Category Archives: Politics

100 billion dollar oil windfall for Canada? Not quite.

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With the hearing on the Northern Gateway pipeline having just begun, the oil industry is already on the offensive, pushing several reports that are proclaiming over a hundred billion in economic activity for the country as a result of the project. To the layman, hearing that one pipeline could bring in such a huge amount of money almost makes the environmental risks seem negligible. In an era of fiscal tightening, the pipeline seems to be an obvious economic boon. As I soon learnt, when things sound too good to be true, it’s because they are.

To get to the bottom of this, I went straight to the main source: a report from the University of Calgary’s School of Public Policy released late December. Here’s a blurb from the press release:

“With better access and new pipeline capacity, oil producers will see more efficient access to international markets which can add up to $131 billion to Canada’s GDP between 2016 and 2030,” the authors write. “This amounts to over $27 billion in federal, provincial and municipal tax receipts, along with an estimated 649,000 person-years of employment.”

Not surprisingly, Alberta, with its robust oil reserves, will be the principal beneficiary, but the authors stress that “most every single province and territory will realize fiscal and economic gains.”

“These are impressive figures,” concluded co-author Michal Moore. “The rewards of additional pipelines for all of Canada are too great to ignore.  Pipelines must be a national priority.”

The final paragraph is perhaps the most revealing in how dedicated the authors are to spin their meagre results. A real look at the numbers shows that, while the figures may be impressive to Alberta, there is a negligible benefit to the rest of the country. My analysis would argue vehemently with the conclusion that this project is in the national interest.

Another interesting element, hidden between the lines, is that these calculations are based not just on the Northern Gateway pipeline, but on the construction and expansion of several others, including the Keystone XL project currently on hold in the USA. Also, while the revenue windfall sounds large, it is important to acknowledge that this is on a 14 year time horizon.

Let’s take a look at the details.

The report is predicated on the realities of the existing market: world oil demand remains robust, but our main source for export is America, which has become saturated. In addition, oil sands bitumen faces bottlenecks in the mid-west, where current pipelines end, a ways from the large refineries in the Gulf Coast.

The report calls for the Keystone XL pipeline, which would directly connect the oil sands to the refineries in the Gulf, eliminating the production bottlenecks and opening up the resource to a larger market quicker. It also calls for expansion of pipelines down to California, where there is an excess of refinery space for the oil sands and ports for export. Finally, the Northern Gateway pipeline is deemed necessary to export the bitumen to Asian refineries, which would ultimately help the Albertan industry escape the captive American market and command higher prices. The financial conclusions assume that all three of these expansions are completed on schedule.

The report says that, from 2016 to 2030, the projects would create $131 billion in economic activity in Canada – let’s deconstruct that a bit. 87% of that figure results from the Keystone XL pipeline, while only 8% is derived from the Northern Gateway project. At eight percent, the economic boon drops down to $10 billion for the Gateway pipeline; over 14 years, that brings us to $750 million in economic activity annually.

That’s not the whole story though. 95% of that economic activity is destined for Alberta, with 2.7% for Ontario, 1.2% for BC, and the remaining going to the rest of the country. One of the most prominent narratives put forth by the oil industry and reinforced by the federal government is that Northern Gateway is in the ‘national interest’. Poppycock.

This project clearly benefits Alberta, and Alberta only. Considering BC is taking on the majority of the risk with regards to oil spills, the benefits are grossly in favour of the producer province rather than the coastal one. Additionally, if 95% of the economic activity of this pipeline remains in Alberta, how can one argue that this will improve the life of Canadians in Nova Scotia, Nunavut, or Quebec?

The answer to that question is often parlayed into the government royalties and tax revenues that will result from the project. The report collated the increased government revenues that will head into municipal, provincial, and federal coffers, and sorted those monies down by province. Let’s take a look.

