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.

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.

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.

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.

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:
http://www.edmontonsun.com/2014/10/23/edmonton-mp-laurie-hawn-round-up-everyone-on-the-terror-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….

CAUT/ACPPU

CAUT/ACPPU

Needed: More Climate Change Honesty

Prime Minister Harper strikes a strong figure on the world stage these days, doesn’t he?  Swift in condemning the barbarity of Isis terrorists and the aggressive unilateralism of Russia; steadfast in defence of Arctic sovereignty; resolute in his uncritical support of  Israel; and determined not to attend the Meeting of Leaders at the U.N. Climate Summit.  But surely there is more to strength than simply a stubborn refusal to change one’s simple tune. Is a more balanced approach to Palestine and a little more genuine leadership on climate issues too much to ask for? From this government, apparently, it is.

The UN Climate Summit is intended to “galvanize and catalyze climate action” in advance of the Paris COP climate talks in 2015 where countries will form binding agreements to address global warming. The 400,000 demonstrators demanding climate action in New York were not rabble-rousers who had nothing better to do. They were concerned citizens responding to the growing emergency of runaway climate change.

Of course, Canada was represented by Environment Minister Leona Aglukkaq, who announced that Canada would bring in the same higher vehicle emissions standards that the United States is bringing in. That has always been the Harper policy: do it if the Americans do it first, and then it won’t run the risk of a high economic cost.  I could find such a policy acceptable, if I didn’t feel that a G-7 country that calls itself an “energy superpower” has a responsibility to do more, and if I didn’t know that the global costs of adapting to climate change will run into many trillions of dollars, and if I didn’t know that there are economic benefits to be had in green power.  This government can, and should, do more.

After the cynical fakery of the Liberals’ non-implementation of the Kyoto Agreement, Mr. Harper replaced it with his own emission target for 2020, which he presented in his 2007 policy statement, “Turning the Corner.” Just like Mr. Chrétien, however, Mr. Harper failed to immediately implement the necessary policies. Canadian emissions have declined slightly, but that was because of  the 2008 recession, some decline of heavy industry, Ontario’s reduction of coal-fired power, and climate policies in British Columbia and Quebec. Mr. Harper’s adoption of U.S. vehicle regulations will have only a small effect by 2020.

So the Harper government won’t achieve the 2020 target, even though it still pretends that it will. And it won’t admit that one of the principal reasons that Environment Canada is predicting  that Canadian emissions in 2020 will exceed the target by at least 20 per cent is the government’s own promotion of oilsands development and pipelines in all directions. But then honesty in climate change policy has not been the forte of Canadian governments, whether Liberal or Conservative.