Friday, April 03, 2015

The REAL Problem with Jim Prentice's 2015 Budget

The "historic" Prentice budget is an historic missed opportunity. Instead of simply and boldly correcting a regressive tax system that relied too much on nonrenewable resource revenue to subsidize current consumption (both public and private) -- something that could have been done simply by returning to the personal and income tax rates  that were in place before 2000-- the government nickel-and dimed the taxpayers with increased fees and minor tax increases. While a graduated approach was recommended by government economists (on account of the fragility of the provincial economy) -- even by 2018-2019 the income tax system will only generate about $730 million more in revenue.  When you take inflation, economic growth and population growth into account , that means that the goal of building up the Heritage Trust Fund will still be critically dependent upon a substantial rise in oil prices.

We should all welcome Premier Prentice's commitment to getting off the energy-revenue roller-coaster and his plans to replenish Alberta's savings. But two things bothered me about  the premier's pre-budget TV broadcast and Finance Minister's speech last week.  First, he gave sketch of Alberta political history that commended Premier Lougheed for creating the Alberta Heritage Trust and Premier Klein for his "financial rigour" and implied that Alberta's fiscal problems were created elsewhere by less responsible politicians. This does not accord with my observations. Ed Stelmach was committed to correcting the infrastructure deficit that was hugely evident in the mid 2000s. He also tried to correct the problem of royalty rates that were 20% too low according to several expert studies. These were problems he inherited from the Klein government and from nowhere else.  Alison Redford , like Stelmach suffered from a lack of support in caucus and a fear of the Wildrose Alliance; she was likewise incapable of following through on a corrective strategy because a proper corrective strategy means confronting the uncomfortable truth that "real"  fiscal conservatism (of the kind exemplified by Ralph Klein) is the problem.

The second thing that bothers me about the Prentice government's approach is that, when I look at the factors that made an energy revenue savings strategy work in Alaska and Norway , what really stands out is presence of bi-partisan support in the former and formal all-party agreement in the latter.  Could even the Wildrose Alliance sign a declaration committing to restoring the Alberta Heritage Trust, while agreeing to disagree about whether those savings should come from reduced spending  rather than increased taxes?  The Government should strive to get all parties in the Legislature to commit to such a proposition; but since this is Alberta (and there will always only be one party in power) it simply does not bother.

Instead of trying to pander to people like Lorne Gunter, Prentice should have the courage to point out why they are wrong.  Stelmach and Redford weren't the problem; they failed to correct the problem created by Ralph Klein and Stockwell Day. The latter increased our dependency on the nonrenewable energy-revenue roller-coaster and created an infrastructure deficit. Gunter focuses on the least-meaningful stats (total spending) and ignores the most meaningful ones (spending in relation to GDP, spending per-capita).  There should be an intelligent consensus that a substantial proportion of non-renewable energy revenue be saved -- then people on the left and right can argue about whether those savings should come from spending cuts or tax increases. Government economists advised Prentice that going too hard in either direction at this time  could push a fragile economy into recession, and he was wise to listen to them. Another thing to bear in mind is that counter-cyclical funding for infrastructure and for higher education is a smart thing to do, especially if you  happen to live in a province that has a below average participation rate in higher education and at a time when interest rates are historically low.

By catering to Klein's personal popularity, and  by failing to gain all-party consensus for the idea of committing at least half of energy revenue to replenishing the Heritage Trust Fund, Prentice may be failing to entrench Alberta's collective commitment to saving.  That means that the policy could change when some future leader decides that it is politically more expedient to offer tax cuts instead of collective savings and investment.  In other words, history may be doomed to repeat itself.

Monday, March 30, 2015

Why the NDP Has the Best Position on C-51


I cannot recall any  party ever getting  elected nationally by bragging about the number and quality of its lawyers.  Nevertheless, the record of our current government has been a perfect illustration of what the lack of legal knowledge and procedural values can lead to: the waste of time and money that went into legislation that was bound to be struck down, as evidenced by the  Supreme Court’s reversal of the Onsite Clinic closure; the Court’s unanimous rejection of several criminal justice reforms that obviously violated the Charter; and the incredible mess that was the Fair Elections Act (since when does a government respond to something like the Robo-Calls scandal  by going after the referee? Since Stephen Harper became prime minister, I guess). 

