The Liberal platform is a remarkable document. It has the feel of catharsis to it: a party that was unsure of what it believed, or unwilling to say, finally finding a sense of direction and boldly declaring where it wants to take the country. And where it wants to take the country is back to the 1970s.
After all those dreary years under Chretien and Martin of cutting spending and cutting taxes and cutting deficits, and that brief, uncertain lunge under Stephane Dion into the ideological heterodoxy of the green shift, the Liberals are back where one senses they feel most comfortable: raising spending, raising taxes (but only on corporations!), and deficits take the hindmost. Oh, and imposing stricter controls on foreign investment, steering the economy into certain preferred “champion” sectors, regulating wages according to their “value,” and so on. As I said, it’s a remarkable document. It’s as if the last thirty years never happened.
To be sure, there’s an air of play-acting at the same time, a tentative trying-on of ideas that have long been out of fashion. The pump-priming, industrial-strategy dirigistes of Trudeau’s era would scoff at the relatively small sums involved: an increase in spending of roughly $6-billion annually, matched by a $7-billion increase in taxes, works out to less than 3% of today’s budget. Mind you, the actual increase in tax revenues is likely to be much less than that: economists who’ve looked at the question don’t believe the 3 percentage points the Liberals would tack onto corporate taxes, reversing the cuts the Tories are in the process of enacting, would raise anything like the $5- to $6-billion the Liberals are claiming.
Which means even the laughable show of concern for the deficit the Liberals manage — they would “reduce” the deficit to 1% of GDP in two years, when it’s at 1.7% of GDP now — rather overstates matters. If they follow through on their spending plans, they will almost certainly increase the deficit, though again by relatively small sums: perhaps $2- or 3-billion. They seem almost to be doing it for the sake of doing it, because that is what makes us Liberals, rather than out of any great conviction it will accomplish much.
Reading the document, I had the same feeling. The foreign investment chapter sounded appropriately hostile, but the follow-through in actual policy terms was unconvincing, and would probably change little. The “Canadian champions” silliness will be an excuse to waste a lot of money on pet Liberal projects, but in the end the economy will go its own way, as it always does. Even the hike in corporate taxes is hardly likely to be apocalyptic. The Grits, after all, would only raise the rate back to 18%, which is where it was four months ago.
Still, it’s the wrong direction to go. People in politics are inclined to depict every disagreement in the direst terms, but the fact that issues are rarely as stark as they paint them should not lead us to believe there are not real differences in approaches, or that one way is not preferable to another. The Grits would not send us to poorhouse overnight. But their economic policies are not the kind that would tend to enhance our prospects either. And over the longer term, as the population ages and a massive increase in costs meets a shrinking labour force, we are going to need those sorts of policies, desperately. The only way the next generation will be able to afford this generation’s dotage is if they are much wealthier than we are. And the only way that will happen is if we start now to generate much faster rates of annual productivity growth, and go on doing so, year after year, for the next several decades.
Measured against that benchmark, the Liberal platform starts to look more alarming. The Family Pack of social benefits, for students, pensioners, caregivers and so on, may be delightful ideas in themselves. But they come unaccompanied by any comparable concern with producing the wealth to pay for them. .
The document reveals throughout a vision of the economy as a thing, a lump of clay to be pushed, prodded, and massaged to the designs of its government makers — not an interconnected network of millions of individuals, each with their own agendas, values and interests, connected by prices and disciplined by competition, and vastly unknowable to any planner or architect. The latter view would tend to see the productivity question as a matter of allowing individuals greater freedom to innovate, by lowering taxes on investment, and giving them no option but to do so, by lowering barriers to competition. The Liberal approach is rather to offer up yet another program, an Innovation and Productivity Tax Credit, on the theory that a) we don’t have nearly enough of those already, and b) innovation comes from the Canada Revenue Agency.
We shall see where all this leads. The NDP have yet to release their platform, but will presumably feel compelled, in view of this overt attempt by the Liberals to poach their voters, to top them. And when, after the election, these two parties came to negotiating the terms on which the one would support the other, we may hazard a guess the resulting document will not be more pro-growth than this one.