Cheap Diesel Bad for Economy (and Planet)

How do you win an election? Roll out the pork of course. And so Canadian Prime Minister Stephen Harper announces a proposed tax cut on diesel fuel, even if it will dig Canada even deeper into an economic and climate hole.

Canada already emits more carbon per capita than almost any other country on Earth. Our total carbon emissions are number seven worldwide – more than the United Kingdom, which has almost twice our population. Harper’s solution: make fuel even cheaper.

While this might play well in an election campaign it is the exactly the wrong direction to be taking our nation and our economy.

First of all the 2% reduction in excise tax would only reduce the cost of filling up a 100 litre fuel tank by less than $3.00. The Globe and Mail today estimated that the proposed cut would save consumers 1/3 of a cent on a loaf of bread. Yet this gimmick will cost the Canadian taxpayer over $600 million annually.

Harper himself agrees this is a dumb idea. In May of this year he told the St. Catherines Standard "The ability of governments to affect the prices of gasoline per se is so small that it's not worth doing."

What a difference an election makes... Can someone say "flip flop"?

Such pandering need not make sense. It is about Harper getting a majority. That quest has already cost the country dearly.

Canada’s surplus has shrunk by 88% since 2000-01. In fact, Canada has already fallen into deficit territory this year. In April and May of 2008, Canada had a deficit of $517 million, compared to a surplus of $2.78 billion in the same two months of 2007. This ends an eleven-year streak of budget surpluses posted largely by the Tory's predecessors.

Harper’s cuts to the GST reduced revenues from that tax by 21% and 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," said Christopher Ragan, a McGill University economist who favours the Conservatives.

"I believe it's a poor idea," said economist Mike Veal of McMaster University in Hamilton. He said most economists would choose an income tax cut.

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

By the way, Canada now has the worst performing economy in the G7.

So here we go again. The Conservative party is not only undoing almost two decades of work to bring our deficit under control, they are undermining the ability of Canada to move towards a green economy.

For a so-called laissez faire economist, Harper is instead meddling in the marketplace and hitching our wagon to a dying horse.

Oil prices have ballooned an incredible 500% since 2002. This is a worldwide phenomenon and well outside the control of a middle power like Canada.

This sea change in the global economy is already transforming the behavior of consumers. SUV sales have dropped 27% in 2008. Transit ridership jumped 5.2% in the second quarter of 2008. The world is rapidly moving away from an oil economy. Countries that choose to ignore this, do so at their peril.

Yet Harper’s prescription for our oil addiction is like handing a bottle of booze to an alcoholic. It might be popular in the short-term but its only going to make the problem worse, and delay necessary changes in Canada’s economy to compete in the 21st century.

We have a long way to go to transforming ourselves into a low carbon country. For the sake of our planet, and our pocketbook, the sooner we get going the better. Stephen Harper is clearly the wrong man for the job.

This ran on desmogblog.com on Sept 10, 2008