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In promising to take axe to federal spending, Maxime Bernier has fun with figures

Maxime Bernier rises during Question Period in the House of Commons on Parliament Hill in Ottawa, Tuesday, March 26, 2013. (Adrian Wyld/The Canadian Press)

Maxime Bernier is arguably the front-runner in the Conservative leadership race and yet you don’t hear much about one key part of his plans: slashing the size of the federal government with a proposal that will require huge spending cuts.

It’s no secret that Mr. Bernier wants to shrink government. That’s a central theme of his campaign.

But the sheer scale of his fiscal plans haven’t attracted much attention – partly because he is one candidate in a field of 14, and partly because he hasn’t provided much detail on his spending-cut plans.

They will have to be big. Mr. Bernier is promising deep tax cuts worth $42-billion to $47-billion a year. And he has also promised to eliminate a budget deficit forecast to be at $15-billion in 2021.

That means he has to come up with about $60-billion a year – roughly one-fifth of all government program spending.

Mr. Bernier contends that a large chunk of it would come from economic growth, which, he argues, will be stimulated by his tax cuts. But that would count on a unexpectedly strong economy – and even if his tax cuts were to lead to a boom, they would still force a Bernier government to cut federal spending by somewhere between $20-billion and $40-billion a year.

That would mean cutting at least the equivalent of the Department of National Defence – the army, the navy and the air force – and at the high end, it would be like cutting all federal health-care transfers to provinces, plus the departments of transport and natural resources.

Mostly, Mr. Bernier hasn’t identified specific cuts, but in an interview, he said it can be done. “It will be tough decisions, I agree,” he said.

He has proposed some policies that will save money, such as getting rid of the CRTC and privatizing Canada Post, but he’s not sure how much. “I don’t know. I didn’t do the math,” he said. As prime minister, he would launch a review of government spending, but he can’t say yet how much that would yield in reductions, or from which programs.

Mr. Bernier said it’s not surprising he has not yet worked out all spending details in a leadership campaign. He said he has put forward more policy than any leadership candidate – and to his credit, that is arguably true. “The principle is there. The cost is there,” he said.

But it’s the huge cost of Mr. Bernier’s tax-cut plans that raise the questions.

He’d start with eliminating the capital-gains tax and reducing the federal corporate tax rate to 10 per cent from 15 per cent. He argues that would be an economic jolt that would stimulate investment and growth. But it would immediately reduce revenue by about $12-billion a year.

Mr. Bernier said he’d pay for that by cutting corporate welfare, referring to a University of Calgary study that identified $16-billion in subsidies. He said he thinks he could eliminate $7-billion to $9-billion in loans and grants to companies and cut regional development agencies, such as the Atlantic Canada Opportunities Agency.

He also promises to slash personal income taxes. He’d raise the basic exemption to $15,000 and leave only two tax brackets: 15 per cent on income from $15,000 to $100,000 and 25 per cent over it. That’s a big cut for nearly everyone. It would also cost the treasury $30-billion to $35-billion a year, according to Mr. Bernier.

But he hasn’t identified how he’d pay for it. His income-tax plan is a bigger version of a Fraser Institute proposal, but the think tank proposed to pay for it by eliminating $20-billion in tax credits. Mr. Bernier points to the same list of tax breaks but would only eliminate a few – “boutique” credits (for example, those for a tradesman’s tools) that the Stephen Harper government created “to buy votes.” Mr. Bernier said he won’t eliminate the big ones on the Fraser Institute’s list – politically sensitive credits, such as the age credit for senior citizens, the disability credit and the medical-expenses deduction. It’s hard to imagine he would cut even $1-billion worth of credits.

Mr. Bernier said he expects economic growth would pay for half the cost of his income-tax cuts, $15-billion to $18-billion. If need be, he would not introduce those tax cuts till the fourth year of a mandate. Even so, his tax cuts mean he’s running on a dramatic shrinking of the federal government.