Blessed by the Potato

By now I’m sure everyone has heard about the Ontario government’s plans to harmonize the PST with the federal GST. I don’t particularly care for this move, for two very simple reasons. The first is that this is going to take away the provincial government’s ability to have incentives for specific areas through PST changes. For example, the Ontario government doesn’t charge tax on the bare necessities such as electricity, natural gas, diapers, or most food items. While most food and diapers will remain free of the new HST, it looks like home energy is going to be taxed, and the MERs of mutual funds might get hit too. An even better example would be the green transportation initiatives: the Ontario government rebates $2000 of the PST paid for a hybrid car (new or used) — will they still have that ability when it’s HST? At the same time, they also cancelled PST for bicycles last year, to encourage Ontarians to take up cycling — will they have that ability with a federally-managed HST?

The other reason is that Wayfare is currently a private contractor at her job, and so she has to remit GST to the government; this is basically a charge she eats out of her “salary”. We don’t know what’s going to happen when the HST comes around, but at the very least she’s going to have to renegotiate her contract with her employer/client.

As reported by the Star, Toronto’s vehicle registration tax has fallen short of expectations. “…the equivalent of 167,000 fewer vehicles being registered than expected.” Of course, I’m one of the many people that had a car registered to a Toronto address that was promptly moved when the tax was announced. Like perhaps half of Western’s student population, I came from the Toronto area, and left all my mailing addresses (including my car registration) set to my parents’ address to make life simpler: no updating every few years as I moved around, and someone at home all the time to let me know if something important arrived. But for $60/year, yeah, I’ll update my address.

Oddly enough, when it was first being mulled over I was in favour of a vehicle registration tax, but that was back when I thought they were talking something modest, like a 5-10% surtax. When the Toronto surtax ended up being almost as much as the original provincial fee, I balked.

Well the opposition coalition seems to have lost its will to run the country, which is unfortunate because then it makes Stephen Harper’s whining to the GG and setting the country adrift work. The new version of the budget is out, and it doesn’t wow me.

I reluctantly agree that a monumental stimulus package is probably needed to keep this recession from snowballing into a depression, and that going into deficit, temporarily, is probably needed. However, I can’t wrap my head around the amount of money we’re forecasted to miss out on. A lot of it is due to lack of tax revenue (you don’t pay taxes if you don’t make any money) rather than spending, but still, where’s the grand stimulus?

Where’s the reintroduction of the green car feebate to stimulate auto sales? Instead we get some vague restructuring of car loans. Where’s the grand vision, the infrastructure spending to not only get bodies working, but also to lay the roots of a better society when we come out of this? In short, where’s my Windsor-Quebec Shinkansen???

Universities, never exactly rolling in the dough even in good times, are finding things are seriously tight as their endowments have been decimated by the stock market (and real estate) crash. PhD comics pointed out that academia is often a refuge for those who would otherwise go into engineering or business or the real world in general: spend a few years in grad school below the poverty line (but at least with some kind of income) and wait the recession out. However, this time there doesn’t look to be the capacity there. I’m pretty sure our department is shrinking, and will shrink more next year as many supervisors seem to not have the funds to take on students. The US is throwing more money at this, specifically towards graduate fellowships, so why nothing from our government?

I did like seeing the duration of EI benefits increase. To my thinking, EI should be automatically scaled to the unemployment rate: as the job market gets tougher EI should automatically extend a few weeks/months to reflect the fact that people need the extra support and that finding a new job is just plain harder; likewise in a hot market EI benefits should be scaled back slightly. Another step I’d like to see is flexibility added to RRSPs: they can continue to tax withdrawls, but the contribution room should be given back, though I don’t think many people in the situation of both having RRSPs and needing to tap them in hard times are terribly worried about losing their tax shelter for future years.

There’s a small rejigging of income tax brackets, leading to a small savings for most Canadians (most of which was already planned to account for inflation), arguably where the previous frittering of the surplus (yes, there was a surplus just a year ago) should have gone, rather than to cutting the GST, though I would have argued it should have all gone to paying the debt from the last recession. The problem with broad-based stimulus packages like this is that the dollars very quickly become diluted: $40 billion spread out amongst 30 million-some Canadians comes out to something like $1300 each. That’s not something I’d sneeze at… but it is easy enough to have that disappear in a family budget, especially after a summer of record high gas and food prices, or to vanish into savings*. To get the economy rolling again a big kick is needed to specific areas that will, hopefully, get those going and lead the way for the economy as a whole, rather than spreading a small amount of love around everywhere. Of course, this isn’t a video game and the recession monster’s weak point isn’t flashing neon orange telling us where to hit it. The banking and auto sectors might be good ones to try to prop up/nationalize — banks in particular are needed to supply credit to grease the wheels of the recovery. However the budget also contains a lot of measures targetting home ownership: renovation credits (which might be as much about getting contractors to issue receipts and file taxes), and changes to help get first-time homebuyers into the market with a modest increase to the HBP and a tax savings of up to $750 for a purchase. I don’t think trying to prop up the housing bubble here is going to help the economy. In fact, more money sunk into houses/mortgages by first-time buyers is less money out there circulating in the economy. These are also poor measures because they can’t even focus spending in one area in a focused way: there are at least 3 different ways of trying to stimulate housing rather than that one big kick.

