OTTAWA—In the spring of 1987, at a conference of western Canadian activists in Vancouver, Stephen Harper showed up with an 11-point “Taxpayers Reform Agenda” that attacked the traditional political class in Ottawa and called for the implementation of a “new economics” of smaller, leaner government.

More than two decades later, Harper is still pursuing the goal of transforming Canada into a more right-wing nation along the lines envisioned by the likes of Margaret Thatcher and Ronald Reagan.

During five years in power, the Prime Minister and his colleagues have relentlessly anchored their economic strategy on this goal. They have done so by shedding government programs, shifting cash resources to the provinces and, above all, hamstringing Ottawa’s ability to act in future by reducing its financial clout through personal and corporate income tax cuts.

“I said for a long time, and nobody listened to me for the longest time, that my goal was to make conservatism the natural government philosophy of the country,” Harper said in a published interview during the 2008 election campaign. And he believes it’s working, he told reporters.

In practice, this five-year campaign has quietly reshaped the socioeconomic face of the country by altering the way Canadians pay for programs and services funded by the national government.

Altogether, tax cuts decreed by the Conservatives since 2006 will result in foregone federal revenues of $220 billion between 2007 and 2013. Of that, $60 billion in tax savings go to Canadian corporations.

And much of these tax reductions will be paid for with borrowed money. Over the same period, Ottawa will record a cumulative $169 billion deficit.

“They have really implemented the tax cut agenda they championed when in opposition,” said Andrew Jackson, chief economist with the Canadian Labour Congress.

In the long term, this will undercut the federal government’s capacity to support social and economic programs, Jackson said. “It’s a classic conservative strategy — starving the beast, as they say.”

One of the Conservatives’ most politically effective initiatives was reducing the Goods and Services Tax, a move that deprives Ottawa of $13 billion a year in revenue.

On the corporate side, Harper is determined to keep phasing in income tax cuts for business — a $10.4 billion reduction in 2011-12 — at a time when Canada is already internationally competitive on tax rates and when Ottawa is recording historic deficits.

Businesses say tax cuts encourage corporate investments that boost the economy and create jobs. But there’s no compelling evidence that increased profits will produce the desired affect.

Another drain on Ottawa’s financial wherewithal is the 2009 Tax-Free Savings Account, which in time will cost the government at least $3 billion annually in foregone revenue. Because these accounts are most useful to the rich, rather than average cash-strapped Canadian families, critics labelled the measure an upper-income tax cut in disguise.

The overall impact of the Conservative tax reductions in Canada has been to intensify the inequalities in wealth across society.

According to Toronto research agency Investor Economics, the richest 3.8 per cent of Canadian households controlled 66.6 per cent of all financial wealth (not counting real estate) by 2009, up from 60.6 per cent in 2005 just before the Conservatives came to power.

And the agency predicts the portion of financial wealth controlled by this richest group of Canadians is headed for 70 per cent by 2018.

In a study entitled The Rise of Canada’s Richest 1%, economist Armine Yalnizyan concluded, “Reductions in personal income taxes, tax exemptions for savings and cuts to consumption taxes disproportionately helped the most affluent and actually made life harder for most Canadians, particularly those with the lowest incomes.”

Middle-class incomes are stagnant and unemployment, which stood at 6.6 per cent when Harper was sworn in, is now stuck at 7.6 per cent, with 1.4 million out of work. What’s more, the jobs picture is expected to improve only moderately this year. And the ratio of household debt-to-disposable income in Canada has reached a record 148 per cent, higher than comparable rates in the recession-battered United States.

Concerns are also mounting about a widespread lack of pension savings, the rising cost of post-secondary education and how Canada will pay for health care for an aging population.

When Harper moved into 24 Sussex, the economy was coming off a year of robust, 2.9 per cent growth. Now, dragged down by the global recession, Canada faces tepid growth of 2.3 per cent. And the Bank of Canada warns that a graying workforce and flagging industrial efficiency will hold down the economy for years.

Loading... Loading... Loading... Loading... Loading... Loading...

While elected on a platform of restraint, Harper’s government has run up budget deficits for the first time since 1996. For 2009 and 2010, the Tories’ economic stimulus created a combined $101 billion deficit.

Flaherty hopes to balance the books by 2015 by reducing the pace of growth of the $276 billion budget.

“It’s doable but it will require some real restraint on the spending side in the next few years,” BMO economist Doug Porter said of the Conservatives’ restraint plan. “And, of course, events have a way of getting in the way of projections. It’s much easier to talk about spending restraint than actually doing it.”

Read more about: