The Broadbent Blog


Election of Hillary Clinton May Support New Deal for Canadians

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The results of United States Presidential elections always have major implications for Canadians. This time around, we may just see a boost to progressive politics North of the border.

It seems likely that Hillary Clinton will win big over Donald Trump, and that Democrats will also do very well in the Senate and House races, perhaps sufficiently well to win control of both Houses. 

Both Clinton and the Democratic Party have adopted more left-leaning and progressive platforms than has been the case for many years. This is mainly a result of the Bernie Sanders insurgency which won almost one half of the Democratic Party base and millions of mainly young voters to the banner of social democracy, something not seen in the United States since the New Deal. 

Democrats after the election will also likely want to re-connect with traditional white working-class supporters by selectively embracing Donald Trump's brand of economic populism. Sanders and Trump are hugely different, but both attacked corporate elites for selling out good jobs and spoke to the prolonged decline of the working-class in an era of soaring economic inequality.

The first big implication of a Democratic victory is that growth and job creation in the United States will likely be given a boost through major public investments with important spillovers to Canada via higher exports and the desire to imitate potential success.

Hillary Clinton has promised a strong focus on public infrastructure, clean energy and environmental transition measures , very much in the spirit of the stimulus program enacted at the start of President Obama's first term. She also promises an ambitious innovation agenda which will involve a major expansion of public programs and not just a one off fiscal stimulus.

The second big implication is that competitive pressures on Canadian governments to lower labour and social standards to United States levels may be alleviated.

The Democrats have strongly championed a $15 per hour federal minimum wage, which applies in almost all sectors engaged in inter State and international trade. They have also talked about applying a living wage standard to all federal government procurement, and promoting the recognition of trade unions and basic labour rights.

If these measures are enacted, the frequently invoked argument that higher minimum wages and expanded labour rights in Canada make us internationally uncompetitive will be much less credible.

Hillary Clinton and the Democrats have also promised to raise effective tax rates on very high income earners. Proposed measures include a minimum federal income tax rate of 30% on incomes of over $1 Million, a surtax on incomes of more than $5 Million, a sharply increased tax rate on short-term capital gains, and the end of so-called carried interest provision which treats the employment income of hedge fund managers as if it were a capital gain.

They have also promised a serious crackdown on corporate tax avoidance by parking assets in low tax jurisdictions abroad, and restoration of estate taxes on large inheritances.

If enacted, the room for Canadian governments to expand fiscal capacity and lessen inequality through progressive tax reform will be expanded, The Trudeau government may even be pushed to raise its progressive bona fides by similarly limiting  tax loopholes for the rich such as the stock options deduction and the highly preferential rate of taxation of capital gains.

We may also see a significant expansion of public and social  services in the United States with spin-off raised public expectations in Canada. Early learning and child care loom large in the Democratic agenda, as does free tuition for students in community colleges and public universities and colleges, and major reductions to current student debt.

The chances of President to be Hillary Clinton embracing a progressive agenda are strengthened by close links between her campaign and left-leaning US think tanks. Campaign Chair John Podesta is President of the Centre for American Progress, and key policy adviser Heather Boushey comes from the Centre for Equitable Growth.

The campaign is said to have closely consulted with well-known progressive economists such as Jared Bernstein, former economic adviser to Vice President Biden, and Nobel prize winning economist Joseph Stiglitz who is firmly focused on how to counter economic inequality and concentrated corporate power.

United States Democrats, like Canadian Liberals, tend to campaign on the left but govern from the right. But there are reasonable grounds to think that Hillary may yet outflank our Young New Leader as a leader for progressive change in North America.

 

Andrew Jackson is an Adjunct Research Professor in the Institute of Political Economy at Carleton University in Canada, and senior policy adviser to the Broadbent Institute.

Photo: Gage Skidmore. Used under a Creative Commons License.