Deficit hawks’ blind spot on fair taxation and inequality
A recent C.D Howe report chastises the government’s commitment to implement national pharmacare and child care, while ignoring new fiscal tools at our disposal.
Read moreSpeech from the Throne: Ambitious but Vague
There is a lot for progressives to like in the Speech from the Throne – promises of major new federal investments in child care, health care, including pharmacare, green jobs, affordable housing, training, the future of first nations, and so on. But experience tells us that we should wait until the next budget before breaking out the bubbly.
Liberal governments are very good at promises, and they seem to have heeded calls to be bold. But we have seen many of these promises many times, not least the promise to build a national early learning and child care program which dates back to the election of the Chretien government back in 1992, almost thirty years ago.
The Speech, as expected, outlines an immediate response to the pandemic which is very far from being over. One can argue that it seems to respond positively to immediate needs, while also noting that is taking far too much time to deal with the crisis in long term care homes which killed thousands of seniors last Spring.
We are now going into a second wave with little further clarity about what will replace the CERB income support program for many families still dealing with high unemployment and short hours. It looks as though some workers will not get into a revamped Employment Insurance program, and that benefits will be cut from the CERB level of $2000 per month.
The pivot to building back better, to fixing the long-standing cracks in our social and income support programs revealed by the pandemic, is very much present in the speech. It outlines a broad reform agenda. But it says almost nothing about financing.
It is quite appropriate to run large deficits to deal with the health, social and employment impacts of the crisis and to fund new investments to replace lost jobs. But we cannot build a strong social safety net for the long term without a long term plan to raise the needed revenues.
Here the Speech disappoints. There is a reference to the need to “tax extreme wealth inequality” but that turns out to mean only fairer taxation of stock options (promised by the Liberals back in the election of 2016), rather than a wealth tax or closing down tax loopholes for the top 1% such as the low tax rate on capital gains.
Similarly, there is a call for limiting corporate tax avoidance, but this applies only to the digital giants (as promised before) and the government is talking about further cutting corporate tax rates as part of the job creation strategy.
And the social agenda cannot really be described as bold and comprehensive.
Pharmacare is mentioned, but very much subject to finding willing provinces. The future of post secondary education is not mentioned. There is nothing on long-term income support reform. The call for a national early learning and child care program is there, but with few specifics and certainly no firm financial commitment.
Those who have called for a green jobs agenda led by the federal government will find some encouraging words, including commitments to building retrofits programs and production of zero emission vehicles.
The government is also making a commitment to greater equality for women in the job market, including through a new task force. And the speech addresses the need for programs to promote greater equality for racialized Canadians.
With only a minority government, the Liberals have tacked left. To what extent that turn translates into action will be revealed in the next budget.
Andrew Jackson is the former Chief Economist of the Canadian Labour Congress and the Senior Policy Advisor to the Broadbent Institute.
Seth Klein's war time analogy hits the right mark in the fight against climate change
Seth Klein, former Director of the BC office of the Canadian Centre for Policy Alternatives, is not the first to draw an analogy between war and the needed response to the global climate crisis. But his just-published new book, A Good War: Mobilizing for the Climate Emergency (ECW Press, 2020) stands out as a sustained and closely argued attempt to show that we can and must act on an almost unprecedented scale, drawing on the lessons of Canada in World War Two.
Klein begins by attacking the new climate denialism, the view that half measures like putting a price on carbon are sufficient to avert a climate catastrophe. Indeed, we have made almost no progress to date in terms of reducing greenhouse gas emissions at a national or global level. While the oil and gas industry, the banks and vested economic interests generally have worked to block effective action, there has also been a major failure on the part of political and even civil society leadership to effectively galvanize the public.
The war analogy and a close analysis of the World War Two experience provide grounds for optimism that big things can be accomplished given political will and popular support. Canada, almost overnight, became a major industrial power providing ships, planes and trucks as well as troops to the allied war effort. We went quickly from the Great Depression to full employment. Despite the sacrifices, such as rationing, living standards for many workers improved considerably due to abundant jobs, the rise of mass industrial unions, and expanded social programs such as mothers’ allowances and unemployment insurance.
When it came to financing the war, what had to be done was indeed done. Federal government debt soared, financed by the sale of billions of dollars of Victory Bonds to the public, with the assistance of the Bank of Canada which also directly financed war spending. Excess corporate profits were taxed heavily, personal income taxes were made much more progressive, and an inheritance tax was levied on large fortunes. The shift of productive capacity back to civilian use after the war ensured that the war debt fell quickly.
