Monday, March 10, 2008

Widdling the budget surplus cushion

On Wednesday, parliament passed Liberal Dan McTeague private member bill C-253 158-122. Should the bill pass through the Senate it would allow RESP contributions to be tax deductible the same way as RRSP. The passage of this bill causes a number of problems for both the Conservatives and the Liberals.

When the Liberals were in power they created a $3 billion contingency fund that would go towards the deficit. This money was not counted as part of the budget surplus. The Conservatives have abandoned this practise and the only left a $2.3 billion surplus for this year. Latest estimates put the cost of the change to the RESP at $900 million.

When this bill was first introduced the government was still working with double digit surpluses. One of the Liberals complaints about the current budget was that it didn't contain enough of a buffer for the pending economic downturn. Cutting the buffer even more doesn't seem fiscally prudent. A deficit under the Conservatives watch will be a plus for the Liberals. If this legislation causes the the deficit the public backlash may be directed at the Liberal party. The plus side for the Liberals is that they now will have fiscal legislation they can take credit for from the opposition benches. This legislation will likely be popular.

There is great conflict of how the Senate should handle this legislation. Harper has asked the Senate to kill it because it could be harmful to the government finances. The Conservatives have also been attacking the Senate for ignoring the will of parliament by holding up legislation. If the Senate passes the legislation quickly it will be open to criticism that they show partisanship by prioritzing legislation that benefits the Liberal party. The only choice the Senate has is to ignore party politics, do their job of evaluating the legislation on it's own merits. Under those criteria it is impossible to guess if the legislation will recieve Royal Asscent.

The bottom line is this is a piece of legislation that addresses the long standing complaint that the federal government is ignoring the financial burden of post secondary education. The timing of passing private member bills is completly unpredicatable. This legislation was passed at the worst possible time. It would be better suited as a plank in the platform for the next federal election.

No comments: