Advice for the Conservatives: Watch out for the Sloth

After a decade organizing a viable alternative to the Liberals and five years of difficult manoeuvrings in a minority Conservative government, the Harper Tories have their majority and may be tempted to think they have arrived. But political success is fleeting; they would be wise to seize the moment to make the actual conservative changes they went into politics to bring about.
People may “go into politics” to “make changes”. But the particular party or movement they choose is determined by what they think makes for good government and a healthy society as well as those things they think harmful.

People attracted to the conservative cause generally hold three key ideas. First, people are better off making decisions for themselves rather than having others decide for them. Second, freedom is not only worth defending but it is also generally in need of defence against foreign attack, domestic subversion and intellectual erosion. Third, experience is worth more than abstraction, so we should only move away from the tried and true when a clear and compelling case exists for a departure from tradition.

The relative importance conservatives attach to each of these ideas determines whether particular conservatives are primarily fiscal conservatives, social conservatives or hawks and how easily they coexist with the others. Abstract principles only take you so far.

Anyone who succeeds in gaining power does so at a particular moment in time under particular circumstances that make one of these ideas more relevant and require it to be applied in a specific way. Once political realities and temperament are taken into account, the most compelling need for conservatives is to cut spending, flatten taxes, reform health care and rebuild Canada’s defences.
These are bold proposals. But when people invest a decade or more of their lives in political engagement it is because they want to make major improvements. While purists observing from outside may be tempted to urge unrealistically drastic changes (I have been accused of this), the opposite danger haunts partisans. Long immersion in political tactics can lead them to flinch from any decisive proposal and, to avoid overcommitment on all fronts, to squander the frequently brief period in which a new government can really make a difference.

Purists vs. partisans
Purists like me are of course frustrated at the timidity with which the Tories have approached some issues and the vigorous manner in which they have gone exactly the wrong way on others.
The apologists/partisans often say the tactical requirements of a minority explain why they let spending explode while offering minor tax breaks to every imaginable voting faction. But what begins as expedience can too readily become habit, then reflex.

My first piece of advice is “therefore, be bold”. But focus on things the Harper Conservatives really might do in the short term, i.e., in the next year.

For starters, I assume that from either expedience or conviction this government will do nothing about the so-called social issues (actually those related to gender). It will take no meaningful steps to affirm traditional marriage, let alone restrict abortion at any point during pregnancy. I find this position disappointing, but, in tempering my boldness with pragmatism, I accept it and move on from social to fiscal issues. (I am treating human trafficking as a foreign policy issue rather than a social issue even though it too often includes a ghastly sexual component.)

Dumb down and flatten taxes
So-called fiscal conservatives are generally in favour of free markets as well as sound public finances. But at this point, their most urgent attention must go to the latter. Federal government revenue and expenditure problems constitute a more serious crisis than does the excessive burden of regulation, so politicians with only so much time, energy and staff should focus on tax and spending questions.

First, a reform of the tax system is a serious possibility because few people like taxes and nobody likes complex government. Most Canadians do not know that the Income Tax Act is 2,902 pages long, but they are not surprised when they discover it.

The government spends far too much time worrying about exactly how Canadians earn specific bits of their income and which bits should be gently encouraged or discouraged. This should not be any of its business.

It is fashionable on the right these days to regard certain kinds of income as more conducive to growth than other kinds, and particularly to favour income from savings and to try to encourage that kind of income. But the government has neither the wisdom nor the moral right to subordinate citizens’ judgement about how to live to some larger collective good.

However, governments, especially conservative ones, ought to tax only to fund spending and, therefore, do it in ways that change citizens’ behaviour as little as possible. The time and energy dedicated to tax-related accounting alone, to say nothing of the way wealthy individuals and corporations change their behaviour, is a big loss to the country with no discernible benefit.

Ideally, the federal government should bring in a flat tax of around 15 per cent on all earned income. If that is too much to ask, the government should (as Charles Lammam and Niels Veldhuis of the Fraser Institute have suggested) reduce the four tax brackets to two, one for income over $250,000 and one for everyone else. It should allow income splitting for all families to eliminate the current bias against couples in which one partner has significantly higher income.

The government should also make a serious effort to eliminate the different treatment of different kinds of income for both individuals and corporations. The Income Tax Act is too long even for lawyers and accountants; it is up to Canadians to decide the best way to conduct our affairs and government should then collect a fair share of that income in as neutral a way as possible. So there is no reason this Act need exceed 100 pages.

Avoid a fiscal “vacation” a la Greece
Second, a reform of spending is a serious possibility because it is an urgent necessity. In this area, the government must, before it does anything else, put aside in their private counsels the necessary political claim that having wisely raised spending to offset the recession, it now has everything under control and will deliver a balanced budget in the fullness of time.

