John Geddes

John Geddes

John Geddes writes on politics and policy, with occasional reporting and comment on arts and culture.

Ian Brodie offers a candid case study in politics and policy

by John Geddes on Friday, March 27, 2009 1:10pm - 116 Comments

Ian Brodie offers a candid case study in politics and policyIan Brodie, Prime Minister Stephen Harper’s former chief of staff, delivered an astonishingly frank explanation today for why the Conservative government cut the Goods and Services Tax, and why he’s glad they did, even though just about every economist and tax expert said it was a terrible bit of public policy.

“Despite economic evidence to the contrary, in my view the GST cut worked,” Brodie said in Montreal at the annual conference of the McGill Institute for the Study of Canada. “It worked in the sense that by the end of the ’05-’06 campaign, voters identified the Conservative party as the party of lower taxes. It worked in the sense that it helped us to win.”

It’s not really surprising, of course, that campaign calculations lay behind the GST cuts, which have cost the federal government about $12 billion a year at the worst possible time. That’s been obvious all along.

What’s noteworthy is that Brodie, who is now a visiting fellow at the McGill institute, doesn’t shrink from publicly asserting that such a major public policy decision can still be deemed a success—even in the face of “evidence to the contrary”—if that move paid the desired political dividends.

It’s important to note that Brodie expanded his justification beyond simply saying that the policy was a success because it helped get Tories elected. He went on to argue that making good on their promise to cut the GST was, somehow, the move that allowed the Harper government to proceed later with the sorts of corporate and personal income tax cuts that most economists and tax-policy specialists believe make much more sense.

In other words, he sees a trade-off. Cutting the GST was in itself dubious policy, since taxing consumption is better for the economy than the taxing income that turns into investment that generates prosperity. But that bad tax cut was, in fact, good because it allowed a government willing to embark on more sensible tax cuts to stay in power.

But that only makes sense if you ignore the recent history of tax reductions. The argument that only a government that had cut the hated GST could politically afford to do the other sorts of tax reform doesn’t hold up. After all, the Liberal government, in then finance-minister Paul Martin’s fall 2000 mini-budget and the 2001 budget the followed, brought in sweeping, across-the-board tax cuts, all without worrying about the GST.

Beyond the narrow debate about the history of the GST cuts, there was something unsettling about Brodie’s candid presentation.

He made it in a panel discussion meant to try to address the question “Does Evidence Matter in Policy-Making?” To some of the other panelists, and I would guess to most of those in the roomful of academics and bureaucrats listening, the assumed premise was that evidence—facts, objective analysis, expertise—should matter a great deal more in policy than it does now.

But Brodie painted a picture of politics where that would appear to be a hopeless aspiration.

He ruefully recounted how the Conservatives tried to run in the 2004 election on a comprehensive tax-reduction platform based on solid policy thinking. But that meant they had to explain, he joked, “multi-year this, multi-year that.” Canadian voters tuned out the details and defeated Harper’s Tories.

Brodie said the party’s campaign researchers then explored public opinion. They discovered that Canadians tend to forget or discount past income tax cuts. Ontario voters don’t remember that Mike Harris reduced them, Alberta voters don’t think Ralph Klein cut theirs. “We found no one,” he said, “who believed they had ever had a tax cut from Jean Chretien or Paul Martin.”

Lesson learned. Deliver a tax cut so simple nobody could misunderstand it or forget it. And so the Tories promised, and delivered, their GST cuts, a point off in the spring of 2006, and another in the fall of 2007. That second reduction came just in time for the beginning of the subprime meltdown, which would soon usher in an era when the Canadian government, like governments everywhere, would need every dime they could get.

Brodie talked mostly about the GST, but he suggested the same sort of clash between policy expertise and political necessity is common. He mentioned the way “sociologists, criminologists, and defence lawyers” attack just about every aspect of the Harper government’s tough-on-crime policy package.

