Terence Corcoran article today, which argues that the Tories have "lost the tax edge":
The Prime Minister's strategists appear to have stumbled on a novel election strategy and slogan: "Tory Times are Tough." In year-end interviews, both Stephen Harper and his Finance Minister, Jim Flaherty, took what looked like unseemly delight in highlighting economic uncertainty. The United States is in a slump, said Mr. Harper, and it will spill over into Canada. That means fiscal tightness in Canada, a stand-pat fiscal stance, and no room for new tax cuts. Adding to the glooming of the Canadian economy, Mr. Harper warned that the Conservative climate-change measures will begin to "bite," further slowing growth.
Some taxes were cut. As promised, the GST was reduced to 5% this week, and a few other tax measures were rolled out in Mr. Flaherty's last fiscal statement. But now we learn there's nothing more to come, news the government seemed all too keen to deliver.
Flashback to the mini-budget, where Flaherty decided to introduce tax cuts straight away, instead of waiting for next year's budget. A curious decision, because there was little to suggest the Liberals were ready to fight an election over the mini-budget. If you want to maximize the political benefits of tax cuts, it seems pretty basic that you unveil the goodies just prior to an election. Instead, Flaherty delivers tax relief, debatable as it may be, in an environment that generated little momentum, and even worse, leaves little room to move when it may matter most.
The more confusing part, the Conservatives deliver the mini-budget which conveyed a very optimistic message, and then almost immediately the tone changes to negativity, which became quite clear in the year end Prime Minister interviews. All of sudden, the government is warning of lightening's, uncertainty, diminishing revenues, a pessimistic forecast. How do you reconcile this stance with the spirit of the mini-budget? Did things change so fundamentally in a matter of weeks? Would Harper and Flaherty be forced to offer negativity, if they hadn't sold the farm in the mini-budget? In many respects, the government actually set the stage for the negativity we see know, through their earlier actions.
Clearly, the future economic situation was relatively the same at the end of October as it was prior to Christmas. Why the Conservatives would rush all these tax cuts, make many retroactive, with full knowledge that it would handicap any further movement in 2008 is politically suspect. Instead of presenting a feel good budget, the government is now faced with arguing negativity to justify the tightening financial picture. I'm not sure anyone could argue that the Conservatives have handled the taxcut issue very well, in a bizarre way they are now on the defensive. Instead of room, we now are faced with doom and gloom, and most of it comes as a result of the government's own decisions. Strange.