As it should, the coronavirus pandemic took centre stage in the Liberal government’s speech from the throne. Getting through this global crisis, which affects us all, must take precedence.
With some notable gaps and a last-minute push from the NDP to ensure workers affected by COVID do not see their incomes reduced in the transition from the CERB program, the government has largely stepped up for the unemployed precarious workers and struggling businesses.
The throne speech laid out a long list of promises, a vision for where the government wants to go. It is not an action plan with numbers and timelines. A clearer picture — whether, when or what extent — these promises will be realized, will emerge in a fiscal update later this fall, or a budget at beginning of the year.
Its promise to set national standards for seniors’ care, where 80 per cent of the fatalities caused by the virus occurred — is a major step forward. It recycles many important promises including universal public childcare and pharmacare, which have been on the table for a generation. It promises climate action and measures to reduce income and wealth inequality.
Using its “fiscal firepower” the federal government has been working collaboratively with the Bank of Canada to finance — at the rate of $5 billion per week — its response to the pandemic-induced economic shock. The orthodoxy of fiscal deficits, which has dominated policymaking for the last four decades, has been suspended.
The federal government’s debt to GDP ratio, currently the lowest in the G7, is expected to exceed 50 per cent this year and likely higher the next. It is worth recalling that during the Second World War the Bank of Canada played a similar role, ramping up the debt to GDP ratio to over 150 per cent. But no one questioned it. There was a war to fight.
The Conservative opposition is predictably voting against the throne speech on the grounds it contains no fiscal plan to reduce the deficit and debt. They are hauling out the well-worn fiscal deficit myths comparing government to household debt and warning of the burden it is leaving our children and grandchildren.
The federal government is unlike any household, business or lower level government, which have to borrow to finance deficits. The feds have the sovereign power through the Bank of Canada, which it owns, to create money. Household debt has grown dramatically over the last 25 years. Overall household debt to GDP is now at 106 per cent.
Federal deficits incurred by, for example, implementing a universal childcare program reduce household spending and hence its deficits. Moreover, the vast majority of federal debt is held by — though mainly the richest — Canadian households; it will be bequeathed to their children and grandchildren.
Prior to the throne speech the Business Council of Canada laid out its parameters for acceptable government action: set clear fiscal targets and rein in spending to control the debt, which they expect to see in the fiscal update.
As well, big bank CEOs told Finance Minister Chrystia Freeland: it’s imperative the government recommit to specific new debt targets to impose discipline on the budgeting process. As my former CCPA colleague Marc Lee reminds us: “In normal times, it is the private banks that do the vast majority of money creation through the expansion of credit to their customers. Obviously, the banks and bank economists don’t like the competition from the Bank of Canada.”
The big business response to throne speech was low-key. Behind the scenes it will be pushing hard to put to ensure its fiscal message is heard. Corporate capture of government policy is well entrenched, defining the acceptable parameters of change. Its efforts over the last four decades have funneled income and wealth upward to the very few, exacerbating insecurity, poverty and suffering amongst the many. It has eroded democracy and driven the planet to the edge of a climate catastrophe.
Powerful forces have spent billions of dollars reinforcing the myth that deficits are bad. Little wonder that in the latest IPSOS poll Canadians are worried about the rising deficits and debt. As its CEO Darrell Bricker stated: “… you can’t spend a generation or two generations talking to Canadians about deficits being a bad thing for them to all of a sudden turn it on their head and start to think that they’re a good thing.”
Yes, there are limits which occur when full employment starts to push up prices causing inflation, but those limits are far off. Official unemployment is at 13 per cent, but estimates of the real level of unemployment and underemployment exceed 30 per cent.
Besides the pandemic, we are living with two other interwoven crises. The pandemic is with us full blown. The inequality and climate crises are nearing a tipping point. The alleged down the road debt wall pales in comparison.
Income and wealth inequality
After falling in the postwar years, income and wealth inequality has risen dramatically since 1980 and is now at a level greater than existed on the eve of 1929 financial crash and subsequent Great Depression.
Finance Minister Freeland wrote a book about the rise of the wealthy class, named Plutocracy. In her words, those at the top have waged “successful political efforts … to tilt the rules of the game in their favour.” And: “To be sure that this new economy benefits us all and not just the plutocrats, we need to embark on an era of comparably ambitious social and political change.”
The throne speech has acknowledged a problem of wealth inequality and made vague references to higher taxes for wealthy folks including its recycled promise to reduce their stock option deductions.
No mention of a wealth tax or an estate tax, eliminating the tax break for capital gains and dividends which is the overwhelming source of income of the wealthy. No mention of increasing marginal income tax rates at the top. No mention of cracking down on tax havens which almost all major corporations (and wealthy individuals) use to avoid taxes. Canadian corporate assets in the 12 largest tax havens reached $381 billion in 2019.
The vast majority of the gains appropriated from economic growth have gone to those at the top. Median household incomes have remained flat. The pandemic is exacerbating inequality. Without major structural changes, post-pandemic economic growth will be as unequal as before.
The existential threat faced by all our children and grandchildren is the looming climate apocalypse.
The throne speech stated: “Climate action will be a cornerstone of our plan to support and create a million jobs across the country …” It committed to exceeding its existing Paris agreement 2030 carbon reduction targets, which it is currently on track to miss.
It announced a fund to support electrification of industry, corporate tax breaks for green companies, although no mention of withdrawing fossil fuel subsidies. Again, worthwhile promises, but they do not add up to a road map and action plan that will get us to carbon net zero by 2050.
Climate denialisim — whether the old Trumpian kind, or the newer version where policy makers acknowledge the climate threat and pay lip service to the science, but whose policy prescriptions are weak and contradictory — permeates the plutocracy.
Between hope and despair
Author Arundhati Roy in her essay, “The Pandemic is a Portal,” writes: “Historically, pandemics have forced humans to break with the past and imagine their world anew. This one is no different. It is a portal, a gateway between one world and the next.”
Does the throne speech signal the Liberal government’s willingness to step through Roy’s pandemic gateway into the next world of transformative change? The government is limping in that direction but may well buckle to change deemed acceptable to the plutocracy, delivering largely underwhelming policies once the pandemic is over. They will need to be pushed through that gateway driven by widespread political mobilization and a paradigm shift as occurred at the end of the Second World War.
The stakes could not be higher!
Bruce Campbell is the former executive director of the Canadian Centre for Policy Alternatives. This post originally appeared on Rabble and is reprinted with permission.