need to let is pass, considering the coalition threat a success and continuing to hold Harper to account in the future. And yes, over time, the coalition becomes less of an option, so going forward we need to demonstrate our readiness, and willingness, to force an election if necessary, particularly if Harper decides to play the confidence game again.

I’ll say it again though, Canadians will not accept a coalition that's a mere power grab. It needs to be justified on policy grounds based on Harper’s action, or inaction. This isn’t our chance to simply do what we couldn’t in an election. That dog just won’t hunt.

* A few points on deficits. First of all, yes, the opposition has been advocating spending increases that will necessitate a deficit, and most observers have accepted the need for a period of deficit spending until we’re out of this economy. The fact is, though, the $64 billion deficit over two years figures that the Conservatives pre-leaked is higher than it need be because of Conservative financial incompetence, their inability to see this storm coming until a month or so ago, and their complete squandering of the substantial surplus the previous Liberal government left them.

The Conservatives squandered the surplus on high spending that doesn’t seem to have bought us much (I can’t honestly say where it went, but went it did), and hugely expensive cuts to the GST that took many billions of dollars out of government coffers. And they eliminated the Liberal tradition of a $2 billion contingency reserve to cushion unexpected difficulties.

A deficit at this point would still have been largely inevitable, but it need not have been near as big. Conservative mismanagement, and their ideologically-driven crusade to strangle the federal government’s fiscal capacity, has left them with very little room to maneuver now that times are tough, and an even bigger hole to climb out of than would have been necessary.

* Finally, the budget. It certainly seems like the spending will be there. The question, though, is where will it go. I’ve already outlined at length my preferred methods of fiscal stimulus, and the problems inherent in the broad-based, and permanent, middle class tax cuts Harper has been signaling he favours.

In addition to the method of stimulus, I’m going to be looking for a plan and roadmap to get back out of deficit, and permanent tax cuts would make that doubly difficult. Infrastructure projects are a one-time expense. But tax cuts, besides being ineffective stimulus, are permanently lost revenue that can’t only be made-up by tax increases (politically unsaleable) or why cuts to program spending.

And that’s my fear with this budget. It’s no secret Harper wants to strangle the federal government’s fiscal capacity, rendering it permanently unable to play a strong national role. I’m fearful they will use the guise of this economic crisis to push through large permanent tax cuts that, while ineffective as stimulus, will neuter the federal government and force massive cuts to program spending down the road.

Such a move, while more wily than the political gamesmanship of the economic update (voting against tax cuts is much harder than voting against ending pay equity), would be just as dangerous to Canada, and would have to give the opposition serious pause.

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