Category Archives: Federal Politics

How social media platforms are threatening democracy and what the Trudeau government can do about it.

Mark Zuckerberg, CEO of Facebook, testifies in Congress following the uncovering of the Cambridge Analytica scandal in which it was revealed that Cambridge Analytica harvested the personal data of up to 87 million Facebook users and subsequently used the profiles to help the Trump campaign.

Introduction

There is a growing sense that Facebook and other social media platforms are a significant factor in the increasing polarization of our politics and even a real threat to democracy in countries such as the U.S. and Canada – countries with historically strong democratic institutions. This post explores how the business model chosen by the biggest platforms  has contributed to the weakening of our democratic institutions and what can be done to curb the socially destructive consequences of the platforms’ current operations.

The Facebook business model

The problem with  Facebook is that it is fine-tuned to be an addictive site in which politics – and information more broadly – are indistinguishable from entertainment. Of course, much the same could be said of cable TV news and the tabloid press. However, the engagement and immersion in social media is more intense  than the kind that television or print delivers. It encourages people to associate only with those who share their opinions, creating information filters regarding politics and general views of the world. By training its users to place greater importance on feelings of  agreement and belonging (“friends”, “like/dislike”) than on objective truth and facts, Facebook has created a gigantic forum for tribalism. Or more precisely, a forum for tribalism that contains a multitude of tribes that define themselves in terms of politics, race, ethnicity, religion, cultural/consumer preferences and social status. And because they are tribes existing in an information bubble with news of the outside world delivered to them primarily by Facebook’s algorithms through its newsfeed, members of any given tribe are increasingly oblivious to any views other than their own. They are also increasingly oblivious (and even hostile) to the notion of objective truth and facts more generally.

Moreover, Facebook’s algorithms are designed to feed users, over time, ever more extreme material that plays to these tribal identities. In strictly business terms, this increases the average time a user stays on the platform thereby increasing Facebook’s advertising revenue. In political and social terms, it leads to a polarized electorate and society.

98% of Facebook’s revenue comes from selling ads and the company has every incentive to continue to collect as much private data as it can on its users in order to keep them engaged on the site and to allow ad buyers to effectively target their ads. The potential impact  of a business model driven by this combination of intense immersion and surveillance manifested itself when it was revealed that the political consulting firm Cambridge Analytica had obtained information about 50 million Facebook users in order to develop psychological profiles to assist the Trump campaign. That number has since risen to 87 million. Yet Facebook seems incapable of accepting the fact that its relentless pursuit of growth, which Facebook CEO Mark Zuckerberg characterizes as encouraging “openness and connection” globally, has been socially destructive.

But concerns over tribalization and the debasement of truth and facts caused by social media, should not stop with Facebook. Apple, Amazon, Microsoft, and Google, also share an aspiration to become the primary lens through which we both view the world and participate in it. And Google, in particular, suffers from many of the same problems as Facebook. Continue reading

The real story behind the NAFTA negotiations on autos and labour standards.

 

None of the governments of the three countries involved in the NAFTA auto and labour standards discussions have told the real story on the tactics and strategies they are using in the negotiations. In the absence of straightforward communication on the trade negotiations, the public in all three countries has a right to be suspicious until the full legal text of an agreement is publicly released.

 

There is no question that Donald Trump rode a wave of anti-trade sentiment to victory in the 2016 presidential election. This included a threat to rip up NAFTA, which he called “the worst trade deal in the history” of the United States.

Trump’s was a populist message that tapped into long-simmering resentment over the loss of American manufacturing operations – including the loss of auto assembly and auto parts plants – to Mexico. And it resonated strongly with voters in the leading manufacturing states – including the states of Michigan, Wisconsin and Pennsylvania  that ultimately gave Trump his victory.

Therefore, it should be no surprise that at the start of the NAFTA talks, Canadian trade officials believed the success of the NAFTA renegotiation hinged on Trump’s ability to claim a win on the auto front. Further, they believed the route to that victory would be through stricter labour standards to minimize Mexico’s low-wage advantage in attracting auto investment.

In theory, reducing the Mexican advantage in auto wages should have been an area where  Canadian and American interests are largely aligned. Statistics compiled by Unifor, the union representing autoworkers in Canada, explain why:

  • Mexico buys just eight per cent of North American-made vehicles but employs 45 per cent of the continent’s auto workers;
  • Since NAFTA came into effect in 1994, four assembly plants in Canada and 10 in the United States have closed; eight new plants have opened in Mexico.
  • U.S. and Canadian vehicle and auto parts trade deficits with Mexico have grown exponentially – a four-fold increase for Canada, from $1.6 billion pre-NAFTA to $8.7 billion now.

