Monday, September 15, 2008

Canadian Election Watch - Day 9

The economy is the hot topic du jour, of course, with the US meltdown and the TSX closing the day at a loss of 500+ points. The Globe & Mail (coincidentally?) takes a look at the economic policies of the Liberals and Conservatives as part of their weekly series identifying various policy differences.

Note: I had written a section here about how anyone should have been able to predict the breach of the economic levees based on fiscally irresponsible conservative/centrist economic policies that historically have not worked and that have harmed Joe and Jane Average Citizen, but Blogger ate that part of my draft so I'm not writing it again. You'll get the drift from the rest of my post though and it did leave this link at the end of that bit intact: Free government cheese? That pretty much sums it up.

Now, back to that G&M article.

Tory cuts to the goods and services tax aside, in recent election campaigns the two parties have differed in the economic bells and whistles, but their general approaches to fiscal policy have been similar. Governments of the past decade have enjoyed healthy surpluses, and could promise new spending, tax cuts and improved transfers to the provinces without worrying much about where the money would come from.

Now, the global economy is on the brink of recession, Canada's economy has stalled and the surplus is slim. Some economists believe a further slide in the price of oil will push Ottawa into deficit for the first time since 1997. Politicians can no longer promise the world - especially if, like both the Tories and the Liberals, they also promise to stay out of the red.

As the economy zooms to the top of the list of public concerns, voters can pick, for the first time in over a decade, between two contrasting visions of how the government should interact with the economy. Well aware of the contrast, the parties intend to make as much political hay as they can.

We've seen the pattern here and in the US: left-leaning governments generally create surpluses (from all of those scary taxes) while the past few decades have seen right-leaning parties squandering them while cutting vital social programs, leaving their huge messes for someone else to clean up. It's become as predictable a cycle and the sun rising and setting.

If you're paying attention to the American election, you'll know that McCain is trying to pretend that his economic policies differ enough from the Bush administration's to make him The Reformer™. The problem with that, of course, is that he buys conservative economic policies in theory (whether he knows it or not since he admits he really doesn't know much about the economy to begin with) and, as much as he'd like to bring his style of change to Washington, he'd be fought tooth and nail every step of the way by the corporate interests and lobby groups that expect something in return for their undying support of the Republican party. I seriously doubt Mr So-called Maverick could stand up enough against the powers that be to make a dent in the status quo. Not that I think Obama stands much of a chance either. His willingness to "compromise" has shown that he can be persuaded to change his mind about basic liberal principles. No matter who wins, it'll either be more centrism or more right-leaning centrism.

As for their Canadian counterparts, we've already seen the ramifications of the broken income trust promise the Conservatives made the last time around. Apparently, they thought they could make up for that loss of billions for Canadians by slashing the GST a tad. A bandaid solution - just as last week's announcement of a diesel tax cut was yet another attempted stop gap measure that will be of little use in the long run.

What can we expect from the Conservatives this time? Witness the spin:

At the heart of the Conservatives' economic thrust is tax reduction. The Tories are campaigning on the GST cut already implemented, as well as their more recent cuts to income and corporate taxes. By kicking off their campaign with the diesel tax announcement, they're suggesting that the plethora of small but targeted tax cuts that worked well for them in the last election will likely figure prominently again.

Tax cuts, they say, have protected the Canadian economy from the U.S. downturn. Some troubled sectors may require direct measures on a short-term basis, but the preference is for permanent tax cuts, explained Jim Flaherty, the Finance Minister and MP running for re-election in Whitby, Ont.

"If we talk about fiscal and tax policy, we approach things in a fundamental, permanent way," he said in an interview. One-time subsidies "thrown at" troubled parts of the economy are often a waste of money, he argued.

"I'm not interested in that sort of ad hoc activity," he said, adding that the millions handed to the auto sector in the days before the election call came from a previously announced fund to spur innovation and does not constitute a subsidy.

Whatever you say there, Jim. Perhaps Mr Flaherty would like to explain why other parts of the manufacturing sector have been treated so brutally by his government. Where's their "innovation" investment? Flaherty and Steve will have a hard time convincing Ontarions and Quebecers that Conservative policies have helped their economic status.

