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Every Monday from now til Election day, the globe is running a special report on one issue and clarifying where each party stands on it. Today was the economy - quite timely considering what is going on south of the border today.
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Where they stand
Issues tend to get lost in campaign rhetoric. But each party does have a position on most issues. Each Monday through the election, The Globe will explore a single issue and examine each party's stand. Today, the competing economic visions of the five major parties
HEATHER SCOFFIELD
From Monday's Globe and Mail
September 15, 2008 at 4:18 AM EDT
When Conservative Leader Stephen Harper vowed, in the early days of the campaign, that he would cut the federal diesel fuel tax in half, the Liberals saw it as a gift.
Posing in front of the celery and carrots at a fresh-produce store in Winnipeg, Mr. Harper told a crowd of partisans that the tax cut highlights the Tory approach to economic management.
The federal election, he said, "is a choice between two very different plans. We want to reduce the tax on diesel a bit. Others plan to increase the tax on diesel significantly. In fact, they plan to increase the price of everything."
The Liberals disagree vehemently with that interpretation, of course, but they do agree with part of Mr. Harper's message: The choice between the Tory and Liberal approaches to fiscal and economic policy is stark.
Just as Mr. Harper was announcing the diesel fuel measure, Liberal MP and economist John McCallum was in the midst of an interview. He could hardly restrain a chortle. The tax cut, he said, is Tory policy at its worst - a targeted measure, aimed wrongly at consumption, that will only exacerbate pollution.
"I think that sums up Stephen Harper pretty well," Mr. McCallum said. "There's not an economist in the country who would support it. It's like reducing the GST and not caring about environmental policy at the same time."
Tory cuts to the goods and services tax aside, in recent election campaigns the two parties have differed in the economic bells and whistles, but their general approaches to fiscal policy have been similar. Governments of the past decade have enjoyed healthy surpluses, and could promise new spending, tax cuts and improved transfers to the provinces without worrying much about where the money would come from.
Now, the global economy is on the brink of recession, Canada's economy has stalled and the surplus is slim. Some economists believe a further slide in the price of oil will push Ottawa into deficit for the first time since 1997. Politicians can no longer promise the world - especially if, like both the Tories and the Liberals, they also promise to stay out of the red.
As the economy zooms to the top of the list of public concerns, voters can pick, for the first time in over a decade, between two contrasting visions of how the government should interact with the economy. Well aware of the contrast, the parties intend to make as much political hay as they can.
The sub-headline on the press release accompanying Mr. Harper's diesel tax announcement is a case in point. "Modest, affordable, practical plan for lower taxes vs. grandiose, costly, risky plan for higher tax on everything," it reads.
Or, from the Liberals on the same day: "Hard-working Canadians are losing their jobs and what does this government do? Insult them and abandon them with laissez-faire, I-don't-care policies," Leader Stéphane Dion said.
"A Liberal government will invest in partnership with Canadians by cutting taxes for families, investing in the manufacturing sector and building strong jobs."
At the heart of the Conservatives' economic thrust is tax reduction. The Tories are campaigning on the GST cut already implemented, as well as their more recent cuts to income and corporate taxes. By kicking off their campaign with the diesel tax announcement, they're suggesting that the plethora of small but targeted tax cuts that worked well for them in the last election will likely figure prominently again.
Tax cuts, they say, have protected the Canadian economy from the U.S. downturn. Some troubled sectors may require direct measures on a short-term basis, but the preference is for permanent tax cuts, explained Jim Flaherty, the Finance Minister and MP running for re-election in Whitby, Ont.
"If we talk about fiscal and tax policy, we approach things in a fundamental, permanent way," he said in an interview. One-time subsidies "thrown at" troubled parts of the economy are often a waste of money, he argued.
"I'm not interested in that sort of ad hoc activity," he said, adding that the millions handed to the auto sector in the days before the election call came from a previously announced fund to spur innovation and does not constitute a subsidy.
The Conservatives want controlled spending and a minimalist fiscal framework that will lead to a stronger economy, Mr. Flaherty said, while the Liberals are eyeing higher taxes, higher spending, intrusive government and irresponsible economic management.
Needless to say, the Liberals don't see things that way - but they're equally anxious to win political points by exploiting their differences.
At the centre of the Liberals' fiscal proposals is a $15-billion shuffle of taxes and spending in the hopes of tackling global warming, cutting income tax and alleviating poverty at the same time.
Their Green Shift proposal would thrust the federal government's fiscal power into the centre of business operations, by imposing a carbon tax on greenhouse-gas emitters. The plan fully expects corporations to pass along the costs of the tax to consumers. And to help consumers and companies cover the cost, the Liberals would use their carbon-tax revenue to cut personal and corporate income tax.
The plan would likely be the biggest tax reform seen in decades in Canada, economists say.
In the short term, the Liberals also see an activist role for themselves in alleviating the pain of the slowdown - dramatically speeding up infrastructure spending so that building projects will put people back to work just when they most need jobs. They'd also inject more money into the manufacturing sector. Mr. McCallum describes his party's approach as "fiscally prudent but active."
Both parties promise to balance the books, encourage innovation and clean technology. But both also have a history of spending a lot - especially right before an election - and accomplishing little in giving Canada an edge, said Jayson Myers, an economist and head of Canadian Manufacturers and Exporters.
