Niels Veldhuis | Balanced budgets and increased investment in entrepreneurship
With a relatively weak Canadian economy, depressed commodity prices and the myriad of international economic issues, federal parties should offer solutions to the economic storm clouds on the horizon.
Here are three of the top issues Canadians should look for federal parties and candidates to address:
The burden we are placing on the next generation
Since the 2008 recession, Canada has witnessed the return of consistent deficits by the federal (and provincial) governments, which means escalating debt. Total government debt (federal, provincial and local) has increased to almost $1.3 trillion as of 2013-14 from $821 billion in 2007-08. This translates into $36,734 per Canadian.
The next federal government should make a serious commitment to balance the budget and begin to reduce the burden the next generation faces.
Despite the common myth that governments lack revenue, the reason for the persistent deficits at the federal and provincial levels is massive ramp-ups in government spending since 2008-09 that were supposed to be “temporary” but weren’t.
Penalizing young Canadians with uncompetitive income tax rates
Given Canada’s aging population, a smaller share of young Canadians is increasingly expected to carry the burden of the obligations made to aging Canadians. We must therefore stop penalizing economically beneficial behaviour through high and uncompetitive personal income tax rates. A large body of academic research has shown the negative effects of high personal income tax rates, including reducing the incentives for individuals to work hard, increase their skills, invest and engage in entrepreneurial activities.
Reducing personal income tax rates, particularly middle and upper rates, would help create an economic environment that is pro-work, pro-savings, pro-investment and pro-entrepreneurship.
Decline in business startups threatens future economic dynamism
A number of prominent Canadians, including Bank of Canada governor Stephen Poloz, have raised concerns about the state of Canada’s business startups and entrepreneurship over the past few years. There is general agreement that entrepreneurship is a critical facet of a well-functioning, prosperous economy. New firms started by entrepreneurs and business people are the lifeblood of innovation, creativity and economic progress.
Unfortunately, business startups with five to 20 employees have declined by 37.5% over the past decade. The results for business startups with 20 to 50 employees are even more startling: a decline of 59% over the same period.
The federal government can super-charge entrepreneurship by reforming capital gains taxes, a key tax for entrepreneurs and the financial backers of entrepreneurs, reducing the burden of regulations and red tape and removing barriers to entry in regulated industries.
On October 19 Canadians must make a single decision among candidates on a whole set of issues including, but certainly not limited to, economic policies. When it comes to the economy, balancing the budget, improving tax competitiveness and encouraging entrepreneurship would go a long way to securing a more robust economic future. •
Niels Veldhuis is president of the Fraser Institute. This commentary was co-written by Jason Clemens and Milagros Palacios.
Irene Lanzinger | More government involvement needed to stabilize Canada’s economy
The first couple of weeks of the 2015 federal election campaign have given voters, regardless of their political sympathies, a lot to think about.
The economic and social priorities of the major parties, the credibility of their leaders as well as the prospects for Canada’s future have all been front and centre in the campaign so far and will all shape ballot box choices on October 19.
There’s no doubt that Stephen Harper’s Conservatives are feeling more than their fair share of voter scrutiny – and for good reason. Recent Statistics Canada numbers showing that Canada has moved into recession are only one of several benchmarks that call into question Harper’s approach to managing the economy. To say that the Conservative scorecard on the economy is looking pretty frayed at this point would be an understatement. Rising unemployment, the virtual demise of Canada’s once strong manufacturing sector, the steady erosion of funding for valuable public services along with Harper’s belief in laissez-faire economics regardless of their consequences have all contributed to the anemic state of Canada’s economy. And all of these problems have happened under Harper’s watch. Not exactly a ringing endorsement of his “stay the course” message during the campaign.
Unfortunately, the problems for the Conservatives aren’t just about recession. Their credibility on several fronts has also been suspect. In the April budget, for example, if it were not for the transfer of billions from the employment insurance fund and the timely sale of its General Motors shares, claims of fiscal surplus would be false.
The Liberals have tried to capitalize on the Conservatives’ problems with a curious strategy of their own. In an effort to paint himself as a supporter of public services, party leader Justin Trudeau trotted out Paul Martin. Not lost on many observers was the fact that Martin was the poster child for austerity measures in the 1990s, measures that drastically cut federal transfers to provinces and led to a cascading series of cuts in provincial funding for health care, education and provincial social assistance programs.
It’s hard to see how Martin can now be seen as a champion for federal programs when his track record as finance minister showed him to be otherwise.
Not surprisingly, voters are seeing Tom Mulcair’s approach as more reasoned and stable. His argument for targeted tax increases is the first honest admission by any of the federal leaders that not only do valuable public services play a critical role in promoting economic growth – a national child-care program, for example, will open the door to full-time employment for thousands of families across the country – but those services need to be anchored to a tax base that is both fair and progressive.
As the Conservative track record over the last 10 years will attest – and for that matter the Liberals’ track record before that – tax cuts as a core economic strategy have been a failure. Moreover, the idea that government should be a passive participant in the economy has also proven to be the wrong approach. The result has been stagnant wages, the rise of precarious and temporary jobs and a growing income gap that is making Canada an increasing unequal society.
The hands-off approach of previous federal governments, whether Conservative or Liberal, has just not worked, and millions of Canadians are paying the price. October 19could well mark the beginning of a new, more progressive approach in our country, and I for one think it’s long overdue. •
Irene Lanzinger ([email protected]) is president of the BC Federation of Labour.
