Thursday, January 28, 2010

On renewed efforts

Thomas Mulcair's call for an extension of the home renovation tax credit (with a focus on energy efficiency) looks to be the NDP's first move in shaping the contents of the upcoming federal budget. So let's take a look at what the proposal might mean.

From a political standpoint, the move looks to be a solid one for the NDP. Even the worst-case scenario would have some apparent benefits: if the Cons substantially take up the proposal, the effect would be to leave the NDP with some of the credit and a cooperation/results moment to point to.

But the prospect of Deficit Jim Flaherty instead leaping into his stimulus "exit strategy" and declining to renew the credit would figure to be nothing less than ideal for the NDP. Suddenly, the millions of dollars the Cons spent promoting the credit as a benefit to the economy and Canadian homeowners alike would be turned to the NDP's advantage - while Flaherty would be left trying to argue that what was an essential investment the previous year has suddenly ceased to be so.

Based on that calculation, I'd figure that the NDP's call to extend the credit makes it very likely that the Cons will have little choice but to do just that. And that may help shift the frame of public debate as to the need for more stimulus in general, as the Cons figure to prefer turning off the stimulus taps all at once rather than explaining to some groups why their funding has been allowed to expire while other stimulus measures continue.

Unfortunately, though, the policy question behind the tax credit itself is somewhat less of a slam dunk than the political calculation.

After all, much of the benefit of the second year of the credit would presumably be absorbed by those well enough off to afford $10,000 worth of renovations in each year of the program. And while an extension of the credit might limit a predictable downturn in construction compared to the result if it's allowed to expire, I'd figure one would generate more actual stimulus from a program aimed at encouraging new types of economic activity rather than simply maintaining the incentives already in place for the past year.

In sum, then, the proposal looks to be a big winner politically in using the Cons' own rhetoric to push for obvious results. But it looks to fall far short of the ideal as a policy proposal - which is somewhat of a shame even if can't expect any better as long as the Cons are in power.

(Edit: fixed label.)

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