In the media, one will see the figure of $27 billion dollars destined for our governments, money that presumably would help fund healthcare and education. Once again, that figure is for all three projects, one of which, Keystone, is expected to bring in $23 billion. The Northern Gateway pipeline actually only contributes $2.17 billion to that figure – over 14 years.

Again, the ‘windfall’, if it can be called that at this point, is not distributed fairly. 92% of the government revenues head to Alberta. 4.3% are destined for Ontario, 1.6% for BC, 1% for Quebec, and a pittance for the rest of the country. To BC, that means an additional $350 million over 14 years, or $25 million annually in government revenue. To put that into perspective, out of BC’s 2011 budget of $41.9 billion, $25 million amounts to 0.005% of the total provincial coffers. $25 million can buy 50 buses or one recreation centre or high school.

For argument’s sake, let’s assume all three projects went ahead, and that the government revenues were in fact in the national interest; how much of a windfall is $27 billion over 14 years. That equals almost $2 billion a year – sounds like a fair chunk of change, eh? However, within the context of Canada’s 2009 federal budget of $237 billion, it amounts to just 0.82% of annual federal spending. But, that’s irrelevant, as 92% will go to Alberta anyways.

Add it all together, and the promise of a multi-billion dollar boon that will propel our economy and fund our social programs, well, it doesn’t sound all that valid anymore. Would there be economic opportunities? Absolutely. But when over 90% goes to one province, it’s hardly in the ‘national interest’.

So let’s not pretend that by approving the Northern Gateway pipeline, our deficits will just disappear, our taxes can be lowered, and we can properly fund healthcare and education, because the numbers just don’t add up.

My renewed belief in the Liberals

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In previous posts, I had been an advocate of a Liberal-NDP merger. To me, the Liberals were clearly a centre-left party, and with Jack Layton pulling the NDP closer to the centre over his leadership, and gaining ground while the Liberals floundered, it seemed like a union was appropriate.

Following the 41st federal election, and the decimation of the Liberals, I contemplated seriously jumping ship and joining the New Democrat bandwagon. After all, they have the momentum, and if the Liberals can’t rebuild, seem poised to become the new home for progressives in the country.

However, after reading the first few chapters of Layton’s book, Speaking Out Louder, I’m convinced now more than ever about the need for the Liberal Party of Canada.

Layton makes frequent and abrasive attacks on corporations, trade, and the market. His arguments seem to stem from a belief that business equals greed, and therefore the government must adequately temper corporate power by essentially competing with it. He also held strong that trade agreements necessitate the loss of state sovereignty, a belief that felt oddly protectionist coming from a man with such a broad and interconnected view of the world. His calls for a much larger government, directly operating far more of our economy, had me thinking “socialist” for the first time ever.

I simply could not believe that Jack, the friendly politician who fought for working Canadians, could be so disconnected from the political and economic realities of history. My conclusion was that, although I share many of the same goals as Jack did, our means were quite different. This realization, I think, underlines the fundamental difference between the NDP and the Liberals: same goals, different means.

And so it is that I’ve changed my mind on a merger. Can the two parties cooperate together? Absolutely. That can manifest itself in many ways, although merger is not one of them. Canada needs a party that is socially progressive, and yet fiscally responsible in a way that understands the benefits of a mixed market economy. That arena can only be filled by the Liberals.

From #elxn41 to #elxn42: What happens next?

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It was an historic evening. Canadians were clearly ready for change. Harper secured his long coveted majority, the NDP have formed Official Opposition, the Liberals were decimated to third place for the first time in history, the Bloc no longer have official party status, and Elizabeth May became the first Green elected to major public office in North America. After nearly a decade of political stalemates in Ottawa, the entire map has been re-drawn. Welcome to a new era in Canadian politics.

Harper and the Conservatives

Stephen Harper accomplished what so many of his predecessors could not. Not only did he unite the right, a fundamental precursor to any of his post-2004 achievements, he has also balanced the demands of his hard right supporters with a tepid and concerned Canadian populace for the past five years. By taking small, often unheard of, steps towards dismantling long held Canadian federal institutions, he has given his base tangible measures of progress without confirming the suspicions of the majority of progressive Canadians who long feared his ‘hidden agenda’.

