April 28, 2015

Who told the truth about the federal budget?

Brett FawcettRebel Blogger
 

Dorothy Sayers once praised medieval education for teaching students “how to detect fallacies in argument,” now largely a lost art, and if ever there were a topic around which fallacies are most likely to cluster, it would be economics.

A perfect case in point are the reactions to the 2015-2016 budget tabled by Ottawa, which successfully balances the budget for the first time since the Conservatives took power. 

This, naturally, failed to impress the anti-Harper contingency, including the NDP, our official national economic fallacists. It isn’t the fact of a balanced budget that bothers them, they claim; it’s how Minister of Finance Joe Oliver went about it that rankles them.

Certain of their criticisms have a curious ring to them. The government has been criticized for selling its stock in GM, which it acquired in the bailout during the automotive industry crisis.  Hey, remember when people were angry at governments for bailing out the automotive industries? 

In any event, the budget’s critics take issue with drawing money from the contingency fund, with cutting corporate taxes, with income-splitting and expanded tax-free savings accounts. Tom Mulcair’s accusation could have been predicted by even the shoddiest fraud-psychic: This budget is awful because it primarily benefits the wealthiest Canadians.

There’s something important to keep in mind whenever you hear a charge like that: Our concern about the economy should not be whether the rich have the best advantage. By definition, the rich are going to have the most advantages in a non-socialized economy. The concern should be: Are government policies such that more Canadians have an opportunity to become rich (or, at least, richer?) 

This is not something that is true of the NDP’s fiscal policies, which proudly raise taxes for corporations but cut taxes for small business. This may sound empowering, but the exact opposite is true. Economists like Duanjie Chen and Jack Mintz have shown that “privileging” small businesses this way actually encourages businesses to stay small, their owners naturally wishing to avoid the punishing taxation which would come with growth. 

This, ironically, seems to give an advantage to the diabolical corporations, usually the villains of the piece in the NDP narrative, who would then have less serious competition. The Tory budget cuts corporate and small business taxes (from 11% to 9% in the case of the latter), surely a more reassuring harbinger of economic health.

Joe Oliver has caught flack for his comment that “Stephen Harper’s granddaughter” will be the one left to deal with any economic repercussions of the expanded TSFAs, which we are told will deprive the government of apparently much-needed tax revenue. 

“I have a granddaughter, and I don't want her to be responsible for picking up the mess that the Conservatives are intentionally leaving,” Mulcair remarked.  Yet notice that Mulcair did not criticize the premise of Oliver’s remarks: Namely, that the tax leakage from this move would have no noticeable effects until, give or take, 2080. That’s a long time for Canadians, who now have more savings stored away, to invest in the economy and, it must be assumed, to bequeath to their grandchildren. 

(On the other hand, Mulcair’s granddaughter may find it harder to get a starting job in high school if his proposed $15 minimum wage becomes a reality.)

Oliver’s first budget may not be flawless; certainly the late Jim Flaherty would have disagreed with some of its strategies, though we should gently remind ourselves that he never quite balanced the budget. But let’s at least appraise it from a place of intellectual respectability, and do the late Ms. Sayers proud.

 

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Comments
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commented 2015-04-29 19:07:33 -0400
good article… pay the $4 million robespierre and then we can talk ..
commented 2015-04-29 02:11:33 -0400
A co-worker was arguing that the TFSA only benefits “rich” people. I said so what? Right now I can’t even put $5,000 a year into one due to my finances. If things improve though I do have that option, and now with that limit doubling I have the OPPORTUNITY for more. Most people look at this and say “What’s it going to do for me RIGHT NOW!” They don’t bother looking at things with a future eye.
commented 2015-04-28 22:55:18 -0400
I trust Harper and Oliver. I’m lovin the tfsa increase, ( I don’t make a ton and don’t really need to defer tax with a rrsp these days, so its perfect for me) the income splitting doesn’t apply to me anymore, but also a great idea. Lowering the tax rate for small business…excellent. Angry Tom is so angry, I really can’t watch or listen to him in Question Period, he is so hostile and really just speaks in sound bites. Gives me no sense he knows what he;s talking about. Trudeau, well , meh. Neither of them have any business sense I have noticed.

To qualify for the small business rate, companies must be Canadian controlled, earn less than $500,000 a year and have capital of less than $15-million. Roughly 700,000 companies claim this lower rate every year. With a cut from 15% to 11, then 9? means a small business owner might be more likely to hire another employee or possibly say yes to a deserved, asked for raise. Or make improvements.
I think its possible that this could enable a business to better position itself for expansion at the lower rate, making the leap a smoother one when they decide to make the transition. Some people will stay under the 500,000 limit, because they are comfortable there. Some will expand, if they figure they can, regardless. Seems win win all around to me.
commented 2015-04-28 13:24:01 -0400
You brought up some very good points, Brett. Thanks.