The projected economic sag deepens in the other major cities of central Canada with Ottawa-Gatineau on track to post growth of only 1.8 per cent, its weakest performance in more than a decade, despite strong public-sector employment as the high-tech sector expansion has stalled and construction activity has been weak.

Montreal is expected to suffer its weakest growth in half a decade at 1.7 per cent, as its manufacturing sector struggles despite strength in the aerospace sector, and in its construction and services industries.

Toronto's manufacturing sector is also expected to fall again this year, offsetting solid construction activity and domestic demand, and limiting growth in its giant diversified economy to an anemic 1.3 per cent

Hamilton, meanwhile, will post the weakest growth of the cities covered in the latest outlook at 0.3 per cent, its worst performance since the early 1990s.

While the growth of cities in Western Canada has been outpacing those in the rest of the country most of the this decade, a separate report by a Western-based think-tank also released Monday, raised questions about whether those cities will have the long-term financing to sustain their expansions.

"The future fiscal sustainability of the West's big cities remains in doubt," said Casey Vander Ploeg, author of the report by the Canada West Foundation. "A lot depends on whether or not recently increased provincial and federal support for infrastructure will be sustained over the long-term and whether or not those governments are going to stay in the urban infrastructure game for the duration."

There are huge economic challenges ahead and the Conservatives have yet to prove that their plans will work to suit the changing landscape in this country.

On the other side of the coin we have the Liberals whose biggest obstacle right now is selling their carbon tax idea to the Canadian public. If they can't clearly and succinctly articulate exactly how their plan works - which I don't think they've done so far - they simply won't be able to sell it. The Cons, as they always do, simply cast the Liberals as the "tax and spend" party and for some Canadians, that seems to be enough of a reason not to support them. The philosophy of "tax and spend" however, has certainly not yielded the kind of economic collapse that Conservative (so-called "prudent") policies have wrought. That's where the disconnect lays in the minds of voters who view the word "tax" as evil - who refuse to admit that taxes are necessary to keep the country going. How else would we pay for our infrastructure, education programs, health care and so many other things? And just how does the average Canadian tax payer get ahead when tax cuts are going to corporations? That's the trickle down theory again. Cut them slack and they'll create more jobs unless, that is, they go bankrupt or use creative accounting while discouraging unionization to keep themselves afloat.

Does our tax system need to be reformed? Yes. You can't trust the Cons to do that in any meaningful way for Joe and Jane Average Canadian though and the Liberals need to improve their messaging. This kind of summary is not enough:

At the centre of the Liberals' fiscal proposals is a $15-billion shuffle of taxes and spending in the hopes of tackling global warming, cutting income tax and alleviating poverty at the same time.

Their Green Shift proposal would thrust the federal government's fiscal power into the centre of business operations, by imposing a carbon tax on greenhouse-gas emitters. The plan fully expects corporations to pass along the costs of the tax to consumers. And to help consumers and companies cover the cost, the Liberals would use their carbon-tax revenue to cut personal and corporate income tax.

The plan would likely be the biggest tax reform seen in decades in Canada, economists say.

It's not that I disagree with this plan. It's that I, along with too many others, need to know the direct impact it will have on my life and my economic status (ie. poverty).

The G&M article concludes with a handy summary of the fiscal policies of the two major parties. But, as I've written here before - and as we've seen again and again - what we see on paper often either vanishes or changes completely once the winning party takes over. I do know this, however: I would not trust a Conservative government to handle the current economic slowdown, recession, or whatever you'd like to call it and I'm not convinced that the centrist Liberals will differ enough and as quickly as necessary to really have an impact.

Put me in the "income redistribution" ie. Godless commie column. Something needs to change. We're a rich enough country to pull all of our poor out of poverty. We have absolutely no will to do it though. Since the centrists are so fond of the middle class, you'd think that boosting the poor a notch to actually make it to that economic level would be a winning strategy - a larger tax base with more spending and investment power. As it stands, however, it's just another day in paradise for far too many of us (especially those of us who are chronically ill) - in both countries. Hope? Change? I'm not seeing it.

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