With his strong, stable, national majority government, Harper now has four years with a next-to-unlimited reign on power in Ottawa. He can push through legislation with little to no debate and can pursue any number of policies his party has long pushed for. But he won’t. Harper’s long stated goal has been to decimate the Liberals and replace them as the natural governing party of Canada – an objective towards which he is closer than ever.

Maintaining progress on this marker will necessitate a continuation of the moderation of his party. Harper is not about to reopen the abortion or gay marriage debates, understanding that doing so would simply anger the majority of the Canadian populace. It is unlikely that he would close the CBC either (confirmed by James Moore following this post’s writing). Pursuing such radical policies would be the best way to energize the left, loose his soft supporters, and be booted out of 24 Sussex in 2015.

With that in mind, Harper’s acceptance speech last night reaffirms his strategy. In perhaps his most statesman speech to date, Harper not only personally congratulated all the other party leaders for their campaigns, but reached out to all Canadians, committing to govern even for those who did not elect him. While the speech did little to rouse his crowd of Calgarian Conservatives, it went a long way towards crafting the persona of a new Stephen Harper and a moderate, populist agenda for the next four years.

With support in all provinces across the country, Harper has systematically, with the help of the split on the left, stolen all the bastions of the former Liberal fortress. The stability of the new Conservative base should not be underestimated – this is not the tense coalition of the West and Quebec nationalists of the Mulroney days. The Conservatives not only have the West; they’ve gained a strong foot hold in Atlantic Canada, in parts of Quebec, in much of Ontario, and even broken through in metropolitan Canada – all components of Chretien’s former Liberal base.

For Harper, the strategy will be to secure and cement his new base. Not only will he need to govern moderately, he will need to reach out to the Atlantic, to Quebec, to Ontario, and to the Canada’s metropolitan trifecta. With their strong fundraising abilities, and solid ground campaign, I have little doubt that the Conservatives will play their hand successfully.

Jack Layton’s New Democrats

Jack Layton became the leader of the NDP in 2003 and has been employing a slow but steady strategy to rebuild and expand NDP support across the country. To that end, Layton has much to celebrate with this historic achievement, proving that hard work over time will reap rewards.

In that regard, Layton has spent much of the past decade pursuing a strategy similar to the Conservatives. He has slowly been moving his party towards the populist centre, targeting key demographics, and wooing long neglected regions.

As was often pointed out near the end of the election, despite concerns about socialist policies from bankers and economists, most of the NDP’s economic plan was concurrent to that of the Liberals and the Tories – there were no big tax increases for the rich, no grand plans for the re-distribution of wealth. The NDP focused on policies that captured the attention of a majority of average Canadians: securing more doctors and nurses, strengthening pensions, reduce carbon emissions, pursuing a peace-first foreign policy. Their shift to the centre is clearer than ever before.

Layton’s new base is vast, both demographically and geographically. Seniors, students, working families, new Canadians – this is a strong group of support pulling from nearly the entire spectrum of the Canadian population. With NDP breakthroughs in Quebec in 2007 and Alberta in 2008, Layton has been working hard to secure and expand that support. The beachhead that is Thomas Mulcair helped usher in the Orange Crush that swept through Quebec and spread to Atlantic Canada and Ontario. With seats in nearly every province, the NDP now too can call themselves a truly national force.

I suspect concerns about the widely inexperienced MPs from Quebec will prove to be the least of Layton’s worries as he has a much more challenging task ahead of him. The NDP are now in a tremendous position of influence – perhaps not in terms of specific achievements in legislation, but rather in a symbolic seat with the potential to be viewed as a government-in-waiting. Layton has performed consistently as one of the most effective checks against Harper’s minority governments – I have no doubt he’ll be up for the job of Leader of the Opposition. What I am concerned about is whether Layton and the NDP will be able to make the jump from simply an opposition to a government-in-waiting.