Rather than actually rebut any of the arguments those opponents raise, however, Brodie noted that such experts are “all held in lower repute than Conservative politicians.”

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  • hosertohoosier

    I would like to point out that cutting the GST is sub-optimal policy, not bad policy. Incidentally, the Liberal alternative – cutting the basic rate – is bad policy for much the same reason that cutting the GST is. Corporate tax cuts (which the Liberals and Conservatives support) and cuts to the top marginal rate (which neither party supports) are the best bang for our buck.

    At least we live in a country where deficits are considered bad (or well, noteworthy), so there is an actual limit to how much politicians can waste our money (stimulus packages aside).

    • SAB

      Corporate tax cuts – I’m with you.

      Top marginal rate – I don’t see this as the best policy to stimulate / grow the economy. Top payers are more likely to save, invest globally, travel etc. etc. etc. vs. lower income earners who will spend the money in the Canadian economy.

    • http://coyne kc

      Sub-optimal? What’s that, a euphemism for bad policy?
      Cuts to the top marginal rate – that worked well for W, didn’t it? I’m not necessarilly opposed to those cuts if there’re incentives to reinvest some of that money inside this country – perhaps something like the endowment schemes in the US [ although i dont see anything wrong with the principle - the more you make, the more you're expected to contribute to the general good - endowments seem like a realistic appeal to the self-interest of the wealthy. ]

      • glak from planet zork

        Has anyone toyed with an incremental sales taxes?

    • Wascally Wabbit

      Joining the discussion late – so hope I don’t repeat too many arguments…
      Walmart – jwl or someone back at the beginning – made some point about – if they didn’t keep their prices low the competion will gobble them up. Duh! What competition? Walmart’s business model is to insert themselves into a marketplace already well serviced by local retailers – bleed them for a year – eliminate the competition – and then – poof – no competition! As for supplies – I’m not sure what the percentage of Chinese products fills Walmart’s shelves – but the jobs that shifted overseas to build those widgets or cheap shirts – did so at the price of millions of North American jobs – and a balance of trade in the trillions – in favour of the Chinese…so don’t lecture us about Walmart – it’s about the equivalent of Gary Goodyear talkng about Mendelian Theory and Darwinianism…and science generally!

      • sf

        “That second reduction came just in time for the beginning of the subprime meltdown, which would soon usher in an era when the Canadian government, like governments everywhere, would need every dime they could get.”

        A non-partisan would make the obvious remark that this is the perfect stimulus, rather than just another jab at the Conservatives.

        • Donatello

          The amount of stimulus the 2% GST cut will produce will in no way cover the loss in revenue it was creating. Most economists are saying the GST cuts were unwise at this time. That’s not partisan that’s just economics.

          • sf

            “The amount of stimulus the 2% GST cut will produce will in no way cover the loss in revenue it was creating”

            Your statement is meaningless. The amount of stimulus is exactly equal to the loss of revenue! Either the money was stimulus or revenue! And there was no need to cover the revenue, because the revenue was surplus at the time. If the government wishes to raise taxes again, they are free to do so.

            “Most economists are saying the GST cuts were unwise at this time”

            Completely false. Most honest economists would admit that stimulus should arrive at the exact moment when a economy goes south, and that most stimulus programs come too late. So your statement is false.

          • http://runesmith.blogspot.com greenjenny

            “The amount of stimulus is exactly equal to the loss of revenue! Either the money was stimulus or revenue!”

            Actually, you are wrong. Money only stimulates the economy if a) it is spent on something and b) the money spent ends up in the hands of Canadians. In the case of tax cuts, a significant percentage of the money is saved or used to pay down debt, and a good chunk of what is spent is bled away on imported products.

            Here’s a relatively balanced article on the subject:
            http://money.cnn.com/2009/01/16/news/economy/stimulus_howto.fortune/

          • sf

            Actually, you are wrong,
            -If we pay people to dig holes and fill them afterwards, that is not a stimulus, and secondly,
            -even if people save their tax cut money, the money goes into the bank (or an investment) at which point it is lent to someone else. Nobody sticks their money under the mattress anymore.