I’m also a fan of the targetted big kick for infrastructure because then the country gets something it might need/want anyway at rock-bottom recession make-work prices. Take $40B, heck raise the GST back to 7% while at it and make it $60B or whatever, and build a shinkansen in Ontario, a few hospitals in BC, some nuclear plants in Alberta, some wind farms in Saskatchewan, carve a whole new riverbed and hydro project through Manitoba, create a shinkansen network in Ontario and Quebec, covered bridges for NB, some tidal energy projects for NS, and a teaching hospital for NFL, then have PEI build a 50-storey phallic fucking tower just because they can. You know, at least that way you get something to show for your stimulus money.

* – Savings are great things to have on an individual level. However, as a country as a whole we should be doing our saving during the boom years, and then tapping the savings during downturns to help stabilize everything — stimulus packages that just go straight to savings just make recessions worse. I’ve seen some recommendations that stimulus gift cards be sent out: something that you have to spend (though that wouldn’t necessarily stop people from then saving the equivalent amount somewhere else).

This week’s events in federal politics have certainly been interesting if nothing else.

Parliament is fractured into four small parties; the Cons are the largest ones (and hence formed the minority government after the election), but are the least willing to work with the others. The Liberals and NDP even combined don’t outnumber the Cons, so to govern one side or the other has to get support from the fourth party: the Bloc. Harper did it not so very long ago, giving them concessions of billions of dollars and “nation” status. Now the Liberal-NDP coalition has received support from the Bloc to overturn the Cons.

Harper has come out with all kinds of vitriol about how the coalition is making deals with separatists; coming from a still-technically-sitting prime minister, this is worrying some people that it’s stirring up the hornet’s nest of Quebec separation just as that issue was finally dying a quiet death, that he will alienate quebecers (38% of whom voted Bloc — more than the Cons got nationally). Likewise, there is valid criticism that by having to go to the Bloc, both sides (the Cons in 2000 and 2006, the Liberal-NDP coalition now) are giving a separatist party legitimacy in the House.

The Bloc is, ostensibly, a separatist party. They were founded to promote Quebec sovereignty… but let’s get real. The separatists lost two referendums on sovereignty. The Bloc doesn’t even put up the pretense of asking for another in the near future. No, the Bloc has gone from being a separatist party to being a mean-spirited, single-minded regional party. They are the party of “give Quebec everything and screw the rest of Canada”; which, I suppose, is not all that different from the mindset of a separatist party. The difference being that it’s quite possible for other regional parties to form even without the separatist agenda/rhetoric.

First-past-the-post election systems, like we have, tend to come down to two-party systems due to issues like strategic voting. Interestingly, this has not happened in Canada — true, really only the Cons and the Liberals have any chance of forming a government, but that doesn’t stop the NDP and the Bloc from putting up strong showings, and even the Greens (and in past elections, Reform) compete. Of course, many ridings come down to two-way races, but nationally it’s a mess.

Oddly enough, this mess of smaller parties is one of the criticisms levelled against alternative voting schemes like proportional representation. Since the population is so fractured on who they support, a proportional representation scheme would most likely return minority government after minority government. Then fringe parties with distributed support who would never get enough concentration to elect an MP in the current system might get in and hold the power to make or break coalitions. Of course, that’s exactly what we face now. The trick of course is that the Bloc have gamed the system: they just need to win a few first-past the post races to be a viable fringe party, by which I mean that obviously they can use regional specialization to their advantage.

This is probably going to be bad for Canadian politics going forward. I mean, the Bloc model is working, and this is not a feature. To compete in a first-past-the-post environment the former Progressive Conservative party merged with the Reform to form our current Con disaster. It used to be that you could sway a centrist between the Liberals and the PC party, as evidenced by decades of alternating majority governments between the two. But now the gulf between the two is quite wide (today’s Cons are indisputably right-wing rather than right-of-centre), and there is little hope or point in trying to “unite the left”.

With things looking like a series of minority governments on the horizon for the next several years if not decades, the door opens to coalition makers and breakers, and further regional specialization. Years ago, my friends and I used to shake our heads at the Bloc, and jokingly say that we would form the “Bloc Ontarioquois” party to counter them. No one is starting such a party yet to the best of my knowledge, but it can’t be long before it happens. The Cons are increasingly seen as the party of the “West” (which somehow excludes Canada’s westernmost province), and it’s only a matter of time before an Ontario/BC-centric party decides to get in on the action. That could be either the Liberals or the NDP, both of which get half their support from Canada’s largest province, or a new party (hopefully one without the initials BO).

