Pre Budget Speculation

The provincial budget will be tabled tomorrow afternoon at Queen's Park.

This is an unusual budget for two reasons. The first is that the federal treasury is heavily dependent on transfer payments, which is a big unknown at this point because of the federal election. The province was unusually aggressive in their condemnation of the feds last week, which is notable considering McGuinty's gentle approach to federal-provincial relations.

Unusual also because it is an 'election budget' that probably won't contain many new spending initiatives considering the size of the deficit.... Nevertheless, the province still has a way of managing to pay for sizeable corporate tax reductions.

Socialist Anti-Tax Populism

In this new era of Rob Ford tea-party-esque populism, framing a message for an unapologetic socialist party is difficult. Martin Regg Cohn`s article in The Star makes mention of two concurrent debates at the federal and provincial level and how Liberals and NDPers deal with communicating tax policy:

Horwath has staked out her turf on corporate taxes to distinguish herself from provincial Tory Leader Tim Hudak, who largely owns the HST as a pocketbook concern. She too has tried to profit from discontent over the HST , but often sounds like a discordant echo of the taxfighting Tories or a socialist Tea Party.
And Horwarth`s HST taxtics have created tensions within Ontario’s house of labour. Ontario Federation of Labour head Sid Ryan complains that her rhetoric undermines public support for the taxes that fund social programs. And Canadian Auto Workers head Ken Lewenza once publicly lectured Horwath: “Andrea, the harmonized sales tax, as unpopular as it may be, cannot be an issue from the progressive side. . . . We do not want every Ontarian to think that taxes are bad.”

Sid Ryan`s comment could be echoed federally, as Jack Layton releases a new set of ads today that slam the HST in Ontario and British Columbia. What is surprising is considering the significant policy planks available for the NDP to mention under a right-wing government (affordable housing, gap between rich and poor, decaying infrastructure, unemployment, CPP, etc etc), they choose taxes.

As discussed in a previous post, this is a losing game for a left-wing party, especially the NDP. Tapping into anti-tax populism is both awkward from a philosophical standpoint for the NDP, but more importantly, it compromises the progressive movement generally, as it advances no social concerns, while moving a significant government revenue source (in this case the HST) into the crosshairs.

Ask and You Shall Recieve

Andrea Horwath asks for all-party hearings into the proposed TSX/LSE merger and two weeks later, Ontario's Minister of Finance agrees.

Unfortunately, there are no thank-yous to Ms. Horwath in the Ministry of Finance media release.

Free Market Mercantalism

The Federal Government has already blocked two big sales: most recently with the attempted takeover of Potash Corporation and the other in 2008 with the attempted takeover of a space division of MacDonald, Dettwiler & Associates by American Alliant Techsystems.

Recent news on the merger of the Toronto Stock Exchange with the London Stock Exchange is interesting because it again forces the Federal Government to consider what precisely constitutes a "net benefit to Canada".

Ontario's Minister of Finance, Dwight Duncan has already weighed-in with negative comments on the merger. With provincial jurisdiction in securities exchange, this allows the province to move into the murky waters of trade regulation, which is awkward for Ontario considering this is not a natural role for a province.

Two things to watch:
The first, this is similar to the Potash debate in that it pits a conservative minded stakeholder group which probably is probably pre-disposed to free market ideas and less government regulations (Bay Street lawyers and traders) to make protectionist arguments. Usually in this instance, the Federal Conservative's opt for the votes instead of ideology. However, Harper is recieving increasingly nasty editorials from his neo-conservative allies at the National Post which may continue to weigh on him.

Second development to watch is the jurisdictional battle between the provincial and federal governments, since both appear to have the ability to block the sale. Will both governments decide against the merger? Or is there an incentive for one government to pre-emptively declare the merger not a "net benefit to Ontario/Canada" while the other stands on the sidelines?

Democratic Mass Transit

The current policy-revamp by Metrolinx regarding the future of Transit City post- David Miller begs a few questions. Does a Mayor have the power to unilaterally declare the end of a transit plan when billions of dollars have already been committed by provincial and federal governments and millions already spent on Environmental Assessments and planning?

What I think is lost in this story is how dangerous it is to entrust long-term planning decisions to Municipal governments. I appreciate arguments that this is damaging to democratic decision making, but transit planning is inherinetly a technocratic exercise, where planning, construction and completion takes place over several governments with different ideological stripes. And I am not certain how democratic back-room meetings with Rob Ford's Chief of Staff and the Premier's Office is.

