Liberal Platform – Fiscally reckless

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.

2 thoughts on “Liberal Platform – Fiscally reckless

  1. It seems that Canada is really dividing along both regional and cultural lines. I saw polls that showed that in the City of Toronto, even though Ontario as a whole is generally closer (i.e. 5 point lead vs. 15 points in 2015), the Liberals have either kept or enlarged their 2015 leads. The question is if the losses are in the 905 suburbs (fatal for the Liberals) or in rural Ontario (no difference since the Liberals only have a handful of seats there which they are likely to lose anyway).

    If I were to guess the results right now:

    LPC 156 – CPC 151 – BQ 19 – GPC 6 – NDP 5 – IND 1

    That would be a true hung Parliament, practically ungovernable. The Liberals wouldn’t be able to rely on the NDP and Greens as they wouldn’t get them over 170, while the Conservatives have no one to get them there either. Snap election in early 2020?

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    1. I think its tough to say as in Ontario a 4 or 5 point swing can flip a lot of seats and never mind Quebec often tends to decide quite late in the game which way it will go. In 2011, the NDP will still in second and low 20s in Quebec 17 days before the election yet look what happened.

      I think the big determinant will be turnout. If turnout stays above 65%, pretty sure Liberals get back in, just a question of whether it is a minority or majority. By contrast if turnout falls to under 60%, pretty sure Tories win most seats, just a question of whether they can form government or not. Tories have a very motivated base who will show up no matter what, but Liberals have a better chance of winning over soft Green and NDP supporters.

      As for regional polarization, totally agree and I think an issue many are ignoring is how angry Alberta and Saskatchewan will be if Trudeau gets back in. Probably not enough to separate, but could see alienation in those two provinces reach levels you haven’t seen since early 80s. In particular if a Liberal minority, pipelines likely cancelled which will be really bad for those promises.

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