Trump and Ford: The new politics of resentment in Canada and the United States

Both Donald Trump and Doug Ford practice the politics of resentment to mobilize their base. However, while there are many similarities between the politics of the two men, there are also some important differences.

Introduction

To understand Donald Trump’s victory one has to understand resentment in white America. While visible minority Americans voted overwhelmingly for the Democrats, the fact is that whites still make up an overwhelming number of U. S. voters (Pew Research has whites at 74 percent of all voters in 2016 , and second, it has whites without a college degree, Trump’s key constituency, at 44 percent of all voters). This means that American politics is still defined primarily by white voters divided by attitudes towards race, religious values, class and suburban vs. urban lifestyles.

With regard to racial attitudes, when white American anxieties are directed towards racial intolerance by the rhetoric of Trump and the Republican Party more generally, they obviously cost Republicans visible minority votes. But they cost the Republicans white votes as well, alienating urban, university-educated voters who value diversity – even as they mobilize some racially resentful  whites.

The fact that American politics is defined by the politics of white resentment is widely understood and commented upon (often in discussions of the rise of “populism”) and is the conventional explanation of Trump’s surprise victory. But what is less appreciated is that the same working class voters that can be mobilized to vote Republican by anti-immigrant and racist rhetoric, can also be mobilized by economic resentment to vote for left-wing Democrats. And while economic resentment has been used by the Republican Party to stoke hostility to taxes by connecting taxes to programs like welfare and food stamps (programs perceived by many voters as “something for nothing” programs), economic resentment has also been used by left-leaning Democrats and unions to mobilize support for higher minimum wages, better pensions, tougher job protection measures, and improved access to health care.

In other words, while it is true that Trump’s anti-immigrant and racist rhetoric helped him win the white working class votes in the Midwest that gave him the necessary electoral votes to win the presidency, the resentment of those very same voters has historically been – and can be again – mobilized against Wall St. and corporate America by left-leaning Democrats for progressive ends. The fact that Trump won Michigan by taking many of the same overwhelmingly white counties that socialist Bernie Sanders won in beating Hilary Clinton in the Michigan Democratic primary, makes this point clearly.

The politics of resentment in Canada 

Much the same dynamic around the politics of resentment plays out in Canada. However, there are some differences.

On the Canadian side of the border, the politics of racial resentment is in some ways more complicated in that all three major parties seek to attract non-white voters. Canada has no equivalent to a Republican Party that has pretty much written off visible minorities. While the Doug  Ford conservative government in Ontario (along with federal Conservative leader, Andrew Scheer) may be picking a tactical fight with the Trudeau Liberal Government over  “illegal border crossers” in order to mobilize its base, the heart of Ford Nation is still primarily in ethnic Greater Toronto – and much of it is non-white. Even Andrew Scheer’s Federal Conservative Party has to tread carefully on the immigration/refugee issue as they need to win at least some seats in heavily immigrant suburban ridings in greater Vancouver and Toronto to form a government.

As such, the Ford Government has to be cautious in tapping into anti-immigrant/anti-refugee resentment if it wants to keep the visibility minority voters who supported it in the June, 2018 Ontario election. Having figured out how to win with next to no visible minority support, Donald Trump and the Republican Party do not have to exercise such caution.

While for political reasons, the Ford government can’t put racial resentment at the heart of its political strategy the way Trump can, there are two other sources of  resentment Ford can tap into to without alienating heavily ethnic Ford Nation in the GTA. These sources of resentment also have support amongst the Ontario PC’s white, rural base.

First, Ford Nation is extremely hostile to anything that smacks of “handouts” for those who are not perceived as working hard for any sort of government benefit they may be receiving. That is why the Ford government moved quickly to cut a planned 3 per cent welfare increase in half and scrapped a proposed basic income pilot program. The Ford base in rural Ontario shares this hostility to paying taxes for what many in the traditional PC base view as “something for nothing” social programs.

Secondly, much of GTA based Ford Nation – like the Ford government’s rural, white support – tends towards social conservatism. It’s the social conservatism that is shared by the two very different constituencies that explains the prominence the Ford government is giving to repealing the former Liberal government’s  sex-ed curriculum changes first implemented in 2014.    

