Cuts wrong way to go - just ask PM TheStar.com - Columnist - Cuts wrong way to go - just ask PM
November 28, 2008
Thomas Walkom
Has Jim Flaherty met the new Stephen Harper? If the finance minister's economic update is any indication, the answer is no.
The Mark II version of Harper claims to no longer be a slave to Conservative balanced budget orthodoxy. In Peru last week, the Prime Minister talked of the need to take "unprecedented fiscal actions if necessary" to fight the global recession.
A day later, he eloquently and deliberately compared the current crisis to the 10-year-long Depression of the '30s, vowing that he would not make the same mistakes that governments made then by trying to balance the books at all costs at a time "when fiscal stimulus (raising spending or cutting taxes) was absolutely essential."
A day after that, he chided those who insist that deficits must be avoided at all costs and called for a "somewhat less simplistic view" of government finances.
And then he came home just in time to watch Simple Jim deliver the same old nostrums yesterday.
Harper says Canada is threatened by the kind of global economic collapse not seen since the `30s. Yet his finance minister predicts that this "technical recession" will be over by next April.
To read Flaherty's update is to weep. The economy is worsening. Tax revenues are falling off. Yet the government's response – contrary to Harper's words from the weekend – is to cut spending.
"We cannot ask Canadians to tighten their belts in tougher times without looking in the mirror," Flaherty told the Commons.
This would be a noble sentiment if the point were indeed to have Canadians tighten their belts. But, as Harper seems to understand, when deflation threatens the world, the point is to ensure that people keep their belts loose.
Alas, Flaherty doesn't get it. Instead he pledges to cut program spending by $2 billion next year and sell $2.3 billion worth of assets – we've all seen that movie before. (The Mike Harris government in Ontario, of which Flaherty was a part, also tried to balance its budget by selling real estate. The court case regarding alleged corruption and fraud arising from these sales is still ongoing.)
As well, Flaherty plans to squeeze $600 million out of public service wages, suspend the right to strike for federal civil servants and throw a spanner in the pay equity program, which is designed to ensure women are paid the same as men for doing work of equal value.
Earlier this month, he announced he is cutting back by $2.4 billion next year the amount that Ottawa transfers to poorer provinces (including Ontario) under the federal equalization program.
In an effort to direct media and opposition attention away from the contradiction between his actions and Harper's words, Flaherty also formally announced the government's plan to scrap public subsidies that political parties get, based on the number of votes they receive at election-time.
The problems with this particular move are not so much economic as political – but that's a topic for another day. Given that Ottawa plans to spend about $248 billion next year, the finance minister's $7.3 billion worth of cutbacks are small beer. But as the Conservatives like to say, symbolism counts and leading by example is important.
And the example that cutback king Flaherty has offered the country – squeezing spending, cutting wages and reducing spending power – is precisely the wrong one for these times. That's not just what I think. If Harper meant what he said in Peru, it's what Flaherty's boss thinks too.
Toronto Star
Clearly they don't know what they are doing and lil' Jim can't make up his mind on whether we do or do not have a deficit.