Article by Conrad Black, National Post
The recent Finance Canada report projecting Canadian federal budgetary deficits into the 2050s must stand as one of the most inane Canadian public documents of recent memory. The deficit could be eliminated any year on a few months’ notice, so the document is just an alarmist warning from somewhere in the bowels of the finance ministry of what will happen if nothing is done to change course and economic circumstances don’t vary. Never in the 150 year history of Canada as an autonomous country have 30 years passed without any flexibility of circumstances. This is in the category of policy options where past finance ministers were offered the following sort of range of choice by their deputy ministers: 1. The impending bankruptcy of the country and the beginning of discussions on the consequences of default on public debt and auctions of government assets; 2. The cessation of all non-contractual expenses, disbandment of the armed forces and all Crown corporations while taxes are raised in all categories, and special arrangements are made to accommodate the immense surplus that would accrue amidst the grinding stagnation of the economy; and 3. The alternative preferred by the author of the memo.
The last federal election was in part a head-butting contest between two sacred cows — the bipartisan commitment (in which the NDP also joined) of no federal deficit; and the Harper commitment not to raise HST, which it had reduced. These are both commendable impulses but they assumed an ironclad quality that became an inconvenience to fiscal planning. Canada was scandalously plagued by deficits through most of the Trudeau and Mulroney years, and at one point in the mid-Eighties the Canadian dollar sank to 65 U.S. cents. Brian Mulroney provided the answer to the problem with the Goods and Services Tax (GST). It avoided the irritating misnomer of VAT, the Europeans’ preferred Value Added Tax, which is routinely assessed on services where not even a delusionist could imagine there is any value added, such as a legal bill. Legal bills are incurred and must be paid, and are taxed in the hands of the recipients as income, but what excuse is there to tax also the person who pays the bill, on the spurious inference that he has a hidden gain in additional value due to having paid his lawyer?
So far, as with many Euro-absurdities, such nonsense has been repelled at the water’s edge with the continental spirit of President Roosevelt’s assurance at Kingston in 1938 that he would not “stand idly by” if Canada were attacked from another continent. (The phrase caught on, as even Mackenzie King shortly announced that Canada would not “stand idly by” If Hitler attacked Czechoslovakia. Dozens of countries would decline to “stand idly by” as years passed, especially after Mao Tse-tung appended the elaboration that China would “not stand idly by with folded arms” as various bad things occurred. In most cases, of course, there was a lot of idle standing, with a wide range of accompanying manual activity.)
The Finance department’s internal document is an exhortation to the next two generations of federal Canadian leaders not to be inactive while deficits endlessly accumulate. It raises a host of related issues about spending priorities, cost and revenue sharing between the federal and provincial governments, and what direction we want Canada to take. Canadians are justly proud of having a relatively peaceable and livable society. But most foreigners would conclude that given that we are not severely harassed by our one adjacent neighbor and have a vast country with immense resources in almost all forms of base and precious metals, forest products, energy and agriculture except tropical fruit, a relatively comfortable and serene country is not such an astounding triumph as it would be in less well-favoured places.
I suggest (once again) a flexible HST — raise it on elective spending (luxury goods, complex financial transactions and the mere velocity of money in financial markets) to eliminate the deficit, and reduce taxes on small personal and corporate incomes to ease the conditions of the most vulnerable and provide affordable stimulus. We are not going to rake in any bonanza piling on energy costs, as the climate change-alarm well has run dry, so rely on marijuana sales as the next formerly immoral source of necessary funds, following in the well-trodden tracks of casinos and alcoholic beverages. Reduce corporate tax to compete with Trump’s America in attracting investment and secondary sector jobs, and shift stimulus from the sterility of traditional welfare, other than where there is no practical alternative because of the acute needs of the seriously disadvantaged, to meet our two per cent commitment of GDP for national defence. Let us finally, for the first time in peace, give Canada a military commensurate with our status as a G7 country that will back up a sensible voice in world affairs. All the personnel expenses in defence outlays go to adult education and training-up citizens, and all the hard spending is in high-tech and key industrial areas such as aerospace and ship-building. With imaginative tax policies, we could move the annual growth rate to three to four per cent (as the United States is likely to do), from an elective HST, and the minister can use this absurd departmental report as fuel for his stove at his ski lodge.