What Liberals Didn’t Tell You – Economic Update

By now you’ve probably seen the business and finance analysis of the Liberals fall economic update in the newspapers, and so forth, from last week. You probably haven’t seen the political analysis, or explanation, of why the Liberals are doing this because it’s not for economic reasons. Economically, what the business people and economists were arguing for was a general reform of the business tax system to make it more efficient. What the Liberals did was some very specific, short term related measures that will boost the economy short term. Now the Liberals did this for two specific reasons; one, they are scared of a recession happening in the next year or two, they need to be able to make sure that until the election, there is no recession in Canada. So what they did, instead of changing the overall structure of the business tax code, is they did some things that would encourage a short term boost for about one year; increased purchases and companies moving purchases forward into next year. The second thing they did, they targeted their tax measures to manufacturing industry. Why would they have done that instead of going for all countries across Canada? Well the manufacturing industry in Canada tends to be disproportionally represented in Ontario and areas where the Liberals hold seats. So what the Liberals were trying to do is encourage manufacturing companies to spend money next year that they might have spent over two, three, or four years, so as to make sure there’s no recession, particularly in Ontario. Now, I think it’s clever politics, I don’t think it’s good economic policy. What they should have done is made a simpler, lower corporate tax rate, instead of carving out these special tax deals for certain types of industries. Again, that’s my opinion; sharp politics by the Liberals not the greatest policy. And again, as per usual with the Liberals, they favour one part of the country over the other.