Thursday, April 28, 2005


Let's make a deal

It isn't exactly Monty Hall and the American people, but it will do. Late Tuesday the federal NDP and the governing Liberals struck a deal to increase spending in the next two years by $4.6 B on four main priorities. The money is coming from additional revenue (surplus) projected in the next two years and not the much talked about tax cuts. In fact, the amount taken out of the tax cuts in the next two years is actually only $45 M.

The critics are railing on Jack Layton for propping up the morally corrupt Liberals. It isn’t, however, that way in this reader’s eyes. It is clear that the Liberals are desperate to retain power and do not want an early election. Also, crystallizing is the fact that the NDP wanted to see investment in people increased (even more than in the 2005 Budget). This isn’t wrong, crooked or corrupt on their part. It is simply good politics. The measures that they want targeted and the means of delivering the money – well that is another issue.

If you want to criticize Layton do it on the basis that he took his marching orders from organized labour (no I am not anti-union). Organized labour leaders (that means you Buzz) have cost the federal NDP more than they have helped. In fact, they are likely the one group that drove the stake through the Bob Rae government in Ontario –not that someone else wouldn’t have. Layton should have taken his orders from his members and their platform.

The deal between the Liberals and the NDP includes:

$1.6 billion for affordable housing construction, including aboriginal housing. It is difficult to argue with this expenditure if you have ever visited an Aboriginal reserve or walked Younge Street in Toronto. Hopefully this can be a catalyst for real Aboriginal reform in Canada since continuing to throw money at perceived problems can't go on forever. It is likely, if Martin survives, that we will see a large policy meeting in Ottawa on First Nations issues in the fall.

A $1.5-billion increase in transfers to provinces for tuition reduction and better training through EI. This is a well-intentioned proposal that is entirely directed. The federal government has no role in tuition policy and should place this money into the Canada Student Loans Program or another federal granting agency. This way the money would go to students who need fee relief and not just be a blanket. Progressives will agree that not everyone needs a tuition rebate and there are many who need every last penny. If you distribute it through the aid system it will get into the hands of the lowest income Canadians. The lack of provincial consultation on this issue means it would be impossible to ensure the transfer would find it's way into tuition rebates and not result in road improvements and tax reduction (both policies worth pursuing just not with this pot of money).

$900 million for the environment, with one more cent of the federal gas tax going to public transit. If only we had a Kyoto plan that wasn't a moving target. Environmental expenditures consistently poll high on voter's priorities. In fact, Albertan's usually rank them in the top 3. I guess that is bound to happen with low taxes and no sales tax. Also, with spring here it brings on Canada's unofficial fifth season - pothole season. Fix the damn roads.

$500 million for foreign aid designed to bring Canada in line with a promise of 0.7 per cent of GDP. Are you listening Bono? This is a good choice and will be money well spent. It fits nicely into the long-awaiting foreign policy review (a good document, a little late, but good none the less.).

$100 million for a pension protection fund for workers. This point seems to be contested by Liberals. They claim it isn't in the deal while the dippers claim it is. I am not sure whom to believe so I say flip a coin.

The Promised tax cuts for small and medium-sized businesses will remain but cuts for large corporations (no I am not anti-business and yes I realize who creates employment) will be deferred. Prime Minister Paul Martin said a day after the Liberal-NDP deal was announced that the business tax cuts would be withdrawn from the budget. Martin concluded by saying "The tax cuts will be introduced later as separate legislation provided the Liberals get the backing of the Conservatives." I wouldn't hold my breathe on that point. The Liberals and the Conservatives are fighting like the Hatfield’s and the McCoy’s.

In the end we are left with more political uncertainty. One thing, however, is emerging there is a real fiscal imbalance between Ottawa and the provinces/territories. We need an equalization formula that takes into account the realities of the country. That will be a subject for another post – Readers Beware!

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