The recent Finance Canada report projecting Canadian federal budgetary deficits into the 2050s must stand as one of the most inane Canadian public documents of recent memory. The deficit could be eliminated any year on a few months’ notice, so the document is just an alarmist warning from somewhere in the bowels of the finance ministry of what will happen if nothing is done to change course and economic circumstances don’t vary. Never in the 150 year history of Canada as an autonomous country have 30 years passed without any flexibility of circumstances. This is in the category of policy options where past finance ministers were offered the following sort of range of choice by their deputy ministers: 1. The impending bankruptcy of the country and the beginning of discussions on the consequences of default on public debt and auctions of government assets; 2. The cessation of all non-contractual expenses, disbandment of the armed forces and all Crown corporations while taxes are raised in all categories, and special arrangements are made to accommodate the immense surplus that would accrue amidst the grinding stagnation of the economy; and 3. The alternative preferred by the author of the memo.
The last federal election was in part a head-butting contest between two sacred cows — the bipartisan commitment (in which the NDP also joined) of no federal deficit; and the Harper commitment not to raise HST, which it had reduced. These are both commendable impulses but they assumed an ironclad quality that became an inconvenience to fiscal planning. Canada was scandalously plagued by deficits through most of the Trudeau and Mulroney years, and at one point in the mid-Eighties the Canadian dollar sank to 65 U.S. cents. Brian Mulroney provided the answer to the problem with the Goods and Services Tax (GST). It avoided the irritating misnomer of VAT, the Europeans’ preferred Value Added Tax, which is routinely assessed on services where not even a delusionist could imagine there is any value added, such as a legal bill. Legal bills are incurred and must be paid, and are taxed in the hands of the recipients as income, but what excuse is there to tax also the person who pays the bill, on the spurious inference that he has a hidden gain in additional value due to having paid his lawyer?