The latest example is Bill C-51, The Anti-Terrorism Act, which goes way beyond what is needed to update our existing security legislation. It has faced mounting criticism from former Supreme Court justices, law professors who have specialized in national security matters, and the Canadian Bar Association. The 8 days allotted to this bill for parliamentary scrutiny is totally inadequate for what is really an omnibus bill affecting every aspect national security. (And will the Government please let the Privacy Commissioner, Mr. Daniel Therrien, speak to the Parliamentary Committee on Bill C-51? Is that really too much to ask?)  And of course the recent exchange in Question Period, in which the Leader of the Opposition Thomas Mulcair simply asked whether the government had gone through the process of sending a letter to the U.N. justifying incursions into Syria under Article 51 of the UN Charter, caught the prime minister flat-footed. It is further evidence of government's lack of legal acumen.

The Liberals showed a lack of courage in not opposing this bill on principle, but just weakly saying they would amend it later.  Although the bill initially had 82% support in the polls, that was obviously because people had only seen  the  title of the bill and not its contents. After all, who isn’t against terrorism? It is revealing that the Liberals’ only distinguished jurist, MP and McGill Law Professor Irwin Cotler, has abstained from voting on this bill, just as he was missing in action last October when the Liberals voted against the ISIL mission.

If the NDP got C-51 right, it was primarily because of the lawyers in its caucus: Craig Scott (Osgoode Hall law professor), Murray Rankin (Q.C. for his courtroom work in B.C. in constitutional litigation), Thomas Mulcair, Linda Duncan, Eve Peclet, Romeo Saganash, Don Davies, and Justice critic Francoise Boivin.  I know, you don’t like lawyers. But when it comes to keeping government from enacting overly-broad laws that needlessly impinge upon our civil liberties, they are indispensable. This federal government has few accomplished lawyers, and it shows.

Monday, February 23, 2015

Alberta's Disadvantage

“Stop mortgaging our future” has been a catch-phrase for several decades. Usually, it has been directed by conservative fiscal hawks at the perceived excesses of the “tax and spend” liberal or social –democratic welfare state of the 1960s and 1970s. Yet in recent years, the worst culprits, in both the United States and Canada, have been on the right side of the political spectrum. And the worst of all may be right next door in the conservative paradise of Alberta.

Do you think I am kidding?  The much-touted “Alberta advantage” has consisted largely of using most of its resource wealth to subsidize both lower taxation and higher spending on services than found elsewhere in the country.   Since the first full year of the Alberta Heritage Trust Fund in 1977, $216 billion in revenue accrued from non-renewable energy went into the Fund;  but  of that amount less than 6% of it has actually been saved. The latest reported total for the Fund is just $17.4 billion—little more in real terms than it was when Peter Lougheed left office in 1985.

In 2011, the Calgary Chamber of Commerce calculated  that if Alberta had continued to save 37 per cent of resource revenue, as was the case under Peter Lougheed, the Fund  would be worth $128 billion.   A reasonable rate of return on that amount of money annually could fully cover even the current "crisis" deficit of $7 billion.  The left-leaning Canadian Centre for Policy Alternatives and the right-leaning Fraser Institute have both published reports arguing that Alberta should be saving more of its non-renewable resource revenues.  So has the Parkland Institute at the University of Alberta . But governments over the past quarter-century have not listened.

Savings started to be reduced during the Getty government in 1987, after which  resource revenue was no longer added to the Heritage Fund.   “King Ralph”  did everything with oil revenue between 1992 and 2007 except use it  to build savings: eliminating public debt,  giving voters pre-election “Klein bucks” when revenues were high, and using the Fund to pay for  special projects for economic diversification (some of which took the form of loans to private companies that had to be forgiven);  the elimination of sales taxes,  the lowest corporate taxes in the country and the country’s only 10% flat income tax . The contrast with other jurisdictions is striking: Alaska for example continued to deposit 25 percent of its royalties from 1982-2011 and Norway contributed 100 percent. If Alberta had followed the Alaskan formula, by 2011 the Heritage Fund would have had $42.4 billion instead of $9.1 billion. By the Norway rules Alberta would have had $121.9 billion by 2011.

Now that the Alberta government is having to scramble because of low oil prices, premier Jim Prentice needs to show that he is another Peter Lougheed and not another Ralph Klein.  Future generations of Albertans are counting on it.

Wednesday, January 21, 2015

Alberta's Tax Dis-Advantage

A recent poll showed that only 9% of Albertans want to have a  sales tax to help deal with the province's fiscal woes, preferring taxes that either others will pay or that they will only have to pay occasionally, like a medical premium ( See , for example, “Albertans Say no to Sales Tax ", Huffington Post, January 19).

Partly, this reflects a reasonable desire to ensure money is spent where they want it (i.e. on health care), but mostly it is just wishful or short-term thinking: the preferred options are not sufficient to wean the Alberta government off its unhealthy and short-sighted dependency on revenue from depleting conventional oil supplies.

