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Jeffrey Simpson (Bill Grimshaw)
Jeffrey Simpson (Bill Grimshaw)

Jeffrey Simpson

To be a credible alternative, the Liberals need to be fearless Add to ...

Prime Minister Stephen Harper has the opposition parties exactly where he wants them.

The New Democrats fear bringing down the government and the Liberals fear ideas. As a result, Mr. Harper defines the debate. When a leader frames the issues, he's in charge.

The Liberals decided some months ago that fatigue with Mr. Harper (and his sometimes brutish style) and the recession would so weaken the government that they would win power. These assumptions have been proved false. The Conservatives developed an economic agenda that is politically bulletproof: spreading tens of billions of dollars around the country, accompanied by maximum publicity, as the government response to the recession.

To this, the Liberals had no credible alternative. They had voted for the budget that authorized this spending, after all, so they could only complain (wrongly) that money wasn't being spent fast enough, while arguing (implausibly) that the deficit was too high.

The Liberals essentially agreed with what the government was doing. They then played in Mr. Harper's ballpark by promising not to raise taxes and not to reduce transfer payments to provinces or touch the defence budget.

In the process, the Liberals became copycat Harperites. Their criticisms were carping ones about timing and procedure. More serious disagreements were over secondary issues. In other words, they are allowing the Prime Minister to set the agenda and define the terms of political debate.

The Liberals remain spooked by the memory of the last election, when they put an arresting idea for a carbon tax in the political window and got steamrollered by the Conservative attack machine. Chastened, they now recoil from anything but political Pablum - another plus for Mr. Harper.

So why don't the Liberals think about redefining the national debate? Why don't they call their redefinition The $70-Billion Question?

Their new pitch would be: Elect us and we will eliminate the federal deficit fast and pay down the debt that Canada incurred to fight the recession. Not for us the Conservative approach of stringing out deficits and building up debt, thereby leaving Canada more vulnerable than it would otherwise be to external shocks such as inflation. We Liberals balanced the budget and kept it in surplus when last in government, and we'll do it again.

How? By raising the goods and services tax by two points, thereby bringing in about $70-billion over five years. With that money and reasonable growth, Canada would almost balance the books in 2012-13, and run a surplus the next year.

With budgetary surpluses, Canada would better prepare itself for the aging population. It could invest more money in health care or higher education. It could have some left over for reducing taxes on individuals and businesses.

Of course, the Conservative attack machine would go into overdrive, just as it did some months ago when Liberal Leader Michael Ignatieff, acting responsibly then, said that as prime minister, he might have to consider tax hikes, among other options. When the attack ads started, Mr. Ignatieff retreated. He hasn't said a sensible thing since about an alternative to Conservative economic policies.

Canada is now headed for a less-than-optimal postrecession landing. We'll get deficits stretching until almost the end of the next decade, with an accumulation of debt (although a declining debt-to-GDP ratio).

This will leave government accounts more vulnerable to external shocks and the looming "fiscal squeeze" caused by an aging population. Under the Conservative plan, big program spending cuts are inevitable.

Politics aside, the risk of a tax hike is slower growth. But if the Bank of Canada knew fiscal policy would be tightened, because a government had been elected on that platform, it could ease monetary policy in a few years. Or the government could phase in the GST increase if a tax hike would unduly threaten growth. Or it could offset some of the GST hike with lower taxes on incomes - something almost every economist would applaud.

Post-Trudeau Liberals have more credibility than Conservatives in balancing Canada's books. Liberals curtailed government spending, when needed, whereas spending has soared under Mr. Harper.

The Liberals, of course, would consider anything brave political suicide. Maybe, sadly, they are right, because Canadians do seem to fear a real debate on anything of substance.

Maybe, though, they might be surprised by what a combination of a sales-tax increase, fast deficit elimination, debt reduction, critical investments and lower personal taxes might evoke.

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