However, just as it is true that Trump’s anti-immigrant and racist rhetoric helped win him white, working class voters in the Midwest who have historically been supportive of an economic populism (again socialist Bernie Sanders won pretty much the same counties in the Michigan democratic primary as Trump did in the general election), so it is true that the resentment of much of Ford Nation could be guided towards an anti-corporate, economic populism rooted in high wage jobs, good pensions and expanded medicare (pharmacare, etc.). The Ontario New Democratic Party made a strong showing in the GTA in the 2018 election running on just such a program and could easily win a majority of seats in Peel and Durham regions and Scarborough in the next Ontario provincial election. These suburban Toronto communities form the very heart of Ford Nation.

Conclusion

North American politics is now dominated by the politics of resentment. However, whether that resentment results in victories for the right or the left, depends upon whether right wing parties are effective in guiding working class resentment towards an anti-immigrant, anti-tax stance or whether left-of-centre parties can guide the resentment of that same working class voting block towards an anti-corporate, economic populism rooted in high-wage jobs, good pensions and access to high quality health care.

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Will the Ontario Public Service Speak Truth to Power to Doug Ford?

The 40% of Ontarians who voted for the Progressive Conservative candidate in their riding may have been voting for change and fiscal prudence, but they did not vote for the kind of lies, cruelty, chaos, managerial incompetence and demagoguery that we are now seeing under the Trump administration.

Introduction

In Doug Ford, Ontario has elected a Premier without a coherent governing agenda and with little knowledge of key government files. The Ford campaign, a tightly scripted production built around a series of populist slogans recited stiffly off a teleprompter, was just competent enough to keep a sure victory from slipping away. The fact that his nervous handlers were obsessed with keeping reporters at a safe distance from the PC leader, suggests that our new Premier is a man with a very shaky grasp of the issues.

During the 2018 campaign, Mr. Ford made countless false claims and misleading statements. It would be an understatement to say that Mr. Ford has little use for the facts. This strong bias against evidenced-based decision-making was clear when within days of being sworn in, the Ford government fired Ontario’s Chief Scientist, Molly Shoichet, an award-winning professor at the University of Toronto, and eliminated the Ministry of Research, Innovation and Science. And in government, the false claims from the PC campaign  continue on many fronts from climate change to federal refugee policy.

Beyond his ignorance of key provincial files, Premier Ford can’t be relied upon to tend to the PC Party’s ongoing operational problems and incessant infighting. One only has to look at the events that brought down former PC leader Patrick Brown and the countless PC nomination meetings in which the results were contested amid accusations of membership recruiting and voting improprieties, to know that there is something seriously wrong with the culture of the Ontario PC party. It is also obvious that Doug Ford is exactly the wrong man to fix those problems.

It is the central argument of this article that a non-partisan, public service willing to speak truth to power is especially crucial with the ascendancy of right-wing, populist governments headed by men such as Mr. Ford and U. S. President Trump. This is because both men consistently display a troubling dis-regard for hard facts and institutional norms.

In other words, the existence of a fearless, professional public service – along with an independent judiciary and a free press – assumes  greater importance given the erratic behaviour of such right wing, populist leaders.

In our  Westminster style political system, all governments – whether of the left, centre or right – require a strong, non-partisan, public service willing to speak truth to the elected government of the day. As such, it is more than a little unsettling that astute Canadian observers of both the federal and provincial scenes have long worried about a decades long decline in the capacity and willingness of our professional public services to speak truth to power. These concerns recently spilled onto the front page of the Globe and Mail when Privy Council Clerk Michael Wernick (Canada’s top public servant) challenged Auditor-General Michael Ferguson’s assertion that the problems with the federal government’s Phoenix pay system were rooted in “pervasive cultural problems” in the federal public service.

In a Globe op-ed on June 24th, Ralph Heintzman, a senior fellow of Massey College in the University of Toronto and a former head of the federal government’s Office of Public Service Values and Ethics, summed up the ongoing debate over problems in public service culture and, in particular, the important contribution to this debate of the Gomery Report of 2005. That report included several recommendations calling for accountability changes at the Deputy Minister level that would provide for a much more supportive environment for public servants speaking truth to power.

