Saturday, December 19, 2015

It's Alive!


If you think neo-liberalism is dead, consider what happened this week to Finance Minister Bill Morneau. Faced with a less robust economy than he anticipated, he'll have to consider new sources of revenue. He mused that those new sources might include the GST. Alan Freeman writes:

That appeared to be what Finance Minister Bill Morneau was doing earlier this week when he gave a convoluted response to a journalist that was interpreted as opening the possibility to a GST hike sometime in the future.

Within hours — probably after a panicked call from the Prime Minister’s Office — Morneau tweeted a climbdown of his own: “Contrary to misleading headlines, we are not considering changes to the GST.”

What Morneau made clear is that the Liberals are scared to death of being slammed as tax-grabbers by the Conservatives. While much of the Harper legacy is being scrapped — his obstinate refusal to take action on climate change, his surly, tough-guy foreign policy — the anti-tax mantra lives on.

Neo-liberals don't believe in deficits -- under any circumstances. And they don't believe in taxes. The Liberals have gone half way, by planning to run deficits. And they'll raise taxes on one percent of the population. But the notion that citizens should pay for the services they demand?  That is a notion they can't stomach.

So Stephen Harper's legacy lives on:

The Harper Conservatives used anti-GST sentiment in the 2006 election to help get themselves elected and soon lowered the tax by two percentage points to 5 per cent. It was a populist brainwave that boosted Harper’s anti-tax street cred but left economists scratching their heads — and deprived Ottawa of an estimated $14 billion to $15 billion a year in revenue. 

Lowering the GST never made economic sense. It's better to tax consumption than income. Apparently, the Liberals haven't learned that lesson either.

Neo-liberalism is alive and well.


Lorne said...

Eventually, if the Liberals hope to enact their vision, they will have to raise taxes, Owen. I, for one, will not be one of the screamers shouting denunciations. I'll leave that to the disenfranchised right, along with those who indulge in magical thinking.

Owen Gray said...

The Right has abhorred deficits, Lorne. But they've never wanted to pay the bills.

Toby said...

Frankly, if there was a button I could push that would erase everything Steven Harper did in his entire political career, I would push that button. Yes, that means I would erase every one of his tax cuts. Yes, I understand that I would be paying more. Government has to have the money to provide the services that Canadians want and need. It is a simple as that.

People who think they want to live in a libertarian paradise should take a serious look around them. Libertarianism only works for hermits. The rest of us have to share the planet and that costs.

Scotian said...

I've already spoken in detail to that article within it, but I'll make this point here as well. I think the author is wrong, and that the Libs will actually look at raising the GST, but that Trudeau wants that conversation to happen in a larger more comprehensive financial examination than what Morneau was doing this month. I suspect as well that Trudeau wants to get all the Harper fiscal abuses out in the open as well (in part to reveal the need for why, in part to undercut the CPC opposition inevitable shrieking to any tax hike, especially to the GST) and create something that deals with it in a rational and more holistic manner than the approach to economics that we saw under Harper. I think the author is jumping to conclusions that suit his POV and trying to make it a self fulfilling prophecy by poisoning the well as much as he can. Given that not only are the books showing themselves to be far more rigged than many/most thought, even those that expected some of it, given that the economic reality of this nation is taking a worse hit than even those of us who saw it coming as a direct result of Harperium policies, this is an area where it is wise and prudent for Trudeau to move cautiously and carefully not just in the tools he ends up using but also in how these things are discussed in the first place to prevent further economic instability through rumourmongering created panic actions.

I suspect Trudeau and the Libs know full well they are going to have to go down this road, but no one said they had to do so in a stupid or careless manner, did they? I'm almost certain we will see a GST raise within the first term, but to pile it onto everything else right at the outset would be a bit much, and doing so without the rest of the economic/fiscal discussion underway would make it a harder pitch too. I'm recommending taking a bit of a wait and see here first for these reasons. It is after all only day 45 of the Liberal government, and it is the Saturday before Christmas at that. One of the things Trudeau needed to be wary of was his government flying off in all directions at the same time trying to do too much too quickly, and I think economic policy discussions of this magnitude would fall into that category. Give it a couple of months or so until they are preparing their budget, then I think we might start seeing this discussed by this government and the reasons why it is now needed despite not having campaigned for such thanks to the duplicity of the prior Harper government. I would think Trudeau would want to be able to show just how much the Harper government fudged the books to be able to make his case, both for reasons of honesty and for political tactics.

That's my take on what happened with Morneau. Time will tell whether I am reading this right or not, but part of that is the point, time will tell, and time is needed to be given to tell, it is simply too soon to be jumping to such conclusions based on the little we have out there to date.

Owen Gray said...

I'm sure things will be clearer around budget time, Scotian. As you say, time will tell. I just hope that the Liberals will not be spooked by the neo-liberal propaganda machine.

Owen Gray said...

Your last two sentences are right on target, Toby.

The Mound of Sound said...

Yes, the Libs may have to reinstate Harper's GST cuts. They have to look at all revenue options including more realistic income taxes for those who have been most rewarded by the rentier economy as well as higher corporate taxes, particularly for firms that are sitting on funds they should be investing in the economy.

It's time to take an adult perspective on taxation as well as other, less known government incentives including deferrals, grants and the provision of public assets at much less than fair market values. A good primer would be Stiglitz' "The Price of Inequality."

A great way to generate revenue is through rehabilitating a genuine, middle class economy. Ralston Saul dismembers the delusion so many of us have that it can't be done by demonstrating that it has been done in the past and very successfully - "The End of Globalism."

We've been fed this neoliberal ideology of free market capitalism as the Great Truth which, again, Ralston Saul dismembers as just another failed ideology, scarcely more grounded in fact than a bagful of disparate religions.

We've arrived at that juncture, Owen, where the old models of organization - economic, industrial, geopolitical, even social - anchored as they are in 18th century economic theory, 19th century industrialism and 20th century geopolitics - have lost their utility and no longer suit our overburdened world. It's either change to meet the new realities or wait to be overtaken by events we'll find very difficult to control.

Owen Gray said...

That's exactly the case, Mound. Either we change, or change will be forced on us. Incidentally, The End Of Globalism is a terrific book.

Steve said...

a one percent on the gsT MUST happen also corporate has to go up a couple of points and then we are back in the drivers seat

Owen Gray said...

Doing those things flies in the face of the conventional wisdom. Steve. We'll soon see how conventional the Liberals are.