Flaherty biggest of the big spenders
It’s true. The $200-billion Mr. Flaherty proposes to spend this year works out to about $5,800 for every citizen. Even after you adjust for increases in prices and population, that’s more than the Martin government spent at its frenetic worst, when it was almost shovelling the stuff out the door. It is more than the Mulroney government spent in its last days, when it was past caring. It is more than the Trudeau government spent in the depths of the early 1980s recession. All of these past benchmarks of over-the-top, out-of-control spending must now be retired. Jim Flaherty has outdone them all.
In two years of this “conservative” government, spending has climbed a historic $25-billion. Bear in mind: that’s on top of the wild rise in spending during the Liberals’ last term. The Tories have taken all of that fat, all of that waste, and all of those hundreds of priorities -- and added to them.
Cast your mind back to 2000. In his budget of that year, Paul Martin, then the Finance minister, pledged to hold increases in program spending to no more than what was required to keep pace with inflation and population growth, or roughly 3% per year. He didn’t, of course -- spending rose more than twice as fast over the next six years -- but suppose he had, and suppose subsequent ministers had followed suit. Today, program spending would be just $157-billion -- $43-billion less than the current estimate.
And that’s assuming Mr. Flaherty shows any greater propensity to stay within his budget than his predecessors. But then, historically, they never do. The $200-billion Mr. Flaherty will spend this year is $4-billion more than he projected in his last budget, just ten months ago. The $207-billion he projects for next year, we may assume, will be similarly revised. The budget boasts of instituting “a new Expenditure Management System.” And why not: That’s a whole lot of new expenditures to manage.
Is this what you voted for, you loyal Conservative followers? Is this what you suffered for, through all those long years of Liberal rule, dreaming of the Conservative revolution to come? “Hiring 50% more environmental enforcement officers?” Increasing “the share of meal expenses that long-haul truck drivers can deduct?” Tax credits for lacrosse? Exactly how does this differ from any Liberal budget -- other than outspending them, I mean?
And on the tax side? We had been conditioned to expect very little in the way of tax cuts by the Tories’ constant trumpeting of their risible “tax-back guarantee,” in which the interest savings from paying down the debt by $3-billon a year -- a whole $20 per taxpayer -- were to be dedicated to tax reduction. But I had not realized quite how little it would be. Because even the “tax-back guarantee,” it turns out, involves no actual tax cut of any kind. Rather, “the interest savings enhance the Government’s ability to deliver on new personal income tax reductions” -- mark those words -- “including the introduction of the Working Income Tax Benefit, the $2000 child credit, raising the spousal amount, and increaseing the age limit for converting a registered retirement savings plan.”
Now, what do the items on those list have in common? They are not tax cuts, in the usual sense of a reduction in tax rates. Rather, they are spending programs, delivered through the tax system. The “$2000 child credit” is in fact a $310 baby bonus. The Working Income Tax Benefit is an earnings supplement. These may be fine programs, but they’re programs: money the government gives you, depending on whether you fit the program criterion. That’s why they’re called tax expenditures -- and why they’re accounted as such on the government’s books.
So even the $1-billion “tax back” -- out of total revenues of $237-billion -- turns out, on closer inspection, to be … zero. What was it Stephen Harper was saying the other day, about the people who didn't have the time to organize a protest or the money to hire a lobbyist? Well, they're the ones that got left out of this budget: the common, ordinary, undifferentiated taxpayers. If you perform little tricks for the government, do the things it wants you to do -- ride the bus, live past 65, invest in a manufacturing company -- you get a cookie. But there isn’t one real, honest-to-God, across-the-board tax cut in the entire document. The government that raised personal income tax rates in 2006 cannot scrounge up enough revenues to lower them in 2007.
Of course they can’t: they gave it all to the provinces. The ad hoc mess that Mr. Martin made of the equalization program -- it was equalization, without the equalization -- has been replaced with a carefully rationalized, formula-driven, principle-based mess. Or rather four or possibly five messes: it’s impossible to speak of a single equalization program any more, not when you have resource revenues that are first excluded (well, 50% of them), then included (via the dreaded “fiscal capacity cap”), only to be excluded again for two of the provinces the cap was supposed to apply to (Newfoundland and Nova Scotia) but not the third (Saskatchewan).
But they did manage to torture the numbers, by means of various one-time payments and other instruments too hideous to mention, to show that no province would be worse off than it “would have” been had they followed some other system. The upshot: equalization, at a time of shrinking disparities between the provinces, will grow by $1.5-billion. And Quebec’s share? Why, all of it, of course. (More than all of it, in fact: don’t ask me how, but Quebec gets 109% of the increase.) Even Gilles Duceppe could not think of a way to find this humiliating.
It is good news, at least, that the “fiscal imbalance,” the notion that Ottawa is systematically stiffing the provinces -- a rank falsehood, but appealing in its simplicity -- somehow wandered into the impenetrable thicket of equalization and got lost. But what a price! All told, this year the federal government will transfer $43-billion, a fifth of every dollar it collects, to other levels of government -- $48-billion if you count the gas-tax giveaway to the cities. (Is it possible to make city governments even less accountable than they already are? Yes: give them billions of dollars in federal lolly every year.) Four years ago it was $29-billion.
And what did the feds get in return? Last year’s budget made some encouraging noises to the effect that Ottawa would use the leverage of its largesse to make some demands of its own, insisting that the provinces get serious about the economic union, harmonize their sales taxes with the GST, accept a national securities regulator, and so on. And now that the money has been delivered? The usual bumf about “working with” our provincial partners to build upon the precedent set in the zzzzzzzzzzz. In other words, about as much cooperation as Mr. Martin got for his $41-billion health accord.
Will it at least shut them up? Don’t bet on it. Quebec may be gorged, but I can hear Ontario squawking already that, while one federal money pot, the Canada Social Transfer, will now be distributed among the provinces on an equal per capita basis, the same is not true with regard to the Canada Health Transfer. It will still get billions more, you understand, than it did before: free money that, notwithstanding the careful labels, it can spend as it likes. But it won’t get quite as much as it might have liked to have got. The new fiscal imbalance?
3/20/2007
