{"id":29265,"date":"2014-12-19T00:03:39","date_gmt":"2014-12-19T05:03:39","guid":{"rendered":"http:\/\/quotulatiousness.ca\/blog\/?p=29265"},"modified":"2014-12-18T07:36:21","modified_gmt":"2014-12-18T12:36:21","slug":"in-stephen-harpers-canada-the-political-beats-the-economical-every-time","status":"publish","type":"post","link":"https:\/\/quotulatiousness.ca\/blog\/2014\/12\/19\/in-stephen-harpers-canada-the-political-beats-the-economical-every-time\/","title":{"rendered":"In Stephen Harper’s Canada, politics beats economics every time"},"content":{"rendered":"

Stephen Harper gets a lot of criticism for being an ideological hard-liner, but he gets nearly as much flak from small-government conservatives for being no better — and in some cases, much worse — than Jean Chr\u00e9tien and Paul Martin. Earlier this month in Maclean’s<\/em>, Stephen Gordon<\/a> explained some of the reasons for Harper’s political and economic actions:<\/p>\n

Politics, not economics, has also determined [Harper’s] strategy for achieving this goal [a smaller government-spending-to-GDP ratio]. If you asked an economist for the best way of reducing revenues, she\u2019d probably prepare a list with the taxes that are the most harmful to the economy at the top, and the taxes that are the least harmful at the bottom. The GST would rank at or near the bottom of that list. (Here is a representative reaction<\/a> to the Conservatives\u2019 2005 campaign promise to reduce the GST; here is an explanation for why economists think the GST is a good idea<\/a>.) In economic terms, reducing the GST was probably the worst possible option available to the Conservatives.<\/p>\n

But as far as politics goes, it was an inspired choice. It helped win the election, and \u2014 perhaps even more importantly \u2014 reducing the GST has made it that much harder for any future government to reverse the trend to lower spending. If the Liberals and the NDP were to ask an economist to provide a list of ways of generating the most revenues at the least economic cost, increasing the GST would be at or near the top of the list. But those two GST points are not going to come back to fill federal coffers in the foreseeable future. Both the Liberals and the NDP have campaigned at some point on anti-GST platforms, and history has not been kind to provincial governments that have raised the HST without an electoral mandate to do so. (The NDP\u2019s proposal to increase corporate tax rates is the doppelg\u00e4nger of the Conservatives\u2019 GST cut. In economic terms, an increase in corporate taxes is probably the worst possible choice<\/a> for generating revenues, but it\u2019s a potential vote-winner. Maybe it will work for them as well as it did for the CPC.)<\/p>\n

[…]<\/p>\n

This brings us to the \u201cstarve the beast strategy\u201d described in detail here<\/a>: the reduction in revenues is now a justification for reducing expenditures. But, once again, the strategy is driven by politics, not economics. The elements are as follows (see also here<\/a> and, most recently, here<\/a>):<\/p>\n

    \n
  1. Let transfer payments to individuals grow at the rate of GDP.<\/li>\n
  2. Let transfer payments to provinces grow at the rate of GDP.<\/li>\n
  3. Hold nominal direct program spending constant.<\/li>\n<\/ol>\n

    These elements have been in place in every budget since 2010. The economics of this approach are very dodgy: the economically efficient way to approach the problem of reducing spending is to perform a cost-benefit analysis and eliminate the programs that don\u2019t pass the test. But the politics are something else. Cuts in transfer payments directly affect peoples\u2019 personal finances, and could be reversed at no political cost. The same is true for cuts in transfer payments to the provinces; much of the Jean Chr\u00e9tien-era cuts to the provinces were rescinded a few year later. The path of least political<\/em> resistance is through direct program spending: the cost of paying federal public servants\u2019 wages.<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"

    Stephen Harper gets a lot of criticism for being an ideological hard-liner, but he gets nearly as much flak from small-government conservatives for being no better — and in some cases, much worse — than Jean Chr\u00e9tien and Paul Martin. Earlier this month in Maclean’s, Stephen Gordon explained some of the reasons for Harper’s political […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[6,25],"tags":[431,258,118],"class_list":["post-29265","post","type-post","status-publish","format-standard","hentry","category-cancon","category-economics","tag-conservatism","tag-stephenharper","tag-taxes"],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p2hpV6-7C1","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts\/29265","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/comments?post=29265"}],"version-history":[{"count":4,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts\/29265\/revisions"}],"predecessor-version":[{"id":29269,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts\/29265\/revisions\/29269"}],"wp:attachment":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/media?parent=29265"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/categories?post=29265"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/tags?post=29265"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}