Harper’s ‘nation of shopping centres’
Winnipeg Free Press April 16, 2008
Tom Flanagan, Prime Minister Stephen Harper’s longtime confidant and former chief of staff, is delighted at the Conservatives’ success in “tightening the screws on the federal government” to dramatically reduce its significance in the daily lives of Canadians.
The Conservatives’ three budgets have left Ottawa financially incapable of offering any new national social program like affordable housing, higher education or day care. Although overall spending went up, mostly on the military, measures were taken to deplete revenues to the point future governments’ hands will be tied unless they raise taxes or run deficits, both prescriptions for political suicide.
By 2010, federal revenues as a share of GDP will fall to their lowest level since John Diefenbaker left office in 1963. Three years before national medicare, revenues were 14.9 per cent of GDP. They rose to a peak of 19.5 per cent in 1974-75 but are projected to drop to just 15.3 per cent in 2009-10.
In fact, the federal Finance Department’s fiscal monitor, released at the end of March, shows that revenue growth came to a sudden halt in January, shrinking that month’s surplus to a mere $600 million as the GST and personal income tax reductions started eating into Ottawa’s tax take
“They’ve gradually re-engineered the system. I’m quite impressed with it,” Flanagan told The Canadian Press in an interview last month. “They’re boxing in the ability of the federal government to come up with new program ideas… The federal government is now more constrained, the provinces have more revenue and conservatives should be happy.” Harper “really didn’t have the option of the cataclysmic approach because you can’t do that without a majority,” Flanagan continued. “So he’s made the incremental approach work — all the time having the insecurity of a minority government. It’s really quite a performance, I think… Over a period of a few years they’ve got all this in place and they never appeared to be making a radical shift. But the cumulative impact of all these together is creating a new profile.”
Not only have the Conservatives boxed in the federal spending power in general, he said, but “they’re also boxing in the Liberals from being able to campaign on expensive promises.” Flanagan is impressed that Harper managed to execute his stealthy revolution in Canadian public policy with barely a whimper from the public. But that, too, was the strategy according to the University of Calgary professor and Reform party founder.
“Part of the execution of the plan was that there would be conservatives attacking him, like John Williamson (of the Canadian Taxpayers’ Federation) and Gerry Nicholls (Harper’s successor as head of the far-right National Citizens’ Coalition). That’s extremely useful, to have that kind of pressure there, berating the prime minister for not doing enough.”
Derek Holt, economist for the Royal Bank of Canada, told CP that the reduction in federal revenue is only just beginning due to the Conservatives’ tax cuts, particularly to the GST and on investment income. Meanwhile, Ottawa already is teetering on the edge of a deficit. “The amount of foregone revenues is just going to skyrocket,” Holt said. “Even within the first five years (of the new tax-free savings account) it’s almost a $1-billion cumulative price tag. Longer-term, that number only multiplies by itself as the portfolios compound. Over time, they’re going to whittle away at the taxes on investment income pretty aggressively over the next 10, 20 years.”
Two University of Ottawa professors are onto Harper’s game. Constitutional historian Michael Behiels says Harper’s revolution is deconstructing the Canadian state and fiscal federalism and destroying Ottawa’s control over the Canadian economy. In a forthcoming article for the Queen’s Law Journal, constitutional law professor Errol Mendes writes that the Conservatives are in the process of “building firewalls” not just around Alberta but around all the provinces by hobbling the federal spending power.
“Every provincial government has different and often divergent priorities so Canada is moving towards a proverbial patchwork quilt,” Behiels says. “If there is a recession… then the provinces and Canadians will have to sink or swim on their own.”
He points to several Conservative moves: the economically damaging but politically rewarding cuts to the GST costing $10 to $12 billion a year, the ongoing hefty increases to equalization payments, even to provinces like Newfoundland who don’t qualify for them, and substantial increases in all fiscal transfers to the provinces via tax points and other measures. Both Behiels and Mendes say that Canada, already one of the most decentralized federations in the world, will become almost unrecognizable if Harper triumphs — “a nation of shopping centres,” a “boneless wonder,” a “postal service for the transfer of federal funds.”
Mendes cites Harper’s numerous denunciations of the federal spending power as “abusive,” “domineering and paternalistic” and “outrageous” to warn Canadians that the Conservatives intend to cripple, if not completely abolish, “one of the most vital instruments to create a unique society in North America that emphasizes community, caring and sharing before survival of the fittest or at least survival of the fittest province.”