NDP's cynical vows

by William Watson - from the Financial Post

Most of us didn't pay much attention to the NDP platform when it came out, on the then-reasonable assumption the party wasn't going anywhere near power, so the platform didn't really matter -which also seems to be the assumption the party itself made in writing it. But now that millions of non-readers are about to vote NDP, it's time to check out what, apart from smiling broadly, the party actually stands for.

The NDP platform, which is 26 pages long, contains 19 pictures of Jack Layton and 12 pages of text. Even so, those 12 pages list 146 bullets' worth of policy, with another 59 sub-bullets, for a grand total of 205 policy promises. The platform's title is Giving Your Family a Break: Practical First Steps. If there are 205 "first steps," how many second, third and fourth steps will there be?

The centrepiece of the platform is to raise the corporate tax rate from the 15% it's scheduled to hit next year to 19.5% and to use the resulting revenues to finance 66 of the "first steps" for which a separate three-page budget document provides cost estimates. The NDP must assume either that the almost one-third increase in the corporate rate won't affect employment and economic growth or that the benefits of expanded programs will offset the cost in jobs and output. Many critics of the Conservatives, including Prof. Henry Mintzberg of McGill University, argue corporate taxes don't have significant economic effects.

It's therefore very interesting that one of the costed NDP policy initiatives is to spend $1-billion a year cutting the tax rate for small businesses from 11% to 9%. When you're introducing 205 policy initiatives in just 12 pages of text, you don't get to spend a lot of time describing each one. About the cut in the small business rate, the platform says merely that it is "to support a sector of our economy that creates nearly half of all new jobs in Canada."

But wait a second. If small business creates less than half the new jobs in Canada, who creates the rest? Governments are responsible for some, though only to the extent they can find tax revenues to finance them. But nonsmall business, that is, big business, does much of the rest.

This promise appears in a section of the platform entitled "Reward the job creators." Strictly speaking, the platform doesn't say tax cuts will encourage small businesses to create new jobs. Maybe we just want to reward them for the good work already done -though $1-billion a year just to say thanks does seem excessive when we're in deep deficit. In fact, the strong implication is that cutting these businesses' taxes will cause them to hire more people.

But if cutting business taxes leads to more investment and jobs, doesn't that mean raising business taxes leads to less investment and fewer jobs? So why encourage small business investment and jobs at the expense of big business investment and jobs? Why have the government take a position in this way on which businesses create the next jobs? Read more...

NDP's cynical vows