Why Should I Care About the Deficit?

It's a simple formula: Today's deficit = tomorrow's tax increase.

You may think the money you borrow doesn't have to be repaid. Businessmen know better. In the world they inhabit, businesses with cash flow problems are businesses in trouble.

1. Tomorrow's tax increase = today's bad investment climate.

2. Today's bad investment climate = less investment today.

3. Less investment today = fewer jobs today, and tomorrow.

DEFICITS KILL JOBS, BECAUSE THEY KILL THE INVESTMENT THAT CREATES JOBS.

Oh, but you say, if tax rates are lowering, doesn't that encourage investment? Only stupid investment.

Let me give you a practical example. Suppose I offer you a stove that uses a special kind of fuel. Right now the fuel is cheaper than the alternative, but three years from now it will probably cost much more than the alternative. Would you pay money for a new furnace which burns my temporarily cheaper fuel? No you wouldn't. Would you invest in a province which temporarily has a lower tax rate, but which has deficits leading to a higher tax rate in the future? Answer: you would ONLY if you plan to get out before the tax rate goes back up.

In other words, you'll create some short term jobs, but if you're planning to create long term wealth from an ongoing investment, you'll seek a financially stable (low debt/low tax rate) jurisdiction.

Can you see now how the Liberal approach encourages short-term, handout-dependent industries?

Oh but you say, if there's growth, we won't need to raise tax rates, the growth will take care of that. That's true, and also unlikely to happen. The more investment you attract, the further you can spread the tax burden, and the lighter it is on everyone. Deficits push away investment, and the remaining industries know that. What do you think works harder, a horse in a team of 8 or a horse in a team of 4? Who do you think is more likely to be taxed higher in the future, a business starting in a low-debt jurisdiction or one starting in a high-debt jurisdiction.

Psychologically, we tend to heavily discount future events. We'll pay those bills later (or our grandchildren will), so why worry now? This ignores the reality of investment, which is: TODAY'S HIGH DEFICIT IS KILLING JOBS TODAY. Not when the debt comes due, not 10 years from now, but RIGHT NOW.