Wednesday, February 3, 2010

Tax hike not necessary to balance budget

Whether intentional or not, parliamentary budget officer Kevin Page’s reports always seem to be more helpful to Michael Ignatieff and the opposition parties than to the Conservative government. Page warned us in November that Ottawa will be still be stuck with a deficit of $18.9 billion in 2014, even after the economy has fully recovered.

I’m not sure what Page’s agenda is. His November projections put him at odds—as more frequently than not he is—with Finance Minister Jim Flaherty and Prime Minister Stephen Harper, who keep reassuring Canadians that Ottawa will balance its books in a reasonable time through economic growth and spending restraint, and not through tax increases. The budget officer suggested that the damage caused by the past recession has cut into the potential of the economy to generate future revenues for Ottawa.

Page seems to relish being a thorn in the side of the Conservatives, casting doubts on government estimates for more than a year. But even if he did enjoy irritating the Tory government, it doesn’t mean his estimates are not correct. He has years of pertinent experience and seems bright enough to do the job.

So who do we believe?

Ever since budget officer Kevin Page’s November report, Tom Clark of CTV’s Power Play has banged on daily about how economists are virtually unanimous in the belief that the deficit will never be defeated without tax increases. According to Clark, it is only politicians who are refusing to face reality or refusing to tell their constituents the truth—i.e., they are going to raise taxes to help pay down the deficit.

But wait, could Tom Clark actually be wrong. Ops, I just bit my tongue!

Today I read in the National Post that after a pre-budget consultation meeting with Finance Minister Jim Flaherty in Ottawa, private-sector analysts said Ottawa might have to wait an extra year or two before the country returns to surplus, but a budget balance is doable without requiring tax hikes. Douglas Porter, deputy chief economist at BMO Capital Markets, told reporters, “I would put a very low priority on tax increases. I think that should be almost a desperation move.”

Who to believe? I’m giving the benefit of the doubt to our government with its plan to balance their books with increased revenues generated by a recovered economy, elimination of temporary stimulus spending and program spending restraint.

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© 2009 Russell G. Campbell
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  1. If there is job increase then the tax base goes up, then people will spend money on other things and the money collected from GST will also go into the coffers adn it will be a win win situation.

  2. Finally, some people to back up the claims!

    I too am wondering if Mr. Page is a Liberal in non-partisan clothing...