It will require a new form of leadership from Layton. The NDP have always focused on their leader’s likeability, a strategy that has left him with an unidentifiable team. In their new role as critics of major portfolios, expect relatively unknown NPD MPs to emerge and present themselves to the Canadian public. Moving from a leader-strong to a strong-team strategy will be essential to create that government-in-waiting aura and prove that the NDP is more than just Jack Layton.

With four years until the next election, the NDP will have plenty of time to focus on their ground game to secure the gains made in this election and improve their organizational strength in ridings across the country. With public political funding on the verge of its death, building a strong fundraising machine composed of grassroots supporters will be essential to compete at a sufficient level with the Conservatives in 2015.

If they bring together a strong team for the air war, as well as a strong team for the ground war, the winds of change should remain solidly behind their sails. Outside of their own performance on the Hill, there are only two variables that could throw them off course: losing the support of notoriously fickle Quebecers or a resurgence in the Liberal Party.

However, if they are able to survive the next four years maintaining the goodwill of Quebec while facing a weak or perhaps even non-existant Liberal Party, the NDP will likely become the tent of progressives in Canada, allowing them to minimize vote splits on the left, pick up many of the 34 Liberal seats, and strongly contest a number of Conservative ridings as well. If it all plays out according to plan, and the NDP expands their growing support in BC, the Prairies, and especially Ontario, the numbers may just fall in their favour in 2015. ‘Prime Minister Jack Layton’ is no longer quite the joke it used to be.

The leaderless Liberals

Following what was then called a crushing defeat in the 2008 election, bringing the Liberals down from 103 seats to 77, the knives were drawn for then-leader Stephane Dion. Party insiders blamed his weak communication skills, his Green Shift carbon tax plan, and his non-agression pact with Elizabeth May for the depressing results. Quickly given the boot, the Liberals were once again thrown into a leadership race, one that proved short-lived as contestants dropped out to make way for Michael Ignatieff who was quickly installed as leader.

Three years later and Ignatieff, the man who was to be the Liberal messiah, has produced an even worse result than Dion, maintaing less than half his party’s seats with a total of 34. He lost his own riding, as did a number of high profile Liberal MPs, including Gerard Kennedy, Joe Volpe, Ken Dryden, Martha Hall-Findlay, Ujjal Dosanjh, and Mark Holland. Any big names that remain are sparse: Bob Rae, Scott Brison, Justin Trudeau, Ralph Goodale, David McGuinty, and yes, Stephane Dion.

It is quite obvious that this result has been a long time coming. The Liberals have been on the decline since the end of the Chretien era and the loss of Quebec. Others trace it back to when Trudeau left office. In any event, the Liberals have been decaying for years, perhaps even decades, due to some serious fundamental issues at the core of the party. It’s not only Conservatives and New Democrats that have lamented long held Liberal arrogance, reflected by their evangelical belief in being the ‘natural governing party’, as if it was a title befitting only them. This arrogance has been even more apparent in the leadership races since Chretien left office. The Liberals have consistently acted as though the right leader, the right face, would bring Canadians back into the big red tent. The reality, as they’ve now discovered, is so far removed from their bubble-like narrow perception.

The Liberals have been so obsessed with finding a quick fix leader to solve all their problems that they’ve neglected any serious efforts at building their party’s organizational abilities or constituencies. Without Quebec and the West, the Liberal base fundamentally relied on Ontario for most of its seats. With this election, the Liberal fortress has been broken by both the Conservatives and the NDP, leaving them with nothing but a scattering of MPs, 34 blips on a much larger electoral map of Canada.

Michael Ignatieff ran a decent campaign, there’s no doubt about that. He was actively praised by the media for a strong first week, along with a platform that seemingly reaffirmed long held Liberal values and policies. However, it was his less than stellar performance in the debates, along with a message on democracy that most Canadians had no apparent connection to, that allowed the NDP to fill the gap. While Ignatieff misstepped, Layton came out as the big winner in both the English and French debates, setting in action a series of events that led to the so-called ‘Orange Crush’.

