Sunday, December 02, 2012

In Their Words: Conservatives Responsible For High Household Debt

Canada's dangerously high household debt is being caused by people spending beyond their means, this Conservative government has done everything possible to make sure Canadians continue to do just that.

In 2006 a newly elected Conservative government began lowering the GST with the explicit purpose of increasing consumer spending. The problem was that at the time consumer spending was already high, the lower consumption tax only encouraged Canadians to spend more and accumulate more debt.

A month before first taking power Stephen Harper boasted about how reducing the GST would encourage Canadians to spend even more. The CBC reported in December 2005 that Harper declared during a campaign stop that "a reduction would be "more effective in stimulating consumption than anything the government's proposing.""

Conservative MP John Baird echoed the sentiment a few months later, saying a lower GST would "spur consumer spending."  Another Tory MP (there are others, see below), this time Pierre Poilievre in the House of Commons said his government was again "reducing the GST to encourage more consumer spending".

All the while opposition members warned of the dangers from incentivizing Canadians to spend more. Liberal MP Francis Scarpaleggia in April 2006 stated in the House of Commons that "a GST cut only encourages more personal debt." And NDP MP Peggy Nash in 2007 said, "The last thing we need to be doing right now is stimulating consumer spending when consumer spending is already quite high."

The Conservatives not only ignored their warnings but also those from non-partisan institutions. In 2008 the government chose to also ignore the Certified General Accountants Association of Canada's warning that a lower GST could create higher levels of personal debt.

In helping to cause and in ignoring repeated warnings, this Conservative government is more that blameworthy for the situation Canada now finds itself in, a situation in which the Bank of Canada has just declared that household debt is the nation's biggest risk.

Currently Mark Carney, the bank's governor, is put in the unenviable position of deciding whether to raise interest rates which though would help stabilize personal debt levels could weaken economic recovery.

Whatever this Conservative government decides to get us out of this mess, they are at the very least partly responsible for us getting into it.

With household debt dangerously high, consumer spending still strong, and large government deficits forecast for years to come, there might be no better time for opposition parties to argue for higher consumption taxes. And though that is one thing Canadians might not buy, in the end, with this government, Canadians will definitely end up paying for it.

"[A GST reduction would be] more effective in stimulating consumption than anything the government's proposing." - Stephen Harper, Conservative Leader, December 2005

"As I say, there is strong consumer spending and strong consumer confidence; certainly the reduction of the GST plays some role there..." - Jim Flaherty, Conservative Finance Minister, November 23, 2006

"We brought in a huge tax cut to help spur investment, to help spur consumer spending in Canada. That was called a 15% reduction in the goods and services tax." - John Baird, Conservative MP, September 29, 2006

"That all resulted from 12 years of Liberal government, so why will the member not now join with our agenda of cutting taxes on capital gains, reducing the GST to encourage more consumer spending, and using tax incentives to get more apprentices into the trades?" - Pierre Poilievre, Conservative MP, April 6, 2006

"First, a GST cut encourages even more consumer debt and overstimulates an economy whose problem is not weak consumer spending but weak business investment." - Francis Scarpaleggia Liberal MP, April 11 2006

"Here the tax policies [including reducing the GST] are clearly skewed to encourage spending on certain items at a time when economists agree that stimulating consumer spending is the wrong way to go and can encourage inflation with higher interest rates as a result." - Senator Austin, May 20 2006

"Lower income taxes induce people to save more and to invest more in improving their skills and education, whereas lower consumption taxes simply encourage spending." - Anthony Rota, Liberal MP, March 27, 2007

"The other problem is those members are affirming the GST cut in the throne speech, and the government will go ahead with it. The last thing we need to be doing right now is stimulating consumer spending when consumer spending is already quite high." - Peggy Nash, NDP MP, October 25, 2007

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