Although the budget may not look very conservative, its long run impact is very consistent with the goal of a smaller, leaner federal government. In that way, the budget is very consistent with Harper’s incremental conservatism.
After several years of surplus budgets, Canada is lurching sharply into the red again. This was something unimaginable two years ago, particularly under a Conservative government, and particularly one led by Stephen Harper, reknowned for his fiscal conservatism. Indeed, many people have argued that yesterday’s budget looks more like a Liberal or NDP budget. Obviously, in a minority goverment situation, the government has to make some overtures to the opposition. But the budget has left a lot of fiscal conservatives wondering what happened to their party and their government.
As I see it, though, there is a decidedly conservative element to the budget. It’s the tax cuts. As a tool of fiscal stimulus, the tax cuts don’t make a whole lot of sense. For most middle-income earners, we’re talking a few hundred dollars a year, not enough to make much of a difference in peope’s spending priorities. An extra $30 a month isn’t going to send people down to the car lot to buy that Canadian-made car that’s going to save jobs in Windsor. It’s not going to reinvigorate the real estate market, either.
Where it makes a difference is a few years down the road, when the economy has (we hope) recovered and we’re back to trying to balance the budget and paying down the debt. Unlike some of the stimulus measures in the budget, the tax cuts are permanent, in the sense that a future Parliament would have to reverse them deliberately. That’s politically difficult. We haven’t had a federal tax increase in almost two decades. So, we’re likely going to be balancing the budget through spending and program cuts. Because of these tax cuts, we’re going to have to cut spening and programs a lot more to get there, resulting in smaller government. Remember also that government revenues took an even larger hit when the GST was cut to 6% and then 5% in the Harper government’s first term. The long run result, then, will likely be a smaller and leaner federal government, something that is very consistent with conservative ideology.
As a Prime Minister, Harper is an incrementalist conservative, working slowly to move the country’s policies and culture to the right through slow steps. This budget is consistent with that approach: in the short term, it looks like a step backwards in that journey, but in the long run, it seems to me that Mr. Harper has nudged us a little further down the path.