Those  numbers are explained by another stark statistic: Mexican autoworkers earn an average of about $4 per hour, compared to $30-$35 per hour in the U.S. and Canada. As such, using NAFTA re-negotiations to rebalance the North American auto industry so that all three countries get a fair share of investment and jobs would seem to be a no-brainer. Continue reading

Can Canadian democracy withstand the era of the strongmen?

Canadians who value democratic institutions such as a free press, an independent judiciary, and fair elections, need to be vigilant in safeguarding these important democratic institutions. Ontario Premier Ford’s justification in invoking the “notwithstanding” clause to overrule a judge who ruled that his legislation to cut Toronto City Council in half was unconstitutional, suggests a leader who seems to think his electoral mandate entitles him to do whatever he pleases and any opposition is illegitimate.

In a recent column, Paul Krugman of the New York Times makes a persuasive argument that the U.S. is beginning a slow drift into “soft” authoritarian rule under the Trump administration and the Republican controlled Congress. He further argues that if the Republicans maintain control of both the House and Senate in the mid-term elections in November, that drift could accelerate. According to Krugman:

“What Freedom House calls illiberalism is on the rise across Eastern Europe. This includes Poland and Hungary, both still members of the European Union, in which democracy as we normally understand it is already dead.

In both countries the ruling parties — Law and Justice in Poland, Fidesz in Hungary — have established regimes that maintain the forms of popular elections, but have destroyed the independence of the judiciary, suppressed freedom of the press, institutionalized large-scale corruption and effectively delegitimized dissent. The result seems likely to be one-party rule for the foreseeable future.

And it could all too easily happen here (the U.S.). There was a time, not long ago, when people used to say that our democratic norms, our proud history of freedom, would protect us from such a slide into tyranny. In fact, some people still say that. But believing such a thing today requires willful blindness. The fact is that the Republican Party is ready, even eager, to become an American version of Law and Justice or Fidesz, exploiting its current political power to lock in permanent rule.”

But could the drift towards a “soft” authoritarian state happen here in Canada? At first blush, the notion seems ludicrous. But then it seemed equally ludicrous in the U.S. until January, 2017,  when the Trump administration took power and the  Republicans took control of Congress.

Soft authoritarianism in Ontario – the Ford government in action.

The best example of the new authoritarianism in Canada is Ontario Premier Doug Ford’s Bill 5, the Better Local Government Act, which arbitrarily cuts the number of City of Toronto ward boundaries from 47 to 25 just ahead of the Oct. 22 municipal election. This change is largely viewed by observers as disadvantaging progressives and advantaging Ford supporters on Toronto City Council. It continues a personal vendetta against progressive Toronto councillors that goes back to Ford’s days on Toronto City Council when his late brother, Rob, was mayor.

This abrupt change in Toronto municipal election rules was done with no consultation of Toronto City Council – or of the people of Toronto for that matter. In fact, Toronto City Council, reflecting broad popular opposition to the unilateral Ford move, voted 27-15 to legally challenge the bill.

Council also voted 25-17 to exhaust all legal avenues to challenge the Ford government’s legislation, including appealing any rulings. A majority also voted to seek to postpone the upcoming municipal election if a delay becomes necessary in order to carry out the legal challenge.

Toronto Mayor John Tory – himself a former leader of the Progressive Conservative Party of Ontario – supported the court challenge, and called the Ford government’s decision to cut Toronto city council’s ranks “wrong and unacceptable”.

On September 9, an Ontario Superior Court judge declared Premier Doug Ford’s move to cut Toronto city council in half in the middle of a municipal election unconstitutional.
In his decision, Justice Edward Belobaba called Ford’s move to cut the number of city councillors to 25 from 47 “unprecedented” with a municipal campaign under way, declaring that the Premier’s intervention “crossed the line.” His ruling would have reverted Toronto’s municipal election to the 47-ward structure for the Oct. 22 election.

Premier Ford’s response? Within hours of the court ruling he announced that his government would immediately recall Ontario’s Legislature and introduce legislation that, if passed, would invoke Section 33 of the Constitution and ensure the Better Local Government Act is preserved and Toronto City Council is cut in half against its will.

Section 33 of the Constitution is better known as the “notwithstanding’ clause. It allows a provincial government to enact a law even though a court has found it violates the Charter of Rights and Freedoms. Never before has an Ontario government used this power.

