THERE’S NO PROPHET IN THIS SOOTHSAYER PANIC
Harper’s deficit musings are no reason for a round of silly fears
I suppose we will have to revisit this issue of the strange powers Stephen Harper has acquired to rule the future. Not only does he control his own government, but in the fevered imaginings of the national press, he controls all future governments as well. (Legal scholars are divided, while it is true that governing from the grave is not expressly authorized under the Constitution.)
The first outbreak of this occult panic was over the Conservatives’ proposed balanced budget law. Never mind that the legislation, which no one has yet seen, does not actually mandate balanced budgets, it was the idea that it might mandate anything that had people up in arms. It was unclear which upset them more: that the prime minister should presume to tell future prime ministers whether they could or could not go into deficit, which made it dictatorial, or that the law could in fact be repealed at any time, which made it worthless.
The notion that it might be neither of these things — that it would remain in effect, like any law, only until it were repealed, and that, like any law, its ability to bind future parliaments consisted in the effort required to repeal it, with all of the political risks that might go with it — did not seem to occur to anyone. It was all just too frightening and disturbing.
Then came the budget, and the “box” it had supposedly put the opposition parties in, by virtue of the string of expensive tax credits, deductions and benefits — income-splitting for couples with children, higher annual limits on contributions to Tax Free Savings Accounts, the expanded universal child benefit — it contained. Imagine spending the surplus on his own programs, the critics said, rather than leaving it to the opposition to spend on theirs. Why, it’s diabolical.
Some said this with disdain for the prime minister’s presumption, others with admiration for his cunning, but all agreed he had left the opposition parties with no option — other than, say, to repeal the programs in question, or cut spending in other areas, or raise taxes, or run a deficit: unpleasant choices, to be sure, but the kind that face most governments at most times, all of whom inherit the policies of their predecessors.
This was, of course, only the latest iteration on a favourite paranoid theme: the notion that Harper has a long-term strategy to “starve the beast,” through policies like the two percentage point cut in the GST, aimed at depriving governments — from here to eternity — of the revenues with which to fund needed spending programs.
I don’t doubt he has — though it is worth noting that he seems equally intent on committing future governments to carry on spending, via those grand 10-year plans that enable a modest annual amount to be summed into a Very Big Number Indeed. And if experience is any guide, the “starve the beast” strategy will meet the same fate as previous governments’ efforts to feed the beast, by raising taxes: that is, it will either remain in effect, or be repealed, depending on the preferences of the voters of the day.
Just how far this fear had progressed was revealed in the ridiculous post-budget controversy over whether the federal government was going to run out of money decades hence because of the increased TFSA limits. The finance minister, to be sure, helped this along with his flip comment to the effect that, should this prove to be a problem somewhere around 2080, it can be left to “Stephen Harper’s granddaughter” to solve it.
But come on. Even if allowing taxpayers to shelter savings from tax — as they should be able to, in any sensibly designed system — were likely to crimp future government revenues, there is a very simple solution: The government of Canada is not so hard up for cash that it has to raid people’s savings to stay solvent. It can tax other things.
The outside estimate of the revenue loss to TFSAs was $15 billion — in 2060. By my calculation, by that time each percentage point on the GST should raise about $50 billion. We are not about to go bankrupt, just because we decide not to tax things we shouldn’t have been taxing in the first place at quite the same rate as we have.
Indeed, if we were really looking to the welfare of those future generations, we’d be giving people every incentive to save and invest, as through policies like the TFSAs.
And we’d start now, to capture the benefits of compounding. Likewise — to return to the balanced budget fracas — if you’re anxious to preserve future governments from the clutches of the present, stay out of deficit.
The one sure way by which present governments may bind their successors is by running up massive debts. For the interest on these must be paid, no matter what.
You can’t starve the beast unless the beast wants to be starved.
The Tories have not passed legislation banning tax increases (and if they did, that legislation could be repealed). If, decades hence, people want their government to tax and spend more, it will. If they don’t, it won’t. That’s not as exciting as timetravelling prime ministers, but it’s true all the same.
This was, of course, only the latest iteration on a favourite paranoid theme: the notion that Harper has a long-term strategy to ‘starve the beast.’