The changes proposed by Gomery would have allowed for a clearer distinction between what the elected government of the day is accountable for (policy) and what the public service is accountable for (administration and program implementation). The Gomery report argued convincingly that a clear distinction can and should be made between policy accountability and administrative accountability and that by making it clear that the public service is accountable for administrative failures and the political side for policy failures, the public service is actually in a much stronger position to speak truth to power. Not surprisingly, putting the mechanisms in place that would allow for a clear distinction between public service accountability and political accountability elicited strong opposition from both the federal public service and federal politicians. It is a sad fact of Canadian public life that both groups saw it as being in their interest to maintain the confusion over their respective areas of accountability.

Another key recommendation of Gomery was to take the power to appoint Deputy Ministers away from the political side and give it to a more neutral body. This would also strengthen the ability of the public service to speak truth to power. But as Heintzman points out, none of the key recommendations were implemented by the Harper government as recommended by Gomery – even though they have long been in place in the U.K. and have been enormously beneficial to the effective functioning of the U.K. Parliament. The results of this inaction are countless failures of program and policy implementation at both the federal and provincial levels for reasons similar to those that caused the failure of the Phoenix pay system. 

There are those that continue to argue that changes such as those recommended by Gomery are not needed, that there is little to worry about, and that Canada’s professional public services are strong and more than capable of restraining a populist leader such as Mr. Ford. However, the sight of young children being torn from the arms of their parents along the Mexican – U.S. border should be a reminder to all Canadians not to take for granted a government rooted in a respect for human rights and the primacy of the rule of law.

Leaders such as President Trump and Premier Ford – men with little respect for facts and an impatience with institutional norms –  require democratic institutional constraints. In the case of Premier Ford, the Ontario Public Service is likely the most important institution that could provide such constraints. However, there is a growing body of evidence (alluded to above and detailed below) that the senior ranks of Canada’s non-partisan, professional public services increasingly lack the will to speak truth to power. If that is in fact the case, Ontarians could be in for a very rough four years under Mr. Ford.

Continue reading

The Ontario election: Why Doug Ford is the enemy of the “little guy”

While campaigning as the voice of the “little guy”, Doug Ford’s PC’s are actually joined at the hip with corporate interests that are pushing a detailed policy agenda that will make life worse for many Ford supporters.

Introduction

A previous post made the argument that the core appeal of Doug Ford populism (much like Trump populism) is a cultural resentment against the professional class as opposed to an economic populism in which working and middle class resentment is directed against the wealthy and large corporations. In other words, the “elites” that Ford rants against are professionals such as bureaucrats, academics, lawyers, journalists and teachers who Ford portrays as “looking down” on average Ontarians and recklessly spending their hard-earned tax dollars.

The previous article also described economic populism – in contrast to Ford/Trump populism –  as a politics that argues that the “elites” who really need to be reigned in are the large corporations whose business practices have directly resulted in an increase in part-time, low wage jobs and the loss of high wage, full-time jobs. This decline in good quality jobs with benefits has hurt many Ford supporters and the article asserts that economic populism embraces a set of policies that would significantly improve the economic lives of Ford voters.

The article also argued that Ford, a rich man’s son like Trump, has no interest in improving the lives of everyday Ontarians and his PC program (such as it is), is evidence of this. Put bluntly, Ford supporters are being duped into voting against their pocketbook interests by being led to believe that they are somehow striking a blow against “elites” by voting for Ford. In fact, the reality is just the opposite. Electing a Ford government would hand the province over to a tightly knit network of corporate interests that already have too much influence and whose policy agenda would hurt non-wealthy Ontarians. This is discussed in detail below.

The reality is that a Doug Ford government would hurt the people who voted it in because it would take its marching orders from corporate interests (the real elites) who have a detailed policy  agenda aimed at enriching themselves and the wealthy at the expense of average, hard-working  Ontarians. Those corporate interests are already talking amongst themselves as to who will fill staff positions in the Doug Ford Premier’s Office, in Ministerial offices (Finance, Health, Education, etc.), and in key positions in the Ontario Public Service. They want their people to implement their policy agenda and this agenda will hurt all but the wealthiest Ontarians.

These corporate interests are named below and parts of their policy agenda are discussed in detail. For years, these corporate interests have been working closely with PC MPP’s and staff at Queen’s Park and have had immense influence on the policy positions the PC caucus took on Liberal government legislation and other policy issues.

