A copy of the spring economic update on April 28. Prime Minister Mark Carney plans to host an investment summit in Toronto in September to hopefully draw billions worth of investments back into Canada.Spencer Colby/The Canadian Press
“In a crisis, fortune favours the bold,” Prime Minister Mark Carney said in a fireside chat video, posted online earlier this month. The Prime Minister laid out the foundation for his Canada Strong plan, which he promised would be transformative, comprehensive and ambitious.
But if fortune indeed favours the bold, as Mr. Carney said, the forces of the universe will simply breeze past Canada, since there was nothing particularly bold about the plan laid out by this government in its economic update tabled earlier this week. Canada’s plan to deal with the converging crises of U.S. economic aggression, our sputtering productivity and growth, and the structural deficit that will extend through the rest of the decade has essentially been for the government to create new institutions: Build Canada Homes, the Major Projects Office, a “Sovereign Wealth Fund” (to manage the excess wealth we don’t actually have), and so on.
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Perhaps these initiatives will bear results, in years’ or decades’ time. But Canada needs transformative change now, and indeed, a true “Canada Strong” plan would marry ambitious policy reforms now with the new institutional changes that Mr. Carney is promising for later.
What would that look like?
Bold tax reform, for one, akin to the blueprint laid out by Jack Mintz, Alexandre Laurin and Nicholas Dahir of the C.D. Howe Institute. They argue that Canada is too reliant on income tax-revenue, and propose a “Big Bang” approach to tax reform that would include lowering the corporate-tax rate to 10 per cent for businesses of any size (or adopting a 13-per-cent distributed-profits tax), lowering marginal personal income tax rates, and introducing an optional $10,000 simplified tax credit for Canadians who want to skip the chore of itemizing all of their various deductions and credits. They estimate these measures could raise GDP by $79-billion (2.5 per cent) in the long term, with the short-term costs of lost income tax revenue offset by either raising the GST to 7.8 per cent, or introducing a 3.2 per cent employer payroll tax, earmarked for health care.
Both measures would be politically unpopular, but a technocrat with a new majority mandate, who promised first and foremost to restore stability to the Canadian economy, shouldn’t care about such frivolous things as popularity. Indeed, not when Canada is projected to spend more than $80-billion just to service its debt by 2030-31, which is roughly equivalent to what it currently spends on elderly benefits – the highest line-item in the budget.
That is another area that a government inclined to pursue actual bold change could pursue reform. Currently, retired couples in Canada with a household income of $182,000 a year may collect the full $18,000 in Old Age Security (while couples with young children with a net household income over $80,000 are ineligible for the Canada Child Benefit). The reason to keep the OAS threshold where it is political; the reason to lower the threshold to, for example, $100,000, is that it could save Canada roughly $7-billion per year, according to the advocacy group Generation Squeeze. Just as raising the retirement age from 65 to 67 could save, according to 2012 estimates, $10-billion per year. These changes would of course be unpopular, and quite bold, but as our Prime Minister says: fortune favours the bold.
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A true Canada Strong economic update would usher in immediate reform to our competition rules, loosening foreign restrictions on telecoms companies (for which Canadians must own 80 per cent of the voting shares and 80 per cent of director positions if the company holds 10 per cent or more of Canada’s annual revenues) and the airline industry (where foreign investors may hold no more than 49 per cent of voting shares) to encourage new entrants and greater competition.
It would take a hatchet to the patchwork of regulations stifling growth and investment in Canada, including Bill C-69, the Impact Assessment Act, for which Mr. Carney has already created a route for bypass with the Building Canada Act. Last month, the Business Council of Alberta (BCA) released a report detailing myriad regulatory reforms that would encourage greater investment in Canada, including lowering capital requirements for federally regulated banks, and repealing Bill C-58, which prohibits the hiring of replacement workers during strikes in federally regulated workplaces. The BCA argues that Canada’s “regulatory system itself has become a barrier” and that “tackling these high-impact barriers is a necessary first step to restoring investor confidence.”
Mr. Carney plans to host an investment summit in Toronto in September to hopefully draw billions worth of investments back into Canada. But to do so, he’ll have to make some bold changes, and not simply make announcements of new government initiatives. “Canada Strong” might mean “Prime Minister Unpopular For A While.” But what is political capital for, if not to actually spend?