The Liberals are on track for a big win election day
Mini-budget reveals a reinvention toward business investments
There are moments when you can tell that a political party has won an election well ahead of voting day, as when Stephen Harper promised in 2006 to reduce the GST.
The Liberals have come close to achieving that feat in their Wednesday mini-budget, which steals from the Conservatives their only compelling message a year ahead of the next federal election.
Andrew Scheer, the Tory leader, has accused the Trudeau government of running a country that is “no longer open for business,” that chases away business investment and thereby puts at risk Canadians’ standard of living.
And it’s true that the Trudeau government has acted only intermittently, and without much conviction, in stimulating business investment.
At times the Liberals have seemed downright hostile to business, never more so than in their botched attempt to tax idle funds accumulating in privately held firms.
But in addressing that electoral deficiency in this week’s mini-budget, the federal Liberals have again demonstrated the tactical finesse that long ago earned them the status of Canada’s “natural governing party.”
Decry it as shape-shifting if you will, but the Liberals did a remarkable job of reinventing themselves this week.
For three years, federal Finance Minister Bill Morneau’s budgets and economic statements have emphasized social-justice issues, notably gender inequality and the gap between rich and poor.
Wednesday’s mini-budget, by sharp contrast, was all business.
The Trudeau government will invest a staggering $14 billion over the next five-and-a-half years to enable business to write off its investments at unprecedented speed.
Business has always been favoured with writeoffs on new investment. But now it will get tax breaks on new investments as much as three times faster than at present.
New factories, warehouses, machinery, computers and so on can now be largely or completely written off in the first year of investment, rather than over several years.
That might be the most powerful government boost to business investment in modern Canadian history. And it’s a smart thing to do. It powerfully encourages Canadian manufacturers, laggards in modernization and thus productivity, to spend big money, and immediately, on 21st-century technology and facilities, making Canadian industry more globally competitive.
It will stimulate job creation — and again, quickly — as business invests heavily in expansion and improvements to its productivity and R&D and export prowess.
Most of that outsized government investment — $9 billion — will be made upfront, over the next three years, with the state’s cost of modernizing Canadian business sharply declining thereafter.
The business payoff in higher profits will also result in a sizable increase in corporate tax revenues. In the next decade, taxpayers will get their money back and then some, and the country will be endowed with a much more competitive business sector.
Corporate Canada has whined about Ottawa’s stubborn refusal to follow the U.S. example of massive corporate tax cuts that went into effect in January, in what economists would call a race to the bottom.
And never mind that Canada already has one of world’s lowest corporate tax rates, at 15 per cent compared with America’s 21 per cent after U.S. President Donald Trump’s tax cuts. And that Trump’s tax breaks will debauch the U.S. Treasury, costing as much as $1.5 trillion over the next decade.
Scheer’s complaint about lax Ottawa fiscal probity isn’t borne out by the numbers. The Liberals’ deficit is manageable at less than 1 per cent of GDP. And Canada’s debt-to-GDP ratio, at about 90 per cent, is lower than that of most G-7 economies, including the U.S., at 105 per cent, and Japan, at 253 per cent.
The Liberals have co-opted a business community that until Wednesday was somewhat yoked to the Conservatives.
Andrew Scheer’s most effective criticism of the Liberals has been to fault them for insufficient commitment to stimulating business investment.
And it’s not as though the Tories have hammered away at that compelling issue.
To the contrary, Scheer has preoccupied himself with odd concerns.
Scheer has endorsed Brexit. He agrees with Trump that Israeli embassies should be relocated to Jerusalem. He wants taxpayer-subsidized home-schooling. Scheer is obsessed with illegal border crossers. He has proposed a gun-control regime that doesn’t include handguns, which is no regime at all.
And Scheer is exercised about the new swing set at Harrington Lake, the PM’s second official residence.
Those positions put Scheer on the wrong side of history, and most are irrelevant to everyday Canadians.
Scheer has also failed to gain traction because he has a weakness for exploding cigars.
Soon after excoriating Justin Trudeau for his many “vacations” — visits to China and India that most Canadians recognize to be business trips — a witless Scheer himself spent a week in India, in August.
Not long after Scheer piled on in the criticisms of Morneau’s personal tax-shelter issues it was revealed that Scheer himself has ownership stakes in three real estate limited partnerships with the same tax breaks unavailable to everyday Canadians.
And while $7,500 is a handsome price for a swing set, Justin Trudeau paid for it out of pocket.
Writing in another newspaper, former Harper communications director Andrew MacDougall credited Scheer with trying to depict the Liberals as anti-populist, but added: “Do the Conservatives have to be so stupid about these things?” (MacDougall’s emphasis.)
By election time, the Tories are sure to have a constructive blueprint for improved economic performance. But for now, the Tory platform is a 161-word anodyne statement of purpose on the party’s website that is too thin to be called meagre.
Scheer’s difficulties arise not from accusing the Liberals of reckless spending, when his own Tories boosted program spending in the Harper years by 37 per cent.
Scheer’s personal challenge is that he appears weak, allowing dynamic premiers like Doug Ford and Saskatchewan Premier Scott Moe to carry the high-profile Tory fight against Trudeau’s carbon-pricing policy. Scheer lashes out at the news media, a reminder that Trudeau doesn’t, and that Trump does. He also shoots from the lip, with this description last weekend of Canadians who disagree with the PM: “To Justin Trudeau, you are the enemy,” Scheer said. The PM has his own weakness for funny socks, and his brain was operating in low gear when he charged taxpayers $215,000 for a private-island sojourn.
But even those Canadians most fiercely opposed to the Liberals know that their PM regards not one of them as an enemy. That’s Trump rhetoric, and Harper learned the hard way that it doesn’t work in this precinct.
The Tories are fortunate in having a year before the next election to develop wellthought-out policies on issues that matter, and to put their leader through charm school.