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Harper slashes surplus -- take that Mulcair and Trudeau!

Harper's reduced surplus poses a challenge for Mulcair (pictured) and Trudeau

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Journalists and Official Opposition Leader Tom Mulcair say the Conservatives' latest Fiscal Update is all about the coming election, now less than a year away.

Finance Minister Joe Oliver's bland and predictable financial pronouncement, on Wednesday, was not a serious exercise, just part of the "pre-campaign," they say.

Oddly, though, this year's update is, in fact, not much more than a statement of the current federal fiscal state of affairs.

There is very little, if any, candy for the electorate in Joe Oliver's fall 2014 update.

When the Prime Minister announced income-splitting about two weeks ago he kept the big story for himself and upstaged anything Oliver could have announced this week.

And so, Oliver had next to nothing new to announce on Wednesday, at a downtown Toronto hotel (not, notably, in Parliament).

The only big news, if it is news, is that the projected federal surplus for 2015-16 is way down. It had been previously projected to graze $7 billion; now it will be well below $2 billion.

But there will be a surplus, nonetheless, for the first time in seven years; and that, the Harper folks figure, is probably good enough.

Income-splitting creates equity between high-bracket taxpayers

The electoral goodies the Harper team has put on offer are well known, though we may see more in the full budget, in the New Year.

For now, the Conservatives' centrepiece proposition is a modified version of their long-promised income-splitting idea.

It is a measure that primarily benefits a minority of people of relatively high income; but which, its supporters argue, creates what economists call "horizontal equity."

What does that mean?

As it stands now, single-income couples with total incomes of $100,000 per year, or double-income $100,000 couples in which one person earns more than the other, pay a fair bit more income tax than $100,000-per-year couples with two equal incomes.

Income-splitting allows the higher-income partners of single or unequal-income couples to shift income to their lower-income partners, thus reducing their tax bills and bringing them closer to the total taxes paid by equal-incomes couples.

There are a few more details; but, in essence, that's it. It is "Harper's Horizontal Equity": a plan to make the tax system "fairer" for about 12 per cent to 14 per cent of the population.

And it does not come cheap.

Income-splitting will cost the federal treasury well over $2 billion per year. More important, it does nothing to deal with our society's much bigger equity issue: the gaping and growing gulf between the super wealthy and the rest of us, between the 1% and the 99%.

It is for that reason that the NDP's Tom Mulcair characterizes Conservative-style income-splitting as "reverse Robin Hood" -- taking from the poor to give to the rich.

Mindful of that accusation, the Conservatives strategically wrapped income-splitting in a bigger "family-friendly" package.

That package includes an increase to the Universal Child Care Benefit of $60 per child, and a brand-new payment of $60 per child, for all children between six and 18.

A clever trap for Mulcair and Trudeau

The net fiscal result of these commitments is that the Conservatives have pre-spent a good deal of the projected surplus, which is exactly what they intended to do.

Now, if New Democrats and Liberals wish to propose other new costly measures they will be under pressure to tell voters whether, to offset those new costs, they plan to scrap any or all of Harper's "family" benefits.

Official Opposition Leader Mulcair reacted to Joe Oliver's update shortly after it was delivered and had to deal with that conundrum.

Mulcair started out by saying, accurately, that the Harper government will have largely achieved its surplus by radically cutting back on federal services and the people who provide them.

The NDP leader pointed to cuts to veterans' services and rail safety inspections as just two examples. The Canadian Centre for Policy Alternatives gives chapter and verse on the cuts the Harper government made to achieve "balance" in a new study.

Mulcair also reminded reporters that an NDP government would not raise personal income taxes, but would modestly raise Canada's record-low corporate tax rate to a level that would still be highly competitive with other developed counties.

The NDP leader reiterated his party's promise that it would restore veterans' services and maintain the current eligibility age of 65 for Old Age Security. The Harper government has a firm plan to boost the age to 67.

And the Official Opposition leader reminded us of his party's major and most recent pledge: to create hundreds of thousands of new daycare spaces across the country, at a cost to parents of no more than $15 per day.

But when reporters asked the NDP leader if his party would maintain any or all of Harper's new "family" measures, Mulcair was very careful not make any definite commitment.

One could sense the NDP leader did want to give the Prime Minister any ready electoral ammunition.

Instead of giving a definite answer, Mulcair talked about working with the provinces, about not having one-size-fits-all solutions, and he focused, as much as he could, on his own party's positive proposals.

In addition to the other priorities mentioned above, Mulcair also pledged to keep federal health transfers to the provinces to their current annual rate of increase -- not reduce that rate, as the Conservatives have promised they will.  

In all this you can see the trap Harper has set for his opponents.

If the opposition leaders intend to spend on other priorities than Harper's, and want to continue to run surpluses (or, at least, keep the budget balanced), they are going to have a hard time maintaining Harper's recently announced measures.

Harper dearly wants Mulcair and Liberal leader Justin Trudeau to say, openly, they intend to scrap all or most of his goodies for families.

Failing that, the Prime Minister wants to get them to say how they will pay for all of their own promises and for his "family" measures. The Conservative leader obviously believes he would do well fighting on that political turf.

The election is still a way off and the battle has not yet been fully joined. In fact, the Liberals, for the most part, are staying out of it almost entirely, for the time being.

But it is not hard to see the shape of the policy choices the parties will put before the electorate in the months to come.

Part of the purpose of Wednesday's seemingly innocuous Fiscal Update was to frame the coming debate in a way that is favourable to the Conservatives.

And nobody who thinks Harper's government has been bad for Canada should underestimate the Conservative party's skill at that sort of political marketing.

Photo: Karl Nerenberg

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