Finance Minister Jim Flaherty has a lot of egg on his face — messy, runny-yolk egg.
Last week, the country’s finance minister blamed global economic conditions for a nearly $7-billion-higher-than-forecasted annual deficit. That is quite a hefty mistake and all since March, when Mr. Flaherty predicted a $18-billion deficit. Fast-forward seven months (or about $1 billion a month) and the federal deficit is projected to be $25 billion.
The European Union’s ongoing economic troubles, China’s reduced growth and the U.S. fiscal cliff are all very real and are all a worry for the world’s economy and its citizens, including Canadians.
But these are not the sole reasons for the Harper’s government budget problems or higher deficit.
In fact, the higher-than-forecasted deficit can be partly (some might say entirely) blamed on domestic decisions.
What we won’t hear about from the Conservatives is how their failed economic, labour market and tax policies have contributed to the higher deficit. It’s much easier to blame world economic conditions for all our woes.
But it doesn’t take a brilliant mathematician to deduct that a government that slashes taxes for super-wealthy corporations may end up taking in less revenues as a result. It also doesn’t take a genius to understand the link between policies and programs that suppress the wages and incomes of Canadians and how this just might impact on the amount of taxes they pay.
Billions of dollars in annual tax cuts to some of Canada’s biggest and most profitable corporations, including banks, oil and mining companies have certainly contributed to the deficit. And it doesn’t take a parliamentary budget officer to figure out that we all pay for these tax cuts to wealthy corporations.
We pay through additional borrowing costs and we pay with reduced services, like in the areas of marine search and rescue, and food inspection.
Supporting a low-wage strategy through changes to the temporary foreign worker program, employment insurance, pensions and an attack on collective bargaining results in a downward pressure on wages. Lower or depressed wages and a growing reliance on temporary labour means lower tax revenues.
In this case, the Harper government is its own worst enemy.
It needs to carry some, if not all of the blame. But don’t expect acceptance any time soon. Rather we should expect to sooner or later see the Harper government take ruthless advantage of their bad and disingenuous forecasts.
In typical Harper style, the higher deficit will be seized as an opportunity to cut more public services and programs.
David MacDonald, economist with the Canadian Centre for Policy Alternatives (CCPA), noted last week that Europe’s austerity cycle, where government cuts lead to slower growth which leads to more government cuts, could start to play out in Canada.
“We don’t have the fiscal problems that European governments have, but we may have a political impetus, getting to surplus, that stands in for real fiscal problems. The result may be even more cutbacks to regulatory agencies, benefits for low-income Canadians … if these deficit projections remain intact.”
The higher deficit will also likely be used as an excuse to continue to dismantle the progressive state, as Alex Himelfarb of the Glendon School of Public and International Affairs has written about.
In an article for The Philanthropist, Mr. Himelfarb, Canada’s former top civil servant, concludes that the budget cuts are not so much about fiscal prudence as they are about dismantling Canada as we know it, including eroding democracy.
What is the alternative, he asks? More democracy, more transparency, not less. More public education and information, not misinformation and deception. More citizen engagement, not voter suppression.
“Above all it means a renewal of our sense of the common good and our capacity for collective management of the future rather than retreating to our private interests and fears and surrendering our future to the vagaries of the market,” he writes.
And then the big ask. That we become more than the sum of our parts.
In many respects, Mr. Himelfarb says, this choice — more democracy rather than more markets — is a far more demanding path. “It is much easier to say ‘let the market do its magic’ or leave things to each community than to come up with policies that help shape our future. It is a hard sell to get people to believe that we can act together to achieve something better, that government can be a positive force if it is balanced by engaged citizens and a vibrant, independent civil society.”
This path is possible.
Yes the higher deficit is partly if not fully manufactured. It is a pretty good bet to assume the Harper government will gleefully use the new higher deficit as an excuse to cut deeper, to dismantle more.
These actions will feed the already growing cynicism with politics and governments, a form of voter suppression.
But it can also feed something positive: a more engaged citizenry demanding something better.
Lana Payne is president of the
Newfoundland and Labrador Federation of Labour. She can be reached by email at
Her column returns Dec. 1.