It is important to note that the two kinds of populism (Ford/Trump populism on the one hand, and economic populism on the other) have considerable appeal to Ontario voters with broadly similar social values – voters who value being fairly compensated for their hard work and for “playing by the rules”. However, when it comes to voting intentions, those not affiliated with a union (many of which are  rural residents not living in communities with a labour tradition), mistakenly lean towards a Ford-style cultural populism which portrays the elite “villains” essentially as “know-it-all” professional types who “think they are better than me”. In contrast, those with a union affiliation (or who live in urban communities with a labour tradition), lean towards an anti-corporate, economic populism most associated with the NDP.

The previous article further argued that Andrea Horwath’s NDP are in a good position to tap into those who hold to this anti-corporate, economic populism. Recent polls suggest that this is exactly what is happening in the Ontario election with a surge in support for Horwath’s NDP – especially in the economically hard hit regions of the Southwest, North and Hamilton/Niagara which have seen a massive loss of well paying manufacturing and resource jobs  in the past decade.

While the NDP may be pulling even with the PC’s in terms of the popular vote, as of this writing (June 1), the most recent polls still suggest that the Ford PC’s have an excellent chance to win  a plurality of seats and a good chance of forming a majority government. Therefore, the question of what a Doug Ford government would actually do during its time in office needs to be examined closely. Continue reading

Ford populism and the 2018 Ontario election

While there is an element of economic resentment in Ford populism, economic elites are not its targets and it is first and foremost an appeal to Ontarians who feel ignored and disrespected by what might be called Ontario’s “professional class”. However, there is also considerable support in Ontario for a very different sort of populism – an economic populism – that would actually improve the lives of working and middle class Ontarians. Andrea Horwath’s NDP are in a good position to capture that vote.

Introduction

This is the first in a series of articles on the upcoming June 7, Ontario election. The series will look at both the partisan political strategies and policy issues at play during the election.

This article takes an in-depth look at the dynamics of Ford populism and the basis of its appeal to its supporters. The basic argument is that the core appeal of Ford populism is cultural resentment against the professional class as opposed to an economic populism in which the resentment is directed against the wealthy and large corporations.

The article argues that the two kinds of populism appeal to voters without university degrees with broadly similar social values. However, when it comes to voting intentions,  those not affiliated with a union nor living in a community with a strong labour tradition, lean towards a Ford-style cultural populism. In contrast, those with a union affiliation (or living in a community with a strong labour tradition), lean towards an anti-corporate, economic populism.

The PC’s seem destined for at least a plurality of seats

All Ontario polls done since Doug Ford was elected PC leader suggest a solid, PC majority government on June 7. These polls are relatively consistent with polls done before the Ford PC leadership victory although the consistency likely masks at least some shifts in PC support at the riding level (i.e. PC support has likely gone up in working class ridings in the GTA and down in affluent, well-educated ridings in central Toronto and Ottawa).

As of this writing (May 10), CBC’s Poll Tracker (which combines and weights recent polls) gave the Ford PC’s 41.1% of the vote, the Horwath New Democrats 27.2%, and the Wynne Liberal’s 25.7%.

The Poll Tracker gives the PC’s a 90% chance of winning a majority government and a 95% chance of winning a plurality of seats.

 

Continue reading

Is a Basic Income Guarantee the Right Choice for Ontario?

Ontario has introduced basic income pilot projects in 3 Ontario communities that aim to provide a living wage for all. For those who believe in a living wage, the question is whether or not the approach being tested in the Ontario pilot projects is the best way to achieve this objective.

Introduction

In 2017, Ontario introduced pilot projects related to a Basic Income Guarantee (BIG) benefit in three Ontario communities. The Ontario pilot projects apply to both low-income individuals in the workforce and low-income individuals not in the workforce. The objective of the pilot projects is to assess whether there is a simple way of providing a living wage that would lift all Ontarians out of poverty.

Before assessing BIG in the context of both working and non-working low-income Ontarians, here is how the BIG benefit works in the three Ontario pilot programs now underway.

Four thousand low-income Ontario residents in three communities have been offered a spot in the pilot study. Non-working Ontarians receive a Basic Income payment instead of standard social assistance and those working will receive what amounts to a wage supplement. The annual payment is set at $16,989 for single individuals, or $24,027 for married couples. An additional $6,000 per year will be provided to individuals with disabilities. Recipients get to keep any child benefits, dental and pharmaceutical access, and disability supports to which they are already entitled. However, their Basic Income payment shrinks by 50 cents on each dollar of work related earnings, and by 100 cents on the dollar of CPP or EI income.

