Tuesday, February 03, 2015

It's Not The Deficit. There Are More Serious Miscalculations

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Much has been written  about the Harper government's deficit projections. Jim Stanford writes that, on paper, the budget will be balanced. There are all kinds of accounting tricks that can make that happen. The government is vulnerable, he writes because it has grossly mismanaged the economy:

The October tax cuts were premature; it is tax cuts, not oil prices, which have jeopardized the attainment of a balanced budget. The Conservatives broke their own promise in implementing tax cuts before the budget was even balanced. (Breaking their promise, not running a small deficit per se, is their key point of vulnerability.) In fact, as I show in my column, the federal budget would be balanced right now, even with lower oil prices, were it not for the accelerated first-year tax cuts which the government was so anxious to rush out the door before the election. 

    The October tax cuts are socially and economically damaging. The CCPA's fabulous analysis of the perverse distributional effects of income-splitting (here and here) is already making this case in spades. 
     
    The government's response to falling oil prices has revealed confusion and internal division. Joe Oliver delayed his budget to some unspecified future date (April or even later); perhaps he will actually "table" the budget on the hustings. Oliver has said that there will be no further spending cuts to offset the loss in revenue, and that the government can use its (phony) $3 billion contingency fund to protect the balanced budget. Employment Minister Jason Kenney, in contrast, said the exact opposite in public: suggesting that incremental spending cuts might be required, and that the $3 billion cushion would not be drawn down (since it is intended, he argued, for true "emergencies"). Treasury Board President Tony Clement, meanwhile, also hinted at surprise reductions in spending -- channeling Pierre Trudeau in saying "Just watch us" reduce spending. Clement's record in consistently underspending authorized operational budgets (part of the government's "austerity by stealth" strategy). These mixed messages indicate a breakdown of discipline within Conservative ranks, and send confusing signals to consumers and investors alike.   
     
    Most fundamentally, the government's macroeconomic and industrial emphasis on making Canada an "energy superpower," investing so much fiscal and political capital to facilitate energy megaprojects (including fruitless pipeline proposals), vilifying critical voices, and inadequately responding to the negative side-effects of the oil boom on other sectors, has left Canada's economy unduly vulnerable to an oil price decline that was always inevitable.
     
The Harper government's first economic responsibility is to put citizens to work. In that task, it has failed utterly -- and the Harperites know it. I suspect that knowledge has something to do with John Baird's exit, stage right.

16 comments:

Steve said...

John Bairds exit was very poorly scripted. What that means I do not know, but it seems strange given the only thing this Goverment is competent at is scripting.

Owen Gray said...

These folks are utterly devoted to managing the message, Steve. It appears that lots of things are being mismanaged these days.

mogs moglio said...

Yes he is jumping into a corporate job.

I think the egging attack in Palestine also may have motivated him and he had a come to hay-Zeus moment and realized he worked for a crooked government hated around the globe?

Dana said...

Maybe Baird will be dead in a few weeks too.

Could become a pattern. Resign from Harper's cabinet and die within a short time.

Like a medieval vatican.

Owen Gray said...

That's interesting, Mogs. I suspect that -- until his recent trip to the Middle East -- Baird has never faced that kind of primal rage.

Owen Gray said...

As much as I dislike Baird, Dana, I wouldn't wish that kind of fate upon him.

I think that Flaherty and Baird left because they had had enough. It can't be easy working for the Borgias.

Dana said...

I'm not *wishing* it on him, Owen.

I actually dislike Baird much less than I once did.

But nothing is beyond the pale for this PM. Including ridding himself of potential inconveniences.

I wonder who will take over being Mrs Harper's companion at cultural events.

This may all be as simple as Baird wants to marry and knows that the fundagelical base of the party will not tolerate that.

Owen Gray said...

Could be, Dana. I'm sure there's a lot of information filed away in the Harperian closet.

Askingtherightquestions said...

