Ian 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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