John Ivison: The goal of reducing Canada’s debt is not something to be ridiculed

National Post

SURREY, B.C. – Andrew Scheer unveiled his party platform on the Friday afternoon of a long weekend in Tsawwassen, B.C., with the Georgia Strait lapping up behind him.

It was almost as if he didn’t want anyone to clock the launch. If so, that hope was forlorn.

Progressive Canada noticed and proceeded to lose its mind, as it was revealed the Conservatives intend to make major spending cuts, if elected.

Such is the orthodoxy that spending is good and cuts are bad that the news was greeted with the same disdain that would have met a proposal to stop the tide coming in.

Now don’t get me wrong, I think the prospect of the Conservatives saving $22 billion from “operating reductions” or $11 billion from cracking down on tax cheats is as likely to succeed as Scheer ordering the Salish Sea to reverse itself.

The platform also revealed that, for all the fuss made about the carbon tax, cancelling it will save a Conservative government just $159 million over five years. Hardly worth the risk of losing an election, one might think.

But for all its faults, its intent is sound.

The goal of reducing Canada’s exposure to debt, particularly in advance of a global economic slowdown, should not be subject for derision.

That didn’t stop Justin Trudeau from pouncing on the announcement with glee. “The Conservatives are proposing $53 billion of cuts and they waited until the Friday night of a long weekend before sharing the platform,” he said at an event on Simon Fraser University campus in Surrey.

Trudeau was enthusiastic in his advocacy for deficit spending, suggesting being deeply in the red will actually help Canada if recession strikes.

“The Conservatives don’t know the difference between spending and investment…. Investing in Canadians is actually the way to grow the economy and the way to build resilience when the world is facing challenging times,” he said. “Do we continue to invest in people and grow the economy or go back to the cuts and austerity the way Stephen Harper used to and the way Doug Ford and Jason Kenney are doing right now?”

He would not bite on the follow-up question of whether he would go even more into deficit if the economy slows further. But I think we know the answer to that one.

Leader Andrew Scheer speaks as the Conservative party released its policy platform in Delta, B.C., Oct. 11, 2019. Carlos Osorio/Reuters

This is a very different philosophy from the Liberal Party under Paul Martin, who believed spending decisions should not be paid for with debt passed on to the next generation.

Trudeau’s campaign commitments will add $94 billion to a national debt that is already approaching $800 billion.

The Liberal leader talks about different choices that have been made between his party and the Conservatives. One of those was to spend an unexpected windfall in the 2018 budget. Tax receipts came in $6.5 billion stronger than had been anticipated but rather than pay down the deficit, which stood at $18 billion, the Liberals spent the lot on 309 line items.

Insiders say that the Trudeau government could have eliminated the deficit in three years at that time but a different decision was made.

The move came in for criticism from then Business Council of Canada chief executive (and former Liberal deputy prime minister) John Manley, who pointed out that it was not prudent to allow spending to consume additional revenue generated by windfall growth.

By contrast, the Harper government paid down $37 billion in debt between 2006 and 2008, so that it was in a better position to survive the worst downturn since the Great Depression.

Trudeau was enthusiastic in his advocacy for deficit spending, suggesting being deeply in the red will actually help Canada 

Not only are deficits ignored but so is labour productivity, the only way to increases Canada’s prosperity.

Trudeau talks about “investment” rather than “spending” but a scan of the commitments in this election budget reveal a number of expensive pledges that are unlikely to generate productivity growth – the $150 million a year “learn to camp” program, for example.

Before anyone swallows the Trudeau “austerity” line, they should at least take a closer look at what Scheer is proposing. The federal public service will be maintained at 2020/21 staffing levels – not exactly “pink slips and running shoes”.

On infrastructure, overall spending levels will be maintained at $187 billion but spread over 15 years, instead of the current 12. Given the problems the Liberals have had shovelling money out of the door on infrastructure projects, will anyone notice?

And just in case anyone resolves “a pox on both their houses” and decides to take a punt on that nice Jagmeet Singh, the NDP also released its costings Friday and they were predictably impractical.

The New Democrats would spend an extra $130 billion over the next mandate but it will all work out because Singh has a cunning plan, best articulated by Ronald Reagan – “if it moves, tax it; if it keeps moving, regulate it; if it stops moving, subsidize it”.

Liberal leader Justin Trudeau at a campaign rally in Ottawa, Oct. 11, 2019. Stephane Mahe/Reuters

A super wealth tax would raise $5.5 billion each year; corporate income tax hikes would bring in $6 billion; broadening the coverage of investment income tax would raise a further $8 billion – and the NDP would still by $32 billion a year in the red.

The suggestion that these huge pools of money may simply not be there when the New Democratic tax bureaucrats arrive to confiscate them provoked howls of outrage from social justice warriors.

But the Parliamentary Budget Officer, who ran the rule over the wealth tax proposal, warned of “high uncertainty” and “a large behavioural response”.

The laws of the economic jungle are relatively immutable.

One is that people who generate wealth do not like paying excessive taxes and will employ high priced accountants to avoid doing so.

Another is that at this stage in the business cycle, governments should not be running deficits, far less adding to them.

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