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THE DEFICIT! THE DEFICIT!
WHO WANTS A DEFICIT?
Herschel Hardin Leadership Campaign
Policy Circular 9 • May 25, 1995 |
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Eliminate the deficit. Do it our way, through the tax system and monetary policy (lower interest rates and a more robust economy), rather than through cutting social programs and savaging public broadcasting and the cultural sector. Seize control of the issue from the Reform Party and the Liberal Party. Use cutting the deficit imaginatively to reduce privilege and create a more egalitarian society.
Our failure to take charge of the issue was a strategic opportunity missed. Who wants a chronic deficit and a large, deadweight debt? Who wants to owe their soul to the company store? For democratic socialists, the idea of being in hock to wealthy bondholders is one of the last things we should desire for ourselves.
The Liberals and Conservatives, moreover, with their leaky tax policies and high-interest-rate dogma, created our burdensome debt. We could have hammered them politically on it, and also hammered the Reform Party. We still can and, as a by product, establish our credibility in this crucial area.
There is something still more crucial in this strategic matter, however. Serious concern about the debt has created an environment where privilege can be questioned, for it is unfair to ask people to make sacrifices to eliminate the deficit if blatant privilege surrounds them. This enables us to advocate tax discipline and equalization of wealth that politically would have been much more difficult in other circumstances. It allows us more easily to create an egalitarian society, which is something we want to do in any case.
To make headway, however, we have to take charge of the issue. Far from downplaying the seriousness of the debt and chronic deficit, as we did in the past, we should be riding the issue hard taking advantage of the general concern and turning the tables on Reform and the Liberals.
Fighting the deficit also allows us to strike a populist chord, for the fight on our side is one of fairness and equity. Perhaps the most painful aspect of this affair is having watched the Reform Party appropriating the guise of "populism" on this issue a matter on which it is politically weak and vulnerable, as I will explain.
Eliminating the deficit, like most problems in a relatively wealth society, is a matter of politics and power rather than of mechanics. The mechanics have always been available to the federal government, as many of you are aware.
On the revenue side, the government forfeits $90 billion a year in "tax expenditure" giveaways, concessions, and loopholes, as of 1992. Some of them, like the basic personal tax credit, may make sense, but even if a third of those "tax expenditures" were eliminated, the deficit would be gone.
This isn't to mention new tax possibilities modest wealth and inheritance taxes on large estates, for example, which are long overdue egalitarian measures. There are one of a kind options, like re implementing the previous cigarette tax rate and providing enough enforcement to contain contraband trade. There are potential tax measures to curb waste and excess in the private sector. A small tax on international currency transactions, to slow down disruptive currency speculation, is most often mentioned, but that only touches the surface (see Policy Circular 7, "Fighting waste and excess in the private sector"). Tax measures are an effective way of both curbing such waste and raising revenue at the same time. (All those luxury boxes in sports arenas and stadiums are still 50 per cent eligible as tax deductible expenses.)
On the interest-rate side, a less restrictive Bank of Canada policy and even a modest reduction in real interest rates would have a powerful effect both on expanding the economy (hence more tax revenue and a smaller social assistance burden) and on reducing the cost of servicing our existing debt. It would bring large numbers of the unemployed back into the workforce and also, in the process, reduce unemployment insurance costs. These factors together would substantially reduce the deficit.
The Bank of Canada has been an arrogant, highly destructive, and most of all misguided force in the Canadian political economy at crucial periods over the last 18 years. It is a classic case of bureaucratic power gone wrong. We should debunk the whole wrong-headed dogma which underlies its monetary policy.
All this and much more has been known for a long time. So have the true causes of the debt and deficit. The suppressed StatsCanada study, which attributes 50 per cent of the cause to tax expenditures and other tax concessions, and 44 per cent to the compounding growth of interest payments (made worse by high interest rates), was leaked and has been available since 1991.
Here is the key: that in fairness, those who profited most in the creation of the debt should be the ones to assume the burden of eliminating the deficit and retiring the debt. For the most part, that means all those who accumulated assets quicker than otherwise, directly or as shareholders in corporations. This includes especially the wealthier and upper income segments of the population but also, in lesser ways, many of the rest of (how many of us pocketed those huge interest rates on Canada Savings Bonds in the 1980s and continue to collect extra percentage points on our term deposits today?).
Let me repeat this: Those who profited most by the creation of the debt should in fairness assume most of the burden for retiring it. This is a powerful, unanswerable message to put to Preston Manning and the Reform Party, against which they would at least lose their populist pretensions.
I won't go into the internal reasons why the NDP in the past missed this strategic opportunity, except to say that it was part of our long retreat from financial and economic issues. The Conservatives, as a result, were looked upon as the party of responsible financial management (remember how the media kowtowed to Michael Wilson?). The NDP at the same time, by inverse logic, was looked on as the party of financial irresponsibility. Even today, the NDP gets blamed for the debt by certain commentators, because of that imagery. We helped reinforce the stereotype we have had to fight against.
Above all, it isn't enough to half heartedly acknowledge that the debt is a serious issue, but that we shouldn't make too much of it, given other priorities. That's counterproductive defeats the strategic opportunity.
We could run an entire election campaign doing nothing but lampooning the Bank of Canada, with its perverse high interest rate doctrine, its abstract otherworldiness, its monastic detachment from the real world and constructive solutions, its theological arrogance, its desperate stubbornness in holding to scripture, its pretensions, its bureaucratic folly.
To do anything at all, though, we have to talk about the issue, grab it, make it our own unequivocally. Those other guys created the problem, not us.
Eliminate the deficit, as I have said. Eliminate the deficit.
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