Wednesday, January 08, 2014

Insanity Drives The Bus

Stephen Harper insists he is all about strengthening the economy. Not so, writes Tom Walkom. He is abandoning it:

The reasons are political. Prime Minister Stephen Harper and his finance minister, Jim Flaherty, now have only one goal in mind — the 2015 federal election.

And they are determined to slash government spending in order to balance Ottawa’s books before then.

They calculate that a fiscal surplus in 2015 will allow their party to offer voters a platter of tasty tax cuts that will win it four more years in power.

As a political strategy, it has worked before. It's been all about buying votes with tax cuts. But as an economic strategy, it's madness:

In Canada, the official unemployment rate still hovers near 7 per cent. The Canadian Labour Congress calculates that when those who have given up looking for work plus involuntary part-time employees are added in, the real jobless rate reaches about 17 per cent.

The country remains divided. Canadians able to take advantage of the oil boom are doing all right. But those connected to manufacturing, particularly in Ontario, are not.

The rich make good money. Census figures show that those in the top one per cent of income earners average $381,300 a year — about 10 times the national average.

Yet those at the bottom find they need two or three minimum-wage jobs just to stay alive. Debt-burdened students graduate from university and college only to find that full-time jobs simply don’t exist.

Mr. Harper owes his political existence to the wealthy. And he's quite willing to strangle everyone else to stay were he is:

All of this is having a direct effect on jobs. The Parliamentary Budget Office says Ottawa’s spending cuts cost the economy 12,000 jobs last year. It estimates that this figure will rise to about 80,000 by 2016.

Up to now, Harper and Flaherty were careful to leave their options open. Both routinely warned that the fragility of the world economy might interfere with their budget-balancing plans. In 2009, the Harper government willingly incurred billions in debt to get the shell-shocked Canadian economy moving again.

Stimulus kept the Harperites in power. Now they calculate that austerity will do the same. But, Walkom warns:

In such a world, fixating on deficits is madness. Nonetheless, Flaherty and Harper are rolling the dice. The stakes are dangerously high.

The situation is grave when Insanity drives the bus.


Hugh said...

I'm in favour of balanced budgets, and reducing debt. I read that a lot of Canada's federal debt is just from the interest.

Owen Gray said...

As the deficit increases, the interest payments go up, Hugh. However, if you reduce the money the treasury takes in, the deficit rises.

Mr. Harper has cut all kinds of taxes and added lots of boutique tax credits -- thus adding to the deficit.

The Mound of Sound said...

Legendary US Supreme Court Justice Oliver Wendell Holmes:

"I like paying taxes. With them I buy Civilization."

Owen Gray said...

A famous quotation, Mound. And the last thirty years prove that, as taxes are cut, civil society disappears.

e.a.f. said...

eventually the harper economic theory will hurt enough Canadians that they will vote for some thing else.

By reducing taxes, the government is simply creating a deficient. no money, in means no money can be spent or you charge it. with no money spent, no services.

Loved the quote about paying taxes, yes that is exactly what we do, "I buy civilization".

Owen Gray said...

And, without taxes, e.a.f., we choose to live in the jungle.