Gotta love the Harris boys club running Ottawa! Tax cuts by Conservatives leave government hamstrung: Critics; Shrinking surplus limits ability to respond to crises, former finance ministers say The Toronto Star Thursday, March 13, 2008 Page: A23 Section: News Byline: Richard brennan and Bruce Campion-Smith Source: Toronto Star The Conservatives today will attempt to kill a Liberal-sponsored bill that would make education savings tax deductible, a plan they say is unaffordable and would plunge Canada into deficit. But federal Finance Minister Jim Flaherty's worries about the program's costs highlight a fundamental change in the country's finances - coffers emptied by Tory tax cuts that leave the current government with little cash to spend, and do the same to future governments. If a future government wanted to boost funding to cities or dramatically hike spending on the environment, it would be hard-pressed to find the money without cutting other programs or raising taxes. The shrinking surplus is in line with Prime Minister Stephen Harper's long- held belief that the federal government should "stick to its own knitting," said Nelson Wiseman, a political scientist at the University of Toronto. "It's not interested in launching programs in areas of provincial jurisdiction. It likes tax cuts, it wants to reduce the size of government," Wiseman said of Harper's Conservative government. Liberal MP Ralph Goodale, a former finance minister, called it "ideology run amok." "They have obviously taken the view ... that you should have severe handcuffs on the federal fiscal framework in order to curtail and ultimately diminish the value and the effectiveness of the government," Goodale (Wascana) said in an interview. When the Tories took over in February 2006 they inherited a surplus that topped $13 billion. After trimming the goods and services tax by two percentage points, which meant lost revenue of more than $11 billion a year, and cuts to corporate and individual taxes, the Conservatives are left with a surplus of just $2.3 billion in the coming year. Flaherty cites it as an example of prudent financial planning. But critics say the razor-thin margin leaves little ability to implement new programs or cope with emergencies or a slowing economy. Thanks to the Liberal policy of keeping a $3 billion contingency, the country weathered two currency crises, the 1998 ice storm, the 2003 SARS crisis and the terror attacks of Sept. 11, 2001, Goodale said. But now that the Tories are eating into that contingency fund, Canada has "no wiggle room left" and is perilously close to going into the red should any little "hiccup" in the economy come along, he said. "Even a rounding error could push them into deficit again. If there is a 1- per-cent variation on either revenue coming in or on expenditures going out they will be back into deficit once again. It is grossly irresponsible to run that close to the line." Former Ontario Liberal finance minister Greg Sorbara said if Canadians want to see where the Conservative government is taking them, they only have to look into Ontario's recent history. "This is exactly the agenda the Conservatives followed in Ontario under Mike Harris and Jim Flaherty and Ernie Eves. Their intention, as we heard later, was to cut the revenue base to the bone so as to prohibit future governments from (undertaking new programs)," Sorbara said in an interview. Sorbara said the SARS outbreak and the blackout in August 2003 put the province in trouble. "With that we went from a province that had been moving more toward balancing to a province that was almost $6 billion in debt." It's because of Canada's slim surplus that Flaherty says the government will torpedo the federal Liberal proposal that would let parents make a $5,000 tax deductible contribution to a child's registered education savings plan. While Liberals say the proposal - now before the Senate - would be a popular incentive to encourage education savings, Flaherty says it's a costly scheme that means $900 million in lost tax revenue. That's why today's ways and means motion on the budget includes a clause to nullify it, if it becomes law. Flaherty defended his budget plan, saying the days of "March madness" - with the Liberals awash in excess funds - are over. "Every March all of a sudden there'd be $10 billion or $15 billion. .. . They'd just go spend the money on pet projects," he said. "We're not doing that anymore."