Eligible participants are those living on a low income (under $34,000 per year if you’re single or under $48,000 per year if you’re a couple). There are no asset tests involved in determining eligibility. Continue reading

The root of fake news in Canada: Facebook and other advertising-based social media

Canadian Christopher Wylie says that Cambridge Analytica targeted 50 million Facebook users without their knowledge during the U. S. presidential election campaign with Trump aligned messaging based on psychological profiles.

Introduction

This article contends that the increasing spread of “fake news” is a direct result of the rise of social media platforms such as Facebook, Twitter and Google. These companies have undermined traditional, fact-based newspapers, and have encouraged the growth of web-based, fake news sites in the following ways.

  1. They have undermined the business model of fact-based, quality journalism by garnering the lion’s share of digital advertising at a time when print-based advertising was collapsing; and
  2. By refusing to take responsibility for what is posted on their sites, they have allowed their sites to be used by fake news propagators;

The following are four examples of the harm being done by the rise of fake news driven by the growth of social media:

Example 1: Facebook estimated that 11.4 million Americans saw advertisements that had been bought by Russians in an attempt to sway the 2016 election in favor of Donald Trump. Google found similar ads on its own platforms, including YouTube and Gmail. A further 126 million Americans, Facebook disclosed, were exposed to free posts by Russia-backed Facebook groups. Approximately 1.4 million Twitter users received notifications that they might have been exposed to Russian propaganda. But this probably understates the reach of the propaganda spread on its platform. Just one of the flagged Russian accounts, using the name @Jenn_Abrams (a supposed American girl), was quoted in almost every mainstream news outlet.

A Russian troll farm known as the Internet Research Agency used Facebook’s tools to promote rallies, protests and other events across the U.S. According to Facebook, 13 of the pages created by the Internet Research Agency attempted to organize 129 events. Some 338,300 unique Facebook accounts viewed the events, the company said. Facebook said about 62,500 marked they were attending one of the events and 25,800 accounts marked they were interested. Continue reading

The unfinished business of labour law reform in Ontario: A strategy for implementing sectoral bargaining

Workers and community activists protest at Tim Hortons as some Tim’s Ontario franchisees eliminated paid breaks, fully-covered health and dental plans, and other benefits for their workers in response to an increase in the province’s minimum wage.

Introduction

This post on sectoral collective bargaining is the first of a number of posts related to the unfinished business of labour law reform in Ontario that will be published by Canada Fact Check during the run-up to the June 7, Ontario election. Future posts will focus on a range of topics related to employment standards, pensions, health and safety, and the WSIB.

While the post contains a fair amount of detail on the specifics of sectoral collective bargaining, it is first and foremost a political strategy paper. As such, if and when readers feel they’ve had enough of the fine points of the Changing Workplaces Review and Ontario’s Bill 148, they should feel free to scroll down to the “Implementing the strategy” section.

The context

On November 23, the Ontario legislature passed Bill 148, a sweeping revision of Ontario’s employment standards and labour relations legislation. While there was (and continues to be) substantial media coverage of employer opposition to the bill’s provisions to raise the minimum wage to $15/hr., there was far less coverage of other aspects of the bill, particularly the labour relations portion. In part, this is because labour relations is a somewhat more abstract concept than employment standards. Employment standards sets out a basic floor for all workers in areas such as wages, overtime, and vacation time. In contrast, Ontario’s Labour Relations Act sets out the rules by which employers and unions relate to each other including the initial certification process to form a union as well as the rules related to subsequent collective bargaining – including strikes. These rules can be highly technical and it was predictable that the debate over options to amend the Ontario Labour Relations Act would be pretty much ignored by the media.

Most of the changes in Bill 148 (albeit not the minimum wage increase) were rooted in recommendations contained in the final report of the Changing Workplaces Review, a two-year effort led by co-commissioners, Michael Mitchell and John Murray. Mitchell was a long time union-side labour lawyer while Murray represented the management side on the review.

