Budgeting for Disaster

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Filip Palda

The recent federal budget suggests that using the budget surplus to cut taxes must seem to federal rulers as advisable as lighting cigarettes on the service deck of a Zeppelin. Ottawa's belated indexation of taxes against inflation and its reluctance to bring us down to tax levels competitive with the US are not signs of waffling, stupidity, or of some flesh-eating disease of the political will. A majority of Canadians receive more in government services than they pay in taxes. They are friends of the debt. Jean Chretien and Paul Martin must tiptoe around this majority in felt slippers for fear of sparking an explosion of resentment.

In the 1980s, the debate on the international scene was whether Gorbachev was a dictator pretending to be a reformer or a reformer trying to do his best while riding a tiger of Soviet unrest. Our leaders are in a similar borscht. This could explain why the ruling party speaks in a variety of tongues. The prime minister invites those who whine about high taxes to leave the country, while the finance minister approves of mild tax cuts.

These diverse opinions from one party reflect that Canada is a nation of diverse interests—and jealousies. It is a land where achievement and wealth earned in the free market must apologize for drawing breath. Banks announce profits the way a teenager informs his parents that the family SUV now resides in the wrecking yard. Financial turkeys heft suitcases of subsidy dollars to the corporate altar with the righteousness of an usher at Sunday collection.

In this twilight zone of public mores, politicians who want to hold on to their positions and keep the economy puttering along must act as did Napoleon's brother, Lucien, during the French revolution. To save from the mob's wrath the superb church organ at Saint Maximin, Lucien, a local deputy, encouraged revolutionary jingles to be played on the instrument.

The revolutionary jingle now coming from Ottawa is that half the budget surplus must go to programs for that social nebula known as the less fortunate.

Businesses and free market types may sputter that low taxes are good for everyone, but politicians understand a deeper truth. Canada is an increasingly lawless country. The notion that a citizen is responsible for his own welfare is disappearing, and with it disappears the restraint that people used to show about asking for public handouts. Interest groups who can paint themselves as downtrodden find special sympathy with the courts and extract financial judgements the way T. Boone Pickens tapped oil wells. A country where an increasing number sees government as a giant cow with millions of udders to be milked forces politicians to be peace- keepers, paying bribes and tribute to interest groups, the way the Chinese empire paid the Mongols not to party in their country.

As the prize from lobbying government for favours grows, Canadians will put their energies into cutting up the government budget and divert energies from making the economy grow. Brains will drain not specifically to the US, but rather away from the private sector, towards politics, or towards that grey zone of private firms that live more by generating government subsidies than they live by generating wealth. In a disarmingly honest statement of this sentiment, Jacques Parizeau explained in 1998 that Quebec should bend itself to extracting "booty" from Ottawa.

Perhaps the best hopes for tax reform will come not from politicians or think tanks, but from those who pay taxes. Canada may end up like the ancient Greek island of Andros. When the Athenian statesman Themistocles came there to extort money he announced that he had brought with him two gods, Persuasion and Compulsion. The islanders replied they too had two great divinities, Poverty and Scarcity, who prevented them from giving money.

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