I favour raising  $2 billion through moderately progressive income, corporate and royalty payments (all of these taxes would still be the lowest in Canada, by a considerable margin).  We might also wish to consider  raising an additional $2 billion through  temporary sales taxes (i.e. a 7% HST)    That way , the progressivity of one tax would balance out the regressivity of the others for a common cause:  the well-being of future generations whose oil we are selling.  Or perhaps a medical services premium and a gasoline surtax....

To help sell the sales tax idea, it could include a sunset clause --for example,  for five years. Or better yet that would see the tax disappear if/when the Heritage Trust Fund reaches $100 billion, or fall to  2% when the Fund reaches $50 billion, etc.

In that way, Albertans can be nudged, fairly and gradually, toward a more sensible and sustainable future.

Sunday, January 11, 2015

Canada's Top 5 MPs of 2014

Allow me to start the New Year  on a positive note by presenting my choices for the Top Five MPs for  2014.

1. Craig Scott (NDP—Official Opposition Critic for Democratic and Party Reform).
Mr. Scott  did a great job of exposing the government’s Orwellian (Un)Fair Elections Act
for what it was –an attack upon democracy that tried to dampen voter participation and
limit the investigatory functions of the Chief Electoral Officer.    He has also been the
Parliament’s leading advocate of real electoral reform. On Dec 3 , 2014 the House of
Commons debated Scott’s motion:   that  “(a) the next federal election should be the last
conducted under the current first-past-the-post electoral system which has repeatedly
delivered a majority of seats to parties supported by a minority of voters, or under any
other winner-take-all electoral system; and (b) a form of mixed-member proportional
representation would be the best electoral system for Canada.”  In countries where
proportional representation has been introduced it has reduced partisanship, while
increasing voter turnout and the representation of women and other marginalized groups
in Parliament.

2. Elizabeth May (Green—Leader and MP for Saanich and Gulf Islands).      Mclean’s
Magazine—which asks every MP to vote for their top picks—named Ms. May the 
Parliamentarian of the Year in 2012, and Hardest Working MP in 2013. In 2014 , the same
poll named her Best Orator in the House of Commons, as well as the Hardest-Working MP
for the second year in a row.  She also introduced one of the more constructive Private
Members’ Bills of the year, “An Act Respecting a National Lyme Disease Strategy,” which
passed with all-party support.

3. Thomas Mulcair (NDP—Leader of the Opposition). Mulcair’s skillful skewering of
the prime minister over the Senate Scandal in 2013 was probably his finest hour. In 2014,
he has continued  to be a strong voice for both democratic reform and as an alternative
approach to foreign policy, trade, and the environment. This fall he received a strong
endorsement from an unlikely source when former PC prime minister Brian Mulroney
called him “the finest Opposition Leader since John Diefenbaker.”

4. Brent Rathgeber (Independent - Edmonton-St.Albert).  Rathgeber  was elected as a
Conservative in 2008 and 2011. But on June 5, 2013, he resigned from caucus to sit as an
Independent MP due to the Harper government’s   “lack of commitment to transparency
and open government.”  In September 2014, he published his book, Irresponsible
Government: The Decline of Parliamentary Democracy in Canada, which provides
several prescriptions for redressing the imbalance between elected parliamentarians and
the un-elected Prime Minister’s Office.  In November, he was named “the Member of
Parliament who best represents his constituents” by McLean’s Magazine, and in
December he voted for the NDP motion on proportional representation.

5. Michael Chong (Conservative – Wellington Halton Hills).  Mr. Chong’s  Private
Member’s Bill, entitled The Reform Act,  aimed at restoring the historic role of MPs  by
enabling party caucuses to trigger leadership reviews, make decisions about membership
in caucus,  and choose the chairs of party caucuses. The original bill also proposed to 
take away the prime minister’s power to veto riding nominations.  However, the version
of the Act that was finally passed  in 2014 was considerably watered down.  Final say
over nominations is to be given to “a person to be designated by each registered political
party,” rather than to individual riding associations. The revised bill will only give party
caucuses  the option after each general election to empower themselves.  Theoretically,
parties could remain as autocratic as ever. But it is reasonable to expect that , thanks to
the Reform Act, parties will evolve into something more democratic in the future.

