Now here’s the thing. Direct federal program spending is already low by the standards most Canadians have known in their lives. Lakehead University economist Livio di Matteo has written that, until the 2009 budget with its temporary “stimulus” spending, federal spending as a share of GDP was lower than at any point since the early 1960s. It has been declining since Brian Mulroney left office in 1993.
Harper’s plan is to continue shrinking the federal government. It’s not a hidden agenda. He’s announced every part of it. Health care transfers will actually help. They’re just blank cheques to the provinces, good mostly for getting money out of Ottawa. The Liberals in government would make a lot of noise about enforcing the Canada Health Act, but mostly they’d just keep writing the cheques. Harper will write bigger cheques, worry even less about the Canada Health Act, and leave himself less money every year to run programs out of Ottawa.
On the other end of the ledger, he’ll keep squeezing his revenues. That process began with the GST cuts after the 2006 election. It will continue with two policies Harper announced in this campaign’s first week. Income splitting will allow a higher-earning taxpayer to transfer part of his salary to a spouse for tax purposes—and cost $2.5 billion a year in foregone revenue. Doubling contribution room to tax-free savings accounts (TFSA) will cost even more. Economist Kevin Milligan has estimated a “revenue cost” of $6.6 billion a year once the TSFA increase is fully phased in.
Add the cost of those growing health transfers and the foregone revenue from Harper’s new tax promises, and you get more than $10 billion a year in reduced fiscal capacity for the federal government. And if Ottawa is locked into a few multi-year spending increases—on military equipment and prisons—there’s progressively less room for everything else. Economist Frances Woolley has said that to reach Harper’s projected savings without cutting defence, public safety or the Canada Revenue Agency, he’d need to cut everything else by one-third.
“Everything else” here includes departments like Environment, Fisheries and Oceans, Industry, Transports and Veterans Affairs.
The Liberals used to talk about the choices implied here, way back at the beginning of the campaign. They had some snappy lines about a government that prefers “jets, jails and corporate tax cuts” to programs for Canadian families. But in the home stretch, they have resorted to scare tactics, and Harper is winning the campaign’s big argument without real opposition.
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