Thursday, February 17, 2011

On Tax Cuts and Borrowing

I have appreciated all the feedback from Liberals (and others) on my comments about making taxes part of our debate about how we deal with the deficit.

The CBC story today is a fair reflection of my views. I just wanted to use this space, for those who care, to answer the question about why I am raising this issue.

The Alward Conservatives have made an obsession with the fiscal deficit their calling card, pursuing a cutting agenda at the expense of having any positive plans for learning, health care reform, population growth or poverty reduction -- which are all key pillars of economic growth as well.

Yet they have defined the problem largely as one of runaway government spending, and at times, the mainstream media has aided them in this. Papers have often noted large increases in, say, hirings of teachers and nurses, or that education spending grew while the number of students shrunk, as if this caused the deficit.

Baselines matter here. First of all, New Nrunswick was last in Canada in many areas like education spending and poverty programs -- and the fact that teachers and nurses and social assistance rates grew faster than inflation reflects a consensus that we had to do MORE in those areas. And, I might remind people, the spending got results in the form of higher literacy rates, lower wait times for surgery and more people leaving welfare for work.

The very first thing the AlwardCons cut was education -- which as an economic choice, should be a last resort. And they are making choices every day, as MLA Roger Melanson pointed out, that dig us deeper. They are giving more universal perks away to even the wealthy -- free ambulances, frozen power rates, lower property taxes -- that were already subsidized for the poor and middle class.

I do not believe that the record increases in education, or ending the shame of low SA rates, or eliminating the backlog in nursing home wait lists, was what caused the deficit to grow too large. These things will reduce costs later, and I can live with borrowing in tbe short-term for them.

Doing those necessary things while borrowing another $200million for tax cuts which went mostly to those making more than $100K a year.....that is where the deficit grew.

And the AlwardCons' decision to pile on gimmick spending by giving free stuff to all instead of means-testing it is making it worse. There is no definition of the "Higgs Doctrine" that can justify saying a property tax freeze for even the wealthiest, or freezing the power bills of families as fortunate as mine, is a "need", but education is a "want". It may be a political calculation based on the fact that kids don't vote....but it makes their Finance Minister (who actually seems the sort of chap who knows better) look foolish.

But if we Liberals want to fight to protect our social legacy -- one part of our governing years we should be damn proud of -- then we have to choose, too. I don't want my party to fall into the easy opposition trap of simply exulting that Premier Alward has to make tough choices and then gleefully pouncing. People won't reward us for that, and we won't win that way.

What we need is principled stands, liberal values and a consistent message. We didn't lose because we tried to change things. We lost because we became random and inconsistent in the changes we made. In Year One, we modestly raised taxes on high earners but funded education and health programs that had been neglected. Then we reversed course, cutting taxes and slashing some of the very things we had rightfully fixed. The polls showed we beat the Tories handily when we acted like Liberals; yet even before NB Power, the tax cut budget caused us to lose the lead for the first time.

We can't sit back and hope Premier Alward makes a mistake. We have to have something to say about the social agenda he wants people to ignore. To be credible, we need to be consistent in our principles and have a party brand that people can trust.

It starts with establishing the deficit-era value that we don't borrow money to cut taxes. Families borrow for education, for health emergencies, and for sound investments. These things will benefit the next generation But borrowing to cut our own taxes is the ultimate moral failing. It is like a dine and dash where we leave our kids with the bill. And step one in building a party progressives can believe in is applying that principle with integrity and consistency.


  1. Re: means-testing. Is that sustainable politically? Ed Broadbent used to say if a health or education service wasn't universal, the middle and upper classes would refuse to fund it adequately.

  2. Fair point, Wendell. And I believe that the big and education should stay universal. My point goes to wasteful expansion of benefits. You can target low and middle income families struggling with power bills, or seniors whose property taxes spike, without freezing them for even millionaires. Spending 10 million to extend free ambulances to the wealthy when you have to cut schools by 10 million is just silly.

    Broadbent made a fair point, though he was speaking about core programs But the AlwardCons are paying for making even fringe programs universal, and paying for it by not supporting health and education. I think Ed would draw the line there.

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  4. Another thought provoking article Lamrock however I am intrigued by the phrase, "When we acted like liberals." This phrase presupposes that liberal values are clear, widely understood and well communicated. I am not so sure this is the case.
    My recollection of history is that the Liberal party had a set of well defined, clearly communicated core values which drove social and economic policy in a direction consistent with those values.
    If we step back and look at recent history, Is this the case? I maintain that somewhere along the line these values became obscured.
    Recall a year one surprise tax increase (retroactive) that to my knowledge seemed like a stand alone policy ie it was never articulated as to how this measure was tied in to a larger vision. Follow this by tax decreases in subsequent years, which I don't necessarily oppose however as you will recall at a time when we could ill afford it.
    Factor in all the noise of the last year of the mandate and I ask , "Were the actions and policy directions integrated with a clearly understood, well communicated set of core values?