Thursday, January 27, 2011

In a battle of populism vs. the experts, the people always win

I've been planning to write about populism vs. experts on taxes for a few days, but with the release yesterday of stunning numbers from Abacus Data on Canadians’ lack of support for corporate tax cuts, the case is bolstered even further.

An interesting battle has been shaping up between the Liberals and Conservatives on the issue of planned cuts to corporate taxes. In essence, here are the battle lines:

The Conservatives want to continue the cuts, saying they’re necessary to spur job creation and make Canadian businesses competitive.

The Liberals want to cancel the planned cuts (and raise the rates back to the current 2010 level after they’re cut further in the coming fiscal year), saying they’re already plenty competitive, and, with a huge deficit, we could better spend scarce resources on priorities such as home care and education.

What I’ve found interesting about this debate is that while the Liberals have adopted a populist track (we want to help you, not big business) the Conservatives are relying on experts to make their “job creators” argument, trotting out economists to discuss economic theory and productivity gains.

It’s an interesting contrast to the 2005/05 election campaign, when the Conservatives campaigned on reversing Liberal income tax cuts (raising personal income taxes for the lowest-income Canadians) to finance their GST cut. It was a policy nearly every economist and expert would tell you was ass-backward. The Liberals tried to argue the economic theory. The Conservatives ignored them; they knew that whatever the experts said, the people would buy into a sales tax cut no matter how they paid for it. And populism trumped the experts and the theory.

When I read columns earlier in the week where pundits said the Liberals were crazy to be taking this track when all these experts said corporate tax cuts are the bees knees, I just smiled and remembered back to 05/06.

And it would seem I read the mood of the people right, according to the study Abacus Data released yesterday. 57 per cent of Canadians most identified with the opposition parties’ position opposing the corporate tax cuts, 21 per cent with the Conservatives, and 21 per cent identified with neither. The opposition carried the day in all age groups, both genders, and across Canada. Even 26 per cent of Conservative supporters disagreed with the government.

When asked if they supported or opposed the Conservative plan to continue with corporate tax cuts, 52 per cent strongly or somewhat opposed it, while just 26 per cent somewhat or strongly supported it. 22 per cent said neither.

So, suffice to say the Conservatives have their work cut out for them, which explains their cross-country panicky full-court-press this week, sending the cabinet out to stump for cuts that studies say will be of most benefit to the big banks.

The framing of this issue is also interesting in another sense. As a Liberal, I’m not opposed to the theory of corporate tax cuts. So, while I think things like Mintz’s study greatly exaggerate the impact of corporate tax cuts, I do believe competitive corporate tax rates are an important part of a competitive economic climate. So I see no reason to debate the experts on the basic theory; just their spin.

The issue for the Liberals is that our corporate taxes are already extremely low. When we were in surplus, the Liberals pursued a balanced agenda of personal and corporate income tax cuts and program investment. But with a deficit of over $50 billion, we need to set priorities. And we think family home care, education, and pensions are all more pressing priorities than yet another corporate tax cut.

Now, this is more nuance than I’d ever hope to see in the soundbite-driven era of modern politics, but the point should also be made that corporate tax rates are not the be all, end all of creating a competitive business environment and fostering job growth. And many of the Liberal proposals, from education to home care, do help to create a more competitive climate for business investment. I wrote about this in November, in a piece called Seeing the forest for the corporate tax cuts. It would be nice to see some of the expert analysis look at ALL the factors that both reduce cost of business and create a climate for businesses to invest and grow.

But in the mean time, in a battle of populism vs. experts, never bet against the people.

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Ted Betts said...

Another point I'm surprised has been pressed more is that Canada experienced a three decade low in unemployment under the Liberals with a higher corporate tax rate. So Harper and Mintz and the experts are full of BS with their numbers and fearmongering of huge job losses.

You could also mention that Harper's panicky tour is (1) costing Canadian taxpayers millions of dollars (2) completely unethical as it is entirely self-promotion electioneering (i.e. the tax cuts are in place so there is no governmental purpose is "selling" them to the public, like there argumably was in telling Canadians about the home reno tax so they would know about it).

