Hyperbole and The Myth of the Fiscal Conservative

The Liberals released their 76-page platform this week, including the proposed carbon tax, to predictable ridicule from the Conservatives. Prime Minister Harper ranted against the idea of taxing carbon as “crazy”, “insane”, and something that would “screw everyone across the country” and “wreck” the economy. The Tory leader went on to trash the Liberal plan as “a work of political and economic incompetence”.

Wow Stephen. Calm down.

Besides the fact the carbon taxes have been widely used throughout the world without the sky falling, or that independent economists have reviewed the Liberal plan and found it sound , perhaps now is as good a time as any to step back and ask the simple question: who has a better record of managing the economy, liberals or conservatives?

Lets start with the royalty of conservative movement: Ronald Reagan. Was the Gipper a restrained fiscal conservative? That’s certainly the mythology.

Yet by the end of Reagan's second term the national debt ballooned by more than 15% as a percent of GDP and totaled $2.6 trillion. Between 1980 and 1990, the national deficit had tripled to $220 billion. When he left office, the country owed more to foreigners than it was owed, and the United States moved from being the world's largest international creditor to the world's largest debtor nation.

Then there is George W. Bush, who inherited a $128 billion surplus in 2001 and yet has so far ran up the national debt by a whopping $2.78 trillion - not including of course the recent bailout of Wall Street on his watch that will cost the taxpayers an additional $700 billion.

The scale of this disaster is only now coming into grim focus and will no doubt hobble the economy of the US for generations into the future. Besides his obvious incompetence, Bush’s contribution to crushing national debt was fueled mainly by tax cuts and military spending.

Here in Canada, Brain Mulroney spent taxpayer’s money like a drunken sailor, racking up a $42 billion deficit in his last year in office. During his tenure the national debt ballooned by $338 billion, an increase of 200%.

Even Margaret Thatcher was appalled, stating “As leader of the Progressive Conservatives I thought [Mulroney] put too much emphasis on the adjective and not enough on the noun."

The fact is that so-called fiscal conservatives on both sides of the border have a shameful record of managing the economy, and typically tear through taxpayer’s money like bingo winner on a bender.

Which brings us to Stephen Harper. When he became Prime Minster less than two years ago he inherited a surplus of $12 billion. In that short time, Canada has already fallen into deficit territory.

This ends an eleven-year streak of budget surpluses posted by their predecessors, the Liberal Party, whose fiscal discipline in the 1990’s finally tackled the deficit, delivering budgetary surpluses every year from 1997.

Like Bush and Reagan, Harper undermined previous surpluses primarily through ill-advised tax cuts and ballooning military spending.

Harper’s cuts to the GST reduced income from that tax by 21% and likely cost the federal treasury over $14 billion up till the end of 2007. While Harper is trained as an economist, his colleagues were almost unanimous in calling the GST cuts a dumb idea. "Stupid, stupid, stupid, stupid," was the analysis from Christopher Ragan, a McGill University economist.

Incredibly, the tax cuts brought by Harper have cost more than all federal transfer payments for health and social programs combined. In other words, if Harper had not slashed government revenues, the federal government could have doubled its support for healthcare, post-secondary education, and social assistance.

At the same time, Harper committed Canada to spend an additional $15 billion on the military, which later became $50 billion . Some predict the actual amount may be closer to $100 billion . Who knows? Harper isn’t telling. Incidentally, Canada now has the worst performing economy in the G7.

Ideologues will no doubt dispute the fact that “fiscal conservatives” like Mr. Harper have a serious credibility problem when it comes to managing the economy. These holdouts are either be blind to history, or willfully misrepresenting the facts. Sadly, shrill hyperbole often substitutes for meaningful analysis south of the border.

Keep that in mind when Harper rants against a carbon tax with terms like “crazy”, “insane” or saying it will “screw everybody” or “wreck” the economy.

Canadians are not stupid, and we expect more from our leaders than hyperbolic fear mongering - especially on an issue as important as climate change.

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