Anonymous Comrade writes:
"The Iceman Cometh"
Canada's New Prime Minister, Stephan Harper, Starts Governing
John Chuckman
Stephan Harper's first budget, while making little economic and social sense, makes a great deal of political sense. Tidbits of spending are distributed to enough disparate groups to aim at luring a majority-making coalition of diverse interests. At the same time, Harper toughly enforces quiet from party members known for blurting out embarrassing, socially-backward views.
His minority government represents little more than an intense public relations effort to achieve majority government, free of existing artificial restraints. The hazards this represents are suggested even under current restraints.
Why do I say the budget makes little economic sense? Every trained economist, including Harper, knows that skewing taxes back to favor consumption - his lowering of the GST (Goods and Services Tax) - is in principle unsound policy.
But if you were determined to re-tilt taxes to favor consumption, a tiny change is not the way to do it, because it is costly and inefficient to re-set the system for a consumer gain of one percent. A huge effort is now needed to re-program or replace countless cash registers and calculators, not to mention the reprinting of forms, receipts, and reports of many kinds.
In economics, often, events that mean one thing for individuals mean something else for the community. Thus, Harper's small change in the GST, which will be almost imperceptible to consumers in their individual purchases, still will manage to deprive the federal treasury of a substantial annual sum.
The measure does keep a campaign promise, but it was never a sensible promise, tailored, as it was, to appeal to people's prejudice towards a tax that features in most purchases, a promise offered without explaining the necessary consequences for federal finances.