Some Honourable Mentions: Frank Valeriote (Liberal) and Stephane Dion (Liberal) for their strong work on electoral reform and environmental issues; Meagan Leslie (NDP) and Nathan Cullen (NDP) for their reliability in getting up to speed quickly on a number of complex issues; Irwin Cotler (Liberal) and Murray Rankin (NDP ) for their legal expertise (notice the total lack of a redoubtable Conservative counterpart to these two);  and pediatric surgeon and MP Kellie Leitch (Conservative)  for adding some badly needed smarts and likeability to the Conservative caucus.

Saturday, November 29, 2014

Conservative Tax Policies are More Regressive and Less Accountable

Our federal government is addicted to tax expenditures—and the shell games that can be played  with them.  By “tax expenditures” economists mean government spending through the tax code. Some of the biggest and most popular examples of tax expenditures include RRSP deductions (currently about $33 billion/year), Pension Income Splitting ($10.8 billion); charitable donations ($8.5 billion) and Child Care Expense Deductions  or CCED ($4.1 billion).  Clearly, they have a role to play in a balanced system of taxation.   But in Canada, tax expenditures take almost as much out of the revenue pie as taxes do: in 2010, they cost $172 billion compared to $191.5 billion taken in tax revenue.
Spending through the tax system has a number of advantages, but they are mostly political. Since tax expenditures are regarded as “off budget” they are often seen as free benefits, especially to those who are best situated to take advantage of them.  At election time, it can seem like the government is giving something without taking anything.  That, of course, is highly misleading. What the government is taking is revenue that could be allocated to public services. Its income-splitting plan, for example, dispenses billions to middle –class families, but it does so at the expense of child care for the young, mental health spending for veterans, and home care for the aged.  For the cost of the government’s Family Tax Proposal, we could raise the CCED from $7,000 to $12,000.  Queen’s Law Professor Kathleen Lahey points out that  Canada is spending $20 billion to subsidize unpaid work in the household—that’s almost twice what an affordable national childcare program would cost.
One wonders whether this government, if it is re-elected, plans health care by tax credit as well. After all, it has been shown that in the United States the subsidization of private health insurance through the tax code made efforts to bring about a universal health care program more difficult (and we all know where our government gets most of its ideas from).  The same process can work in reverse: as Canada’s federal government caps health transfers to the provinces at what it knows is half the rate at which health costs are growing, and provinces are forced to either raise taxes or de-list services, the feds can ease that painful transition with tax credits for private healthcare.
Before we reach that point, two things must be done. First, we should try to replace tax expenditures with proper public programs, especially where basic needs of children and the poor are concerned. Second, where we do choose to keep tax expenditures, they should be integrated with departmental spending and therefore included in departmental reports and estimates.    We cannot expect progressive government from the Conservatives, but greater transparency and accountability is never too much to ask.

Wednesday, October 29, 2014

Laurie Hawn's Round-Up

Fear not this Halloween! Our Edmonton-Centre MP is at work! 

I find it truly remarkable:  in the aftermath of last week’s  tragic  attacks in Montreal and Ottawa,  Edmonton Centre MP Laurie Hawn  issued the statement  that we should “round up” everyone on the government’s watch list: .

Laurie’s  talk of “rounding up” people  is not just an unfortunate choice of words, in the light of Canada’s shameful “round-ups”  of Japanese Canadians under the auspices of the War Measures Act in 1942 and  of law-abiding separatists and student radicals during the October crisis in 1970. It is an actual reflection of the Conservative attitude that, in Stephen Harper’s words, “our laws and police powers in the areas of surveillance, detention and arrest ..need to be much strengthened …work which is already underway will be expedited. ” This is not the view of security experts , including the prime minister’s own former legal advisor, Prof. Benjamin Perrin, who stated on CBC radio on October 27  that government already has all of the tools it needs and simply needs to resource and implement them properly. But then, this is not a government that has shown a very high regard, either for expert opinion or for the CBC!

 I do see a need for greater preparedness on the part of uniformed soldiers and a need to beef up security at the Parliament Buildings; I also share  a sense of gratitude that the Sergeant -at-Arms proved to be more than a ceremonial position on this singular occasion.

In related news, I was glad to see that Justin Bourque will be serving an unusually harsh sentence for the premeditated murders of three RCMP officers in Moncton. (Even if  forcing judges to hand down a sentence of 75 years without parole gives him little incentive for rehabilitation.) But I have just one question: why is he not a “terrorist”? Because he is a right-wing survivalist who hates cops ( and not a Muslim),  and acts  alone, he gets treated as just a deranged individual.  But if he is channeling extreme Islamist propaganda instead of extreme American conservatism, and acts alone, like Michael Zehaf-Bibeau, he attracts the terrorist label and is used to justify a more extensive surveillance state and increased police powers.  It makes you think….