Wells on the Harper Neo-Con Fiscal Gutting of Government

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KenS
Wells on the Harper Neo-Con Fiscal Gutting of Government
KenS

Shouldn't be news around here.

Although I think there is an awful lot of Pavlovian Harper is Evil 'answers' about what is going on, rather than sober discussion that the frog [us] is successfully being slow boiled.

Anywaoy, good summary.

Gaian

quote: "And the foregone revenues from the GST cuts. I’m actually less interested in echoing the value judgment Stephen Gordon makes here than I am in reminding us all of the scale of the change in Ottawa’s fiscal position"

Ah for the days when our at-home Conservative economist served as a stimulant to debate.

KenS

Stephen Gordon is no Coservative economist.

In fact, he is steeped in the thinking of European social democrat economists.

But he was as much about politics and polemics around here- one of those progressives with no time for the NDP, pinning all of their hopes on the great natural governing party.... to the degree that he apparently thought he was helping in that by sniping at anything the NDP proposed, and staying away from discussion of the Liberals playing their part in the longer game neo-con fiscal agenda that Gordon would from time to time remind people was the real issue.

Weird politics- though I have seen that one before from Liberal or Liberal allied intellectuals. That and being an unapologetic intellectual snob.

I dont know if he could be called a stimulant to debate. I engaged him.

But he so relished a fight for its own sake, that there was no chance people were going to look beyond all his in your face mocking and sneering for anything he might have to say. 

 

GuyF

I don't mind the idea of the provinces taking over from the fed a little bit. I feel like the provinces are in a better position to be closer to the actual issues that affect me anyways.

078

GuyF wrote:

I don't mind the idea of the provinces taking over from the fed a little bit. I feel like the provinces are in a better position to be closer to the actual issues that affect me anyways.

 

I can't say I agree. I'm in Ontario and absolutely hate that all policy seems to be dictated from the GTA. There's nothing worse than having decisions out here made by some idiot who's never lived in the country. Have a look at how the Ontario goverment has been short changing the MNR for years....   Frown

Gaian

KenS wrote:

Stephen Gordon is no Coservative economist.

In fact, he is steeped in the thinking of European social democrat economists.

But he was as much about politics and polemics around here- one of those progressives with no time for the NDP, pinning all of their hopes on the great natural governing party.... to the degree that he apparently thought he was helping in that by sniping at anything the NDP proposed, and staying away from discussion of the Liberals playing their part in the longer game neo-con fiscal agenda that Gordon would from time to time remind people was the real issue.

Weird politics- though I have seen that one before from Liberal or Liberal allied intellectuals. That and being an unapologetic intellectual snob.

I dont know if he could be called a stimulant to debate. I engaged him.

But he so relished a fight for its own sake, that there was no chance people were going to look beyond all his in your face mocking and sneering for anything he might have to say. 

 

Well, if you "engaged" him, he stimulated something, Ken.

And here is Stephen doing his academic thing, wondering at the lack of wisdom on the part of the Harper government in bringing this about:

"So this is the fiscal situation that the Conservatives inherited:
•a structural surplus/deficit that was close to zero
•an actual surplus on the order of 1% of GDP, due to a booming economy

Again, it's important to emphasise that no-one really knew that at the time; this is hindsight speaking. Back when the Conservatives first floated the idea, critics said the GST was the the last on the list of any intelligent tax-cutting agenda (which is of course true). I don't recall anyone warning of the risk of chronic deficits in the 2005-06 election campaign.

But this doesn't change the main conclusion: when the economy finally does return to capacity - the Bank of Canada's current forecast is that the output gap will close at the end of 2012 - the swing in the federal government balance will not be enough to close the deficit.

How big is the hole that has to be filled? Unlike, say, corporate income taxes, the effect of the GST on the budget balance is fairly easy to calculate. Since the behavioural responses to changes in the GST rate are small (this property is why they are such a favourite with economists), the numbers in this earlier post - around 0.75% of GDP or $12b - won't be a bad guess. The PBO's estimate is $14b - and again, their estimate also corresponds to the size of their estimate of the effect of the GST cut on the budget balance.

