Here is brief look at Harper's Fiscal Management

1. Harper's fiscal record is a
catastrophe
BY: PAUL YOUNG, CPA, CGA
FEBRUARY 26, 2017

2. Agenda
• 1990s and 2000s GDP
• Why is it difficult to compare economic data?
• What is government role?
• Paul Martin Austerity Measures
• Budget Surplus
• Operational Results / Canada
• What drives an economy?
• Government policies / Savings and Retirement
• Goodale
• Harper ‘s approach to economic/taxation policies
• Trudeau’s approach to economic/taxation policies

3. Key quotes

4. GDP Growth Rates
• Source – The Balance
USA GDP /Chretien PM
Canada GDP – Martin, Chretien and
Harper
Comments:
• 1990s started the technology boom –
Internet
• US de-regulation of housing market
started the housing boom
• Baby boomers were at the peak
business cycle

5. Why is difficult to compare economic data?
• Period times reflect conditions for those periods
• GeoPolitical issues
• 1970s was oil crisis
• 1980s was the start of closing branch plants
• 1990s was the rise of internet and China
• 2000s was the shift of the baby boomers into retirement and rise of emerging
markets
• 2010s was the rise of the millennials
• Internet of things
• Automation
• Analytics
• Drones
• eCommerce

6. What is government role?
• Government role is
• Setting taxation and spending policies
• Delivery of program spending through value for money
• Providing the conditions to support business expansion
• Management of deficits and surpluses
• Management of the Debt to GDP

7. Paul Martin Austerity Measures
• Canada was approaching 50% of their federal debt to GDP
• Canada undertook various measures the deficit/debt
• Reduced program spending
• Reduced the transfers to provinces
• Changed the rules for EI
• Other austerity options
Did Paul Martin’s Plan work
What makes the Canadian experience really stand out is
the very heavy reliance on spending cuts to eliminate the
deficit and then run budget surpluses. In 1996, when
Canadian debt peaked, spending was 46.6% of GDP,
down a bit from a peak of over 50% of GDP in the
recession of the early 1990s. Source – Policy Alternative
Canada also stands out in that it did not rely at all on tax
increases to lower the deficit and debt. Indeed, once
surpluses emerged after 2002, corporate and personal
income taxes were cut.
Putting the burden of debt reduction on social spending
cuts rather than on taxation meant that the burden of
Canadian deficit reduction fell on the lower end of the
income distribution, and this was a significant factor behind
the pronounced increase in Canadian income inequality
over the 1990s – Source – Policy Alternatives
Spending Cuts
Taxation and income inequality

8. What is a surplus?
Source - http://www.investopedia.com/terms/b/budget-surplus.asp
A budget surplus is a period when income or receipts exceed outlays or
expenditures. A budget surplus often refers to the financial states of
governments; individuals prefer to use the term 'savings' instead of the
term 'budget surplus.' A surplus is an indication that the government is
being effectively managed.

9. Source – Federal Government
Surplus/(Deficit) Analysis - Canada
Comments:
• The budget office's report identified
large amounts of authorized spending
for this year
that were "administratively frozen" in
government estimates, the largest of
which was $829 million allotted to
Infrastructure Canada. The analysis also
found that $366 million in spending this
year had been frozen for National
Defence, $192 million for Fisheries and
Oceans Canada and $100 million for
Indigenous and Northern Affairs
Canada. – Source – Metro News
• Money has been slowed to infrastructure
projects

10. Harper’s approach in 2008-2009
• Tax cuts
• Infrastructure spending
• EI extensions
• Other targeted spending
• Other new programs
- Tax cuts net Canadians $30B in savings
- Dedicated funding via Gas Tax and Build
Canada Funds
- Extension of EI benefits to workers
- Honored the CST and HST transferred
- Family tax benefits
- Tax Credits
- Pension Splitting
- TFSA

