With everyone now back in Ottawa having caucus meetings, some to lick wounds others to celebrate, the spin, bs, and indignation is starting, in the lead up to the Harper government's first budget.
The G&M covers, still Minister of Finance, Goodale as vowing a battle over income-tax cuts and NDP finance critic Judy Wasylycia-Leis as telling the Conservative government elect that they don't have a mandate to make decisions, at least in respect to the Liberal government's Early Learning and Child Care policy.
Good to see everything off to such a nice start but I guess I'm hoping that this - the 39th Parliament - may be just a bit more constructive then the 38th, least the 38th in its last days.
Unlike, Worthwhile Canadian Initiative, I read the Conservative Party policy document, but quickly and only a few things have stuck in my head - the GST rate reductions and the new Family Allowance Payment for kids 5 years old and under.
Interestingly these 2 items seem to be the 2 red flags right now for the Liberals and the NDP. The Bloc, I'm not sure what they may think of the GST initiative now. During the election campaign the Bloc did point out, correctly, that a rate reduction will have a direct impact on the government of Quebec's consumption tax revenues.
A small back and forth over on the Conservative Party web page.
My back of the envelop calculation is that the Bloc was about correct in saying that the rate cut to 5% would cost Quebec about $200 million per year (the QST is applied to the price of a good plus the GST. There is a nominal 7.5% QST rate which is then an effective 8.025% rate with the current 7.0% GST. Dropping the GST to 6.0% means the effective QST becomes 7.95% and with the GST at 5.0% the effective QST is 7.875%. Small changes, eh. But sort of big effects when the tax base is about $136 billion.)
If the Conservative Party spin is correct and Quebec is unconcerned with this then we have moved to a new federal/provincial level of understanding. You want to bet this isn't the case. As an aside wasn't the whole Gomery mess over $250 million?
You could also believe that the GST rate reductions will cause consumption to increase and offset the Quebec revenue short-fall. But if that's the case doesn't every other provinces with a retail sales tax not only keep existing revenues but win because of the increase in consumption.
I just couldn't avoid this.
I can't see the Liberals going to the wall on their income tax cuts for the years after 2005, but until the budget is actually tabled I guess we'll have posturing. I'm assuming I don't see any tax savings for awhile as I don't plan on changing my consumption pattern any time soon even though it looks like I could save 85¢ every 2 months on my electrical bill.
As for the NDP and their rhetoric on provincial agreements on . Hmm. Just rhetoric. There was a mad scramble to sign agreements or agreements in principle on Early Learning and Child Care before the writ was dropped. But I think this was simply to get the trust funds which had been set aside in the 2005 budget for 2004-05 and 2005-06.
As usual you could drive a bus through these agreements so they were only worth something if Parliament voted the funds annually. I think this means that the Party in power choices if it may be its policy of not.
Todays G&M has some provinces weeping about the Liberal program. I take this as the normal provincial bs in its look for more federal funds. After past experiences with federal based funding only a really dumb dumb provincial finance minister would count on any guaranteed federal funding.
Also having the feds provide phony non-earmarked funds to a province for a specific portfolio (I say this because there is no real reporting requirement to get federal ELCC money - if it was earmarked the federal funds would have gone to provinces as contribution agreements with actual strings and auditing requirements attached) allows provincial ministers a leg up in actually getting provincial funds allocated to their specific departmental needs. Notice it hasn't been a provincial finance minister weeping for the ELCC funds. If this stuff had been factored into a province's medium term fiscal plan someone needs to have a serious chitchat with that person.
None of this, of course should be taken that I personally agree with the proposed Harper approach to the child care issue.
I think it has now been generally agreed that the early years of kids are extremely important to their later development. This means there is a real economic interest in ensuring that kids get lots of benefits - it helps the country later (see David Dodge's piece from 2003). I get a real kick out of the type that consider kids a strictly consumption decision on the part of parents. Yes, to some degree, but society or a country's future economic well being is also linked to having a productive population which is better ensured if you look after the kids at an early age.
Harper's proposal for the new family allowance, from my perspective, is more ideologically driven than any concern for ensuring good early learning or child care policy. More individual and less state decision making, that's fair I guess I just don't agree in this case. The concern, of course, isn't with the middle or upper income level families. but those near the bottom have more difficult choices to make about daily life and the long term expectations for a kid sometimes get sacrificed.
The good thing about the structure of the family allowance is that it will be taxable and likely considered income for social assistance payments thus reducing these payments so provinces, that actually have to implement this social - better name would be economic - service to their citizens, will collect some of the funds needed to provide it.
You, if nothing else, should be realist about things.
No one yet has mentioned much about the "fiscal imbalance" although I think it was hinted at yesterday by the Ontario Premier in his comments about the upcoming provincial budget.
I think this issue is where provincial governments will spend there time and not trying to get Harper to maintain previous Liberal government policies. It's also an area outside parliament, at least for the time being.
Whomever ends up being the federal Minister of Finance gets to deal with the Expert Panels report on Equalization and Territorial Formula Financing which should be out in the spring.
Right now federal transfers from both these programs are fixed to grow at, I think, 3.5% annually. The Panel's report could allow a segue into the re-balancing promised by Harper.
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