It is reminiscent of the old children’s story. As a naked emperor parades through town, no one but a small child is prepared to point out the obvious. Our modern day parallel is our prime minister’s repeated self-praise of his magnificent raiment of fiscal responsibility. Fortunately, Canadians are not so easily fooled by such imaginary cloth. The bare facts reveal the truth.
What kind of fiscal responsibility would get us into deficit financing before the global meltdown in financial markets?
Cutting the GST two percent to win votes when taxpayers are paying $15 billion a year in interest on the national debt was fiscally irresponsible. This reckless revenue reduction eliminated the annual budget surpluses that were directly applied to paying down our national debt. Conservatives were not motivated by sound economic analysis—no economists believed cutting the GST was wise—but by the hope of gaining votes from this tax-cutting shell game. They hoped most of us would not notice that we will end up collectively paying far more in total interest charges from the slower repayment of a larger national debt. There is more than irony in Finance Minister Jim Flaherty’s recent statement that Canadian homeowners will significantly reduce their total mortgage interest payments from his decision to reduce the maximum mortgage amortization period from 35 to 30 years. What happened to practicing the fiscal responsibility you preach?
At the same time that Harper’s Conservatives cut the GST, they also cut corporate taxes, while increasing spending. It doesn’t take an economist to know that if you cut revenue and increase spending, you’ll go into the red. And it is certainly not fiscally responsible to further cut corporate taxes with borrowed money on which additional interest payments will now have to be paid.
When the late 2008 recession began, as it always does at some point in the business cycle, the Conservatives found themselves caught out with no budget surplus to buffer the normal revenue decline and higher social expenses of an economic downturn. The Conservatives managed in two years to erase the prior decade’s $90-billion national debt reduction. Balancing the federal budget after the Trudeau and Mulroney eras was a painful exercise for most Canadians at very real cost in blood, sweat, and tears. All gone now in a self-promoting spree of deficit spending that will add yet another $90 billion new debt before we balance the budget—maybe. So much for our decade of sacrifice.
Conservative government meddling in CMHC lending practices has also created a very real risk of significant public financial loss should the housing market soften further. Finance Minister Flaherty hurriedly cancelled the 40-year zero-down mortgages that his government had earlier encouraged only after the stunning credit and housing crash in the United States. Should there be a significant adjustment downwards of Canadian housing prices, Canadian taxpayers could well be on the hook for as much as $125 billion in CMHC-insured higher risk mortgages. No wonder Minister Flaherty is scrambling now in damage-control mode to avert a potential crisis.
Our international competitors are investing strategically in energy efficiency and renewable energy knowing this conserves the “natural capital” on which the human economy depends. This gives them a head start on who gets the high-quality green energy and manufacturing jobs of the future. Our federal government is putting Canada’s future economic competitiveness and green job creation potential in peril by not providing a robust green energy policy framework to strategically guide private and public sector investment. Instead, by subsidizing fossil fuel production to the tune of over $1 billion a year, the Harper Conservatives channel private investment into an unbalanced petro-economy, causing significant collateral damage to manufacturers, the pulp and paper sector, tourism, and other sectors that are sensitive to U.S-Canadian dollar exchange rates. So much for economic smarts.
Then to add further insult to economic injury the Conservatives spend an incredible $ 1.2 billion—the equivalent to the investment setting up the national gun registry that Stephen Harper loves to attack—on a short G8/G20 photo-op summit that featured a fake lake and questionable spending in Conservative ridings. So much for election promises of accountability.
The old stereotype that Conservatives are fiscally responsible and good economic managers has proven itself to be only that: an out-of-date stereotype. The current Conservative government is “conservative” in name only. The Alliance party take-over of the Progressive Conservatives did more than eliminate the “progressive” element of that party. It also moved to a more libertarian bent, without those fiscal instincts so long associated with Conservatives. The new version of “Conservatives” abandoned core principles of fiscal prudence embraced by the Progressive Conservatives they destroyed. A more accurate representation of the Harper Conservatives is that they are fiscally irresponsible and economically misguided, but hope no one notices the naked truth.
Elizabeth May is the leader of the Green Party of Canada.