We must keep hitting them on this point, Owen! Harpers economic "competence" has been shown to be an utter sham. You, I and many others have pointed to his ideological faith in economic theory that has NEVER been proven to be effective. We have been in an extremely low demand crisis since 2009. Harper hoped that oil would be our saviour yet even with a majority (e.g. no possible impediment to his plans, unlike Obama and he Democrats in the US) he has been singularly unsuccessful in creating new jobs. Why? Because he does not believe that government has ANY role to play in the economy. He has cut 16,000 to 19,000 public sector jobs (actual figures are difficult to obtain), he believes passionately that balancing the budget in the face of record inherently low demand is the correct move (in the face of all historical data) and that "red tape" (oversight) is bad.

Yes, objectively Harpers record over the past 9 years is disgraceful on so many levels, yet he still is polling neck and neck with the opposition - how is this possible? And then John Baird announces his departure (and I agree with Steve -this was performed in such an odd way). The question still remains, why now? Is it possible that Baird finally realized what an unbalanced, unCanadian regime he was tied to - the unquestioning support of Israel, blindly calling out jihadists and Vladimir Putin, tying foreign aid to Canadian extraction companies, etc, etc,....?? He, by his own admission, saw the world as black and white early in his career (he was 25 when first elected to Harris's government). Worldly experience and temporal maturity can lead to personal growth? Interesting times for sure.

Owen Gray said...

The Harperites carefully stage manage everything, Asking. Baird's departure seems to run contrary to that prime directive.

You have to wonder what's going on behind the scenes.

Anonymous said...

Some say Baird and Harper have not getting along and there have been tensions. That was my first thought, of why Baird left so suddenly.

Harper's Ministers are not permitted to do their jobs. Harper over rides them, over rules them and refuses to listen to their advice on anything.

Scotian said...

Baird's departure is curious and seems a bit rushed from my initial impressions, for as has already been noted this wasn't handled all that smoothly it seems. What it means, well that I am taking a bit of time to see on. I do think though Owen your comparison to the Harper government/leadership as the Borgias does a disservice to the Borgias, they at least while utterly ruthless tended to also be more competent in how they employed their power as I recall, far more so than we have seen out of this government.

As to the economic point of your post, basically yup, agree without reservation. Harper has mismanaged the best economic situation any modern Canadian government ever inherited, created a structural deficit in 2 years just in time for the largest fiscal collapse globally since the Great Depression which Canada only weathered so well thanks to the hard work of his predecessor Lib government in managing the financial sector as well as the debt reductions, and still cannot shape our national economic situation into anything remotely resembling a healthy growing economy. That is most certainly a record that needs to be tied around his neck, along with his proven fiscal non-conservativism in how he gave away tax breaks before they were payable for as well as so many other bad decisions.

Harper the strong/good economic manager is as much a fiction as Harper the Brave and Strong Leader is now that we have sen the true nature of Captain Cowered. It is important to make sure voting Canadians are made as aware of that as possible, he needs to go for many reasons, including overall incompetence as a manager of not just government but the national economy as well as for his multitude of sins/abuses of power and destruction of core democratic structures within our governing structures. It is not just on those grounds he is toxic for Canada, it is on the more basic bread and butter side as well.

Owen Gray said...

I've heard those rumors, too, Anon.It would be interesting to know if Baird told Harper to take a hike -- or if it was the other way around.

Owen Gray said...

Paul Wells writes today that there was a rumor making the rounds in the fall that Baird was going to quit, Scotian, because Baird felt Harper wouldn't win a second majority.

Who's to know if there's any truth to the rumor? But if it is true, it would seem to indicate that at least some people inside the fortress thought the jig was up.

Pamela Mac Neil said...

I think Owen, it's rats running from a sinking ship. I am glad to see though that Harpers entrenched incompetency, in everything, is starting to become noticed by Canadians overall. My guess is there is alot more fiasco's that we don't know about and will only find out if he loses in Oct.

Owen Gray said...

You can bet, Pam, that they're working very hard to keep the skeletons in the closet. They'll only come out if and when he's evicted from the House.