On imbalance

Jim Flaherty's long-range economic plan won't disappoint that segment of the Canadian population which wants nothing more than for government to put itself out of business. But for the rest of the country, the plan seems very likely to backfire on the Cons:

In an economic statement delivered to the House of Commons finance committee, Finance Minister Jim Flaherty said the government will continue to cut income taxes and will reduce the GST by another percentage point, to five per cent, not later than 2011.

The finance minister said the added tax relief — which he said could amount to $22 billion over the next six years — would be in addition to the $20 billion in personal tax breaks unveiled in his May 2006 budget...

Flaherty also set a goal of eliminating the "total government net debt" by 2021. But that prompted criticism from Liberal finance critic John McCallum, who said it was a term "only a handful of economists in the OECD have ever heard of."

Now, I have to figure Flaherty went with the 15-year projection in order to be able to find some time frame over which he could claim to want to pay off Canada's debt (however dubious the argument that "total government net debt" measures much of anything). But that choice looks like a dangerous one for a minority government - particularly one which has been so one-sided with its focus so far.

The most obvious problem with the long-term framework is its presumptuousness. It's far from clear that the Cons will ever be able to implement a single one of their announcements - let alone hold power for any substantial portion of the longer term projected. But the Cons' apparent desire to write themselves a multi-decade tenancy in power could push anybody who might have been willing to put up with a Con minority into other camps.

And the possibility of long-term Con government only looks worse due to the content of Flaherty's announcements today. While tax cuts are understandably popular to a point, Canadians will surely ask themselves whether they want a government which looks for excuses to hack another $20 billion away from its bottom line every time it updates its finances, or one which thinks there may be more to life than tax cuts.

For some, the Cons' pattern (along with Flaherty's track record) will serve as reason to doubt that any debt repayment will ever take place under the Cons; for others, the problem will be with the complete lack of commitment to programs of any non-military kind. But one way or the other, the vast majority of Canadians expect far more balanced decision-making than the Cons seem willing to carry out - particularly over the long term. There are very few Canadians (presumably limited to the membership of the Canadian Taxpayers Federation) who are likely to buy an argument that tax cuts should be prioritized to the exclusion of everything else, and that's the only group which is going to like the Cons' big-picture planning.

In fairness, there are some good ideas in the Cons' plan which hopefully won't get lost in the shuffle. In addition to debt repayment as a general principle, the EI tax cut and the working income tax benefit are certainly worth supporting. But even these reflect the Cons' lack of willingness to solve any problem through anything but a tax cut. And now that the Cons have gladly given that impression, it doesn't seem likely the Cons can successfully present themselves as a party capable of making balanced decisions in the long run.

Update: Relentlessly Progressive Economics has more.