Prudent conservative governments rely on the power of competitive market forces

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The Article

With Tuesday’s budget, the Harper Conservatives have set quite a standard for fiscal extravagance by a supposedly conservative government.

As recently as 2006, the preceding Liberal government of former prime minister Paul Martin achieved a budget surplus of almost $14 billion. Who would have thought that within three years, a Conservative government would propose a budget deficit of almost $34 billion?

Granted, Conservative Finance Minister Jim Flaherty is not entirely to blame for this fiscal calamity. As he noted in the budget, the collapse in revenues and hike in expenditures caused by the recession would produce a $15.7-billion budget deficit next year, even if the Harper government were to retain all existing fiscal policies.

As it is, Flaherty has made matters much worse. By his own reckoning, the tax cuts and spending increases in his budget will produce an additional $18 billion in deficit spending next year and a cumulative $85 billion in total budget deficits over the next four years.

Like the Liberals, New Democrats and Bloc Quebecois, the Harper Conservatives now maintain that a vast increase in deficit spending is necessary to revive job-creating economic growth. There is no evidence for this pretence.

Indeed, there is better reason to believe that most of the additional spending proposed by Flaherty will only prolong the recession and retard future economic growth. Consider, for example, the $4 billion in “repayable loans” for Canada’s troubled auto sector. Anyone who thinks that money is likely to be repaid is dreaming in Technicolor.

While in opposition, Harper and Flaherty decried the billions upon billions of taxpayers’ dollars wasted on failed corporate handouts by the Liberals. Yet now that the Conservatives are in power, they are doing the same. Among the bizarre items in the budget is a proposal to lavish $1 billion on a so-called Southern Ontario development agency.

The international record on government handouts to failing corporations is clear: More often than not, the state-directed payments serve only to postpone bankruptcy and joblessness, while diverting scarce investment capital away from more efficient, job-creating production.

Of course, there are some special cases: No responsible government would allow a major financial institution to go bankrupt in a way that would undermine the financial stability of the entire economy.

That said, the general rule remains: Prudent governments leave investing in private companies up to private investors subject to competitive market forces.

Prime Minister Stephen Harper used to advocate both sound fiscal policies and a stricter separation of federal and provincial powers. Now, his government proposes to spend billions of taxpayers’ dollars on a host of provincial and local projects such as a Highway 39 truck bypass in Estevan, Saskatchewan, and the revitalization of the municipally owned Union Station in downtown Toronto.

On Jan. 22, the Bank of Canada projected that the Canadian economy will resume growth by the second half of this year, and continue to expand at a brisk annual rate of 3.8 per cent during 2010. Under these circumstances, there can be no economic rhyme or reason to the $85 billion in deficit spending planned by the Harper government.

What, then, is the real purpose of such fiscal improvidence? The answer is evident: By this means, the Harper Conservatives aim to bribe voters and win support for their minority government from the opposition Liberals.

And sure enough, Liberal leader Michael Ignatieff has indicated that his party will back the Conservatives on the budget—a deficit-spending plan so extravagant that it could have been designed by the Liberals.

Meanwhile, Harper’s conservative base has good reason to be increasingly fed up. So far, his government has done little to curb the judicial usurpation of legislative power; has opposed every initiative to safeguard the lives of babies in the womb; and now has introduced the most reckless budget since the Progressive Conservative government of former prime minister Brian Mulroney presided over a record deficit of $39 billion in 1992-3.

Mulroney’s liberal Conservatives subsequently went down to a crushing electoral defeat. Harper should beware: History can be repeated.

Rory Leishman
Latest posts by Rory Leishman (see all)

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