It is not enough to note, though it is true, that the government has not made the kinds of hard choices the Chrétien Liberals made in the 1990s or that the deteriorating demographic situation makes such choices more rather than less urgent. It is essential to consider the debt and deficit crises now wracking Greece, Ireland, Portugal, Britain and the United States, among others, to understand the extent to which the welfare state is overcommitted.

The Minister of Finance and his colleagues must request a series of charts to summarize the fiscal problem. One should demonstrate spending on the major social programs over the past 50 years; another should show what that spending will do over the next 30 years at the same average rate of increase, and; a third should show what it will do given the probable impact of an aging population on the CPP and health care. They must then add to those charts a depiction of what federal revenue has done over the past half-century and what it is likely to do if nothing changes except the share of the working population.

The impact of these charts will be to show the public what one hopes the politicians privately understand, namely that the present course is unsustainable under any rational assumptions about economic growth. So once they are digested within government, Jim Flaherty must go before the public and present them; he should also deliver a plan to reduce the rate of spending so that it does not cross the revenue line on its way toward 100 per cent of the GDP. This plan must necessarily involve raising the rate of retirement (which is, by the way, a good recommendation on its own).

As part of this plan, in the name of fairness as well as prudence, the government must reform public sector pension plans, so that over time they match those of the private sector. It should do so while keeping as many of the contractual promises to current retirees and long-service public employees as it can. While difficult, this task is quite simple compared with the main spending challenge: health care.

Tackle the elephant in the fiscal room: health care
In this area, the situation is almost too grim to contemplate. The natural inclination of practical politicians is to shy away from health-care reform after they promise to spend more than anyone else promises. But this strategy is inadvisable even in partisan terms. If the Tories wish to become, and think they have become, the natural governing party, they must face the issue at some point. I suggest now, when it is frightening, rather than several years from now, when it will be terrifying and will make a mockery of their efforts to stabilize the federal budget.

In 2004, when health spending passed 40 per cent of provincial program spending, many voices warned that it was unsustainable. But nothing happened, except the federal government threw money at it. As a result, health spending reached 46 per cent of provincial program spending in Ontario by 2009 (other provinces ranged from 36 to 49 per cent). We cannot simply continue to increase spending in relative as well as absolute terms in this fashion, and the federal government does no one any favours by facilitating a further deterioration in the situation with emergency funding.

Instead, it should free up provinces to experiment with market-like mechanisms. Opportunity knocks here because the 10-year Canada Health Accord on federal funding for the provinces expires in 2014. The federal government should offer a 10-year deal with significant funding increases for five years, and the annual 6 per cent promised by the Grits and Tories in the last election, followed by cuts twice that large for the next five years. In return, the provinces should be freed from the antique straitjacket of the Canada Health Act (CHA) and its five dogmas of universality, portability, accessibility, comprehensiveness and public administration.

In fact, everyone knows either the first four “pillars” are no longer standing or they never were. The fifth, public administration, is an exploded doctrine of central planning that ought to be anathema to conservatives especially those who like the Prime Minister have solid backgrounds in economics. The CHA is more than a quarter-century old, is directly contrary to conservative principles, does not work, is an affront to the spirit and arguably the letter of our constitution and it frustrates citizens.

Whack the Equalization Program
On a less horrifying note, the Tories should also dramatically simplify and reduce the Equalization Program. Everyone secretly knows that the program is silly … or perhaps not so secretly: Ontario Minister of Finance, Dwight Duncan, just had a major tantrum over people calling Ontario a “have-not” province because it now receives equalization payments. This occurred even as his boss, Premier Dalton McGuinty, insisted that Ontario must continue to receive a subsidy from the “have” provinces six years after then-federal Minister of National Revenue, John McCallum, rightly called such a development “hard to believe.” As columnist Lorne Gunter pointed out in 2006, every single province is now wealthier than Alberta was when it became a “have” province in 1964. And yet, the program rolls inexplicably and incomprehensibly on.

The worst thing about equalization is not just that it is silly; it is also impenetrable. As U.S. commentator P.J. O’Rourke has rightly observed, “Beyond a certain point complexity is fraud…. [W]hen someone creates a system in which you can’t tell whether or not you’re being fooled, you’re being fooled.”

No citizen can possibly explain how equalization works nor can many experts. In 2006, the federal government’s Expert Panel on Equalization and Territorial Formula Financing admitted it had “discovered” a supplementary equalization program of which it was unaware. Other transfer programs have their own versions of equalization, sometimes expressly designed to counter changes in the real one.

