Canada’s New Government is getting old

An article in the Globe wonders what comes next for a Harper government that seems stuck: unable to move up in the polls despite delivering on its most populist proposals, but unable to deliver the goods for its core supporters because of, well, the polls. And interestingly, its best moves have come by doing the right thing and breaking its election promises, on equalization and income trusts.

The shortlist of what might be next, based conversations with some insiders on Parliament Hill and in the Calgary school, then is:

1. The second one-percentage-point cut to the GST.

2. Legislation aimed at reducing the federal government’s role in areas of provincial jurisdiction.

3. Tax measures that would allow income-splitting for couples.

4. Reduced capital gains taxes.

In other words, tax cuts and reducing the size of government. Number two harkens back to my conjectures in writing about the fiscal imbalance last year – that the Conservatives would use the fiscal imbalance to introduce a CD Howe/CCCE proposal to eliminate non-equalization transfers paid for by reducing (eliminating) the GST and/or income tax cuts. But that did not fly back then with the premiers.

The Quebec election showed that tax cuts are not always the winner that the conventional political wisdom suggests. This could just be Quebec, but I’m sensing that the growing underclass on the streets of the nation’s cities is having some effect, in a country where two decades ago the homeless were very few, and at a time when the top of the distribution is pulling away from a middle that has stagnated in terms of real incomes.

The rise of environmental issues to fore is also glaringly absent, though I suspect that the Tories contacted by the reporter probably do not believe climate change is really happening anyway. And despite apparent efforts to take climate change seriously, I don’t think Harper pulled it off, either in hard policy terms or in public perceptions.

For the opposition, a lot of good actions can fit the inequality and environment frames, and neither can be cured by tax cuts (and may even require some tax increases). They require public spending and leadership. As I say, stop cutting taxes and start solving problems. Whereas, the five points above point to a non-agenda of reducing fiscal capacity at the federal level, the public may well embrace a public agenda that cleans up the streets, dramatically increases public transit, crafts a new green industrial policy, creates broad-based early learning programs across the country, and builds tens of thousands of units of social housing.

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