The story of the GST cut just keeps getting worse. It wasn't a good idea at the time, and it blew a $12b hole in the federal balance that will have to be filled somehow."

AS THOUGH STEVE Harper WAS CONCERNED ABOUT ANYTHING OTHER THAN GETTING RID OF A BALANCED BUDGET SO THAT HE COULD CONTINUE HIS IDEOLOGICALLY-DRIVEN PROGRAM OF DESTROYING THE STATE'S CAPACITY TO INTERVENE.

Stephen Gordon always was naive that way.

KenS

Cant follow you George.

For one thing. I'd have to ferret out what is you quoting Gordon, what is you para-phrasing him [I guess], and what mmust be you talking about him.

But dont bother, this isnt about Stephen Gordon. He's an ass, and I'm not into defending him, even if you have him all turned inside out.

But I might have an interst in you spelling out, or confirming, exactly what you mean by this: "Well, if you "engaged" him, he stimulated something, Ken."

 

Gaian

Ken, he's lecutring the world, as he was wont to do, unmindful of the fact that Harper was doing was he was doing not because of his failure to understand the economic error he was committing, but because as a neo-con, he could not wait to cause fiscal failure and carry on ridding the state of even more responsibility.

And it was you who said that you "engaged" the other Stephen. :)

Ah well..

KenS

Wells repeats the estimate that the GST cut alone blew a $12billion annual hole in annual government revenues.

Topp's tax plan talks about bringing in $16billion annual, and probably not in the first year.

In other words, we need revenue increases like that just to get back to the bad enough neighbourhood of where we were AFTER the Chretien-Martin cuts.

Which is intuitively what I figured when Topp announced his plan.

Yet we have other candidates demurring on that and mumbling about closing loopholes.

Really now.

For retail politics it is not good enough to just say we need this. That we need it is effectively the end of the story for a lot of babblers, but nothing flys on that alone.

Topp is saying that Canadians are ready to face this need and turn the page. Skepticism on that is undertstandable.

But we really cannot afford to venture out only on what we are SURE is safe.

We know damn well that if we are afraid to utter the words tax increase, we will not do it after an election either. Surest path to buyer remorse and a one term government.

And pray tell me, how do people plan to govern without increasing taxes? Trying that sounds pretty risky.

Nash has a plan for dealing with this too. And everyone else is doing their best to avoid it.

 

KenS

Like I said George, its not about Gordon. And I cant disentangle what you said about Gordon from what he said. 

But I remember pretty clearly him saying that Harper blowing the hole in revenues was the deliberate plan. Which is really pretty obvious.

Find us a Gordon quote that says or indicates otherwise. Or just forget it, since it doesnt really matter what Gordon thinks. Sorry I brought it up.

The two of you have a lot in common.

Gaian

KenS wrote:

Like I said George, its not about Gordon. And I cant disentangle what you said about Gordon from what he said. 

But I remember pretty clearly him saying that Harper blowing the hole in revenues was the deliberate plan. Which is really pretty obvious.

Find us a Gordon quote that says or indicates otherwise. Or just forget it, since it doesnt really matter what Gordon thinks. Sorry I brought it up.

The two of you have a lot in common.

The thought that perhaps economics does matter...perhaps beyond a propensity to prattle?

Gaian

On taxes:

"Nash has a plan for dealing with this too. And everyone else is doing their best to avoid it."

KComplete and utter bullshit.

KenS

Do you have something to contribute to this thread George, besides snark.

For example, if its bullshit that the rest of the candidates are avoiding the question of taxes, illuminate us.

What did any of the rest of them say?

KenS

It might be an intersting topic, if someone has something they want to chip in.

 

[The opening post and # 10 having something to do with the topic.]

ygtbk

Well, here's a relevant article from the Toronto Star:

http://www.thestar.com/news/canada/politics/article/1104440--ottawa-to-s...

