Skye Sepp points out to me that the Conservative budget is not as innocuous as I believed. I find his objection entirely convincing, and hereby change my mind. He focuses on the “tax-free $5,000 account” program, which looks very attractive on the surface. But, on closer examination, it turns out to be a swindle, aimed at neutralizing the progressive income tax system, so that the rich pay less while the poor and average Canadians pay more. In the program, Individuals will be able to put only $5,000 a year into accounts to earn tax-free interest and/or capital gains. In their first full year of operation, this will cost the federal treasury only $50 million in lost tax revenue. That’s why it didn’t leap out of the budget with glaring warning lights. In fact, it looked rather warm and fuzzy. The small initial sum makes it look like a measure aimed at Canadians with modest savings. The Conservatives keep repeating that it would “help someone buy a car” — which is nonsense on the face of it, as you would have to have very large amounts in savings for it to be useful for that.
But, on closer examination, the contribution limits are cumulative and indexed to inflation. Within 20 years, it will cost the treasury $3 billion annually, in inflation-adjusted dollars. Only the rich will have the money available to take advantage of this in any significant way. It amounts to a tax shelter that will hand back large chunks of tax revenue from the wealthy, without even offering the advantages of existing tax shelters (which at least benefit charities, museums, and education). That shortfall will have to be made up by — I’ll give you a second to guess .…. yup, the ordinary, middle-income taxpayer who carries the burden of the cost of government. These will have the illusion that they are gaining something, but will ultimately have it taxed back from them, with an extra burden.
It shows you what the real Conservative ideology is: Keep a tiny aristocracy rich, for ever and ever, preferably without having to work for it. Make the ordinary Canadian pay for everything, through the nose, whether it benefits them or not, for ever and ever. In other words, the economic ideology of Vladimir Lenin. The Republicans used the same kind of slick, bait-and-switch, ball-under-the-cups shenanigans to stick the American public with a “reform” of the inheritance tax that benefited the .01% richest Americans and stuck ordinary Americans with the hidden costs. Nothing could more clearly illustrate the “elites as con-artists” thesis I put forward in the Meditations On Democracy. It also shows that when it looks like a good deal, you better damn well read the fine print.
Wednesday, February 27, 2008 — A Correct Liberal Call on the Budget
In Canada, the historical record is clear: the Liberal Party has established a tradition of responsible fiscal management. The Conservative Party are incompetent yahoos who will spend us into a nightmare of debt.
When the Liberals came into power in 1993, the Conservatives had left us with crippling deficits. The Liberal Party oversaw nearly a decade of extremely painful fiscal measures, many of them extremely unpopular. But we entered the new millennium with surpluses, and by the time the party was defeated on minor, economically irrelevant issues (it was mostly just boredom with a party too long in the saddle) in 2006, had been paying down its debts for a decade and hefty budget surpluses were the norm. Despite many things I strongly objected to in the Party’s policies, every time I spoke to a federal Member of Parliament, it was obvious that keeping out of debt was always the number one issue on their mind.
Now we have had only two years of Conservative government, and the huge surplus we had in the bank has eroded to a small nest-egg. What most Canadians don’t understand is that even that nest-egg only reflects current account. Future commitments and newly embedded policies tell a frightening tale: we are only a minor crisis or a recession away from going back into debt. And guess what? The recession is here. Ontario and Quebec are already teetering on recession. In other words, typically reckless, irresponsible Conservative economic mismanagement has screwed us. Vast welfare handouts to the rich, the Alberta energy industries, and the Conservatives’ coterie of corporate friends (which does not include the modern technology and manufacturing sectors), as well as unbelievably expensive military adventures undertaken as tribute to Washington, have turned our fat deficits into a time-bomb of self-destruction.
When will people learn that it is Conservatives who are the chronic mis-managers of economies? Can’t they see what thirty years of Conservative economic quackery (practiced as much by Democrats as by Republicans) has done to our neighbours to the south? There, it has reduced the world’s wealthiest nation to a pathetic global laughing-stock of debt and incompetence.
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