Ignatieff takes aim at deficit

Michael Ignatieff is preparing to embark on a politically risky “adult conversation” with Canadians about the painful measures necessary to eliminate the country’s ballooning deficit — including the possibility of tax hikes.

OTTAWA — Michael Ignatieff is preparing to embark on a politically risky “adult conversation” with Canadians about the painful measures necessary to eliminate the country’s ballooning deficit — including the possibility of tax hikes.

Senior party insiders told The Canadian Press that the Liberal leader is about to launch a blunt discussion of the realistic options available for staunching the flow of red ink.

That includes tax increases, major spending cuts, remaining mired in deficit for years longer than anticipated, or some combination of the three.

Ignatieff won’t disclose his own prescription for taming the deficit until the brink of an election, which now seems unlikely this year.

Insiders say he wants a better idea of just how bad the fiscal books are and how willing voters are to bite the bullet before making any detailed proposal.

Still, by showing a willingness to even broach the hot-button issues of tax hikes and budget slashing, Ignatieff is taking a huge risk.

Voters typically balk at the notion of paying more taxes, even for a good cause — as Ignatieff’s predecessor, Stephane Dion, discovered when he proposed a carbon tax during the last election.

And the governing Conservatives are masters at framing the tax debate in its most simplistic terms: Taxes are bad; big-spending Liberals want to make you pay more.

Ignatieff felt the impact of the Tory spin machine last spring when he mused that tax hikes might be necessary down the road. The Tories pounced instantly and Ignatieff reversed himself before the day was out.

But insiders say that was before this fiscal year’s deficit had ballooned to $56 billion — the largest deficit in Canadian history despite Prime Minister Stephen Harper’s assurances only a year ago that the country could weather the global recession without plunging back into the red.

And it was before independent parliamentary budget officer Kevin Page had forecast a structural deficit of almost $12 billion by 2013-14 — a figure Liberals expect to go up in Page’s next report in a couple of weeks.

They say Ignatieff is now willing to gamble that Canadians want some honest, straight talk about the true depth of the deficit hole, and that they already know that climbing out of it cannot be pain-free.

“It’s the elephant in the room,” said one strategist.

Ignatieff intends to kick off discussion of the tough choices ahead with a speech Thursday to the Chamber of Commerce in London, Ont. That will be followed by a series of townhall-style meetings to engage Canadians in the debate.

For the past few days, Ignatieff has been laying the groundwork for the debate with repeated attempts to demonstrate that the Tories’ relatively rosy fiscal projections are misleading, if not an outright lie.

Harper and Finance Minister Jim Flaherty maintain the deficit can be eliminated by 2015-16 through economic growth and some unspecified government belt-tightening. They’ve vowed not to raise taxes or slash transfer payments to the provinces for health care, post-secondary education and social assistance.

On Wednesday, Ignatieff slammed the government for including a stealth tax in last month’s economic update: $15.5 billion worth of increased employment insurance premiums.

He pounced on a report by economist Dale Orr, who argued that increasing payroll taxes is one of the worst things a government can do as the economy is struggling to recover from a job-killing recession.

“Will the prime minister admit that his way out of his own deficit is to raise taxes and do so in such a way that it kills jobs?” Ignatieff demanded Thursday in the House of Commons.

The government maintains the premium hikes are not a traditional tax increase but simply a temporary adjustment as a result of the way the EI program is structured to maintain an account balance over time.

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