Apparently Dwight Duncan lives in a world in which 6% increases to 2016-17 and GDP-growth-level increases (but not less than 3% per year) thereafter are "cuts". What an innovative use of the word. As Paul Wells says in the article linked at the opening post:

Paul Wells wrote:

"Health" transfers to the provinces will continue to gallop well ahead of economic growth for a couple of years, and then trot ahead of economic growth after that. Even though Ontario health spending, not atypically among the provinces, has already begun to flatten out.

KenS

That quote of Wells is a seperate point really from the main one in the article:

Paul Wells wrote:

But he will spend ever more money on jets and jails, while taxing less as a fraction of GDP than any federal government has since the 1960s

The column is aptly titled: 'flat tire federalism'. Lots of money for coservative likes discretionary spending like jets and jails, but make sure there is nothing in the treasury for the big ticket social spending you want gutted.

Sure, the provinces are not innocent in the health care funding schema. But we have the system we have, and the 6% increases merely helped keep the system maintained at a 'steady state'.  

Can we sustain that, no? And we shouldnt just let it go like that even if tax revenues are not being gutted. But the federal government is just absolving themselves of any share of the responsibility. "We're no longer helping to underwrite the inherited system, you deal with the problems." A process started by Chretien and Martin, but applied gleefuly by the out and out neo-con bunch.

ygtbk

KenS wrote:

That quote of Wells is a seperate point really from the main one in the article:

Paul Wells wrote:

But he will spend ever more money on jets and jails, while taxing less as a fraction of GDP than any federal government has since the 1960s

The column is aptly titled: 'flat tire federalism'. Lots of money for coservative likes discretionary spending like jets and jails, but make sure there is nothing in the treasury for the big ticket social spending you want gutted.

Sure, the provinces are not innocent in the health care funding schema. But we have the system we have, and the 6% increases merely helped keep the system maintained at a 'steady state'.  

Can we sustain that, no? And we shouldnt just let it go like that even if tax revenues are not being gutted. But the federal government is just absolving themselves of any share of the responsibility. "We're no longer helping to underwrite the inherited system, you deal with the problems." A process started by Chretien and Martin, but applied gleefuly by the out and out neo-con bunch.

Can healthcare spending grow faster than GDP forever? Obviously not. So is increasing spending at 6% per year "steady state"? Obviously not.

Is increasing funding at 6% until 2016-2017 and at GDP-growth-level thereafter making sure that there's nothing in the treasury for social spending? Only if you define healthcare as not being social spending, which seems like a stretch.

Is healthcare a provincial responsibility? Yes.

Having said all that, I agree that whether there's room to tax more is a legitimate question. The provinces could move on this without waiting for the federal government, though. I think they don't want to because raising taxes when the economy is weak could be viewed as suppressing the recovery. If we're going gangbusters by 2015, maybe Brian Topp can convince people to add a new top bracket.

KenS

The provinces have a whole lot less room to manouver- they do after all have to pay the ultimate bill on education, health, and welfare. And yes, steady increases in health care spending well above GDP growth is only steady state maintenance as far as the built in needs of the systems go. Anything less requires cuts to be made... except for the possibility we can reform the system over the mid and long term, not the short term in question here... and the feds want nothing to do with even playing a role in that. Just "cut, and you deal with how it is supposed to work."

The provinces could raise taxes, but we weren't talking about them. They have not gone around systematically removing revenue capacity, as has the Harper federal government.

Do you have a problem with just agreeing [or not] that the Harper Crew has deliberatlely over the years blown a hole in federal govt revenues, while increasing dramatically spending on things they like, such as more jails?

And given years of excalating cuts, can we wait until things are going gangbusters? Is there a compelling reason to wait on raising taxes in the top brackets?

ygtbk

KenS wrote:

Do you have a problem with just agreeing [or not] that the Harper Crew has deliberatlely over the years blown a hole in federal govt revenues, while increasing dramatically spending on things they like, such as more jails?