It has been fun seeing Liberals with a backbone on a contentious issue, I have to say.

wilson said...

When the Harper govt brought in the GST cuts, they were following thru on a campaign promise.

Liberals campaigned on not only keeping the corp tax cuts, but deeping the cut to 14%.
And the Liberals reaffirmed their stand to keep the corp tax cuts, in the coalition agreement.

So yes, populism trumps experts,
but does it also trump 'trust'?

Can Canadians trust that the LPC will not change their minds on any or all of their future campaign promises?

Surprising too, that the LPC chooses a time when new social programs mean adding to the deficit, borrowing money.

But didn't think the time was right back when the LPC had 3 majority govts and 6 back to back surplus'.

Jeff said...

The Liberals campaigned on a position two years ago. They lost that election, as I recall. They changed leaders. The country is now in a deficit. And in the next campaign, the Liberals will campaign on a new platform, designed to meet the times, including a freeze of corporate taxes.

Do you seriously expect a party to take one position and hold that position forever, through every election, through multiple leaders, through economic meltdowns and Martian invasions?

Please be serious.

As for lectures on trust, in 2005/06 the Conservatives campaigned on never taxing income trusts. Then months later, they reversed themselves and taxed them.

If you're really concerned about trust, you must not believe a word they say about anything.

Jeff said...

Surprising too, that the CPC chooses a time when tax cuts for the big banks mean adding to the deficit, borrowing money.

At least they know where to go to borrow the money, and who to pay the interest too.

Gene Rayburn said...

whoa. for a moment there I though Wilson was CanadianSense...

CanadianSense said...

I am curious our PM gave a year end address in 2007 and was attacked for fear mongering about the storm clouds in the US economy.

During the campaign all three parties were stating we were in a recession and the government was not being truthful.

Ignatieff was the deputy leader? Sadly many Liberals missed the actual vote on continuing the corporate tax rates.

The Liberal platform in 2008 which Ignatieff was promoting has them promise to take it to 14%.

Dion refused to cancel those cuts and the NDP agreed to those terms.

Now it appears Ignatieff has jumped the shark and gone hard left stealing every NDP policy he can find.

(I don't have a problem, they did the same thing in the 1990's)
They promised many of the things the NDP offered but we both know they failed to scrap and make the cuts.

I confess I hope the Liberals keep running on the ideology of the NDP. It will give Canadians two choices.

I agree with populism vs experts but the missing ingredient is credibility-trust.

Will voters trust the Liberals and their leader to implement the left leaning policies of the NDP+Bloc or will they bypass the Liberals for the real deal?

Jeff said...

In 2007, the Ottawa Senators played in the Stanley Cup final against the Anaheim Ducks.

In 2011, the Ottawa Senators are 15 points out of a playoff spot.

You can budget for buying four rounds of Senators playoff tickets this year like you did in 2007. But you may want to come up with a new plan, giving the fact the team now sucks.

Jason Hickman said...

I'm sure there's a difference between Stephen Harper cutting corporate taxes in the face of a deficit, and Dalton McGuinty cutting corporate taxes in the face of a deficit.

Martha Hall Findlay couldn't (or wouldn't) explain it here (it's about half-way down the page), but presumably, there's an answer somewhere.

Jeff said...

As I think I've said to you a few times Jason, I'm not a defender or even a member of the Ontario Liberal Party. They're different parties, with different leaders and different policies. I'll leave it to them to explain their policies. To be frank, I don't pay that much attention to Ontario politics.

So is your point that both Dalton and Stephen are right, or that they're both wrong? Or that one is right and one is wrong?

Jason Hickman said...

In this case, on the issue of the corporate tax cuts, yes, I think the PM and the Premier are both right.

I don't *think* that puts me offside the PC Party of Ontario's position vis a vis the issue of corporate tax cuts in particular* but regardless, yes, that's what I think.

(*I'm sure that just like any opposition party in a minority government situation, the Ontario Tories will find reasons to vote against McG's budget. I doubt that they would do so solely on the basis of corporate tax cuts, however.)

Jason Hickman said...

D'oh! I mean "majority situation" (when talking about the Ontario PC's).

Sigh. Is it time for a drink yet? All signs point to yes...