It's The Pocketbook Stupid

July 31, 2019 - This blog first appeared in Northern Ontario Business.

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Experts across the country are trying to understand how they lost the argument about the carbon tax. The evidence is overwhelming that a broad-based carbon tax is the most effective and least costly way to shift from a carbon intense to a carbon alternative economy. Yet, in province after province, governments are choosing the less effective and more costly alternative of regulation combined with carbon pricing for high emitters.

A considerable amount of navel-gazing and finger pointing will now take place, but the answer is right there for all to see. It’s the pocketbook stupid. Voters are not prepared to accept another “tax on everything” especially when another politician is prepared to offer them the alternative of a higher tax on some things which, at least in the first instance, someone else will pay.

In the latest national polls “cost of living” is cited as the number one issue heading into the federal election this fall. For economists, being concerned over “cost of living” makes little sense as inflation has been stable at around 2% for over twenty years now. For political scientists the sudden appearance of “cost of living” on lists of ballot box questions traditionally dominated by health care or education is quite the shock.

To the average Canadian, this is not a surprise at all. Whether it is housing in Toronto, gas in Kenora, or property taxes pretty much everywhere, the money going out rises every year and rises faster than the money coming in. This is abundantly clear to a parent struggling to afford the monthly childcare costs in any province but Quebec or for a worker at one of those centres (even in Quebec) trying to save for a house. This reality has repercussions for political strategy and public policy.

Consider the NDP. They have fallen into fourth place nationally. For better or (mostly) worse the NDP is largely seen as the party of high taxes and high spending. The strange thing is that, in government (at the provincial level) the NDP has the best record of fiscal prudence of any of the parties. Were I them, I would be the one trotting Janice Mackinnon out at public events, as opposed to letting her be coopted by my political opponents.

Mackinnon was Roy Romanow’s (NDP) Finance Minister and is widely considered to have the best record of matching spending to revenue of any Finance Minister in modern times. Doing so while also expanding and making more sustainable key supports for at risk and underserved populations. Protecting pocketbooks while improving government services.

The Liberals, despite their stance on the carbon tax, understand pocketbook issues too. In 2015 they promised a lot of tax and price relief to Canadians, and they have largely delivered. Much of the recent new spending has been debt financed, charging it forward I guess. The same trend appears to be taking shape for this fall and, if they get re-elected, for the years ahead. Major promises already include more tax relief and continued hammering at the immediate sticker price for services the government provides. We can be sure that big ticket items like a possible national pharmacare plan will be back end loaded for costs, to make things easier on your pocketbook and tougher on the next generation of voters. Who, conveniently, will be someone else’s problem.

Getting back to Mackinnon, for some time now she has been the darling of fiscal conservatives. Expect the Conservatives to continue to shout from the rooftops her core messages of reasonable taxes, value for money spending, and helping people help themselves. The danger for the Conservatives is that the Liberals will be selling that too, without a side order of populist rhetoric.

As to the Greens, relevance is theirs for the taking. But not with confusion on how to balance the economy and the environment, or with promises of universality of benefits when even the NDP abandoned that concept as not only unaffordable but unfair long ago.

It’s going to be an interesting few months, but ultimately, when the rhetorical smoke clears, the winner will most likely be the party that promises to protect your pocketbook the most, and I am just fine with that.

 

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Charles Cirtwell is the founding President and CEO at NPI.


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