And given years of excalating cuts, can we wait until things are going gangbusters? Is there a compelling reason to wait on raising taxes in the top brackets?

I don't think a new top tax bracket is going to happen federally before 2015 at the earliest, given the current government. So it's not a question of there being a compelling reason to wait, it's a question of realism.

On the other hand, Dalton McGuinty could raise the existing surtax tomorrow in Ontario, since I'm sure the Ontario NDP would support him and so he'd have the votes to pass it.

I do agree that the GST cut to 5% was much better politics than policy. People were used to it at 7% and there was no compelling need to cut it. But weirdly enough the provinces did not raise their sales taxes by an equivalent amount, which I thought at the time they'd do. 

And I do agree that there's no proof that a lot more spending on prisons is needed. I don't know enough about F-35's to have an opinion on that.

Gaian

quote: "I do agree that the GST cut to 5% was much better politics than policy. People were used to it at 7% and there was no compelling need to cut it. But weirdly enough the provinces did not raise their sales taxes by an equivalent amount, which I thought at the time they'd do."

You haven't noticed the death of governments raising taxes lately ( the last two decades)? Mainstreet is implacable in its opposition...and it's the only subject on which they can carry a conversation. Oh, maybe, supply and demand, buy low, sell high...fundamental stuff.

KenS

And yes, all those seperate things.

But ygbtk, do you think there is a neo-con plan, now largely fullfilled [even if not permanently] to systematically not just do incremental cuts, but to cut government in general down to size and make it politically and fiscally at least very difficult to reverse that?

That is the main point of the article.

ygtbk

KenS wrote:

And yes, all those seperate things.

But ygbtk, do you think there is a neo-con plan, now largely fullfilled [even if not permanently] to systematically not just do incremental cuts, but to cut government in general down to size and make it politically and fiscally at least very difficult to reverse that?

That is the main point of the article.

I am sure that Stephen Harper would like to shrink the size of the federal government. However, since the Federal budget has actually increased from $209 billion in 2005 to $280 billion in 2010, he hasn't actually succeeded yet. Maybe that's phase 2 of the neo-con plan. Paul Wells might have drawn at least slightly different conclusions if he had focused on expenditures rather than revenue.

I do think that some of the changes are meant to be hard to reverse. As Gaian points out, it will be difficult for a future government to raise taxes (like corporate taxes and the GST) without provoking an outcry.

Gaian

"All those separate things," were meant to indicate that that is the level of discourse on things economic out there on Mainstreet, Ken. It was meant to indicate that lower taxes have been offered in the U.S. since the California tax revolt of the late 70s, and has been standard Conservative fare since. (Reagan skipped town after driving up the spending in California that brought revolt, and brought the concept of lower taxes to Washington. Joan Didion wrote a beautiful piece about the governor's mansion that he had built - bullet-proof glass and all - and that then sat empty. Gerry Brown, Ronnie's replacement, refused to live in the decadence of his predecessor as governor.

Harris brought the concept winningly to Canada in'95. And the masses of Mainstreet have been sold on it since. It is a part of the libertarian package that came with neo-conservatism in the U.S., and now to Canada through the Calgary School. Pretty hard to beat, for sure, even now as the rotting pipes and transportation systems accumulate as a result.They will eventually be done as P3 projects...starting with Champlain bridges and such. Medicare escapes the downward pressure - so far - only because the lower tax types also like "free" medical attention.

If only their economic thought reached beyond "supply and demand," and other such stuff, eh Ken?

KenS

Yes, we know what happened [with some not so minor differences in how it is characterised].

The question is  what to do about it.

If you think that more of the public/popular discussion has to be about the 'state of the economy' [or economies, or the structure...], then where does the reality of the fiscal brick wall fit in?

And if the masses are bought in as deeply as you say, why are we even talking about a discussion? How do you have a discussion with the zombies you seem to see around you?

Boom Boom Boom Boom's picture

Meanwhile...  EI financing agency spends millions doing nothing
 
excerpt:
 
A federal agency created by the Harper government with great political fanfare in 2008 is costing millions of dollars to achieve pretty much nothing.
 