Things could turn around: federalism could return to Quebec, or the main federalist parties could learn to work together without having to pander to the Bloc. But I think that the time for electoral reform might have come. Depending on the system (I prefer STV myself, to continue electing MPs to represent ridings, and then just have ~5 MPs per riding, with ~30 on the ballot to rank as you please, as complicated as that might make the ballots), that might open the door to national fringe or single-issue parties (the marijuana party, or the pro-life party as common examples bandied about), but I think that might be preferable to the tearing apart of our country by rabid regional factions that are more interested in gaming the system for local advantage than getting everyone to run a big country together.

So for those who haven’t heard, we’re having a little bit of a crisis of faith in our government here in the great white north. We just had an election, which returned Harper with a “strengthened minority” — but a minority nonetheless. There was no “message from Canadians” — our ballots are not that detailed. Nonetheless, I’ve seen Con pundits all over say that Harper has a “mandate” from Canadians and that the opposition parties attempting to form a coalition to govern in his place is “undemocratic”.

Of course, it’s nothing of the sort — the majority of people voted against Harper. He spent years trying to self-destruct parliament with brinksmanship and confidence measures. The message from Canadian voters if anything was “you can’t rule as though you had a majority; here’s another minority now go play nice with the other parties.” Then the first thing he does when he gets back is introduce a partisan fiscal update (that takes away a source of funding for smaller parties) and made it a confidence measure to try to bully it through (oh, it also takes away the right for public sector workers to strike and the right for women to sue for pay equity). So the opposition has indicated that it is prepared to call his bluff, and he throws a hissy fit and threatens to shutter parliament for over a month. Or, as explained over at Whatever by Leila:

“Stephen Harper is not being removed because he proposed to eliminate the $1.95/vote, although that was an underhanded tactic intended to cripple the opposition parties. He withdrew that proposition […] Stephen Harper is being removed because he seems to think that 143 seats and 37.6% of the popular vote is a mandate from Canadians to do whatever the hell he pleases. He has a minority government. As such, it is his responsibility to cooperate with the opposition parties. He refuses to do so. “

Yes, in the midst of the worst economic turmoil in a generation, he wants our government and our leaders to go take a little vacation. Maybe spending more and having economic stimuli and bailouts won’t save us. Maybe it will just create more government debt and make the hole even harder to dig out of — but he’s not even willing to discuss the issue. At a time when the worldwide markets are facing a crisis of confidence, Harper wants to show Canadians that the government is not just asleep at the wheel, it’s not even at the helm!

On top of all this has been the Harper-Flaherty boondoggle of the last few years: lying to Canadians (income trusts, the prospect of a deficit), fiscal mismanagement, politicizing everything, including the safety issues of an ageing nuclear reactor, and breaking their own fixed election date legislation because they were so desperate to get an election in ahead of this turmoil that they’ve long known was coming (but did nothing about).

In a word, the Cons have lost the confidence of parliament, and of Canadians. Having the other parties work together to come to a compromise position that everyone can agree to is democratic, and it’s how our system is supposed to work with minority governments.

Now, my dad is in a bit of a huff over all this — he doesn’t care who ends up in power, but we need some stability to restore confidence in the markets. The Bloc is going to support a coalition for 18 months, so that might be enough, whereas a continued Harper government could be back here again in a week (assuming it is allowed to carry on by some back-pedalling and compromising by the PM) because of just how unstable those personalities are. The market has been burned by Flaherty before: the surprise income trust tax, and two rounds of buying mortgages from banks (not quite a bailout, but close) when the banks didn’t really seem to need it (which actually hurt confidence a bit). Because of that, on a per capita basis, the bailouts in Canada have been almost as large as the ones in the States, and we’re just getting going with this party.

Some perspective is, of course, required. This is not really a “takeover” or a “crisis” — tanks are not going to roll up parliament hill. The MP you elected is still your representative in parliament. All that’s changed is that the majority of ABC MPs have decided to cooperate since the Cons won’t. It’s been pointed out that Stephan Dion and the Liberals will probably take a drubbing in the next election over this — 18 months away, if the Bloc are to be believed — and that’s probably true. For that reason I have to respect the man. He’s willing to take the hit to his own reputation and long-term outlook in order to step up and do what is right for Canada now. Hopefully the coalition will manage to fix the economy (and our environmental plan at the same time) and turn it around within the next year and a half and they’ll be vindicated. If not, at the very least the next Con government we face won’t have Harper (and hopefully not Flaherty either) at the helm; hopefully it’ll be a Progressive Conservative rather than a Reform/Con man.