Stéphane Dion’s party platform is a house of cards that will never survive the stiff wind of reality.
Dion’s platform offers an accumulated four-year projection of $1.07 trillion in taxes and $1.05 trillion in spending, leaving a surplus of about $20 billion.
But the platform is like a house of cards, for it’s foundation is based on the rather shaky assumption that annual revenues will grow by an unlikely 4.5 per cent for each of the next four years.
That’s a higher rate than the department of finance projects, and, taking into account the US financial crisis, is almost certainly not to be realized.
Surprised? I’m not. The Liberals are quick to point out that they will pare back their plan to match the reality of the economy as time passes. That’s their way out. They get credit for their promises during the campaign knowing full well they will never have to live up to them—like so many other Liberal campaign promises.
If their projected growth rates are off by even one percentage point, there would be a shortfall of $60 billion, blowing away their platform’s surplus of a $20-billion and leaving a $40-billion deficit.
Would a Stéphane Dion government post $10-billion annual deficits to finance their platform under this scenario? Dion says no. He has committed repeatedly during the campaign to run balanced budgets.
Would a Stéphane Dion government then raise taxes to the tune of $10 billion per year? Again, Dion says no.
There is, of course, one final option for Dion should his plan meet a shortfall: cut spending.
In the late nineties when the Jean Chretien liberals balanced the federal budget after a generation of deficits, they did it by cutting program spending by about 10 per cent starting in 1993. Those cuts were made across the board and included healthcare transfer payments.
This sort of spending reduction program could not be sustained politically. Look at the public reaction to the recent one per cent reallocation in arts and culture. Can you imagine the reaction there would be to a five to ten per cent reduction? And as to health care and education cuts: political suicide.
With none of the above options open to the Liberals, their platform becomes a ridiculous pipe dream, unless, of course, Canada's economy grows by 4.5 per cent or more. And just how likely is that?
At the end of August 2008, Statistics Canada reported that the Canadian economy increased by an annualized 0.3 per cent in the second quarter, but a revision of the first quarter contraction to 0.8 per cent confirmed the economy had just squeaked past recession. Oops… Add this to a world wide financial crisis and a crippling new carbon tax on our energy sector, and a growth rate of 4.5 per cent for 2009 through 2012 becomes highly unlikely.