The Liberals' budget has slain one sacred cow -- the notion that deficits are intolerable. Scott Clark and Peter Devries write that there is one more cow to be dispatched -- the idea that Stephen Harper's cuts to the GST are cast in stone:
How will these future growth initiatives be financed? Or, for that matter, how will the remaining election promises be funded, if at all? The government is already forecasting a deficit of about $29-billion in 2016-17 and 2017-18, falling to just under $15-billion in 2020-21. The budget projects a relatively stable debt-to-GDP ratio over the period of about 31 per cent. In other words, running larger deficits in future budgets to finance new spending is not an option, since this would violate the government’s only remaining fiscal anchor.
There is some cushion in the budget, which the government might be tempted to use for new spending. The deficit projections include a $6-billion annual prudence reserve, which reflects the high level of risk and uncertainty in the global economy.
The real problem is that the Liberals are still playing by Harper's rules:
Currently, the government is trying to squeeze a Liberal policy agenda into financial constraints imposed by the previous Conservative government. Former prime minister Stephen Harper must be quietly chuckling to himself as the government struggles with this impossibility. After all, he set the trap for future governments by cutting two points off the goods and services tax, which “starved” the federal government of $15-billion a year. He was betting, perhaps correctly, that any future government would be afraid to restore the cuts to the GST.
Clark and Devries believe that now is the time to call in Harper's chips:
Would Canadians accept restoring two points to the GST in order to finance programs and services they believe are important to Canada? We think they would. Canadians (especially seniors) are, largely, “small c” fiscal conservatives. They don’t want the 1970s and 1980s all over again. They don’t want another 1995 budget (we certainly don’t). They don’t want unchecked deficit financing and they will punish any government that tries it.
They believe that Harper's GST cuts were "the worse tax policy change ever made."
There is one more sacred cow to go.
Image: blogs.spectator.com.uk