            So, I prefer to avoid the Dr. Suess approach to economics and focus on reality.

  • Brent Fullard

    Then there is this Brodie gem to justify Harper breaking of his income trust promise from the 2006 election

    From: Brodie, Ian [mailto:ibrodie@pmo-cpm.gc.ca]
    Sent: Monday, November 13, 2006 1:56 PM;
    Subject: RE: column

    This would be a more compelling analysis if the government weren’t already in the midst
    of a steady program of cutting tax rates, including corporate taxes, across the board. The
    alternative to breaking the election promise and taxing trusts was to abandon all other
    tax cut plans as the corporate tax base quickly disappeared. Instead, Flaherty acted
    quickly, in the face of rapidly changing conditions, to break the trusts promise and save
    the rest of the government’s promises. Not a pretty choice, to be sure, but hardly an epic
    betrayal either.

    Ian Brodie
    Chief of Staff / Chef de cabinet
    Office of the Prime Minister / Cabinet du Premier ministre
    Ottawa, Canada, K1A 0A2
    Office / bureau : 613.992.4211
    Email / courriel : ibrodie@pmo-cpm.gc.ca

    • Caper

      I am totaly naive about the politics of our nation. I thought that our elected officials were there to do what was “right” for Canada. Since when do we concider a move to win an election “a successful political decision” if it is well known to be a “bad economic decision”.
      The Spin Doctors and manipulators must go!

  • Meany

    To summarize: Stupid policies often work, because most Canadians are stupid.

    Sadly, I completely agree.
    Make a stupid policy that people can understand in 1 second and they will like it (CUT THE GST!)
    Make a great policy that people will not understand until the read for 10 minutes (no tv, they actually have to READ) like harmonize PST with GST, and they will hate it.

    Ah well, that’s democracy.

  • madeyoulook

    There was another more powerful political benefit of the GST cuts. Them provinces wot wuz bellyaching about a fiscal imbalance? Can anyone tell us how many of ‘em upped their own sales taxes by one or two percent as the GST got cut? Anyone?

    To this taxpayer it was an elegant demonstration of the spinelessness of provinces willing to take actual fund raising responsibility for all their sugar daddy promises to their voters.

  • wml

    It makes no difference to this stupid Canadian if the GST is 5 or 7 percent. What I am looking for is stability in the taxing system,

    What I am concerned with is the dedication by those currently in power to change the political direction of this Country from middle of the road, to extreme right, Steamroller over anyone in the way, spend whatever it takes to accomplish their goals – just so long as the political ideology is achieved. That’s what should worry all of we Canadians. I love my country the way it was.

  • Santa

    Was Ian Brodie, Prime Minister Stephen Harper’s former chief of staff, at the Bilderburg meeting in the USA last year, as he appears on the list of attendees?

  • Lloyd MacIlquham

    When you combine this with what Tom Flanagan, a former Harper adviser, said about the Harper attack ads on Ignatieff rebuilding the coalition after an election,

    “It doesn't have to be true. It just has to be plausible …”

    what do you get . . . The current government.

    Is this really what Canada is all about.

    Lets just give Harper the boot.

    Lloyd MacIlquham cicblog.com/comments.html

  • http://coyne kc

    As an ordinary joe six-pack Canadian – i’ve been a blue collar guy my whole life, with no poli-sci training – i can tell you i’m sickened by this confirmation of expediency trumping good policy decisions. I’m aware this goes on of course – but to hear an ex- official brag openly about implementing bad policy, essentially identfying the public interest as being indivisable with his parties fortunes, leaves cold. I seriouly believe this is nothing more than contempt for the electorate, and democracy itself. Utterly pathetic!!!
    And they actually have the gall to ask why people have stopped voting – honestly, why the hell should we???

