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Harper Should Not Brag About His Fiscal Reputation

02/02/2015 12:36 EST | Updated 04/04/2015 05:59 EDT
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With Canada's Gross Domestic Product (GDP) actually shrinking and despite having the worst economic growth record of any Prime Minister since R.B. Bennett, Stephen Harper seems keen to brag about the fiscal reputation of his Conservative Party. Well, let's take a close look.

To begin with, here's an interesting question: How many Conservative Prime Ministers in all of the 20th century presented Canada with balanced budgets?

Answer: Only one! It was Robert Borden in 1912. Like Mr. Harper, he inherited a surplus from his Liberal predecessor (Wilfrid Laurier) and, again like Mr. Harper, it was quickly gone.

On his first day as Prime Minister in 2006, Stephen Harper was handed a thriving economy that was growing at 3 per cent per year or better. Close to 3.5-million net new jobs had been created over the previous 10 years. We had a consistent trade surplus. Both consumer and business confidence were high.

The federal government's books were solidly balanced. The country had ended a quarter of a century of chronic deficits and had recorded a decade of surpluses. As a result, both taxes and debt were falling faster than ever before. In fact, Canada's debt ratio (i.e., the size of the federal debt compared to the size of the economy overall) had been slashed in half -- down from nearly 70 per cent of GDP in the mid-1990s to about 34 per cent by 2006.

The Canada Pension Plan had been rejuvenated on a sound actuarial foundation for the next 75 years. The Canadian banking system was the strongest in the world.

Federal Transfer Payments to the provinces were at an all-time record high, and the country was making transformative new investments in benefits for children and families; the renewal of medicare; better access to higher education and advanced skills; ground-breaking science, research and innovation; more modern public infrastructure; a more secure and healthy environment; effective global trade and marketing; and novel measures to narrow the painful life-gaps between Aboriginal and non-Aboriginal Canadians.

The "new" Harper government trashed a number of these initiatives and walked away from others. On the financial side of things, they quickly squandered Canada's hard-earned fiscal strength.

Mr. Harper overspent by three times the rate of inflation. He eliminated all the contingency reserves and prudence factors that had served as fiscal "shock absorbers" to get Canada successfully through untoward events like international currency crises, the SARS pandemic and 9-11. And he put this country back into deficit again BEFORE the recession arrived in the latter part of 2008.

Mr. Harper likes to claim the recession "created" his deficit, but that's not correct. He put Canada into the red all on his own. The recession a bit later no doubt made it much worse, but Mr. Harper was the one who left Canada exposed and vulnerable.

After a few months of denying the recession, insisting on more austerity as his only policy and projecting five years of fictitious surpluses, Mr. Harper finally had to concede (in early 2009) that he had been all wrong. He launched a belated stimulus plan. But it got so bogged down in hyper-partisanship that most of it didn't get delivered until after the recession was officially over.

The legacy of this travesty is nearly $160-billion in new Harper debt. That makes Stephen Harper responsible for fully one-quarter of all the outstanding federal debt created since Confederation. It works out to just under $5,000 for every man, woman and newborn child in Canada today.

And how has he tried to deal with that burden?

By clawing-back funds that had been promised by the government and approved by Parliament to help vulnerable groups like Veterans.

By fire sales of federal assets like community pastures across the Prairies and a valuable, historic tree nursery in Saskatchewan.

By undermining environmental protection, disaster management, search and rescue, food inspection, police and security services, forensic labs, even the supervision of Canadian spies, and other elements of public health and safety.

By cutting and postponing urgent investments in municipal infrastructure, housing and even National Defence.

By pulling back future investments in health care and old age security.

By hiking and then freezing Employment Insurance premiums at excessively high levels.

By increasing -- by billions of dollars -- the federal taxes extracted from Canadians in every one of his last five budgets.

And what is all this in aid of?

So Mr. Harper can concoct a "balanced budget" for the 2015 election and proceed with his pet project -- Income Splitting for wealthier families.

To judge this scheme, it's wise to recall the insightful criticisms of Mr. Harper's former Finance Minister, the late Jim Flaherty, who said this particular tax break is just too expensive and unfair.

Income splitting will cost more than $12-billion over the government's current planning cycle, and it's benefits will go to just 14 per cent of Canadian households -- 86 per cent can never qualify. The wealthy will gain the most. The biggest winners will be those earning $233,000.

This is not a fiscal record to boast about.

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