Do we need to be big to be cosmopolitan political animals?

The just society has been restored. Best intentions, disciplined by fact-checkers, motivate our institutions. When we’re not on Netflix or vicariously fighting US elections, Canadians ponder Canada’s singular original flaw: being good, but too small. Canadians simply can’t shake the feeling that Canada could do so much more to save this troubled word if only it was bigger.

Happily, this problem has a gently impactful, re-calibrated century-old solution: a population target of 100 million bona-fide Canadians by 2100. Its champions most surely already own real estate in downtown Toronto and Vancouver, studied and vacation in Europe, and can’t stand America’s cussed indifference.

After putting up with more than a century of being less appealing to global risk-takers and mistreated minorities than the great happiness lady to the south, we’re now a first love, not a rebound destination. So, that old itch to be great too has found credible voices in our national politics.

Andrew Coyne gives the idea a cleared-eyed pass in his excellent column: “Increased immigration is good for Canada — and the reasons aren’t only economic”.

The target isn’t a leap of faith and wouldn’t require that much of an additional increase in annual immigration annually. We can micro-manage (high-grade) the admission of individuals keen to embrace Canada’s governing values. Coyne doesn’t try to argue that immigration will solve the emerging burden of grey dependents or increase real incomes per-capita by magically increasing our productivity. He settles on a classic liberal assertion, and a Machiavellian one:

“Ambitious countries want to grow, but growth also makes countries ambitious.”

                  

“Second, it (population target) would add to our clout in the world. We would be growing at a time when our peers are shrinking. At 100 million, current United Nations projections suggest we would be second only to the United States (it is forecast to grow to 450 million) among the G-7, vaulting past Japan, France, Germany, Italy, and the United Kingdom.”

                  

Since half of new Canadians settle now and will continue to settle in Toronto, Montreal, Vancouver and a fourth city, depending on shifting regional job prospects, Coyne is a hundred percent, half right: by 2100 Montreal and Vancouver will have joined Toronto as eminent, brutally ambitious centers of western creativity, commerce and civilization.

                  

Having the talent and problems as big as New York’s and Los Angeles’s, it is reasonable to expect that Toronto will discover in its midst truly exceptional, cosmopolitan political leaders. Visitors will study how we run things as a giant city and we’ll be more entertaining than the Fins and Norwegians.

                  

However, Canada as a nation-state and the public service in its national capital Ottawa won’t have more “clout in the world.” To put it personally, your choices of future prime ministers won’t give you added or less voice as an unregistered ‘citizen of the world’, let alone North America.

                  

This is not a good thing or, happily, the way it must always be.

                  

As a child of the Sixties, I still believe “clout in the world” is a constructive, indeed a healthy ambition--others out there will not stop seeking to have it and, often, in order to do less good. 

                  

However, Machiavelli would only be amused at the thought that the nicest suburb on this continent wants to be a significant political force on its own. Indeed, as an Italian cosmopolitan--who’d see instantly that secret ballots in primaries, caucuses and general elections have the real power--he might ask: why do you follow US political gossip, passionately day-after-day, and reject any form of political participation?

Is the Quebec drama over?

Standing in the ruins of ancient Rome, you don’t appreciate that the drama in our civilization is also dead. Then I cross the street, order a caffe, and go online. Suddenly, I’m reading that nothing big will ever change across the "English-speaking civilization" and also in the "French-speaking civilization" of Quebec.

The evidence is trending: Scotland could vote yes or no for independence and still keep the Queen and £; either another Bush or another Clinton will return to the White House in 2016; and an overwhelming majority of Quebecers say they like the "status quo."

Andrew Coyne has found it “impossible to overstate” the tectonic significance of federalists winning a clear majority in Quebec’s latest provincial election. Coyne divines that, since Quebecers “rejected secession without being offered any special inducement to do so,” they think Canada is not so bad, that they are happy with the "status quo."

Quebecers have settled for an unlovable impasse. The Canadian federation’s prime minister is wildly unpopular. Quebec federalists are tainted by scandal and, as well, are uniformly uncharismatic. Neither on the stage nor in writing do they offer positive change. Quebecers cherish their democracy but accept that the Clarity Act and Canada’s Supreme Court have made separation “unavailable.” The choice is only “the status quo or the status quo” — and, still, 75% of eligible Quebecers bothered to vote.