On election night, Ignatieff took responsibility for his party’s defeat and committed to remaining on as leader so long as his “democratic” party would have him. Twelve hours later he stepped down. That the party did so should be of no surprise, considering its history of internal struggles for the past decade.

The question on everyone’s mind is where do the Liberals go from here?

It is clear that despite their electoral ruins in this Parliament, the Liberal brand is strong and remains close to many Canadians’ sentiments, for better or for worse. The Liberals carry will them a solid connection to many of Canada’s federal institutions, having shaped the country for most of its history. That strength carries on and is undoubtedly its strongest asset in any rebuilding of the party. But should the Liberals re-group or should they cut their losses and pursue a merger with the NDP?

Openly advocated for by former NDP leader Ed Broadbent, former NDP Premier Roy Romanow, and former Liberal Prime Minister Jean Chretien, a Liberal-NDP merger is based on the fundamental reality that 60% of Canadians do not support the Harper Conservatives. In essence, so long as the NDP and Liberals split the majority of that centre-left vote, they are allowing the Conservatives to come up the middle and win far more seats than the popular vote warrants. The centre-right vote faced the same dilemma in the 90′s, with the Reform party and Progressive Conservatives vote splitting securing Chretien’s strong majorities.

Saying the two parties should simply merge is of course simplistic. It assumes that Liberal and NDP votes are interchangeable, which they aren’t entirely. It also neglects the histories of each party, the unique cultures of each party, and the people who have invested much partisan time and energy into their own party. If a merger were pursued, it wouldn’t be an easy road.

That said, the votes do seem to line up, but only in an optimistic scenario. The Vancouver Sun crunched the numbers, showing that if all the Liberal and NDP votes went to a ‘Liberal Democrat’ party, it would easily beat the Conservatives and secure a strong majority. But, if just 25% of the Liberals moved over to the Conservatives, the Tories would retain their majority.

As an EKOS poll notes, while 53% of Liberals would choose the NDP as their second choice, 13% would choose Conservative, and another 17% said they had no second choice. In other words, the Liberals are still very much a centrist party, leaving a strong handful of supporters without any venue for their vote, while a merger would push their centre-right supporters towards the Tories.

For the time being, the Liberals have four solid years to re-group and figure out their next steps. Although Justin Trudeau remains a popular contender to fill the leadership shoes, it remains obvious that he is not yet prepared for the role. An interim leader seems to be the most appropriate solution, perhaps in place for two years and responsible to engage in a dialogue with card carrying Liberals, and indeed all Canadians, on the party and its future role in the country. The real question is whether or not there is still a role for a centrist party in Canada.

If the answer is yes, then the Liberals must be in it for the long haul. Rebuilding the party from its current state will not take a year or two. It could well take at least a decade of solid work redefining its policies, re-engaging its members, and building a new base across the country. Assuming the new right-left dynamic takes hold in Ottawa, the Liberals will be spending several elections on this process.

The one factor that could help them out is an NDP implosion. If the New Democrats are not able to perform successfully in Opposition, they could find themselves booted back to fringe status in no time flat, leaving the Liberals to fill the void. The next couple months will be a trying time as Liberals attempt to judge Layton and his team’s long term performance potential in Opposition benches.

For those who remain committed to the Liberal brand, expected them to push for one final election before pursuing any form of merger. For those who want to take down Harper, rather than face consistent defeat themselves, expect the push for a merger to begin soon. For the latter group though, they may not see a receptive NDP for a year or two, until it becomes more clear as to whether or not the New Democrats will be able to stand on their own two feet in 2015 successfully. As much as this is now in the hands of a few committed Liberals, the ball is also very much in Jack Layton’s court.