The purpose of this post is to highlight a sub-set of labour relations options the Changing Workplaces Review labelled “broader-based bargaining”. While the Review’s discussion of these options was largely ignored by the media, behind the scenes unions, employer associations, academics, and lawyers representing both management and labour, engaged in an intense debate over the pros and cons of broader-based bargaining options with unions  (to varying degrees) endorsing the concept and employer groups unanimously opposing it.

One of the broader-based bargaining options strongly endorsed by the final report of the Review involved measures making it easier for unions to organize franchise operations. It is the author’s opinion that the Ontario Government’s refusal to include this very modest proposal in Bill 148 was a serious mistake and a completely unnecessary capitulation by the Wynne government to employer lobby groups opposing the measure. The franchise proposal is discussed in detail later in this post but the long-term implications of not implementing the Commissioners’ franchise recommendation is articulated nicely in a January 11, Star Op-ed by Ontario Steelworker head, Marty Warren. In addition to allowing for greater unionization of franchise employees as Warren suggests, the Commissioners’ franchise recommendation could have served as an effective “bridge” to a more ambitious broader-based bargaining regime.

But before addressing the specific broader-based bargaining options discussed in the Changing Workplaces interim and final reports and why such regimes are important, some context is in order.

Continue reading

Reining in Canada’s Financial Giants – Are Consumers Getting a Fair Break?

While arm’s-length regulators at both the provincial and federal levels do the heavy lifting when it comes to regulating Canada’s financial services, it is ultimately politicians such as Ontario Finance Minister Charles Sousa and Federal Finance Minister Bill Morneau, who are accountable for protecting the interests of consumers in their dealings with Canada’s banks and other  financial institutions.

Introduction

In an important piece in the July 31 issue of the New Yorker Magazine on the decline in the prosecution of white collar crime in the U.S., author Patrick Radden Keefe cites a telling 2002 incident involving ex-FBI director James Comey. Keefe relies on the description of the incident contained in the journalist Jesse Eisinger’s recently published book, “The Chickenshit Club”.

Keefe writes:

When James Comey took over as the U.S. Attorney for the Southern District of New York, in 2002, Eisinger tells us, he summoned his young prosecutors for a pep talk. For graduates of top law schools, a job as a federal prosecutor is a brass ring, and the Southern District of New York, which has jurisdiction over Wall Street, is the most selective office of them all. Addressing this ferociously competitive cohort, Comey asked, “Who here has never had an acquittal or a hung jury?” Several go-getters, proud of their unblemished records, raised their hands.

But Comey, with his trademark altar-boy probity, had a surprise for them. “You are members of what we like to call the Chickenshit Club,” he said.

What Comey was saying, of course, was that avoiding risky prosecutions aimed at reining in Wall St. might have been seen as career enhancing under the previous U.S. Attorney responsible for keeping an eye on Wall St. but with Comey as boss, such an approach was going to be a career killer.

This post is the first of a series of Canada Fact Check investigations asking the question: does Canada have a Chickenshit Club problem when it comes to the development and enforcement of financial services regulation?

The answer for impatient readers? The next 12 – 18 months will tell and Canada Fact Check will be there to tell the inside story.

Here’s what we know now.

Finance Minister Morneau’s response to CBC investigations of hyper-aggressive bank sales practices

On March 6, the CBC’s Erica Johnston broke the first of a number of CBC stories on shady sales practices in Canada’s banking industry. The CBC reports revealed a constant pattern amongst big banks and credit unions of signing consumers up for products or services without providing all the required information, particularly about fees, costs and penalties related to the products. In many cases, bank employees were signing people up for products without even notifying them.

On March 15, in response to the CBC reports, Finance Minister Morneau turned to the Financial Consumer Agency of Canada (FCAC) and announced that the Agency would be conducting a separate industry review to examine Canada’s financial institutions’ sales practices. The FCAC has the primary mandate to represent the interests of consumers on “systemic” policy matters effecting federally regulated financial institutions such as banks, trust companies, life insurance companies and property and casualty (auto, property, etc.) insurance companies.

The FCAC has indicated that it expects to publish its initial findings by the end of 2017. Furthermore, FCAC officials expect to conclude the review of bank sales practices in June, 2018 and will publish a final report soon after. Finally, FCAC may conduct additional specific investigations flowing from the industry review. For example, if a FCAC  follow-up investigation determines that a specific violation has occurred, the Commissioner may make public the nature of the violation, which financial institution committed it, and the amount of any monetary penalty levied by the FCAC on the financial institution. Continue reading

The Liberal hydro rate reduction program: sound policy or just a shell game?