In any case, the equations that drive equalization are so complicated it is doubtful that the authors could understand them even if the program had not been jury-rigged to settle disputes over natural resources in a way that is purely political. Such side deals are no more popular with the public than baffling complexity is. The public is not impressed by the enormous subsidy that results for Quebec or the fact that Ontario is also in the trough. The time for significant simplification and reduction has come.

There is some question whether the language of section 36 of our Constitution makes the program justiciable at all. (See Sylvia LeRoy’s analysis). Again, I will water my wine and not suggest the outright abolition of the Equalization Program. Instead, I will suggest that it be simplified, so that every province with per capita income below the national average gets a subsidy from Ottawa that makes up half the gap between what it would raise with a typical tax structure and average income and what it would raise with the same tax structure and its actual income. (If even that is too complicated, reconsider abolishing it.)

Put consumers first
Although it is less important, the government should also tackle some of the more obnoxious barriers to freedom of commerce within Canada. First, in pursuit of the notion that individuals are generally the best judge of their own interest, the government should abolish such monopolies as the Canada Wheat Board. Second, it should vigorously assert federal jurisdiction over internal trade barriers to sweep aside a horde of petty, vexatious restrictions on interprovincial movement of goods, services and people.

Where Ottawa ought to spend more: our security
On national defence, the government has spoken well on everything from veterans to reequipping the military. But it has not done what is necessary, and it has not done so because of its other budgetary problems. Even with the enormous surge in spending since 2006 (program spending has notoriously risen 42 per cent), it has been forced to underfund the military at under 2 per cent of the GDP rather than the 4.5 percent needed for a serious military force.

Obviously, a spending increase from $20-billion to $50-billion is not going to happen unless we encounter a massive national emergency. The imperative of balancing the budget leaves no room for significant funding increases and even minor ones would be difficult. The government has already expended political capital on the Lockheed Martin F-35 fighter plane, and it would merely be discouraging to list the other weapons systems that are rusting out. (The entire navy is just one example.) The government has already taken some important and inexpensive steps to crack down on immigration fraud and human smuggling. And it can now take two largely symbolic steps to lay the groundwork for a direct strengthening of the military in the short run and to cultivate public opinion over time to favour a major reinvestment in our defence capacity.

First, it should re-establish the Canadian Officer Training Corps on campuses across the country. There is surprising receptivity to this idea in the universities, and it would strengthen the link between citizens and soldiers that apparently almost dissolved a decade ago but has been steadily gaining strength. Second, bring military bases and reserve units back into cities. A third, more-direct measure that is long overdue is to increase dramatically the size of the reserves from today’s 15,000 part-time and 6,000 full-time reservists to as many as 40,000 to 45,000, mostly part-time. Many Canadians do not appreciate that reservists provided as much as a fifth of the deployments to Afghanistan. Reservists are also crucial front-line responders in the event of natural or man-made disasters at home. They cost a great deal less than regular soldiers (perhaps $20,000 a year instead of $100,000, all costs included), but they do need equipment, supplies and pay.

Clearly, such an increase in the reserves cannot be done all at once. Who would train the recruits? However, putting a plan and funding in place to add a few thousand members a year over a decade would provide the best insurance possible against the failure of our drastic underfunding of the Regular Forces that, given other budgetary realities, is unlikely to change in the near future.

Having taken these baby steps, the Tories should think about a clear policy statement explaining the extent to which they are determined to intervene abroad in pursuit of values rather than interests and the kind of resources they are going to make available to that end.

Clean up crime – and the CBC
The Conservatives should also do a few other things in the protection-of-persons field. They have moved firmly on crime and immigration policy, and they should stand firm, including improving the way crime statistics are compiled to reduce the drumbeat of claims that crime is down. (They should simply consult the paper “Why Canadian Crime Statistics Don’t Add Up” by Scott Newark, published by the Macdonald-Laurier Institute.)

It is time to end the CBC’s billion-dollar-plus subsidy that is used to oppose government policy. Private media do that and everything else worth doing, and this would be one more decisive step toward ending the culture of subsidy that stifles creativity by making broadcasters responsive to the state rather than customers.

To accomplish any of these objectives, the Conservatives must take two preliminary steps. First, they must admit that despite five years in office and much partisan rhetoric, there are still many major problems with governance in Canada. Second, they must remember that they entered politics to fix major problems, not to fixate on minor matters.

Do it now
The Harper Tories have achieved a majority government in part by patient manoeuvring, small steps and a willingness to compromise on principle for partisan advantage. They must now recognize, while opportunity for significant reform still exists, that the point of all this tactical politicking was to achieve a position where real change could take place. The great danger now is not recklessness; it is to allow the iron to enter their souls and then find themselves incapable of acting.

Like this article?

Facebook
Twitter
Linkdin
Print

Leave a comment