Wednesday Morning Links

Miscellaneous material for your midweek reading.

- The Star skewers the Cons' insistence on pushing ahead with bad budget choices:

As the Star argued during the election, Canada needs progressive economic vision in the form of strategic investments in scientific research and innovation, health care, a national child-care plan and improving the Canada Pension Plan for younger workers and the elderly poor. Measured by these needs, this budget, like its predecessor, is a bust.

Moreover, it remains packed with dubious spending, including an unwarranted $6 billion corporate tax cut and a smattering of other giveaways. And the Conservatives’ profligacy won’t end there. They are on an imprudent course to spend untold billions on F-35 fighter aircraft and prison-building, as other priorities go unmet.

Apart from its fundamentally skewed agenda, the budget is built on an unstable platform of rosy optimism that may not survive the gathering economic storm. Finance Minister Jim Flaherty readily acknowledges that “the global economic recovery remains fragile.” Even so, he says he can eliminate the $32 billion deficit by 2014/15 by trimming spending by 5 per cent. Yet Ottawa’s anticipated revenue growth could be dragged down by a variety of factors: the weak American economy, $100 a barrel oil, Europe’s debt woes, slowing growth in China and India, or Japan’s tsunami fallout. Anything less than an optimal outcome could force Ottawa to cut more deeply than the $4 billion a year it has earmarked to balance the books.

- And Thomas Walkom also notes the problems with Harpernomics:

When Finance Minister Jim Flaherty tabled his budget this week, he used precisely these kinds of calming words.

Sure, we’ll be doing a bit of cutting here and there, he said. But don’t sweat it. We’re only talking about trimming up to $4 billion a year from $80 billion worth of direct program spending. That’s just 5 per cent. Chill out.

Yet the reality of his plan is quite different.

First, he’s not planning to cut just $4 billion. He’s planning to cut up to $4 billion every year for four years. As his budget document points out, the cumulative total of these as-yet-unspecified cuts is $11 billion.

But that’s on top of the cuts that the government announced in past budgets but that have not yet kicked in. The cumulative total of these, according to Flaherty’s own figures, is at least $9.7 billion.

Add the two together and you get more than $20 billion in planned cutbacks between now and 2015. That’s not 5 per cent of federal direct program spending. It’s closer to 25 per cent.

Which is radical surgery.

So what gives?

The most obvious explanation is that the government is being dishonest.
...
Harper and his finance minister are taking a gamble. Taking a leaf from the Jean Chrétien Liberals, the Conservatives are using the deficit as an excuse to continue dismantling the parts of government they’ve already signalled they don’t like — such as health and safety regulation, veterans’ disability pensions and job training.

This would move Canada in the direction Harper wants it to go. But I suspect the Prime Minister knows his cuts could also threaten jobs and income should the world economy take another turn for the worse.

In that sense, the government’s careful rhetoric is more appropriate than its actions. This is a time for caution. It’s not a time for massive spending cuts, no matter how ideologically attractive the right might find them.

- No, it shouldn't be much of a surprise that the Bush administration saw Stephen Harper's Con government as a useful tool from day one. But it's striking how both the U.S. and the Cons seem to have overestimated the value of the softwood lumber debacle in giving Harper room to sell out Canada's interests further:

“That said, I see a real opportunity for us to advance our agenda with the new government,” Mr. Wilkins wrote. “I recommend early on that we look for an opportunity to give Harper a bilateral success story by resolving an irritant such as the Devil's Lake filter system or entering into good faith negotiations to reach a solution on softwood lumber. Press reports here indicate a growing willingness across Canada to get back to the table. Early success on a bilateral issue will bolster Harper and allow him to take a more pro-American position publicly without as much political risk.”

Less than four months later, Canada and the US reached an agreement on softwood lumber, with the Americans returning 80 per cent of the $5.3 billion in duties it had collected on lumber imports over the years.

However, if the deal was supposed to give the Conservative government an accomplishment to show the public it could stand up for the country and defend Canada’s interests in dealing with the US, it badly backfired.

A large number of softwood lumber industry groups, the BC government and the federal Liberals and NDP strongly opposed the agreement, declaring that the Harper government had in fact sold out to the Americans. The Conservatives retaliated by describing it as the best agreement possible and made the deal a confidence motion.

- Paul Krugman sums up how fiscal policy designed for the benefit of current creditors ends up harming the general public. [Update: And then highlights exactly who stands to gain as a result.]

- Finally, Nik Nanos' advice to the NDP may not be particularly surprising, but it nicely summarizes the message the party will need to develop:

“What’s always risky for a party is when it does things that seem to be inauthentic,” Mr. Nanos said. “Your guys and gals are going, ‘Hey what’s this all about now,’ now that we’re in the opposition people will expect certain things from the New Democrats.”

Mr. Nanos added: “I would say that the best way for the New Democrats to try to consolidate second spot is to deliver what people would expect from New Democrats, which is a socially progressive agenda that’s very compassionate, fighting for the little guy and gal.”