BC’s economic challenges and the NDP platform
Below is an oped of mine that was done at the request of the Vancouver Sun and that ran in today’s paper. Unfortunately, for reasons that are not entirely clear, the last two paragraphs were cut off, leaving the oped hanging. I put them back in below, and have requested that the online version be changed.
UPDATE: The online version has now been fixed.
Can the NDP deal with B.C.’s economic challenges?
By Marc Lee
In BC’s 2009 election, parties must respond to two fundamental challenges: first, a crashing provincial economy with rapidly rising unemployment; and second, the global climate crisis, which demands that BC dramatically reduce its greenhouse gas emissions.
Rather than pit these objectives against each other, good policy choices should instead link them together: our efforts to boost employment through stimulus packages should be strategic investments that put BC on a sustainable path, not just a return to old patterns of development.
While the NDP platform takes some important steps on both fronts, it does not offer the bold new direction and vision many might expect with global capitalism on its knees. The NDP attacks head-on some of the most egregious and controversial policies of the Liberals, like run-of-the-river power projects and the flawed P3 infrastructure model. But ultimately, the platform is cautious and lands very much in the middle of the road.
This is problematic in that the NDP platform accepts both the culture of fiscal conservatism that has come to dominate Canadian politics (manifested in an over-emphasis on tax cuts and balancing the budget), and an overly rosy view of the state of the economy. It takes as given the Liberals’ February budget, which describes an alternative universe in which unemployment averages 6.2% for 2009, and BC weathers a small storm just in time for the opening ceremonies of the Olympics.
But the provincial unemployment rate hit 7.4% in March, up from 4.3% a year before. Since last summer, 83,000 jobs have been lost. With new housing starts down 70% compared to last year, construction employment will plummet even further as current projects are completed, meaning an unemployment rate that could hit double digits by year-end.
This inevitably means the half-billion dollar budget deficit tabled by the Liberals is a work of fiction. Both parties need to come clean about how they would amend their plans given higher-than-budgeted deficits in the $1-2 billion range.
Moreover, falling consumer spending and business investment mean government must lean even harder against these adverse economic winds. In terms of stimulus, the 2009 budget package will do little to curb rapidly rising unemployment. BC is in an excellent fiscal position, and should err on the side of doing too much, not too little.
The NDP platform adds more stimulus, with a modestly larger deficit and higher capital spending. Together, these provide additional stimulus of 1 to 1.5% of GDP if we count the multiplier effects. How the stimulus is spent is also important, and the NDP’s plan is focused on green infrastructure and social investments.
The NDP platform also takes aim at the climate change file. Its program would cap emissions from large industrial sources starting in 2010, and will harmonize those efforts with a North American cap-and-trade system. They also propose major public transit investments, low-interest loans for building retrofits for energy efficiency, and a royalty on “flaring” in the oil and gas sector (the source of 13% of BC’s GHG emissions).
Unfortunately, most of the attention of climate policy has been on the BC carbon tax, which is neither as horrible as the NDP paints it, nor as potent as advocates make it out to be. Given BC’s fiscal challenges, the NDP would do better by fixing some of the problems with the tax (like ensuring it covers all GHG emissions), using the revenues to fund climate action (rather than borrowing), and shoring up a low-income credit that fails to protect low-income households as of 2010.
The incrementalist approach of the NDP platform also shows on social policy. Even during the recent boom, many British Columbians were left out. The Liberals have overseen the shredding of social assistance, the gutting of social housing construction, and the dubious distinction of BC having the lowest minimum wage in Canada.
The NDP platform would reverse some of this damage. It would raise the minimum wage to $10. It aspires to create 2,400 new social housing units this year, and 1,200 per year after that â€“ a move aimed at a major reduction in homelessness. The NDP have said they would bring in a poverty reduction plan with targets and timelines, but do not say what those targets should be. And the new money for social assistance in their platform is inadequate given this goal and the economic situation.
Now that BC’s housing and commodity booms are over, and the recession is getting worse each week, structural weaknesses in BCâ€™s economy have been revealed that were not cured with a tax cut. BC needs a bold new vision that combines social justice principles with a sustainable economy. By this yardstick, the NDP makes some progress, but by pandering to tax cuts falls short in its ambition.
