Harper's Decade: The Economic Legacy
To the considerable relief of many Canadians, Stephen
Harper’s term as Prime Minister ended this month after a sweeping
Liberal victory in the federal election on October 19. Changes in
government are an opportune moment for reflection, and in this piece I
look back at Harper’s economic legacy. For a review of his social
policy, you can read
my other article in this month’s Québécois Libre.
When the Conservatives came to office, there were
high hopes for Canada’s economic policy: Economics is generally seen as
the right’s strong point, and Harper himself holds
a master’s degree
in the subject from the strongly pro-market department at the University
of Calgary. But if the government had any good intentions when it took
office in 2006, they did not survive contact with reality.
One of Harper’s first actions in office was
an income tax cut enacted by the outgoing Liberals, in order to instead
cut the Goods & Services Tax by one point (with another one-point
reduction following in 2007). Since raising the cost of a thing causes
there to be less of it, if the government must raise funds it makes far
more economic sense to tax consumption rather than production. And yet
the holder of a postgraduate degree in the field chose to do precisely
Unfortunately, that piece of economically-dubious
policy was a harbinger of things to come. While Ottawa did implement
some genuine tax cuts over the years, such as raising the basic personal
deduction, hiking the upper threshold for some tax brackets and slashing
of their “tax relief” provided since 2006 makes plain the Conservatives’
favourite tool of fiscal policy: tax credits. The Harper government
added or expanded countless exceptions to the tax code, allowing people
to get some of their money back if they engage in certain behaviour.
taking public transit, buying tradespersons’ tools, renovating their
homes, and buying textbooks.
Economists typically describe tax credits as “tax
since they resemble a subsidy in that they involve sending people tax
dollars on condition that they do certain things. Real tax cuts involve
taking less of people’s money in the first place, not offering some of
it back to them if they conduct themselves properly, collect receipts,
fill out an increasingly complex tax return and patiently wait for their
The financial crisis that began in 2008 left no
country unscathed, bringing overwhelming political pressure on Western
governments to adopt stimulus packages. And while the Conservatives
deserve credit for not
on the deficit bandwagon, they had the scare of their lives when the
opposition parties reacted to their fiscal prudence by forming
that threatened to bring down the minority government.
Harper’s resulting conversion to
was positively Damascene: After more than a decade of balanced budgets
under Liberals and Conservatives alike, Ottawa ran
deficits, borrowing a total of almost $150 billion as government
spending rose from $222 billion in 2006 to $289 billion in 2015. Every
dollar borrowed in the name of
economic theory will eventually need to be paid back, with interest, by
“On the whole, Stephen
Harper’s Conservatives governed nothing like the prudent and
rational economic managers that they claimed to be.”
As an aside, Harper’s budgetary policy makes an utter
during the recent campaign of Liberal leader Justin Trudeau’s pledge to
run comparatively modest deficits to fund infrastructure spending.
While Canadian banks weathered the storm in 2008
better than most, any feelings of superiority over the Americans and
their $700 billion
are sorely misplaced: Although it received little attention at the time,
provided banks with over $100 billion in assistance through such
measures as extending loans and buying mortgages. Three major banks
received support worth more than their entire market capitalization in
If the bank bailout was under the radar, the auto
bailout was anything but. In December 2008, the federal and Ontario
governments joined the United States in extending a massive aid package
to Chrysler and General Motors, consisting of almost
in loans and share purchases. Seven years later, the auditor general
that Ottawa asked for little in the way of information before extending
the aid and is in the dark as to how much of the money was used.
Taxpayers are estimated to have lost
on the value of their shares of GM.
In 2006, Canada’s record on foreign investment was
rock-solid: While the Investment Canada Act empowered Ottawa to
block investments by non-Canadians on the grounds that they were of no
“net benefit” to Canada, the chances of rejection were virtually zero.
Foreigners could choose to put their money into Canada without fear of
being blocked, thereby promoting job creation, innovation, and wealth.
During Harper’s tenure, the Conservatives turned away foreign money not
just once, but repeatedly.
In 2006, Ottawa blocked a proposed acquisition of a division of
MacDonald, Dettwiler and Associates. In 2010 it prevented a proposed
takeover of Potash Corporation of Saskatchewan. Then in 2012, it
to Petronas’ bid to acquire Progress Energy. The resulting
did nothing to sell wealthy foreigners on Canada as an investment venue
of choice. The resulting loss of opportunity, though difficult to
quantify, impoverishes us all.
It cannot be said that all of Harper’s economic
record was bad. There were a few authentic tax cuts, mentioned above.
During his time in office, Ottawa signed an incredible
free trade agreements, up from only five before 2006. The introduction
of the Tax-Free Savings Account
in 2009 was a passable second best to a reduction in the capital gains
tax. And despite the deficits, federal spending was not totally out of
under his tenure from 15.1% of Canada’s GDP to 14.2%.
On the whole, though, Stephen Harper’s Conservatives
governed nothing like the prudent and rational economic managers that
they claimed to be. They complicated the tax code, borrowed massive sums
of money, adopted a corporatist industrial policy, and took a bafflingly
hostile stance toward foreign investors. While there is no reason to
expect Justin Trudeau’s Liberals to be any better, it remains to be seen
whether they will be any worse.
From the same author
The Canadian Election: Looking on the Bright Side
(or, Putting Lipstick on a Pig)
335 – October 15, 2015)
I Don't Agree with His Bart-Killing Policy, but I Do
Approve of His Selma-Killing Policy
334 – September 15, 2015)
Thank You, Edward Snowden
333 – June 15, 2015)
Omar Khadr: How Scary?
332 – May 15, 2015)
Discriminatory Discrimination Laws
331 – April 15, 2015)
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