Ontario Premier Ford’s justification in invoking the “notwithstanding” clause to cut Toronto City Council in half suggests a leader who seems to think his electoral mandate entitles him to do whatever he pleases and any opposition to his government’s actions is illegitimate. He seems to be suggesting there is something wrong with judges overriding government decisions – even when those decisions are found to violate the Constitution’s Charter of Rights and Freedoms.

And Ford said in his speech announcing the move that he would use the “notwithstanding” clause again in the future if his government is challenged.

And he almost certainly means it.

Ford authoritarianism on the education front

The Ford government’s authoritarian tendencies are also manifesting themselves on the education front. In his fight with the province’s teachers, Ford has created what critics are calling a “snitch line” for parents to report teachers who refuse to stop using the repealed 2015 sexual education curriculum.

Ford calls the “snitch line” an online portal for parents “to report any concerns” about what teachers are teaching in classrooms.

But the claim by the Ford government that the portal is aimed at improving classroom teaching is laughable. The form that parents use to express their concern about what is going on in the classroom is anonymous, so it’s of little use to parents genuinely concerned about something wrong in their own children’s classroom.

The online form also presumes parents have “concerns about the current curriculum”. Moreover, it was all announced in a government news release that came with the threatening words from the premier. “Make no mistake, if we find somebody failing to do their job, we will act.”

That’s clearly a threat to teachers — along with their union representatives — who had indicated that they wanted to continue to teach the 2015 sex education curriculum instead of following the government’s directive to go back to the outdated one first introduced in 1998. Many Ontario school boards have voiced similar concerns to those of the teachers and their unions, so the premier’s threat should be taken as a warning to them as well.

Unfortunately, the Ford government’s education provications don’t stop there. Earlier this summer, Ford promised “the largest consultation ever in Ontario’s history” to develop a new sex education curriculum.

But later, he expanded that consultation to include numerous other hot-button issues in education: the math curriculum, standardized testing, the legalization of cannabis, cell phones in classrooms and a committee to create a “Parents’ Bill of Rights.”.

To initially set up a consultation essentially to hear from a socially conservative faction of parents who want less detailed sex education in schools and expand it to include a series of other education issues included only to mobilize the Tory conservative base, is not just bad policy making but demagoguery of the worst sort.

Ford and Immigration

But Ford is doing more than just manufacturing politically motivated crises in our schools and at Toronto City Council.

At the same time he is stirring up the Tory base on education, the Ford government is also waging a rhetorical war with the Trudeau Liberal government over “illegal border crossers” in official statements that misstate reality and incite hostility towards all immigrants.

Ontario’s new Minister of Children and Social Services, Lisa MacLeod, attacked Prime Minister Trudeau for supposedly triggering a mass migration when he (according to MacLeod) “tweeted out that everyone was welcome here, and as a result of that, we’ve had thousands of people cross the border illegally.”

Again, more demagoguery by an Ontario government politician that ignores the facts and yet another effort to stir up the Ford government’s conservative base.

“Soft” authoritarianism in the Conservative Party of Canada

For another example of the drift of the Canadian right towards soft authoritarianism, take the non-binding motion passed at the recent Conservative Party convention  asserting that children born in Canada should not be given Canadian citizenship unless one of their parents is Canadian.

There is no doubt that immigration has become a significant issue in Canada, and that it is the Conservative Party – at both the federal and provincial levels – that is making it an issue. Remember it was past Conservative leadership candidate, Kellie Leitch, who suggested the incorporation of a “values test” for immigrants.

The idea that you can only be Canadian if you can prove your Canadian heredity moves beyond the common conservative concern that “Canadian values” are being swamped by waves of immigrants with “foreign values” and into the dangerous terrain of “purity” testing. Let’s be clear, binding or non-binding, by passing this motion at its policy convention the Conservative Party of Andrew Scheer took a real step towards an illiberal authoritarianism completely at odds with the basic liberal democratic values of Canada and, at least historically, of the Conservative Party itself.

Conclusion

Donald Trump’s presidency and the almost complete acquiescence of the Republican majority in the U.S.  Congress to his agenda, has raised a question that few thought would ever need to be asked: Is the U.S. drifting towards a “soft” authoritarianism? This soft authoritarianism consists of a Republican majority party in both Houses in Congress which refuses to hold a president with clear anti-democratic instincts to account, an independent media which is under daily assault from President Trump and his party, a Supreme Court stacked by the Republicans with judges with a literalist view of the U.S. Constitution, and a presidential election manipulated (perhaps with the knowledge of some of the Trump campaign team, perhaps not) by the Russian government.

