Tuesday, November 20, 2012

Why is NDP the Best When it Comes to Fiscal Responsibility?

It is a common talking point of New Democrats, whenever they are playing defence on economic issues: the NDP has the best record of the three major parties when it comes to balancing budgets. 

During the time that there have been NDP governments in Canada since 1980, those governments have produced balanced budgets 50% of the time and deficit budgets 50% of the time. Conservatives managed to balance the books only 37% of years they were in government while Liberals could only manage 27% - which was roughly the same record as Socred and PQ administrations. (Sources - Canada Finance: fiscal reference tables October 2010, RBC Provincial Fiscal Tables April, 2011; Statistics Canada: Provincial and Territorial Economic Accounts Data Tables) .

It is important to go a little beyond the talking points and the statistics in order to understand WHY this should be the case. Put simply, conservative and neo-liberal politicians are attracted to tax cuts, whether for the wealthy and business  on the trickle down theory, or to everyone else on some kind of populist rationale.  They like to imagine that they can re-coup the lost revenue through a combination of fat-trimming and economic growth. In fact, they can only re-coup a faction of the revenue through either one of those means.

Internationally, George W. Bush was the poster-boy for such thinking; more generally the U.S. has been forced by a combination of populist conservative ideology and constant congressional electioneering into shifting its tax burden onto business. The ironic result: the heartland of global capitalism shifts too much of its tax burden and its health cost burden onto business!

More locally, the new Conservative premier Alison Redford is obviously a sensible person who understands the need for long-term planning and infrastructure in a province that is the hub of the Canadian economy and which is expected to grow by about a million people over the next 10--15 years. Her problem is that she has find a way to pay for this inside the conservative nut-house that is Alberta politics.  This is a place where an unexpected shortfall in oil and gas revenues ought to mean only that the Heritage Trust Fund doesn't grow that year; instead it is a place where deficits balloon, schools and hospital beds get closed and nurses get laid off, all because  Conservative politicians and their supporters  think it is a matter of principle to use revenue from a depleting non-renewable resource to subsidize  the current consumption of the current residents of Alberta instead of the long-term welfare of long-term residents.

New Democrats  are under no such fiscal illusions, and are not as prone to that kind of collective irrationality. They place their faith instead in the growth-enhancing properties of public investments in human capital (education) and infrastructure(which business benefits from). And--though they are often loathe to admit it during election campaigns--avoiding broad, across-the-board tax cuts.

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