Elizabeth May and the Greens

As the first Green elected to major public office in North America, Elizabeth May, by all means, made history on May 2nd. Not only did she decisively defeat a Conservative cabinet minister, she also helped attract a voter turnout of 75%, the highest in the country.

Early musings are questioning her ability to speak out as she remains simply one member in a House controlled by Harper. For May though, her success was necessary for the Greens to have a future. Having run unsuccessfully in London, Ontario and Nova Scotia, this third attempt would’ve been her last as leader had she failed, and would likely have meant the death of the Green party as all momentum would be lost. Fortunately for her, that scenario did not come to pass.

Her achievement did have a tradeoff though. May sacrificed a national campaign to win her seat, dedicating most of the party’s finances and resources in her riding. The result was a severe decline in national support for the Greens, although that is likely to have less of a financial effect now that Harper has committed to repeal the per-vote public subsidy that gave the party over a million dollars in 2008.

Now that they’ve secured their historic seat, the focus will be on building May’s profile as a Parliamentarian and a neglected party leader. With her party’s brand, and her seat’s strategic location off the coast of British Columbia, May will likely find herself as a national defender of Canada’s environment if she opts to pursue the role. Look for early demands to prevent oil tankers on the Pacific Coast and a moratorium on fish farms. To do the role effectively though, she cannot remain locked up in the halls of Parliament and will have to perform like the most popular of newscasters, reporting at the scene of the action and engaging people on the ground.

May will also have to balance profile building with party building. Without the per-voter subsidy, it will be crucial for the Greens to develop a stable fundraising base from which they can rely on. Future success will also require them to focus on a handful of ridings that they have a serious chance at winning, and following May’s model, targeting them strategically with strong candidates over the course of several years. At the risk of losing the Greens broadest support – young people – to the NDP, May should also focus strongly on building the Young Greens brand with much more vigour.

Nothing less than excellent performance on all these markers will be required if the Greens hope to remain relevant to the public discourse. Today though is a moment of rejoice for a long fought breakthrough for the youngest party on Parliament Hill.

12 days to #elxn41

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Oh man, what a wasted opportunity. I went into this campaign with some hope for change – right now, all signs seem to point to us ending up with exactly the same House we had before. I’m so tired of election after election with little difference, as I think many others are. I’d go for a Harper majority just to shake things up and send a jolt to the opposition at this point.

I’m in the camp that a Harper majority wouldn’t be the end all of Canadian society. By the position’s nature, and Harper’s proclaimed long term goal for the Tories to replace the Grits as the country’s natural governing party, they will be forced to remain firm in the centre. Certainly they could use a four-year term as a chance to implement strong social conservative policies, but they’d be kicked out harder than in ’93. For Harper, it is all about decimating the Liberals and keeping the Tories in power for the long term. So, if he gets a majority, I’m not worried, and I almost feel like that defeat is exactly what the Liberals need.

The Liberals, ever since their slow defeat began in the early 2000′s, have been trying anything they can to regain power. Not once have they earned it, but rather they treat it as if a Liberal government is an assumed right. That arrogance sure turns me off. If they had actually had a good five-ten year plan to rebuild trust in the party and regain the confidence of the Canadian people, they could be back in power by now. Instead they try these short term fixes that never work out. If the Liberals end up losing seats, you can bet that the knives will be back out for Ignatieff because he didn’t return them to power.

Certainly their eroded base isn’t helping. Quebec has long since been decimated, Atlantic Canada is disappearing, and even Ontario is wavering. One of the biggest reasons they were government was because of the seat allocations of their support in Quebec and Ontario. This is another area where they should’ve had a long term strategy to build grassroots support in these areas.

