Public Values

Tax cuts caused deficit

Losing billions more to new cuts still won't fund services to citizens.

Author Murray Dobbin argues that tax cuts the cause of, not cure for, the defictby Murray Dobbin, The Tyee

June 1, 2009 — It is astonishing given all the commentary and news stories about the "sudden" $50 billion federal deficit there has not been a single story in the mainstream media that focuses on the principal explanation: the huge tax cuts made by the Liberals and Conservatives since 1995.

First it was former finance minister Paul Martin with his $100 billion income tax cut over five years starting in 2000. Then it was Jim Flaherty in 2007 with $60 billion over five years. Add to that the $12 billion lost each year by lowering the GST from seven percent to five percent and the $50 billion is no mystery. It was an inevitability whenever the next recession hit.

But what to make of the sudden embrace of deficits by those who built their political careers on fiscal conservatism? There is no mystery here, either. Neo-cons like Jim Flaherty don't really care about deficits per se - their ultimate goal is downsizing the social and redistributive role of government. From that perspective, the $50 billion shortfall is a godsend: a useful crisis that will provide the rationale for huge spending cuts.

Without all those tax cuts, it is arguable that there would be no deficit at all. Not only that, of course, we could have been spending that money on the collective needs of Canadians - municipal infrastructure, national child care, pharmacare, lowered tuition fees, money for greening the economy, targeted industrial development...

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  Why Flaherty Loves His $50 Billion Deficit, by Murray Dobbin, The Tyee, June 1 2009

Posted: June 15, 2009

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