What the hell, why would they leave the last 2 paragraphs out, that Sun Media group under quebecor really and truly are cutting back! lol.
nice piece Marc.
Good stuff Marc. I have long disagreed with the NDP orthodoxy around balanced budgets. What you call fiscal conservatism, tax cuts and balanced budgets, means that there can be no borrowing today to invest to meet tomorrows needs, indeed no gov. spending increases other than from growth dividends.
So what I like in the NDP programme is the recognition that there is a downturn and the government should scoop up some of the excess savings through its green bonds and invest the money for the future.
Fiscal conservatism used to mean we have to raise taxes to increase spending. What we learned was that raising taxes in a downturn worsens the situation. Taxes should be raised to stem inflation or used as a disincentive, or my favorite re-distribute income.
Thinking of the future, I always prefer borrowing to tax increases, especially in a downturn, especially when interest rates are low, and most especially when government bonds are sold, safe haven place to put what is left of people’s savings after the stock market disaster.
Good for you. I must admit I’m only moderately committed to the platform, nauseated by the tax cuts, and unconvinced it conveys bold vision or strong convictions. The more I look at the platform, the more I get excited about the free coffee MacDonald’s is giving out for the next three weeks. Now that’s real stimulus!
Great article Marc. Duncan has got it right. NDP is still catching up to the “new era” of more of the same isn’t working and talk to your constituents’ hearts.
I hope they listen and come out with improvements as the race for who wins picks up.
Yes but its the word that most people believe is something special get a tax break and pay big interest on it so madness? Because we all know there will be bills in the mail for government services that are going to get it all back and more? Who benefits the NO TAX AND BIG SPENDERS ON THE RICH party. Its dosen’t matter if things are ready to go belly up no or government won’t account for its spending, no just promise the working fool a couple hundred dollars tax break and you got yourself a vote.
The same fool who could find himself unemployed on Vancouver’s street hoping he dosen’t run into one of the many slashers.
Hello we are in an inflation? Heading for dangerous ground as High Rents? High Prices? High Job Loses? Highest Gas Prices? + Carbon tax and on and on so where are the tax? And not on energy thats a killer. And it is the cause of much misery for many in this province as business goes belly up as not competitive with other provinces much less the globe. Industry is the culprit along with the rich who bank on the poor taking the brunt of the hardship. As they are unable to survive while the NO TAX AND SPEND ON THE RICH BIG TIME party have the Rich and Foolish banking on those tax breaks. Only the Rich get to keep theirs.
I remember just 3 years ago, when the Liberals had done nothing on the environment, and were planning to build three coal-fired power plants, and NDP strategists were worried about how people in the NDP might scare away voters if they got too radical on climate change. Campbell’s moves on the Great Bear Rainforest and the carbon tax have left the opposition flat-footed and divided.
The NDP shows equal caution about taxation and balanced budgets. But if, as you point out, there is a big cost to tax cuts–the threat they pose to the sustainability of health care for example–shouldn’t we have politicians who have the courage to say so?
I do–but then I am not running in the provincial election! Check out http://markcrawford.blogspot.com/2009/03/enough-already-stop-fucking-tax-cuts.html
Any political party wanting to run in a BC provincial election, whether to win or just to place, has to contend with the legend of balanced budget and supposed debt avoidance that has been gospel among press and public alike since the days of WAC Bennett. Simply put, it’s a constraint that will not budge.
By recommending a more counter-cyclical plan, a higher discretionary deficit, the NDP is taking a risky stand, contrary to what Marc thinks.
I find it hard to accept the arguments of some that eliminating the present government’s carbon tax legislation is retrograde. There’s been pressure placed to accept it from many quarters, including American environmental funders. Many BC residents have no access to transit, yet they are paying additional gas taxes, and that’s what the fuss is about. And in urban areas a real question should be asked, why is transit funded from gas rather than property taxes? If the gas tax is consumed buying buses and trains, how does one pay for the highways on which those buses will run?