What I’m most excited about is the so-called NDP surge. I’m hearing more and more about it, and it seems to be sticking according to the polls. As always, NDP votes tend to be soft, but I don’t think Ignatieff’s weak threats of a Harper government are convincing enough to parade them all into the Liberal tent. Canadians realize that the Liberals have no chance of replacing him (at least in terms of seats in the House) and so are following their hearts right to the NDP. Layton needs to present a valid case that a vote for the NDP is not a wasted ballot or a campaign spoiler. By presenting his strong numbers within a narrative of making political Canadian history, I think he could convince voters that they can be a part of a movement whereby the NDP replace the Liberals as the official opposition and hold a Harper government to account. I have yet to see that case be presented though and I unfortunately suspect the NDP votes will flatline and disperse back to the Liberals or Greens.

The war on the middle class and the need for a new ‘New Deal’

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These days, it feels as though everything in life is getting more expensive: hydro bills, the ferries, gas, taxes, MSP premiums – the list is endless. The middle class is feeling the squeeze, and although certainly the phenomenon existed in earnest prior to the recession, the economic situation isn’t helping matters. Expenses keep rising and families can barely keep up. What’s going on?

There is a war on the middle class, a war that began with the 1980′s shift in Western public policy towards neo-liberal governance: deregulation, privatization, tax cuts for the rich, and so on. The promise at the time was that these policies would stimulate economic investment and production, create well-paid jobs, and prosperity would in turn “trickle down” to the average Joe. After nearly thirty years in support of such policy, the evidence is quite clear that these promises have not been fulfilled.

According to a Statistics Canada report entitled “Earnings and Incomes of Canadians Over the Past Quarter Century, 2006 Census,” income disparity has grown enormously. Between 1980 and 2005, middle class Canadians’ incomes were stagnant. Real incomes, after accounting for inflation, grew by 0.1%. Meanwhile, for low-income Canadians – the bottom 20% – real incomes decreased by 20.6% over the same time period. In other words, while it may seem like the minimum wage is higher than in the past, when adjusted for the higher cost of living, they have actually less purchasing power today!  What about the rich, the ones who’ve gotten the most generous tax breaks? Not surprisingly, their real incomes have grown by 16.4%.

The rich have gotten richer, the poor have gotten poorer, and the middle class are stuck in a time warp getting nowhere fast. With data this clear, it truly begs the question – why do we continue to support such policy?

This federal election, middle class Canadians are being frightened by the Conservatives who claim that jobs will be lost and the economic recovery will come to a halt if the Liberals are elected and implement their plan to reverse corporate tax cuts, bringing them back to 2010 levels. The corporate tax rate is scheduled to decrease to 16.5% – the Liberals want to take it back up to 18%. Now, without context, this may seem like an asinine decision that will wreak havoc on the economy, when in fact, it isn’t. Relative to other countries in the G7, Canada already has the second lowest corporate tax rate in the West, a competitive edge that would not change if it was brought back up to 18%. Furthermore, one must question the true economic utility of the corporate tax cut, considering the USA, with historically the most productive economy in the modern world, has a corporate tax rate nearly 15% above ours.

Underlying the whole debate are two main premises. The first is the notion that lower taxes are the key to a more productive economy. Second, there is the view that a bustling economy will result in higher wages and improved quality of life for citizens. Let’s begin with number one.

While there is undoubtedly validity to a desire to remain within a reasonable competitive arena with regards to tax rates relative to other jurisdictions, we are confusing our means with our goals. Lower taxes do not create well-paid jobs, nor do they improve our productivity or raise real incomes. As we increasingly engage in a race to the bottom with Asia and other less regulated jurisdictions, we are decidedly lowering our standard of life to match theirs. As we lower taxes to try to compete with nations like China or India, all we end up doing is cutting into the very institutions that create and support our economic advantages – universal healthcare to support a healthy and productive society, public education to develop a knowledgeable and creative population, or essential civic infrastructure such as roads, sewers, water, and electricity that keeps our advanced economy moving forward. As we reduce our investments in these areas in an attempt to match developing nations’ tax advantages, we simply end up neglecting our own assets – strengths that, as of yet, can rarely be matched in such countries.