The Canada Employment Insurance Financing Board has just about everything a budding government agency could want.
 
So far, it has spent over $3.3 million for new offices, computers and furniture, well-paid executives and staff, travel budgets, expense accounts, board meetings, and lots of pricey consultants.
 
All that's missing is a reason for it to exist at all. 
 
excerpt:
 
Aside from spending money, what the agency seems to do best is create bureaucratic plans and policies for itself. 

Uncle John

If Harper has raised spending from $200 billion to $280 billion how is that 'neocon gutting of government'? It is overblown dishonest rhetoric like this which discredits any positive ideology you might have, as people just think, "what a lying dirtbag". I dont know what you would define Harper as now, but it is certainly not 'fiscal conservative'. 'Neocon' seems be increasing government to spend money on all the things we don't want. Call it what it is, or no one is going to take you seriously.

contrarianna

Uncle John wrote:

If Harper has raised spending from $200 billion to $280 billion how is that 'neocon gutting of government'? It is overblown dishonest rhetoric like this which discredits any positive ideology you might have, as people just think, "what a lying dirtbag". I dont know what you would define Harper as now, but it is certainly not 'fiscal conservative'. 'Neocon' seems be increasing government to spend money on all the things we don't want. Call it what it is, or no one is going to take you seriously.

You are the only person here who has used the term "fiscal conservative" so that's a straw man.

If you have trouble reading the article, let's put it into language you might be more familiar with:

Cletus hates his estranged wife and has access to her bank account, and he drains it on expensive alcohol, a new truck, and fancy guns. His loud-mouth dim-witted pal comments: "Hey, Cletus must really love his wife to buy all that cool stuff".

Meanwhile, his wife finds she can't buy groceries or medicine for the kids.

Her husband smiles and says, "Gee, I guess yer gonna have to do some belt tightenin'".

Gaian

Thank you. Needed that. I was about to go into despair mode. :)

Michael Moriarity Michael Moriarity's picture

That is a wonderful analogy, contrarianna, thanks for it. I'm sure I'll find some occasions to use it.

Glenl

Expenditures for fiscal years 2001 to 2009.

http://www40.statcan.ca/l01/cst01/govt49b-eng.htm

JKR

ygtbk wrote:

I do agree that the GST cut to 5% was much better politics than policy. People were used to it at 7% and there was no compelling need to cut it. But weirdly enough the provinces did not raise their sales taxes by an equivalent amount, which I thought at the time they'd do.

With Alberta having no sales tax at all and planning on keeping it that way to maintain the "Alberta advantage" it's difficult for other provinces to increase their sales taxes.

The provinces outside of Alberta are only going to face more pressure as the oil sands are set to provide Alberta with the capacity to lower their taxes even more and spend even more on programs than the other provinces. Equalization will become a more pressing issue in the future but Harper is going to want to maintain the "Alberta advantage" as much as possible as he clearly stated in the firewall letter.

JKR

KenS wrote:

The provinces could raise taxes,...

The provinces ability to raise taxes is limited because they have to keeps their tax rates reasonably competitive with each other in order to avoid flight of capital and labour from their jurisdiction to jurisdictions with lower rates of taxation, most notably Alberta. So the federal government is in a much better position to raise taxation then the provinces are.   Also, rebalancing the equalization program would also require federal participation.

Fidel

Wells is right, the Harpers are much more comfortable in bullying Atawapikat than they are in promising to defund health care transfers. These Reform Party retreads are pretty tame so far and biding their time until 2015-2017.  They know they have a real opposition party breathing down their necks this time. The Harpers know that the centrally planned and enforced impotence in Ottawa could be for nought by 2015.

Gaian

And as soon as the minister of health (or any other minister) is not sitting in Harper's cabinet and telling her naive constituents back home in Nunavut that she represents progress and their salvation, we'll know that they have grown wiser. Not wise, but politically, wiser, having seen that paternalism without substance just adds to the death rate.