And what can be said of Ontario Premier Doug Ford’s startling  invocation of  the “notwithstanding clause” to  restore Bill 5, the Better Local Government Act, within hours of  Ontario Superior Court Justice Edward Belobaba’s ruling that Ford’s legislation to cut the number of Toronto city councillors to 25 from 47 was “unprecedented” with a municipal campaign under way, declaring that the Premier’s intervention “crossed the line” and violated the Charter of Rights and Freedoms?

Again, the “notwithstanding clause” has never before been used in Ontario.

The fact that conservative party leaders in Canada such as Doug Ford – and many of the drivers of the successful Brexit campaign such as Nigel Farge and Boris Johnston – have many of the same authoritarian political tendencies as the Trump administration and the Republican controlled Congress, suggests a growing trend throughout the English-speaking political right towards a kind of “soft” authoritarianism.

Harvard professors Steven Levitsky and Daniel Ziblatt explore these worrying trends in the English-speaking political right and elsewhere in their important new book, “How Democracies Die”. They believe that:

“Democracy no longer ends with a bang—in a revolution or military coup—but with a whimper: the slow, steady weakening of critical institutions, such as the judiciary and the press, and the gradual erosion of long-standing political norms”.

Danger signs of precisely this sort abound in the U.S., U.K. and Canada. The questions that need to be asked are whether the forces for Canadian democracy will see these signs for what they are – as a real threat to liberal democracy as we’ve known it – and what they will do to fight it.

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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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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

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

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

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

Justin Trudeau’s big infrastructure mistake

port-mann-bridge-construction

It is a mistake to have private asset managers invest in projects funded by a new infrastructure bank expecting a return of 7-9% when the government can borrow long-term at 2%.

November 14 was a big day for the Trudeau government’s infrastructure plans.

In the afternoon, Prime Minister Trudeau attended a “summit” for foreign investors focussing on investment in areas like infrastructure, technology, natural resources, and renewable energy.

The summit was hosted by Blackrock Capital Investment Corporation, the world’s largest asset management company with $5.1 trillion dollars under management. All told, BlackRock brought two dozen of its clients to Toronto from around the world to meet with Trudeau. Blackrock clients include many of the world’s largest pension funds, sovereign wealth funds and other institutional investors.

Cabinet ministers attending the event included Finance Minister Bill Morneau, Minister of International Trade Chrystia Freeland, Minister of Natural Resources Jim Carr, Minister of Innovation Navdeep Bains, Minister of Infrastructure Amarjeet Sohi, Minister of Canadian Heritage Melanie Joly, and Minister of Health Jane Philpott.

Earlier in the day, the Liberals met with Canadian institutional investors such as the CPP Investment Board, the Caisse de dépôt , Ontario Teachers’ Pension Plan, OMERS, and Brookfield. Continue reading

What the New CPP Agreement Means for You

pensions CPP

The agreement  reached in Vancouver to enhance the CPP last week was historic in nature. Still,  some people will benefit far more than others. Many Ontario workers, for example,  would have been better off with the provincial pension plan that was abandoned by the Ontario Government within days of the signing of the CPP accord.

There is no question that Canada’s finance ministers reached an historic agreement in Vancouver on June 20. There is also no question that the changes in CPP design that the ministers agreed upon represent an eventual increase in CPP benefits for all workers when compared to the current CPP design.

That said, two additional questions need to be asked when assessing the agreement:

1)      To what extent are the workers most in need of a boost in their retirement savings getting the increase in benefits they need to truly retire in dignity and security. In other words, are the CPP changes agreed upon in Vancouver targeted towards those most in need ; and

2)      Are Ontario workers – who comprise almost 40% of the Canadian labour force – better off under the new CPP regime than they would have been under the Ontario Retirement Pension Plan (ORPP) that was scheduled to be fully implemented in 2019 – the first year of a 7-year phase-in of the agreed upon CPP changes that won’t be completed until 2025? This is relevant given that with the signing of the CPP accord, the Ontario Government moved within days to kill its ORPP initiative.

Background to the Vancouver agreement

Before answering these two questions, it is important to provide some context to the discussions that took place in Vancouver on June 20th.

The task for the finance ministers meeting in Vancouver was to see if there was a formula for reform that had a chance of getting 7 provinces containing two-thirds of Canada’s population (the amending formula for the CPP) to buy into. This was always going to be a challenge given that B.C., Saskatchewan and Quebec had been clear in the previous federal-provincial meeting in December, 2015 that they had little appetite for any sort of CPP/QPP enhancement and Manitoba’s brand new Conservative government was almost certain to join this “sceptic” group. Continue reading