Thursday, July 28, 2011

Taxing Questions

Over the coming days, we will learn whether U.S. lawmakers have been able to reach a compromise on how best to tackle the federal deficit. Already this week we have seen both President Obama and the Republican Speaker of the House of Representatives, John Boehner, make their respective pitches to Americans.

While all sides agree that spending needs to be curtailed, there are differing views as to by how much and in what areas. That there are differing views on government spending is normal and in fact healthy. We are about to embark on a similar such debate here in Canada.

However, where the divide between the two sides is more pronounced and the debate potentially less healthy is on the question of taxes. More specifically, should taxes be increased to bolster government revenues?

The Democrats would favour some increases as part of what the President has called a balanced approach. The Republicans favour no increases. At all.

This intransigence on the question of taxes, while rooted in the Republican mindset, is becoming further entrenched due to the presence of the Tea Party - a group which is fast becoming the conscience of Republican party. Republican lawmakers have both an eye forward to the 2012 elections and the memories of the 2010 elections, and know that they need the support of the Tea Party.

On or before August 2, we will have a better sense as to how this conflict of views plays out. In the weeks that follow, we will also see how the markets, rating agencies and the public respond.

As we watch this all unfold, it is useful to consider whether there are any lessons for Canada. To date, the discussion as far as Canada is concerned has been about the parallels between what is happening in the U.S. today and what happened in Canada in the 1990s, when we embarked on a deficit reduction program.

To be sure there are useful comparisons that can be made, particularly as it relates to how to implement program cuts. However, the area which interests me and which I think we need to consider more fully in Canada is the question of taxes.

The Conservative Party of Canada does not favour tax increases - quite the opposite. Their long-term focus is on further reducing taxes. This is the mindset that drove the GST cuts, and is the mindset which will further govern how they manage Canada's economy.

There are real similarities here with the Republican position. Unfortunately, in the U.S. this position has over the past three decades effectively taken off of the table one of the major tools available to a government to manage the affairs of state. Pity the politician in the U.S. who openly contemplates a tax increase, regardless of the need it could serve.

Unfortunately, this "stigmatization" of taxes is becoming more and more a part of our political discourse in Canada. We are not far from the point where the merits of a policy initiative or course of action take a back seat to rhetoric on taxes.

When considering any new initiative, costs have to be considered and choices need to be made. One of the choices should be around whether taxes are an appropriate and effective means of funding an initiative. The U.S. has taken this off of the table, which in part has fueled the crisis in which they find themselves.

A lesson for us? We would do ourselves a favour in Canada if we pulled back from the current path we are on, and resist the temptation to take taxes off of the table. Good policy requires a thoughtful consideration of all of the options.

Monday, July 25, 2011

The NDP Needs Jack, But So Does Canada

Earlier today Official Opposition Leader Jack Layton announced that he is temporarily stepping aside to receive treatment for a second bout of cancer. Both the announcement and the appearance of Mr. Layton surprised many, as he appeared to be in fine form as recently as June when Parliament broke for its summer break.

The immediate reaction can be broken into two categories. The first was sympathy and concern for the well-being of someone who is respected in politics. Canadians, by and large, like Mr. Layton - his enthusiasm, positivity, and ability to be committed to his principles without being blinded by them.

The second category of reaction is more focused on the impact this could have on the NDP. As one commentator noted, he has become more than just the leader of the NDP - for many voters he is the NDP. While all parties thrive or falter based on the popularity of the leader to some degree, the story is more pronounced for the NDP.

The success of the NDP in May was largely driven, particularly in Quebec, by the appeal and popularity of Mr. Layton. And now he is temporarily stepping aside in what continues to be a very formative period for this new NDP.

For caucus members who should still be basking in the glow of their May breakthrough, the immediate future holds innumerable questions about Mr. Layton's health. Similarly, for a party which should be looking to the future with hope, there is a danger of becoming somewhat introspective. This is the challenge with having a leader-based narrative - they become the story.

But for me, the issue is broader than that. Mr. Layton is not just the leader of the NDP. He is the Leader of the Official Opposition and the principal critic of government.