"What are we doing," he asked, "to actually create wealth in this country rather than just redistribute it?"
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THE LIBERAL PARTY
THE ECONOMY TAX ON, TAX OFF
ON GOVERNMENT'S ROLE: "Fiscally prudent but active," according to finance critic John McCallum. Ottawa needs to recharge social programs and reform the tax system to help the poor, fight greenhouse gases, reward good behaviour and punish bad behaviour.
ON THE SLOWDOWN: Government money should be made available for manufacturing; infrastructure funding should be dramatically sped up to flow quickly to cities and create jobs.
NATIONAL CHAMPIONS: Liberals want to rekindle Canada's relationship with China, lead high-profile trade missions and promote key Canadian businesses abroad. Liberals would likely bring in a national security review of foreign takeovers.
ON REGIONAL DEVELOPMENT: They have been sympathetic to creating regional funds in the past, and hint they will have new campaign initiatives to announce about employment insurance and regional employment incentives.
ON DEFICIT FINANCING: "Liberals have it in their DNA not to go into deficit," Mr. McCallum says. Liberals would reinstate the $3-billion contingency fund to keep government out of deficit, and if they were to inherit a deficit from the Tories, would immediately cut spending to make ends meet.
ON TAXATION: The so-called Green Shift slaps a carbon tax on industrial emitters, rising gradually over four years. The tax is being marketed as revenue neutral, however, because the Liberals would also cut corporate taxes and personal income taxes, with an emphasis on low-income groups.
ON SPENDING: Poverty reduction, families and seniors would receive more income supplements, funded by new revenue flowing through carbon taxes. The Liberals' record shows the party eliminated the $42-billion deficit in the late 1990s, but allowed spending to gradually creep up as a share of GDP.
ON EMISSIONS CONTROL: The carbon tax is meant to deter emissions and steer industry into green technology. The Liberals say they would also move towards a cap-and-trade system over the long run.
Winners and losers
Who benefits: Lower-income Canadians, through cuts to income tax and enhanced income supplements.
Who pays: The 700 large polluters who would pay the carbon tax.
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THE CONSERVATIVE PARTY
THE ECONOMY FREE-MARKET FAITH
ON GOVERNMENT'S ROLE: "We approach things in a fundamental, permanent way," says Jim Flaherty, the Finance Minister. A federal government should do what it can to not impede business: cut red tape, cut taxes, offer incentives for innovation.
ON THE SLOWDOWN: Stimulus took place last fall with a series of tax cuts that meant tax refunds to Canadians this spring were on average $200 higher than the year before, up 14 per cent.
NATIONAL CHAMPIONS: Governments should not pick winners, but create the conditions for winners to emerge on their own. Conservatives would encourage more foreign investment in Canada by removing some restrictions in the uranium and airline sectors, and raising the threshold for review of foreign takeovers. But they would also bring in a national-security review of potential takeovers.
ON REGIONAL DEVELOPMENT: Tories have a general distaste for making allowances for struggling regions, but introduced a $1-billion "community trust fund" to help hard-hit areas try to move on.
ON DEFICIT FINANCING: "I can say without hesitation that we will run a surplus this year," Mr. Flaherty says. Even if the economy turns from bad to worse in 2009, when the budgeted surplus is expected to be slimmer, he says a Conservative government would make up the difference, if necessary, by speeding up its expenditure review process.
ON TAXATION: Lower business taxes help give Canada a global edge; all taxes should drop relentlessly; cuts should be small and targeted, with specific policy aims.
ON SPENDING: Mr. Flaherty argues it should be tightly controlled, though his own budgets have contained spending increases at least as large as those in many Liberal budgets. Spending is budgeted to be above 13 per cent of GDP, a higher ratio than in most years of Liberal government. The Canadian Taxpayers Federation estimates the Tories' pre-election spending promises total $19.2-billion, announced between June 2 and Sept. 6.
ON EMISSIONS CONTROL: Conservatives want it accomplished mainly through regulation, not tax policy. But any attempt to control emissions puts government in the middle of the energy industry, despite Tory ideology that dictates minimalist intervention.
Winners and losers
WHO BENEFITS: The middle class, because of cuts to consumption taxes and income taxes.
WHO PAYS: People who have lost their jobs at factories that have closed, because funding is for struggling firms that remain open.
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THE OTHER PARTIES
A MIX OF MESSAGES
BLOC QUÉBÉCOIS: It wants financial support, loan guarantees and better tax treatment for the manufacturing sector; wants a law to force government to buy Canadian; wants better income support for seniors; hopes for enriched transfers to Quebec and more provincial freedom to spend the money.
NEW DEMOCRATIC PARTY: The NDP would halt corporate tax cuts and instead create a $2-billion-a-year fund to offer subsidies and create 40,000 factory jobs; the fund would offer subsidies to encourage companies to innovate, produce low-emission cars and train unemployed workers for green jobs. The NDP wants a made-in-Canada procurement policy and trade policies that protect manufacturing.
GREEN PARTY: It would overhaul taxation so that polluters paid a carbon tax; would use the proceeds to cut payroll taxes, allow income splitting and boost transfers to seniors and low-income people.
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