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Comparing The Platforms: A Better Way To A Balanced Budget.

April 11, 2011

3-minute read

A quick and easy way to get a very bad bad headache is to attempt to compare and contrast the fiscal plans attached to the major party platforms. But they throw some light on the real priorities of the parties, and the real choices in play in the election.

One thing the Conservatives, Liberals and New Democrats apparently have in common is a commitment to balance the federal budget over the life of the next Parliament.

However, there are important differences.

The Conservatives and New Democrats say they would balance the books by 2014-15.

The Liberals go a fair bit further. They commit to a 1% deficit within two years, which is a bit less than the 2011 Budget forecast of a 1.1% of GDP deficit  for 2012-13. They pledge further reductions thereafter, and raise more in new revenues than they would add to spending by allocating $1.5 Billion each year to a new "Prudence Reserve Fund" which would likely, Paul Martin style, be used to reduce the deficit. Overall, they seem committed to a faster pace of deficit reduction than either the Conservatives or the New Democrats, which implies the possibility of spending cuts should the economic recovery begin to slow and/or the deficit does not fall as fast as forecast in the last Budget.

The Conservative platform is basically a somewhat amended version of the Budget they just introduced, with the costly family income tax splitting measure and doubling of TFSAs to be added once the deficit is gone.

As I have noted earlier, eliminating the deficit requires that you believe (1) that the currently optimistic fiscal forecast is accurate notwithstanding the criticisms of experts like Peter Devries and the Parliamentary Budget Officer and (2)  that $4 Billion in additional savings savings can be found.

I take the Conservatives more or less at their word that, given a majority, they are prepared to cut their way to budget balance and a new round of tax cuts, since I suspect there are a lot of  federal programs that they don't like very much.  Readers may want to take a glance at the spending estimates of Departments like Canadian Heritage, Human Resources and Social Development, Citizenship and Immigration and Indian and Northern Affairs to guess where the axe will fall to eliminate another 5% of direct program spending. Arts and film development programs? The CBC? Social Sciences and Humanities research? What remains of the Office for the Status of Women?  Grants and contributions to social development organizations? Student loans and grants? Disability programs? Aboriginal learning and health programs? The list goes on.

Neither the Liberals nor the New Democrats are very explicit about what spending  measures embodied in the 2011 Budget would be rolled over into a new fiscal plan if there were to be a change in government. Some Conservative promises have found their way into the platforms of the other parties. For example, all parties seem to support tax credits at varying levels for volunteer firefighters, to cite a minor example, and the Liberals and New Democrats  both allocate $400 million to the GIS on top of the modest Conservative annual increase of $300 Million.

One assumes, or hopes, that  there would be some significant revisiting of expensive  Conservative spending priorities, such as on crime and defence,  in a new fiscal plan.

I see one big difference between the New Democrat fiscal plan and those of the other parties. The total amount of money to be raised through new revenue measures is really quite substantial - $9.0 Billion in 2011-12 rising to $15.2 Billion in 2014-15. That is more than double the new revenues that the Liberals would raise on top of the current fiscal plan.

The New Democrats would introduce a bigger corporate tax rate increase than the Liberals, raising it to 19.5% rather than 18%, which will raise about $4 Billion more per year. They propose to raise $2 Billion from ending fossil fuel subsidies, almost ten times as much as the Liberals. They also propose to raise $1 Billion in new revenues next year rising to over $3 Billion in 2014-15 by cracking down on tax havens. (Details are apparently  to follow.)  There is a lot of evidence that the CRA have been extremely lax in preventing large-scale Canadian tax evasion and these numbers seem credible.

The New Democrats would also raise significant revenues - $3.6 Billion this year, rising to $7.4 Billion by 2014-15 - from an emissions cap and trade system. Proceeds from selling emissions permits would go to an impressive set of green economy initiatives, including major investments in energy efficient housing, expansion of public transit, and clean energy.

As Mike McCracken says in a short note included in  the NDP platform, major changes in the mix of spending compared to the current fiscal plan  would likely give a boost to job creation.  The big items in terms of job creation are significant tax credits to business for job creation and real investment in place of no strings attached tax breaks; the major green jobs package; and modest funds allocated to child care and other services which would create new jobs while meeting caring needs.

While it is fiscally cautious, the New Democrat platform does point to a better way to bring down the deficit, through job creation rather than through spending cuts.

I might also note - since it has not been widely noted- that New Democrat support for a continued 6% escalator in health transfers is clearly and explicitly tied to enforcement of the Canada Health Act and maintenance of publicly delivered health care.

Andrew Jackson is Chief Economist with the Canadian Labour Congress and a CCPA Research Associate.

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