  • Critical Reasoning

    kc, you’ve nailed it. It seems like all four parties have allowed political expediency to trump policymaking in the past decade or so, and it really is sickening. The end does not always justify the means.

  • leigh

    If you stop voting do you really think things will get better? And if so, how?

  • madeyoulook

    Alrighty then, let’s replay the tape:

    SCRAP DA TAX helps get p’tit gars elected and da tax not get scrapped. And they get re-elected anyways. Which just proves that the proof is a good proof because it’s proven, I guess.

    IN OUR NEXT MANDATE WE WILL PROGRESSIVELY LOWER THE GST BY TWO POINTS helps get the Tories get elected and… in their next mandate they progressively lowered the GST by two points. And, despite the various epithets hurled at them here for actually living up to their election promise, they get re-elected anyways.

    But, hey, go ahead an get all galled up about political expediency if it floats your boat…

  • John D

    You are clearly lying. Every ‘average’ Canadian loves Stephen Harper and thinks he’s just like them. They love everything the Tories do and realize that anyone who disagrees is probably a Taliban supporter. The doubt you are expressing in the PM’s policy decisions means you must be an ivory tower NDP staffer from Toronto ;)

  • http://coyne kc

    yeah, even more, the means affect the ends. Look no further than this article for almost universal cynicism and contempt for the political class!

  • http://coyne kc

    No, i don’t really advocate that. But is it any wonder our best and brightest, not to mention idealistic, young people are flocking to ngos! Leaving the the rest of us with either the dross or the unprincipled – a la Brodie!

  • Dot

    myl is the type of neighbour who played David Bowie’s Suffragette city full blast when you were camping, and when you complained that it was too loud, and past normal hours, suggested it was his right, and told you to get ear plugs if you didn’t like it.

  • http://coyne kc

    myl
    So i guess you don’t give a damn about good vs bad policy either. So they did what they said they would do – yipee ky ya! The policy was stupid and yet myl admires the consistency of their expedient policy. And all because you never saw a tax you couldn’t wind yrself up into a force 9 snit over!

  • madeyoulook

    …?

  • Critical Reasoning

    He/She (most likely he) is criticizing you for being the kind of freedom-lover who prioritizes his own freedoms at the expense of others’ (e.g. the freedom to enjoy loud rock music at the expense of others’ freedom to sleep in peace.) No doubt Dot had a negative experience at a campground somewhere.

  • madeyoulook

    And this has to do with commentary on federal tax policy… how?

  • Critical Reasoning

    I have no idea.

  • Dot

    I was pre-empting. myl, your arguments always eventually boil down to the same issue – minimize taxes, let the individual decide. Was just shortening the thread, well, at least trying to.

  • http://eugeneforseyliberal.blogspot.com eugene forsey liberal

    Reminds me of a bit of a speech Wherry reported recently that Brodie would appreciate:
    “Michael Ignatieff talks in Kamloops: “We took the carbon tax to the public and the public didn’t think it was such a good idea,” he said. ”I’m trying to get myself elected here and if the public, after mature consideration think that’s the dumbest thing they’ve ever heard then I’ve got to listen.””

  • madeyoulook

    Actually, I have acknowledged repeatedly that the GST cut was unfortunate “retail politics” just like the stupid assortment of minicredits on bus passes and kids’ tiddlywinks registrations.

    But they promised it, they got elected, and they delivered it. So you’re quite right, the force 9 snit stays in the shed next to the category 4 brouhaha for another day. You want to use up your force 9 snit on this? Be my guest — re-read my last line, pasted here for your pleasure:

    But, hey, go ahead an get all galled up about political expediency if it floats your boat…

    Cheers.

  • http://coyne kc

    Hmmm, yes i must confess i have heard you criticize those policies – for what it’s worth to you i apologize. As you say ethics, or rather the lack of them, galls me. I guess i’m a moralist at heart – i don’t expect perfection, but pure unadulterated cynicism corrodes everything it touches.

From Macleans