To begin with a technical problem:

The "Canadian status quo" — along with generalizations like the "Gilded Age," the "Trudeau Years," and the "Quiet Revolution" — is but some writer’s invention (usually employed as an insult). In any event, it doesn’t exist. Even as expressed opinion it only exists for an instant. And happy crowds only last in pictures. You invent; you don’t see agreement even on the smiling faces in Kim Jong Un rallies in North Korea. Votes decide who governs but they don’t tell us what those voters were thinking and will be thinking next.

The Quebec-Canada "status quo" was not endorsed on Monday night and wouldn’t be any safer today if 100% of Quebec adults had turned up to vote.

Much has been made of the poor showing of the Parti Quebecois — its worst performance since 1973. Yet I’m not aware of anyone suggesting that Stephen Harper is a better advocate for Canada than Jean Chretien, Pierre Trudeau, or Brian Mulroney. Apparently, Quebecers only spent their evenings reading scary stories about the Clarity Act and the hardhearted monetarists in Ottawa who would never let Quebec keep the Canadian dollar.

But what about the role of "personality" in the outcome? After all, it is politicians, not abstractions, that we reject or embrace when we vote.

Was Quebec’s election night about something bigger than the unappealing prospect of re-electing Pauline Marois? Has the PQ and its founding vision ever been so poorly represented?

In the two debates, hour after long hour, she complained about being questioned in a snap election that she called. On the cause dearest to her heart — Quebec nationhood — she insisted that the citizens of Quebec weren’t “ready” to discuss it. As if that discussion would be hard, unpleasant work, as if she found managing the status quo exhausting enough.

When witnessing the fall of the Berlin Wall in 1989, Francis Fukuyama asserted that as a contest of ideas we had come to “the end of history.” Big politics in Berlin may be crowded out for now by building cranes and tourists. But big politics is still busy elsewhere, around the world and in Germany.

The thesis that Canada’s governance is settled won’t fly indefinitely in Quebec and certainly not in Western Canada. 

The "status quo" — never having to think about the constitution again — may be an attractive proposition. But is it sustainable? Old shoes that pinch are wearable — but only for a while and only until you try on a better pair.

Jim Flaherty’s great tax transgression

It was bad enough that departing finance minister Jim Flaherty survived in finance for eight years — right under our noses, through two minority Parliaments and a recession that compelled the largest and most self-conscious application of Keynesian pump-priming in modern history. Along with all that, Flaherty didn’t cut taxes the way liberals — and Andrew Coyne — would have.

Designing big tax cuts, of course, isn’t a signature passion among federal Liberal thinkers. They’ll do it in emergencies and when a budget surplus grows too large to be spent responsibly or credibly withheld from taxpayers.

Then, they’ll make broad cuts to personal income taxes.

Their approach (which I generally favor) has two virtues: It can easily be tailored to most benefit the middle class and least benefit the rich, and it can be phased out over time. Taking away payroll tax cuts has been done successfully by incumbent governments in North America for a century. It’s the safest way to manipulate revenues.

It’s the status quo working intelligently. Yet, there are adult options. That’s one of the reasons why we still have politics.

Jim Flaherty’s two percentage point cuts off the GST was his best conservative option and he took it.

Although it "costs" the federal treasury some $13billion annually, it helped hold up demand in a shaky economy, helped Stephen Harper defeat three Liberal leaders, facilitated consumption tax harmonization with Liberal governments in Ontario and Quebec — and will be almost impossible to repeal by whoever forms the next government.

Yes, it was a conservative accomplishment by a conservative government. It addressed a longstanding concern by conservative federalists: A balanced union can’t be sustained by a tax structure that makes it too easy for Ottawa to raise money and relatively more difficult for the provinces to finance their own legitimate responsibilities directly.

Andrew Coyne poses Flaherty’s choice differently:

“Should we remember the Flaherty, who against every axiom of economics, cut the GST rather than cutting income taxes, then larded up the tax code with all manner of special tax breaks for favored political interests?”

You can strip Coyne’s assertion down to this: My politics are above politics; I follow axioms and you’re a clown.

The technical issues are subtle and do not, overwhelmingly or conclusively, favor one broad tax cut option over another.

