Tuesday, January 27, 2009

A Big Box of BandAids

It's shaping up to be a Post-It Notes budget, a hobbled-together porridge of ordinary government spending, stimulus spending, non-stimulus handouts and income tax cuts.

Now, if it sounds a bit rich for a government that emptied the federal coffers in good times to introduce further tax cuts when it's just settling in to a return of Mulroney-era deficits - well, it is. It sounds like Harper has been on the phone to Congressional Republicans in Washington.

Naturally, a lot of the "new" spending is simply recycled old spending, the run of the mill sleight of hand we've come to expect from Harper. Income tax cuts are great - for those who manage to keep their jobs, and income - but inevitably lessen the support the feds can provide to those who don't.

And, for what little actual stimulus spending there is, it has one fatal flaw. It's penny ante, small stuff. Canadians will lose sight of it and, as they say, out of sight, out of mind.

Infrastructure spending is about more than employment and getting money moving again, much more than that. It has to be money spent on investments that will yield returns for decades to come. It has to go on investments that are big and plainly visible. There has to be both the payback factor - the return generated by real infrastructure projects - and there has to be the added, psychological factor, the confidence building that occurs when people see and understand that infrastructure investment in action.

When Jim down the block gets a thousand dollar grant to help renovate his house with energy-efficient windows that's not really infrastructure spending. Sure a small amount of money - his and the government's - gets injected in the economy and, sure, a couple of guys get a day or two's work out of it but that's pretty much where it ends. There's no great return on investment for the nation and even if the neighbours notice the new windows they won't for long.

But it's the middle class tax cuts, a sheer vote-buying ploy that undermines the stimulus budget, that Iggy must reject. As mentioned previously, those tax cuts are only relevant to those who have kept their jobs and incomes. But, worse, in trying times people horde money, they don't spend it. They won't stimulate spending among people who have doubts about the security of their job. In terms of helping Canada, these tax cuts are daft. In terms of helping Harper at the expense of Canada, they make perfect sense.

Let's hope Ignatieff has the courage to say no to a tax cut budget.


Fish said...

As much as I would like to see Harper brought down, my prediction is that he will support the budget.

Iggy has won a victory by getting Harper to back down, and the Tories will not be able to accuse him of making a power grab.

There is also the risk that the GG could call an election rather than appoint the coalition (not likely but still a risk).

I think he'll quit while he's ahead and concentrate on fundraising so that he can win an election.

I hope I'm wrong though.

The Mound of Sound said...

I sure hope you're wrong too Fish. As I wrote a day or two ago, a lot of the budget debate/vote will be about establishing optics for the next election, whenever that may come. I wish that wasn't so but it's plain from Harper's ploy for a middle class tax break that he won't have it any other way.