Canada -- despite its rhetoric of supporting population health -- has bought
head long into neo-liberal political and economic ideology.  One notable policy
direction has been
the reneging on establishing a national network of childcare.  Is it the case of
 no money being available?
---------------------------------------------------------------------------------------------------------------------------------------------------

 Report throws Grits' [Liberals] dividend promise in doubt

 By BRUCE LITTLE


 Monday, May 27, 2002  Globe and Mail



? Print Edition, Page B8

 What a shame the Auditor-General cannot be sicced on the question of
 whether or not the government keeps its election promises. We could use
 someone to arbitrate the huge gap between what the Liberals claim to be the
 record on one of their big promises and what the Canadian Labour
 Congress, for one, has to say about it.

 The promise in question was simple. The fiscal dividend created by
 eliminating the deficit would be split like this: 50 per cent would go to new
 spending and the other 50 per cent divided between tax cuts and repaying
 the federal debt.

 So much did Prime Minister Jean Chrétien like the divvy-the-dividend
 promise that it was part of the Liberal platform in both the 1997 and 2000
 elections.

 In the budget he brought down just before the 2000 election was called,
 Finance Minister Paul Martin laid out his version of the split as it would
affect
 the five-year span from the 1997-98 fiscal year to 2002-03.

 He acknowledged that the 50-per-cent target had not quite been met. After
 all, his new budget included tax cuts valued at $100-billion over the next five
 years, and the government had run surpluses far bigger than it had expected.
 Since surpluses automatically go to pay off debt, the share for debt reduction
 had climbed.

 Even so, the budget documents claimed that new spending would get 46.5
 per cent of the fiscal dividend over the five years, while tax cuts would
 account for 36.6 per cent and debt reduction 16.9 per cent.

 That was a bit of a stretch, as even the government conceded, because it
 was counting some tax cuts as spending. This applied in cases where Ottawa
 had introduced tax credits -- like the Child Tax Benefit -- that technically
 counted as tax cuts, but could reasonably be treated as spending because the
 benefits went to specific groups of people. Had such sums been counted as
 tax cuts, the spending portion would have fallen to 38.4 per cent.

 This failing, even by the government's generous (to itself) accounting, had no
 impact on the election that followed and the Liberals walked off with a big
 win.

 The government hasn't updated those estimates since, but at least one other
 economist has, using a much simpler measure.

 It will take several more months -- and a variety of year-end adjustments --
 before the accounts are closed on the 2001-02 fiscal year that ended March
 31, but as of then, Ottawa was running a surplus of $9.8-billion. This follows
 a $17-billion surplus a year earlier.

 Does this affect the three-way split? You bet it does. We may not know for
 some time how the government will work up its calculation, but Pierre
 Laliberté of the Canadian Labour Congress has produced one that is a long
 way from anything that's likely to come out of Finance.

 Beginning with the 1997-98 fiscal year, when the first surplus appeared, Mr.
 Laliberté calculated two sets of figures.

 First, how much money would Ottawa have raised each year since then if its
 revenue had remained constant as a share of gross domestic product?
 Revenue has, in fact, been lower, so he counted the difference as the value of
 the tax cuts. In the latest year, the old status quo would have produced
 $187.6-billion in revenue, but since Ottawa took in only $174.1-billion, the
 tax cuts were worth $13.5-billion.

 Second, how much would Ottawa have spent each year if spending had risen
 only in line with population growth and inflation? By Mr. Laliberté's count,
 the sum would have come to $122-billion. Since Ottawa actually spent
 $125.6-billion, he credits the government with $3.6-billion in additional
 spending.

 If you add together the value of the tax cuts, the extra spending and the
 remaining surplus (which goes to pay down debt), you get a fiscal dividend
 of $26.9-billion for the year. That produces a split of 14 per cent for new
 spending, 50 per cent for tax cuts and 36 per cent for debt reduction.

 Since 1997-98, however, Mr. Laliberté figures that the fiscal dividend
 totalled $72.2-billion, of which 63 per cent went to debt reduction, 31 per
 cent to tax cuts and a mere 6 per cent to new spending. Even if he had
 counted the Child Tax Benefit as spending rather than a tax cut, he says, the
 spending share would still have been only 11 per cent, while the tax cut share
 would have fallen to 26 per cent.

 By his measure, the government is a very long way from keeping its promise.
 Those who prefer tax cuts and debt reduction won't object, but the CLC
 and Mr. Laliberté do: "It's not like there are no areas crying out for
support,"
 he says, citing health care, housing, education and training as examples.

 Arguments over splitting the dividend have plenty of life left in them. It's
too
 bad that settling them isn't part of the Auditor-General's mandate.

 [log in to unmask]