Thought Leaders National Taxation

The economic illusions of the Canadian election

Party platforms should reflect some modicum of economic literacy, says Gregory C. Mason

Author: Gregory C. Mason

Winnipeg – As an economist, I approached voting in the Canadian federal election with deep ambivalence that was shared by most everyone I know regardless of vocation or political persuasion.

Most expressed resignation and stated, with a sigh, that: “X is at least better than the alternatives,” or “I don’t want X to win, so am voting for Y.” I too fell into that ditch of despair, but then remembered a strategy from my anarcho-syndicalist days of my early 20s. 

I now feel much better about how I voted, but before revealing my choice and a recommendation for the construction of future ballots, let me share the source of my pre-vote despondency from the perspective of an economist. 

It is really time we insisted that party platforms reflect some modicum of economic literacy and coherency, at least at the first-year university level. 

Let’s consider some of the prominent positions of the national parties that irked me and have repercussions for Canadians’ financial well-being now and in the future. 

What is striking about many of the policy positions of the federal parties is their timidity. Take climate change. The three left-of-centre parties would continue the current Liberal program, which currently adds about four cents per litre at the gas pumps, and would lead to an additional 11 cents by 2022.

While I support a carbon tax, this modest increase applied to only some provinces, won’t change driver behaviour or industrial use of fossil fuels. The increases must be greater, progressive and locked in. 

Conservative Mishmash

The Conservatives reject the carbon tax as ineffective in meeting the challenge of climate change, which at these levels it is, but they proposed a vague penalty system on big polluters presumably to fund investment in green technology, home improvements and investment standards. It’s a mishmash of a cap-and-trade system that has proven elsewhere to be ineffective and a bureaucratic nightmare. 

Maybe it’s time we accepted that energy corridors and fossil fuel exports will be a declining feature of Canada’s economic future. The Liberals clung to the fantasy that the Trans Mountain pipeline will proceed, and the Conservatives dreamed of an energy corridor. But these projects will be “Bloq-ed” on provincial self-interest as well as environmental and Indigenous opposition. 

This election was an opportunity to either put forward a vision of a post-oil economy or present a strategy for how the federal government can navigate the competing interests that stymie resource development in Canada. 

Balanced Budget Pledges

All party leaders also promised a balanced budgets in a set number of years, while planning billions in spending increases ranging from modest tweaks in the senior’s tax credit (Conservatives), adjustments to student loans (Liberals), a national pharmacare program (all but the Conservatives) and a basic income (Green Party). 

These election promises came at voters like mosquitoes on a summer day and I am sure most, like me, became numb. 

How can we improve this dismal situation? 

This is the first election where the Parliamentary Budget Office (PBO) had a mandate to prepare estimates of election spending proposals over the next 10 years. However, the PBO only estimated the costs of proposals submitted, and nowhere could anyone locate a consolidated estimate of the total spending package for each party. 

If each platform were independently and fully costed three weeks before the election, voters would see more responsible promises by the parties, who would need to justify their total spending plans. 

Promising a balanced budget is also a meaningless gesture. A household with $50,000 annual income may balance its budget through frugality, while a household with an annual income of $250,000 may chronically run out of money. Rather than promising a balanced budget, we need politicians to debate the desirable size of government relative to the national income or GDP. 

One useful measure is the tax-to-GDP ratio and on this front, Canada does not too badly at 32.7 per cent. Countries that include the United States, Australia and Mexico have lower ratios. Unsurprisingly, countries like France and Sweden have public spending at 46 per cent and 44 per cent of GDP. 

France’s spending in particular is triggering warnings from auditors. 

What about the size of government?

So, a second task for the PBO in an election is to monitor how election promises affect the size of government. 

The minor tinkering of tax credits and adjusting exemptions won’t have much impact, but a national pharmacare program or a universal basic income could greatly expand the scope of government. Voters need independent information to support an informed choice. 

Failing to find any sensible discussion of Canada’s economic issues, I did vote, but not for any candidate on the ballot. 

I elected to write in “none of the above” and spoiled my ballot. But think for a moment. If “none of the above” officially appeared on the ballot and those votes were counted along with votes for candidates, two benefits might accrue. 

First, it may encourage voting by those whose election ennui keeps them at home, and therefore could raise the turnout rate from the current 66 per cent toward the almost 80 per cent who voted in 1958

Second, it shrinks the degree of support for all candidates, reminding everyone that a group of voters exists who want someone to vote for, not against.

Gregory C Mason is an associate professor of economics at the University of Manitoba. Cropped photo from Parker Johnson on Unsplash.

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