Liberals’ platform promises much, but how much can they deliver?
SUBSCRIBERS ONLY
Jeffrey Simpson
The Globe and Mail
Published Wednesday, Oct. 07, 2015
Any political party’s election platform that projects spending and revenue four years into the future is like a child’s game of pin the tail on the donkey.
The party might place the tail in the correct place – that is, its projections might come close to reality; more likely, reality will unfold in unpredictable ways, thereby causing the tail to miss the donkey altogether.
So when the Liberal Party projects deficits a shade under $10-billion for the first two years of a government it would lead, followed by $5.7-billion in the third year and a $1-billion surplus in the fourth, the projections are guesstimates.
The party can only surmise that future economic growth will be strong, hope the public money it will invest stimulates economic activity as forecast, and cross its fingers the cuts it will necessarily have to make in government administration plus the elimination of yet-unidentified tax expenditures will balance the budget.
In other words, the Liberal platform, much like the NDP’s, is directional rather than something to be counted on in detail. In the Liberals’ case, the platform promises much – more than it can deliver.
Two costly centrepieces dominate the platform: a whopping, tax-free Canada Child Benefit and investments in infrastructure.
The benefit, plus a middle-class tax cut, would trump, in cost to the Treasury, the Conservatives’ family allowance cheques that began to be delivered in the mail just before the election was called. The cost of the Liberal plan would be a staggering $25-billion a year. The child benefit is income-related and would put a lot of money into low-income families – the right social-policy approach – but it would also enrich, by almost $6,000 a year, the better-off, two-child families, defined as those earning more than $90,000 a year. For those earning $140,000 with two children, the transfer would be about $3,100. Such a transfer for these families makes no economic sense.
But the entire Liberal pitch is built around the “middle class” and “those working hard to join it.” So, large sums would be handed to families, from the poorest to those earning $140,000, paid for in part by higher taxes on those earning $200,000 or more – an increase that would push the marginal tax rate above 50 per cent in some provinces, with the result that tax avoidance would soar. This would mean, most assuredly, that the sum the Liberals hope to secure from these wealthier Canadians is exaggerated.
In contrast to the $25-billion a year for families, the Liberals would be spending about $5-billion on “infrastructure,” more than pledged by the Conservatives. The gap between the two would hardly be enough to kick-start the economy “now,” as the Liberals claim.
Whatever the impact of the $5-billion, it represents only about 15 per cent of the Liberals’ planned additional spending, although listening to Leader Justin Trudeau and his candidates, the unwary might suppose the share to be much higher.
Put another way, the pledge to run deficits to kick-start the economy through infrastructure, which is the way the party presents the plan, is misleading because so much more money is being allocated on a plethora of new and existing programs or tax cuts.
Most of this spending – for health, job training, clean technology, arts and culture, aboriginal people, veterans, immigration – gets baked into base government appropriations. It’s not one- or two-time stimulus, but rather permanent additional spending to the government’s bottom line.
The Liberals therefore would be changing the structure of the budget – by not proceeding with income splitting (except for seniors) and not allowing contributions to tax-free savings accounts to increase, and a few other small revenue changes – while adding a larger sum in the baked-in spending.
Something would have to give for the budget to snap back to balance in four years, and the Liberal platform, although wordy on the subject, is not very clear (many words sometimes being a camouflage for unclear or wishful thinking).
High economic growth would be expected to fill some of the gap, but who knows about such projections?
Most economists, looking at the country’s aging population, lower commodity prices, ensnarled resource projects and weak productivity, do not forecast robust economic growth. The Liberals had better hope that the economists are wrong.
As a political document, shaped by extensive polling and focus-group testing, the Liberal platform is enticing, which partly explains why the party’s campaign has proved to be better than all but its diehard supporters had dared to hope.
But in the unlikely event that the party were to get four years to implement the platform, some of its elements would have to change.