Additionally, if lower taxes spurred on productivity or investment, our economy should, on a per-capita basis, be on par with America’s, although that is clearly not the cast either. Canadian business leaders have for decades decried our productivity problem and yet lowering corporate taxes and incomes taxes for the rich has done little to reverse that trend. Quite simply, productivity is a measure of labour efficiency, a factor that cannot improve unless corporations re-invest their profits in their employees and industries. Canadian corporations have a knack for neglecting to invest in these critical resources, leaving our companies less competitive internationally and prone to takeovers from global investors. Recent analysis by the Globe and Mail has revealed that as the corporate tax rates has decreased over the past ten years, companies have decreased their investment in machinery and production – the complete opposite of what they’ve been demanding businesses do to improve productivity!

The second premise is the myth that the economic growth that we long for will result in an improved quality of life. For many, that means higher real incomes, as it is the basis upon which the luxuries of the now-globally-sought “America dream” can be purchased: the house, the car, the plasma TV, the vacations, and so on. As was already noted however, the “trickle down” economic policy of the past thirty years hasn’t improved real incomes for the middle class, while simultaneously decreasing real incomes for low-income Canadians, making the cycle of poverty even more ingrained than before. The only ones who have profited have been the rich. Unfortunately for the majority of Canadians, the so-called “dream” remains just that.

There was only one era in recent history where real incomes grew, quality of life improved, and wage disparities decreased. This time period, between the Great Depression and the end of World War II, launched the West into an era of vast prosperity for all – it was in fact during this time that the middle class was created. According to Paul Krugman, Nobel prize winning economist, the era he calls the Great Compression – as income disparity compressed – was precipitated on very different policies of the day: more income tax brackets with much higher rates for the rich, higher corporate tax rates, the minimum wage, employment insurance, social security, and the expansion of unionization. All part of the “New Deal” politics of the era, the development of the middle class in Western society took just eight years, according to Krugman. It has been slowly and steadily eroded ever since.

This lesson from history has much to teach us. First off, clearly our economic policy for the past several decades is not resulting in either the raising of real incomes for ordinary Canadians, nor is it lifting low income Canadians out of poverty. Our just society is more elusive than ever and obviously cannot come about as a result of our current economic philosophy.

Secondly, rather than tearing down unions, non-unionized workers ought to be organizing. When construction workers or service employees complain about their taxes paying for wage increases for public sector nurses or teachers, they are expressing frustration at their own lack of income improvement. Instead of trying to limit union workers demands, they need to start pressing their own employers for better wages, benefits, and working conditions. The companies that will succeed in the twenty first century are those that allow every employee the opportunity to earn a decent wage in a safe, respectable, and fulfilling work environment.

Thirdly, we must stop this race to the bottom. Canada is not China, nor is it Mexico, Thailand, or Bangladesh. We must recognize our own assets and continue to develop and market them on the world stage. We cannot play their game because we will not win. We need to keep the bar high, not just for safety, health, or environmental reasons, but for the very fact that these standards are what have come to define Canadian values and a Canadian lifestyle. We should never sacrifice these ideals to chase increasingly elusive, unstable, and low paying jobs that are being gambled off by transnational corporations to the lowest bidder. Instead, we must develop our own home grown talent, help instill a sense of socially-responsible entrepreneurialism in every Canadian, so that we can build the cutting edge companies and business models of tomorrow. The developing nations ought to be playing our game, striving to achieve our business standards and quality of life.

We have the potential to end the war on the middle class and to truly eradicate poverty in Canada, but it will only come about when we change our economic policies and begin to embrace and develop our unique assets in the West. The “trickle down” theories of the 80′s have clearly not worked – it is beyond time that we shifted gears into a new paradigm. Undoubtedly, the policies that created our modern society in the mid 20th century cannot simply be adopted wholesale to the global world of today. However, with some creativity, ingenuity, and innovation, I have no doubt that we will find a way to break out of our economic inertia, change course, and develop a “new New Deal” that will rise the tides across Canada and lift all boats into a new era of prosperity for all.