11. What drives an economy?
• 2/3 of an economy is driven by consumer spending
• Canada exports about 530B per year or about 30% of its’ GDP
• Government Spending
Government Role
• Set taxation policy
• Delivery program spending
• Set the conditions to support private sector investment

12. Targeted Measures / Savings and
Retirement
• Canadians were not saving enough money? Liberals ran on this issue during the election
Facts:
• Harper implemented TFSA - or http://business.financialpost.com/personal-
finance/tfsa/exclusive-canadians-maxing-out-their-tfsas-from-all-walks-of-life
• Canadians are saving for retirement - http://www.cbc.ca/news/business/canadians-
are-saving-enough-for-retirement-says-c-d-howe-study-1.3100653
• Many government and businesses leaders were complimenting Harper and Martin for
their handling of deficit/debt - -
https://www.youtube.com/watch?v=yOl37VcG89c&t=107s
• The interviewer makes a valid point “The middle class is under pressure around the
world”

13. Ralph Goodale vs Harper
Source - http://ralphgoodale.ca/news-nouvelles/mr-
harpers-reckless-tax-policy/
As a former Finance Minister, I know there’s
nothing any government likes better than cutting
taxes. That’s why the Harper Conservatives are
bragging about their plan to cut three more points
off the federal income tax rate for big corporations.
But the first rule for any responsible Finance
Minister is that tax cuts must be fair, affordable,
sustainable and consistent with other economic
and social obligations.
Mr. Harper’s proposals fail on all counts.
First, his tax cuts are not for families or small
businesses, but only for the biggest and wealthiest
corporations. Ironically, while these well-off firms
will get another big break, the Conservatives are
slapping an extra, job-killing payroll tax on small
and medium-sized enterprises that generate most
of Canada’s employment.
• Another gift to the government in the report was that the
PBO found that in relative terms — lower income
Canadians earning between $12,200 and $23,300 benefited
the most, increasing their after-tax income by four per cent.
https://globalnews.ca/news/1356467/tax-cuts-since-2005-
net-canadians-30b-pbo/
• “The IMF agrees with those who say that Canada risks
losing investment to the U.S. because it has lost its
corporate tax advantage. It called for a “careful rethink” of
the way it taxes companies. “The U.S. tax reform increases
the urgency of moving ahead with the review,” the
statement said. “Its impact remains highly uncertain, but
the potential effects, through both real activity and profit
shifting, could be substantial.””
• Source -
http://business.financialpost.com/news/economy/imf-
calls-for-careful-rethink-of-corporate-tax-strategy
• Carbon Tax/Pricing will shave billions off of GDP – source -
https://ipolitics.ca/2018/04/23/pbo-says-carbon-tax-will-
knock-10-billion-off-gdp-by-2022/
• 80% of the middle class is paying more income taxes -
https://globalnews.ca/news/3769136/taxes-middle-class-
liberals/

14. Harper approach
• Low taxation - Canada Corporate Tax rates are competitive with
countries around the world
• Trade and Investment deals – The expansion of business into
countries like China, Colombia, CETA, SE Asia
• Targeted innovation funds (Forestry, Automotive, food, etc)
• Holding the line to payroll taxation and other tax increases
Those include removing import tariffs and accelerating tax writeoffs on new machinery and
equipment, cutting the corporate tax rate from 22 per cent to 15 per cent, inking free trade
agreements with Europe and others, and establishing strategic investment funds.
“Many of the programs the Conservative government has put in place do support
manufacturing, and do it very well,” Myers said. “In many respects, the federal government,
whatever party is in power, realizes the importance of manufacturing and has been
supporting the sector.” Source – CME Quote

15. Justin Trudeau approach
• Nationalized Carbon Tax (No Carbon Tax by USA)
• Hikes to CPP premiums
• No reforms to regulatory process to approve projects
• Honoring methane emissions caps (USA is not pulling the caps)
Source – Chamber of Commerce

16. Summary
• Many different groups will write paper and/or articles on
government from their perspective. It is important for readers to
review all sources when it comes to debating various government
policies