His role tasks him with the responsibility of holding the government to account; with offering Canadians an alternative perspective on how their money is spent, their environment is protected, their security ensured and their country governed.

As we consider the challenges, opportunities and choices in front of us, we need strong voices to share all perspectives and alternatives. You don't have to agree with his politics to see that Mr. Layton offers such a voice.

So yes, the NDP needs Mr. Layton back and ready for action. But so does Canada.

Sunday, July 17, 2011

It's My Planet Too

Imagine you owned a home and that home required major work. A new roof, foundation repair, something structural and unquestionably expensive. You know it will be hard on your wallet to get it done, so you decide not to - even though the reasons for doing it are compelling and the cost of not doing anything could be far greater down the road.

Instead you decide to spend money on aesthetic improvements, like painting, or on amenities. Things that make you feel better when you are in the house, but do nothing to address your real problems. An outside observer would call this decision-making shortsighted.

Heads-up Canada, this is exactly how we are making climate change policy in our country.

Jeffrey Simpson has just written a good piece in the Globe and Mail on how Australia is trying to come to grips with the climate change question. His piece accurately describes the challenges a government faces when trying to tackle a long-term problem with solutions which are seen as expensive, and which do not deliver a "visible" benefit for some time.

Canadian policy-makers have been trying to get their head around this issue since the 1990s, with little success. Yes we ratified Kyoto, but did not take any of the difficult decisions that meeting our commitments required. We have done small things to improve and promote energy efficiency, but have studiously avoided meaningful debate on the oil sands and pricing carbon.

Sadly, despite being a country with a lot at stake, our federal government has played at the margins on an issue which could define the next century. Policy-makers have mastered the art of having "half the conversation". Some examples...

- The government has made great fanfare about its plans for asserting and protecting our Arctic sovereignty, yet has not highlighted the fact that climate change and its effect on sea lanes has helped to make the arctic such a pressing issue.

- Tremendous effort has been expended dealing with natural disaster at home and abroad, but there has been little if anything from government about the role climate change is playing on weather patterns and disasters which are becoming less freak and more the norm.

- Energy policy, and in particular discussions on the oil sands, rightly highlights the security aspect of Canadian energy but wrongly fails to acknowledge the trade-off in terms of the environmental impact of oil sands development.

By only having half the conversation, our policy makers are limiting discussion about the linkages between climate change and a host of public policy issues. Why? Because of the potential political ramifications. Those who do try are attacked and marginalized, first by their political opponents and then by a public which too often is more concerned with the here and now and not the long game.

Not for the first time, it may come down to the provinces to move the yard sticks in Canada. Lead by British Columbia and Quebec, the provinces (and their stateside colleagues) may be able to implement policies which demonstrate leadership and de-mystify the economic impact arguments of this opposed to taking real action.

As promising as that may be, it also serves as another indictment of federal policy on an issue which is no longer emerging. Climate change is here and Canadians need to see the Government of Canada tackling the issue with the seriousness it deserves.

So to MPs currently on summer break, please take a moment to consider what climate change might mean for the people in your riding. Think about it from a health issue, consider the economics (short-term and long-term), consider the impact of weather on food production. Think about your role as a steward for this country; about being a government holding Canada in trust for current and future generations.

Please. It's my planet too!

Monday, July 11, 2011

You can't have responsible government without responsible voters

The topic of voter apathy popped back into the news in recent days. Statistics Canada is reporting 23% of all eligible voters did not vote because they were not interested. I find this frustrating.

There are lots of things I don't do because I am not interested. I don't see movies or read books that don't interest me. I don't visit or vacation in places for which I have little interest. You get the point.

However, there is a category of things that I choose to do to even if they don't necessarily interest me. I follow news stories that don't always interest me, but which are nevertheless important enough that I feel I should stay informed. I talk with people at events - as they do with me - even if the topic isn't interesting. This is about being polite.

Finally, there are things I have to do whether they interest me or not. We all have some of that at work, for example.

So where does or should voting fit in? There is no easy answer.

