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.