Klein shows in great deal that the war economy was essentially a planned, democratic socialist economy. Indeed it was lauded as such by Tommy Douglas and the CCF. All production was subordinated to the war effort, with resources allocated by central planners, including the famous “dollar a year” men seconded to the government by business. There was a major expansion of public ownership as crown corporations were established to build capacity where none had existed. Klein argues that the usual constraints of a so-called free market economy were cast aside, though the private sector still continued to exist as a means to an end.
Advocates of a Green New Deal such as Klein have argued that dealing with the climate crisis also requires climate justice, a full-scale assault on inequality to build social solidarity. This was largely achieved in war time. Today, climate justice will further entail recognition of Indigenous rights and taking the goal of just transition from the oil and gas economy for workers and communities very seriously.
It is often argued that painting too dark a picture of the magnitude of the climate crisis and playing up the scale of the needed transition works against effective mobilization of the public. Klein disagrees, though he is very aware of the dilemma, and manages to convey a great sense of optimism that radical change is both feasible and desirable.
The book does raise some questions for needed further discussion. First, how much resistance can one expect from corporate Canada to a radical economic agenda? To the extent that some in the corporate elite such as Mark Carney understand and are prepared to mitigate the climate crisis, the test will be the need to frontally challenge private control of investment. However, there are rather few signs that corporate Canada is prepared to really break from the dominant model of extractivism and staples driven economic growth.
Lastly, how does the global political economy constrain policies for climate justice in Canada? Klein rightly notes the need to support transition in the global south, but he says little about the constraints of trade and investment agreements, the pressures of competition from countries, like the United States, which remain wedded to the production and use of carbon, and the lack of national control over international capital flows.
Seth Klein's book should be read by all those who recognize the daunting scale of the climate crisis, and want to help build a movement which will lead to real change.
Andrew Jackson is the former Chief Economist of the Canadian Labour Congress and the Senior Policy Advisor to the Broadbent Institute.
Be Bold Minister Freeland
Newly appointed minister of finance Chrystia Freeland faces the daunting task of putting Canada on the path to a more sustainable and equitable future. Inevitably, even while rightly continuing to run a large deficit for now, she will have to make some tough choices between competing, urgent priorities.
Read moreCorporate Bailouts or a Long Term Post COVID Strategy?
The federal government has just announced a new program to expand loans to struggling non financial corporations – the Large Employer Emergency Financing Facility. It’s role deserves serious debate.
Read moreDealing with the Economic Impacts of COVID-19
At this time, it is impossible to know the course and consequences of COVID-19 cases arising from the novel coronavirus. A probable outcome seems to be a spread of the illness among the general population, before it stabilizes and/ or an effective vaccine is developed which could take several months or even longer
Read moreLiberal Income Tax Cut Costs a Lot, Accomplishes Little
A new report from the Parliamentary Budget Officer shows that the personal income tax cut proposed by the Trudeau Liberals will cost more in terms of lost revenue than first thought, and will strongly favour high income earners and families.
Read moreFair Taxes and Global Capitalism
In recent years, progressives and social democrats have begun to embrace a much bolder tax fairness agenda than was the case even five years ago. This is especially true in the United States where Democratic Presidential candidates Bernie Sanders and Elizabeth Warren have both made the case for a significant tax on large holdings of wealth, the closure of personal tax loopholes for investment income such as stock options, and serious corporate tax reform. In the 2019 federal election, the NDP similarly called for a wealth tax, higher taxation of capital gains in the personal income tax system, and a higher corporate tax rate.
Read moreThe Conservative Platform – Tax Cuts for the Affluent, Austerity for the Many
The Conservative platform put forward by Andrew Scheer delivers tax cuts for the relatively affluent, to be paid for by largely unspecified cuts to spending on social programs and public services. That is a poor deal for ordinary working families who get much more each year in program benefits like public health care and post-secondary education and child benefits and public pensions than they pay for in personal income taxes.
Read moreWhen Income Tax Cuts Leave You Worse Off
The competing personal income tax cuts proposed by the Liberal and Conservative parties in this federal election are almost identical in terms of goals and re-distributive impact, and neither advance a truly progressive agenda.
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