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Michael Ignatieff doesn't want to promise realistically how to raise the needed revenue (CHRISTINNE MUSCHI/Reuters)
Michael Ignatieff doesn't want to promise realistically how to raise the needed revenue (CHRISTINNE MUSCHI/Reuters)

Jeffrey Simpson

How would the Liberals pay for their 'national strategies'? Add to ...

One theme - call it even a longing - ran through the Liberal Party's weekend thinkers' conference. Party Leader Michael Ignatieff picked it up during his closing remarks.

"I must have heard 20 times that we need a national strategy," Mr. Ignatieff said. Mr. Ignatieff had listened well, perhaps because it was the message he wanted to hear.

Liberals in the tradition of Pierre Trudeau and Jean Chrétien used to be the party of a strong central government, in contrast to the more decentralizing, province-friendly Conservatives. They lost track of their roots after Mr. Chrétien departed. Now, Mr. Ignatieff wants them back as the "national strategy" party, with a twist.

Mr. Ignatieff insisted that "national" would not result in more "big government" but "the power of the network," which apparently means galvanizing other levels of government and non-government institutions to all work together.

However Mr. Ignatieff explains what he means by "the power of the network," his list of "national strategies" needed by Canada is long - and by no means inclusive of everything that was called for at the conference. The list includes strategies for innovation, early learning, daycare, aboriginal education, illiteracy, language training for immigrants, higher education, aging, health promotion, family support, energy, climate change.

Where would the Liberals find the money, with Ottawa now facing a $49-billion deficit, to pay for even some of these "national strategies"? Answer: They won't, because for reasons of political fear, the Liberals refuse to consider tax increases.

Mr. Ignatieff said Liberals are concerned about the deficit, and would reduce it to 1 per cent of GDP in two years. This pledge sounds tough, but it represents almost exactly where the Conservatives want the deficit to be in two years - about $17-billion.

So where's the difference between the parties, after Mr. Ignatieff's speech?

Mr. Ignatieff promised that the Liberals would freeze corporate income tax rates, instead of lowering them in the next two years from 18 per cent to 15 per cent, as the Conservative propose.

Figuring out how much this would save the treasury is difficult, because no one knows precisely how strongly the economy will recover. A stronger recovery means more corporate profits, which in turn lead to higher corporate tax revenues, and vice versa. Equally murky is whether, if elected in a year or two, Mr. Ignatieff would freeze the corporate tax rate at a lower level or push it back to 18 per cent.

But let's say the Liberals would stay with an 18 per cent rate, rather than letting it fall to 15 per cent. This might save Ottawa (or cost corporate Canada, if you like) about $5-billion a year, according to estimates in a recent paper by former Finance Department officials Scott Clark and Peter DeVries.

Crudely put, the difference between the parties is thereafter roughly $5-billion that the Liberals would spend and the Conservatives would use to lower corporate taxes. (Left out of the calculation is how much either party in power would cut government programs or administration.) In a federal budget with revenues anticipated to be $265-billion in two years, $5-billion isn't chicken feed, but it's hardly steak and potatoes.

Moreover, both parties are kicking a balanced budget down the road, well past the next election, into the mists of five years from now, or more. They both assume that the resumption of strong economic growth will do most of the budget-balancing.

Liberals have obviously decided they are not going to propose any increase to the goods and services tax and they are distancing themselves from a carbon tax like the plague - despite being told by many speakers at the conference that a tax represents the best single policy for reducing carbon emissions.

The party considers politically suicidal any talk - even any hint - of the kind of tax increase former Bank of Canada governor David Dodge suggested. (He called them "tax measures.")

Liberals will also duck (like all the parties) the squeeze on budgets from rising health-care costs. They would apparently accept forthcoming Conservative cuts in foreign aid and defence, despite Mr. Ignatieff's plea for "restoring Canada's global leadership."

"National strategies" were all the rage at the Montreal conference. Mr. Ignatieff obviously wants a lot of them to guide a future Liberal government. He just doesn't want to promise realistically how to raise the revenue to pay for them.

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