Sunday, July 12, 2009

Where's the plan, Steve?

In the midst of a disastrous week for the Conservatives, Stephen Harper finally admitted what has been obvious to everyone with half a brain for months: the Flaherty budget projections of emerging from deficit within five years are fantasy and will not be met:

Prime Minister Stephen Harper has scrapped his government's controversial promise to stop running annual budget deficits in five years.

For the first time, Harper said today that keeping the government's pledge to balance Ottawa's books by 2013-14 will depend on how quickly Canada's economy recovers.

"We will allow the deficit to persist if necessary," Harper said.
At least he's not lying to us anymore on the deficit time line. But while, once again, he is tacitly admitting that he and his finance minister were very wrong (see $50B deficit) and Parliamentary Budget Officer Kevin Page was very right, he still wants us to know Page is dumb:
But yesterday, Mr. Harper disputed the suggestion that the government would need to slash spending or boost taxes to balance its budget when the economy recovers.

"We will not start raising taxes and cutting programs. That's a very dumb policy and, to the extent, frankly, that the parliamentary budget officer suggested it, it's a dumb position," he said.
Well, Harper is an economist, after all. I'm just a writer, but I have to say I find Harper's plan to balance the budget, which seems to boil down to "do nothing and hope for the best" to be irresponsible and doomed to failure. Maybe Harper just doesn't plan to be around when the bills come due?

But it has become increasingly clear that we won't be able to grow our way out of this hole. Through endemic Conservative economic mismanagement, we're now in a structural deficit, as Page has reported. Harper seems to dismiss this finding, but let's consider his and Page's track-records here: who you gonna believe?

There are only two ways to deal with a structural deficit: spending cuts or tax increases. Or some combination thereof. There is going to need to be sacrifices, and Canadians deserve the truth from their government, not the willful ignorance of Harper and Flaherty.

According to Ipsos Reid, Canadians are increasingly skeptical of the veracity of anything the Conservatives have to say on matters budgetary. Indeed, just 35 per cent of Canadians believed the Harper Conservatives would be able to meet their budget commitments. And that was before Friday's credibility-busting admission.

The poll also found 88 per cent of Canadians favoured spending cuts over tax increases, which is hardly surprising. Asked in isolation, that's always going to be the case. But ask someone to choose between actual services, such as health care, and taxes you're going to get a different answer.

Ipsos doesn't seem to do that, but they do ask which spending people would like to see cut first:
But if the Canadian government and others were to cut spending, the top three programs that should be on the chopping block are, according to survey respondents, foreign aid, salaries and benefits of government workers and military spending. Environmental protection, public transportation, education spending and health care were at the bottom of the list.
Fact is, you're not going to find substantial savings in government spending without getting into those areas favoured for protection by survey respondents. There's little savings to be found in foreign aid and government salaries, and military cuts would be difficult. Much of the recent spending there has been capital acquisitions anyways. But the point is, to have any meaning, a spending cuts-alone policy will hurt those areas Canadians don't want hurt.

Of course, it's a discussion Stephen Harper is unwilling to have with Canadians. Just cross our fingers, he says, close your eyes, keep spending, and never mind the perpetual deficits. It will all be fine. Trust him.

You're supposed to be an economist, Stephen. And you're supposed to be a leader. So level with us: where's the plan? Or are you just making it up as you go along?

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1 comment:

ADHR said...

One concern: Harper isn't an economist. He has a Master's in economics, but he has, as far as anyone can tell, never done any serious research on economics. (Indeed, no one seems to be able to find his master's thesis, so who knows how much research he even did for that.)

We should, though, always trust the PBO -- which includes actual economists and other people with real chops -- over Harper.