Liberals have finally released their much vaunted platform and despite claiming it is fiscally responsible, I believe there are major problems with this. For starters on the revenue side, they ignore behavioral changes. Unlike the tax hike on the top 1% in 2015, I don’t have any objections to a luxury tax on expensive cars or taxing Google, Amazon, and Netflix, or even reviewing tax system. My real problem is their assumptions go on a linear relation assuming those affected won’t change their behavior; when in reality that almost never happens. As for fiscal prudence, I believe any platform that calls for tax hikes on corporations or high earners should always assume it will net significantly less revenue and thus leave a large cushion. In addition many of their plans are completely excluded from their costing. Their pharmacare plan doesn’t have a single dollar budgeted towards it, yet could cost anywhere from $15 billion to $26 billion. Perhaps Liberals are assuming the provinces will balk at idea so its promise they presume will never happen. But what if the provinces do go along never mind over next four years quite possible we could see change in government in several provinces that are more open to this. True that asides from Ontario and Nova Scotia; governing parties have leads in the polls elsewhere but things can change. As such it is better to come in under budget than over. In addition it is going to dramatically increase the deficit.
I am not opposed to running deficits during downturns, but with a strong economy operating at its peak, this is a time when we should aim for a balanced budget. With a $14 billion deficit and a $22 billion increase in spending, we could have had a balanced budget this year if spending increases were just kept to $8 billion. Long term, surpluses in most years gives governments more flexibility to deal with unexpected issues. While its true many economists say debt to GDP is stable so nothing to worry about, that assumes they meet their targets, interest rates stay low, and we don’t go into recession. Any one of those happens and our deficit won’t be so manageable. More than anything from past experience; once big deficits become the norm, it is very hard to break the habit and often doesn’t happen until you hit a crisis point. Ontario Liberals and his father showed exactly the dangers of running deficits year after year. Likewise austerity is not a bad thing; it causes short term pain, but long term benefits. The Liberals in the 90s understood this and thanks to their strong discipline, Canada was in a very enviable fiscal position when they left office in 2006. Unfortunately much of that good work is being shredded on the view we can spend year after year beyond our means and also that government is the key driver for growing the economy. A lot of the Liberal ideas are worthy and if spread out over 2 mandates instead of 1 could easily be accomplished in a fiscally responsible manner. But I worry if re-elected, things will get worse and no party, not even Tories will want to fix things for fear of political backlash. That is why it is important Liberals don’t get re-elected so we can avoid this. There is lots to dislike about Scheer and I agree with many the Tories would be in much better shape had they chosen a different leader. But we have to deal with what we have rather than waiting for the right person. Scheer’s plans are not great, but at least not as bad as the other three parties long term.