Consumption taxes, like the GST and HST, can be levied reasonably equitably — otherwise liberals wouldn’t regret Flaherty’s cuts to the GST. Further, it’s mighty shaky as an "axiom" to presume that increasing people’s discretionary incomes by cutting income taxes rather than consumer prices will necessarily better stimulate savings and investment rather than unwise shopping. (A dollar saved, as my mother would remind me, can also be banked.)

Further, liberals (not Coyne) would favor, rather than resent, the appreciation of the Canadian dollar if they believed lower prices would automatically lead to quantitatively greater purchasing. A strong dollar makes it easier to import productivity and wage-enhancing technologies.

However, the political case for the Harper-Flaherty GST cuts were overwhelming. The promise to cut the GST further distanced Stephen Harper from memories of the Brian Mulroney government, and that was a political imperative. The GST cuts weren’t merely variants of what Liberal Finance Minister Paul Martin had been doing. They would be hard for the government to forget to do them or take away. You pay them almost every time you leave the house.  

This post wasn’t written to guild Jim Flaherty’s political obituary. I’m only saying it is unfair to bury his tax cuts in some shadowy graveyard of two-bit ideas that betray fixed rules of effective public finance.

Canada’s floating dollar and its middle class woes

Having created a public service worthy of international respect, Canadian governments have striven to keep up with the coolest innovations in public policy. Indeed, in keeping up with what the United States had to do in the early '70s, Canada did a dangerous thing that it didn’t have to. When Richard Nixon was forced by global economic dynamics to float the globe’s reserve currency, Canada instantly followed suit. Our dollar has been managed as a modern world currency ever since, and that pretense has depreciated our North American interests and middle class.

A stand-alone, freely floating Canadian dollar has been a source of pride to modern nation-builders. Unfortunately, it’s floated above critical analysis. Akin to high Anglicanism, it’s a faith now that’s impossible to explain. Unlike Anglicanism, however, Canada’s floating god literally tithes both believers and the rest of us.

Hundreds of highly trained monetary economists are employed at the Bank of Canada, protecting its freedom to ignore the Canada-US exchange rate. They disseminate one circular dictate: it doesn’t matter what happens to the wider economy when the dollar rises or falls, so long as those directly elected to manage the economy stay out of the way. Private speculation is healthy, so long as it is not about what the government thinks.

This morning in the National Post, Andrew Coyne offered the lay sermon on the proper separation of the Church of the Unpredictable Dollar and any biases amongst amateur politicians.

“It is, of course, not a given that even a 10% devaluation will be manufacturing’s salvation — with the pressure off, businesses may feel less impetus to make the adjustments needed to regain competitiveness — but whatever gain there may be to exporters comes at the expense of everyone else, in the form of higher prices for imported goods and services."

“There’s nothing wrong with a falling dollar, in itself: indeed, the fundamentals may well support a decline. But that is a different thing than a deliberate policy of devaluation, which is no more to be desired than a policy of propping it up: both subordinate the proper objectives of monetary policy, domestic price stability, to an extraneous target.”

Coyne makes dogma sound sophisticated by appearing to please no one.

The “fundamentals” are never enumerated, let alone weighed against one another. Conceivably, the fundamental that drives the driverless Canadian dollar is theological: above all, our monetarists must be as orthodox and as in charge as their so-called peers in Washington, London, Tokyo, and Frankfurt.

That would be fine, if it was free.

However, although it’s a crap shoot what the recent 10% devaluation of the Canadian dollar will do for or against individual producers in the Canadian economy, it’s blindingly obvious what it is doing to hard-pressed middle-class consumers. In three short quarters, their standard of living has declined by 10%.

Maybe they didn’t deserve the 10% income boost they received over the last half-decade. They didn’t recently lose that 10%, however, because they weren’t willing to be more productive or accept controversial policies to make Canada more competitive.

They’re losing that purchasing power relief simply because policy elites in Ottawa, in its Parliament and its bureaucracies, either refuse to consider the benefits of monetary union with the US or secretly hope that their homemade dollar will float down and stay there. The country will be that much poorer. But basic economic change will be less urgent — and governing that much easier.

Canada’s leaders are being squeezed by entrenched special interests that resent the high dollar. Obligingly, they’re accepting another squeeze on the middle class because currency depreciation is almost invisible to the untrained eye. Gallingly, they assume they won’t be interrupted as they prepare their tearful middle-class election platforms.