Harper channelling Reagan with ‘starve-the-beast’ strategy
Tax cuts equal big debt, which leads to spending cuts and — voila! — smaller government
Back in 1984, when Ronald Reagan was about to run for his second term in the White House, U.S. Republicans were arguing about how to run against Democratic nominee Walter Mondale, who had proposed tax increases.
Republican leaders, led by Senate finance committee chairman Bob Dole, wanted to make the following pledge: “We therefore oppose any attempts to increase taxes which would harm the recovery.”
Newt Gingrich, then a young rabble-rouser, wanted to go farther, and he attacked Dole as “the tax collector of the welfare state.”
The Republicans compromised by inserting a comma in the sentence, so that the pledge ruled out all tax increases: “We therefore oppose any attempts to increase taxes, which would harm the recovery.”
That comma is the punctuation point that separates traditional conservatives — who sometimes increased taxes — from modern conservatives, who won’t agree to them under any circumstances. They want, as Grover Norquist put it, government “down to the size where we can drown it in the bathtub.”
The no-tax-increase position is now dogma — 95 per cent of Republican congressmen have signed Norquist’s Taxpayer Protection Pledge — but it is worth recalling that conservatives arrived at this position out of frustration with their inability to sell the public on spending cuts.
Reagan put it this way in 1982: “There were always those who told us that taxes couldn’t be cut until spending was reduced. Well, you know, we can lecture our children about extravagance until we run out of voice and breath. Or we can cure their extravagance by simply reducing their allowance.”
It’s known as “starving the beast.” Rather than doing the politically painful work of cutting spending, you cut taxes and increase public debt to the point where it is necessary to cut spending to keep the repo men at bay.
Unlike Reagan, Prime Minister Stephen Harper has never publicly discussed his “starve-the-beast” plan, but it’s pretty clear that that’s what he’s doing.
His former chief of staff, Tom Flanagan, described it as the prime minister’s long-term plan: “First depriving the government of surpluses through cutting taxes … and then it makes it easier to make some expenditure reductions.”
On budget day we will see what that means. We likely can’t be guided by what Harper said on the campaign trail when his opponents accused him of planning to cut health spending and pensions.
“Anybody who says that you can’t find money in Ottawa without cutting vital services to people simply is living in a fantasy world,” he said, adding that the key was finding inefficiencies.
“Unlike the Liberals, we have a pretty good record of doing that, while increasing the amount of money we spend on vital services like health care, pensions and education.”
Last month, though, Harper announced that the federal government will reduce the six-per-cent escalator on health transfers after 2017, and in Davos last week, he signalled that changes are coming to Old Age Security.
It is not shocking that Harper downplayed his plans during the campaign.
In 1993, Jean Chrétien promised to reduce the deficit without explaining how he would do it. He then forced cuts on the provinces, downloading the pain.
In comparison, Harper’s health plan provides for continued (though shrinking) increases. Critics complain that the money has no strings attached, so Ottawa will play less of an oversight role, leaving that task to provincial voters.
And while the opposition has been attacking Harper on OAS, Harper’s plan seems to be to reduce payments for future recipients, likely people who are now in their 40s or 50s.
I’m not sure that’s fair, since my generation will pay for better benefits than we will receive, and the details may reveal a cynical play on inter-generational politics, but it won’t be as gloomy a scenario as the opposition suggests.
Independent analysis shows, though, that Harper is exaggerating the urgency of the problem. Current OAS payments are sustainable, if they are a priority.
But Harper wants smaller government, and he will marshal the arguments that will help him sell his vision.
He is creating private instruments — the taxfree savings accounts and pooled pensions — to encourage individuals to take responsibility for their own retirements, and will point to public debt to say that changes to public systems are not just desirable, but absolutely necessary.
This is a powerful message in these troubled times, but it is not magical, and voters have always punished Canadian politicians who moved to slash entitlements.
Harper surely knows that, but he doesn’t seem bothered.
Last month, he told Calgary radio host Dave Rutherford to expect “fairly aggressive action” to “position this country for growth over the next generation.”
That sounds like more radical surgery than the inefficiencies he blandly discussed during the campaign.
It may mean cuts to Employment Insurance and equalization.
Having starved the beast, Harper may now be ready to climb into the cage and take on the weakened creature more forcefully.