Wednesday, April 15, 2009

Could the economists have been right?

You'd have had to look under rocks in the most obscure places to find an economist in Canada who agreed with the Harper government reduction of the GST. Most addressed it for what it was: An expensive maneouvre designed to do one thing - gain votes.

Via Impolitical comes a report from the Canadian Centre for Policy Alternatives that suggests Canadians might have been much better off if the GST had remained at its pre-Harper levels.

The basic premise for their observations is that Canadians get a lot of value for their tax dollars - maybe the best deal they will ever get for an equivalent amount of money.

I tend to read CCPA information with a bit of weather eye. I'm always wary of their starting position just as much as I am with the Fraser Institute, but this analysis appears to echo a throng of economists who were dead-set against the GST cut when it was introduced. The fact sheet CCPA issues with the report is consistent, clear and accurate.

The bottom line is that cutting that particular tax could only have one effect: The cutting of services.

Of course, that is exactly what Harper and his reformers want. This is nicely underscored by the latest shot taken at universal health care by a squaloring Preston Manning. By cutting taxes (Good, says Manning) the economy is being stimulated. That's the same voodoo economics of Ronald Reagan. In truth, cutting taxes means less government revenue and that gives the reformers an excuse to hold universal health care out and declare it "too expensive" - we'll have to devise another model. You middle-class folks will just have to get health coverage from one of the newly authorized health management companies...
This would require provincial and federal leadership to create a two track system, public and private, for health care insurance, financing, and delivery — replacing several billions per year of public health-care dollars with private dollars while still preserving universal coverage for all citizens.
And where does Manning propose those private dollars come from? He doesn't actually say it, but count on it being your pocket. He then proceeds to perpetuate a myth:
This is what most European countries have done, resulting in better health care outcomes at lower cost than Canada.
False on two counts.

Manning hasn't produced an example of the European system because it doesn't fit his narrative. In truth, the European system is still a single-payer model. Where there is a "two-track system" (to use Manning's term) there is a plethora of complaints from those accessing the public side of the track about preferential treatment for the wealthy. Not that it matters because very few European countries actually have that kind of system.

What actually exists is similar to the Canadian system but with a patient centered model. Hospitals and services do not receive bulk funding - they are paid for services provided. That's not "two track"; that's efficiency. It's also not what Manning is calling for.

The "lower cost" he continually blusters on about is also mythical. His convenient ommission of Canada's next door neighbour is a disingenuous attempt to obscure a reality: The reason Canada's health care costs are higher per patient than those of Europe happens to be because of our proximity to the US, where health care costs are substantially higher than equivalent care in Europe. Canada is forced into a system of higher compensation in order to prevent the best skills from crossing the border. What Manning doesn't include is that the cost of branded prescription medications in Canada is substantially lower than the US and Europe.

It is worth keeping in mind that as Harper keeps offering tax cuts as an incentive to vote for his party, the cost is higher than most Canadians are willing to accept and the result would likely be something much worse than Manning has fabricated on behalf of his party leader.

Added: Manning said this:
At Canada's high levels of taxation...
That's starting the paragraph with a lie. The OECD Centre for Tax Policy and Administration has pegged Canada's tax levels at well below the OECD average before the Harper GST cuts. Manning is inventing something he can't substantiate.

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