No matter how you add it up, Harper’s fiscal record is a catastrophe
On April 8, Finance Minister Joe Oliver stood up before the Economic Club in Toronto and delivered what can only be described as one of the greatest “fantasy economics” speeches in decades.
It was a message from a parallel universe — one in which the Harper government delivered ‘sound economic management’ through the recession (it didn’t), the economy recovered its pre-recession growth pattern (it hasn’t) and Ottawa is delivering tax relief for the average Canadian household (it isn’t). Stranger still, it’s a parallel universe where Pierre Trudeau is still around, haunting us.
In his speech, Oliver somehow contrived to blame Justin Trudeau for the alleged fiscal sins committed by his father during Trudeau Senior’s decade in power. (Justin Trudeau is 43. He was in his early teens when his father left office. Somehow we doubt Pierre was taking Justin’s fiscal advice at the time … but that’s the magic of rhetoric for you.)
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So what about the Liberals? Oliver is hardly going to give any credit to Jean Chretien and Paul Martin for getting the federal government out of the worst fiscal crisis it had ever faced.
According to Oliver, the Liberals balanced the budget “by hiking taxes, cutting vital programs and slashing billions in transfer payments.”
Now, as far as we can recall, the Liberals imposed a temporary capital tax on large deposit taking institutions; a higher tax on large corporations; a temporary corporate surtax; and higher excise taxes on gasoline and tobacco products. That was it. There were no higher taxes on the elderly, as Oliver has claimed.
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In 1994-95, the federal deficit was 4.7 per cent of GDP. By 1997-98 the deficit had been eliminated and the federal government ran surpluses for the next nine years. The federal debt was actually reduced by $90 billion; the debt burden fell from 66.6 per cent in 1994-95 to 31.4 per cent in 2006-07.
How does this compare to the Harper government’s fiscal record? In 2006-07, the Conservatives inherited a surplus of $13.8 billion — which they turned into a deficit of $5.8 billion within two years.
Since then, they have been in deficit each and every year. In 2009-10, the deficit reached its peak of 3.5 per cent of GDP. They are desperate now to show a surplus in 2015-16 — one surplus in nine years. Since Harper was elected, the federal debt has increased by over $150 billion, wiping out the reduction in federal debt achieved under Chretien and Martin. Not much to boast about there.
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What about the government’s commitment to economic growth and job creation? Who hasn’t heard about the 1.2 million jobs created since “the depths of the recession”? Again — time for a reality check.
The figure — 1.2 million — is correct, but almost meaningless. It certainly doesn’t describe the performance of the economy since 2006 and the labour market situation in Canada. Since 2006, economic growth has declined in every year since 2010 and averaged only 1.7 per cent per year.
In the previous nine years, economic growth averaged 3.4 per cent per year. In 2014, only 120,000 new jobs were created — less than in 2013.
At the end of 2014, the unemployment rate was higher than at the end of 2008. The labour force participation rate was lower than in 2008.
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All of this, of course, came after the government’s biggest and most foolish tax cut — the two point cut in the GST which every economist warned them was a terrible idea. Sure enough, it was a major factor in putting the government into deficit.
The key thing to remember here is that these tax cuts accomplished nothing for the economy. None of them contributed to economic growth or job creation. They certainly didn’t contribute to tax fairness.
Numbers don’t lie, but people do. It’s one thing to spin your failures as successes — it’s another thing entirely to try to present a decade of fiscal failure as one long triumph.