Former top bureaucrat critical of GST cuts

A11

by Adam Huras
canadaeast news service

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SACKVILLE - Canada needs to raise its taxes after a looming recession ends to counteract what will be an unavoidable federal deficit, according to a long-time advisor and chief of staff to former Prime Minister Jean Chrétien.

Delivering a lecture entitled "Governing in Hard Times" at Mount Allison University last night, Eddie Goldenberg chastised the Harper government's cuts to the GST, calling the move one of the reasons why government finances will soon be marked in red.

Retired from his days on Parliament Hill and now a partner in the law firm Bennett Jones, Goldenberg said that while running a deficit in bad times is not a bad thing, the debt will eventually tie the hands of government action.

Without an eventual tax increase, the country will suffer the loss of its fundamental needs.

"It will handcuff government and make it unable to meet the most important needs of Canadians, and ironically will mean lower living standards and less money in our pockets in the longer run," Goldenberg said.

"I am confident that if the purpose of a tax increase is clearly explained, Canadians will be prepared to listen and engage in honest debate.

"I know that advocating a tax increase has been politically unpopular for a long time, but then again so has increased oversight and regulation of markets until very recently."

Goldenberg said running a deficit affects the country four fold.

The higher the national debt is as a proportion of the economy, the more international currency markets may put into question the financial stability of a country. That would lead to higher interest rates, slower growth, higher unemployment, and less government revenues he said.

It would also give the government less financial flexibility, tie money up in interest payments instead of infrastructure spending and strip the country of its ability to meet the increased demand of a retiring baby boomer generation.

Goldenberg said as a senior policy advisor to Chrétien, he was "deeply involved" in the policies and actions that led to the elimination of the federal deficit in 1997. When Chrétien came into government the federal deficit for the previous fiscal year stood at $46 billion.

"Healthy public finances are absolutely essential for government to play a constructive role in the country," Goldenberg said. "If people are going to have confidence in governments, they have to have confidence that the overall level of public debt will remain sufficiently low. That payment on the debt does not over burden government finances in the longer term."

Goldenberg took a swing at Harper's reduction of the Goods and Services Tax asking the crowd if their spending habits have changed since the two per cent tax reduction.

He then followed it up by saying that while it may make little difference to the individual, it made a $12 billion difference in federal revenues.

"If I told you that the money could be spent every year to rebuild our roads and bridges and ports and environmental infrastructure, that some could go to alleviating child poverty and some could go to reducing the cost of post secondary education, how many of you would object?" Goldenberg said. "It removed the fiscal cushion that might have avoided the need to go into deficit in the short run even in today's economic circumstances."

Goldenberg concluded by saying Canada does face serious economic challenges, however in a much better position than the United States and even the rest of the world.

"This is in part because Canada never adopted the ideology that the least government is the best government," he said. "The fiscal position of the federal government has been stronger than that of all other large industrialized countries for over a decade."