The March 2 hydro rate reduction announcement by the Ontario Liberal government was widely compared to converting a 20-year personal mortgage to a 30-year mortgage. Your short-term payments may go down but in the long run you end up paying a lot more.

On March 2, the Ontario Government announced its latest package of initiatives designed to reduce hydro rates. The key initiative in the package (the re-financing of the Global Adjustment) was widely compared to converting a 20-year home mortgage to a 30-year mortgage and amounted to little more than a cheap accounting trick designed to bribe Ontarians with their own money. The re-financing initiative was the latest in a series of Liberal hydro initiatives that set aside sensible electricity policy and instead, embraced private-sector style financial engineering in order to pursue political – as opposed to policy – objectives.

The purpose of this post is to provide some context and analysis to the March 2 announcement as well as other recent Ontario government initiatives on the hydro file.

Policy Context

To achieve rate reduction, the Ontario government had three broad approaches to energy policy to choose from. It could have:

  • Dealt in a targeted way with the affordability challenges of those paying an unacceptably high proportion of their household income on home energy costs. This may very well have involved additional assistance for a good chunk of the ratepayer base but it certainly didn’t need to include an increased hydro subsidy for everyone;
  • Dealt with the “structural” inefficiencies that have contributed to spiralling system costs and therefore steadily rising hydro bills; or
  • Engaged in a range of complex financial engineering exercises that simply shift current energy costs to future generations of ratepayers and tax payers.

Clearly, a high profile measure such as the re-financing of the Global Adjustment (the key March 2 announcement) falls into the “financial engineering” category.

That said, the government has implemented several low-profile initiatives that deal directly with the real hydro affordability crises facing many Ontarians. Moreover, the government is beginning to explore some market design changes that deal with the “structural” inefficiencies that have driven up the overall costs of the system. Unfortunately, the perceived political need to dramatically reduce all Ontarians’ hydro bills in the short-term has won out. The result is that the more nuanced and targeted initiatives that address the real problems of affordability and unnecessary system costs are taking a back seat to the misguided (but splashier) financial engineering initiatives. Continue reading

Will federal tax review lay the groundwork for real tax reform in next budget?

Will a low profile review of federal tax expenditures lay the groundwork for tax fairness in the Spring federal budget?

Last Spring, federal Finance Minister Bill Morneau announced that his Liberal government would be undertaking a comprehensive review of tax “expenditures” found in the federal tax code. According to Morneau, the aims of the review are to simplify the system and make it more progressive. In the process, he hopes to find $3 billion in savings. A panel of “external experts” was appointed “to ensure that the review is informed by a range of perspectives”.

While little known to the general public, the review is of enormous importance. Every year, Ottawa spends about $110 billion on programs such as health transfers to the provinces, the Canada Pension Plan, Employment Insurance, and other line item programs that comprise the federal budget. These expenditures, as with all direct spending, are put before Parliament for examination. Through this “Estimates” process, information on the costs and impact of these programs is available to the public.

Far less visible and transparent is the roughly $100 billion the federal government forgoes annually in so-called “tax expenditures”. These exemptions, deductions, credits, rebates and surtaxes are not subjected to the same kinds of parliamentary accountability mechanisms that are applied to more direct government spending. Moreover, many of these expenditures (including all exemptions and deductions), while legally embodied in the federal tax code, have huge implications for the fiscal situation of the provinces in that they also define the tax “base” against which all personal and corporate income taxes are levied at the provincial level.

Given the sheer scale of these tax expenditures, there is a strong argument for subjecting this hidden tax spending to the same oversight and public debate as any other spending. This is especially true given just how regressive (i.e. favouring the affluent) many of these expenditures are. If the government wants to provide billions of dollars in tax breaks to the richest Canadians, it should have an obligation to justify these gifts to the vast majority of Canadians who don’t benefit from such largesse.

The last comprehensive evaluation of the federal tax system was the Carter Commission of 1966. It’s clearly time to take a top to bottom look at our tax system to see if it is the truly progressive system the public deserves. Continue reading