Some argue that the root of our apathy lies in the dysfunction of our politics; that the squabbling, partisanship and the focus on "in the bubble" issues have created a disconnect between the voter and the democratic process. People aren't connecting because (a) the issues are not theirs and (b) the theatre of our politics is off-putting.

Another argument is that the way we vote is out of touch with a 21st century communications world. Lines, booths and slips of paper don't cut it in a 140-character, high speed, "give it to me quick world." The youth voter, the argument goes, is disconnected from the process of voting.

My thoughts?

I agree that our politics is flawed and is too often showing a disconnect between what is important to Canadians and what is discussed in Ottawa. Scandal increasingly trumps substance, and it is something which all of the parties have allowed to happen (and in some cases preferred to happen). I also agree that we should look for ways to introduce more technology into the voting process.

However, I think too often we are looking for easy answers and opportunities to point fingers. I get frustrated when I hear someone did not vote because it takes too much time, or because the issues did not appeal to them. A decision not to vote is being made the fault of someone else.

For me, these arguments reveal a disappointing absence of a sense of responsibility; responsibility which should be inherent in a healthy democracy. To say "make it compelling for me", or "make it easier for me" suggests that participation in the democratic process of your country should be driven by the same motivations behind going to a movie or choosing what to watch on television.

The problem of voter apathy is a collective one. Our politics needs to be more responsive to the challenges and opportunities we face. Our process needs to embrace 21st century technology. And we, the voter, need to step outside of our current mindset and rediscover the concept of civic duty and responsibility.

The birth of responsible government in Canada was a significant milestone in our development as a nation. However, for responsible government to work you need responsible voters. Interested?

Monday, July 4, 2011

A Royal Mess

In recent days, our papers, tweets and news stories have been filled with the latest surrounding the royal visit to Canada. Well, here in the hallowed halls of A Guy Watching Politics, we decided to get on board with such regal themes - but in our own way.

Now, before any of you monarchists reading this shout "off with his head", I should clarify. When I say "royal mess" I am not referring to the state of our constitutional monarchy. What I am referring to is the global economy; something Canada needs to see stabilize or our deficit reduction plan could get know.

By now we all know the lines. The recent financial crisis was the worst faced since the Great Depression - true. But Canada fared better than most western countries due in part to the regulatory framework governing its financial institutions - also true.

This is not to say we didn't suffer. A quick look at our deficit and our job loss numbers will illustrate how difficult this was for Canada. Yet while it may have cost us a King's ransom, in the end we came through better than many of our global colleagues.

So what is the danger now?

Recall that we entered the initial crisis in relative good economic health. Yes, we were already running a small deficit, but by and large we were in good shape. The measures taken in the 1990s helped ensure we were able to better withstand the crisis than others with poorer public finances.

However, should the global economy enter into another such crisis, this time arising from sovereign debt in the EU and the US, what tools are left to help us? Interest rates can't be lowered and governments do not have the capacity to take on more debt, as states are running huge deficits.

In 2008-2010, we had monetary and fiscal space within which to act. This is no longer the case - our toolbox isn't empty, but we have used the best tools already. Not just Canada, but everyone.

This in part explains the strong interest in states like Canada and the U.K. to review public spending. Governments need to get back to a stronger financial footing sooner rather than later, in the event that things do not improve. If economic growth cannot be counted on to get you out of deficit, public spending has to be addressed. Sadly, this truism is lacking from our political discourse.


So dear reader, when you see yourself getting transfixed by the latest comings and goings of the royal visit, consider the following:

- the global economy is in somewhat of a royal mess;

- we paid a King's ransom in terms of job loss, lowered interest rates and massive injections of government dollars to survive the initial crisis;

- today, governments' ability to withstand a similar such crisis is more limited as they have already used the tools available leaving them in a position in which all the King's horses and all the King's men might be unable to fix the economy again.

All to say, our policy makers face some hard facts and tough choices. What are they doing to prepare Canada and Canadians for what might come our way? This should be a major topic of discussion, but it isn't. This is something on which government should be engaging public opinion. They are not.

I know it isn't always pleasant for a government to seek views and open debate on such controversial topics. However, as the saying goes heavy is the head that wears the Crown...
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