Which is why a centralized decision-making body like Metrolinx is a great idea because it takes decisions away from politicians and in the hands of provincial bureaucrats and business people who are less susceptible to short term political objectives. This is necessary if we are to see the building of any new transit lines over the next few years.

Also necessary is to reform the manner in which transit is funded. The Transit City battle demonstrates that direct government subsidization of transit should be kept to a minimum. Of course, there needs to be massive public funding, but this must be seperate from general government revenue and sustainable over long periods of time. The Toronto Board of Trade raises some very positive suggestions about long-term financing methods for TTC and Metrolinx to consider.

Managing Expectations - Stop Bashing the Public Service

I think this article demonstrates the problems centrist and left-of-centre governments face when they promise conservative reforms to the public service such as wage freezes and cutbacks and then under deliver on their promises. This is similar to Mayor David Miller's promise to roll-back union concessions within their collective bargaining agreement.

Perhaps only right wing parties should attempt to engage in this type of union demagoguery. Otherwise you are playing into right wing talking points while angering your core constituency.

Provincial Corporate Tax Rates - A Story of Policy and Media Indifference

The McGuinty move to lower corporate tax rates seems to have been done with very little public advertisement, looking at the 2009 and 2010 provincial budgets, announcements on corporate tax cuts are rare and buried within the documents. For an initiative that is estimated to cost around $2.4 billion annually in revenues, one would think that they would have attempted to receive more PR bang for their buck.

As a looming the federal election seems galvanized around the question of appropriate levels of corporate taxes in an era of record deficits, such a discussion has been muted in Ontario. Any opposition has been more or less marginalized to public sector unions and the odd media release from the NDP.

One would think that after having a corporate tax structure already significantly lower than the US would be sufficient for competitiveness. There is already a litany of data (from all over the ideological map) demonstrating how ineffective corporate tax cuts are as a stimulative measure.

Most troubling, is that the upcoming provincial budget seems to be framed around austerity measures, with minor departmental shuffling to shave off a few million dollars. Yet, the province is still planning on fulfilling multi-billion dollar corporate tax cuts.

As the Federal Conservative's are pressured from all sides to reverse the Corporate Tax Cuts, one wonders if there will be the same political momentum to reverse course in Ontario.

Changing Camps

As an observer in the Toronto election the news of defection from Rocco Rossi to join the Tim Hudak team isn't a shock.

His campaign was punctuated by assaults on unions, and of course plans to revive a 30 year idea to build a new highway through the city. I think his particular brand of politics was never "Liberal" and was certainly always self-serving.

As for his ability to win in Eglinton-Lawrence - he will have to bet on his ability to court uneducated, sophomoric Edge listeners. If Dean Blundell supported him, how can this be a losing bet?

An (already) blue-ish Ontario

Radwanski article on Hudak. A telling excerpt:

On the couch of his Queen’s Park office, he’s asked to forecast what Ontario will look like in 2015 if he’s been running it for four years. His response would make his old boss cringe. “I don’t think it’s tremendously different from the Ontario we have today,” he said,

I think this demonstrates not only the moderation of Hudak, but also the very centrist Liberal policies of McGuinty's last 7 years in office.

Conservative Compromises

This article from The Star's Martin Regg Cohn seems an accurate enough description of Hudak's strategy leading up to the election.

When you look at some of the major PC policy grievances they tend to be a predictable mix of Toronto Sun style populism. What is more interesting is how responsive McGuinty is in addressing each policy.

For instance:
Hydro Rates: A significant rebate system which continues the artificially low rates on electricity in the province
Public sector pay raises: A very public war on public service salaries
HST: There isn't much room for compromise here, although the rebate cheques seem to be a transparent political ploy to lure buy votes without any significant broader economic goals.

In each instance it seems that there is a significant overreaction to opposition criticism, more worrisome is that the responses are framed in Conservative terms.

It seems to me this is ultimately a loss politically and is also damaging to long term policy objectives. As Adam Radwanski points out, out-Hudaking Hudak is not a winning strategy.

As demonstrated by the attempted wage freeze – which hasn’t really taken, because Mr. McGuinty is reluctant to play hardball – the Liberals often don’t go as far as the Tories probably would. So they run the risk of sending the signal that there needs to be a shift in the way that government functions, but that they’re not the ones capable of achieving it.