My July 7 column stated: "The only thing that will lower oil prices is a reduction in worldwide consumption, and that can only happen if there is a worldwide recession. Canada faces a particularly worrying economic prospect because the country responsible for 80 per cent of our international trade is in real trouble. … Yet, incredibly, current indications are that the next federal election will be a battle over different schemes to increase energy costs."
Fast forward 12 weeks. Oil prices have come down from their peak of about $150 (U.S.) as the United States faces even bigger trouble, dragging global financial markets down with it. Yet the first weeks of the Canadian election campaign have focused on attacks and gaffes, grand schemes to increase energy costs and dangerously unaffordable new spending promises.
What's really needed is a focus on the best policy environment for both small and large businesses to weather the economic storm, continue to create jobs and help preserve the investments and pensions of Canadians. We need prudent spending policies that will balance the books and we need leadership that fosters confidence in our financial system. So how do the parties vying for our votes stack up by these criteria?
Canada has four national political parties and one that runs candidates in a single province. The Bloc Québécois has morphed into a declining socialist rump party that combines strident negativism toward almost everything national with the kind of policies that emptied corporate offices and killed economic opportunity for a generation of Quebeckers.
The New Democratic Party offers a typical socialist agenda. Tax and spend, subsidize unionized industry and make big business "pay" - the kind of policies that drove Ontario and British Columbia to the brink of economic ruin. While its founding raison d'être is environmental, the Green Party under Elizabeth May has announced policies that are at least as socialist and anti-trade as those of the NDP. The keystone of its platform is a large carbon tax and higher goods and service tax, combined with a massive social transformation.
The Liberal's "Green Shift" plan would also levy carbon taxes of around $15-billion a year, all of which would supposedly be redistributed, leaving the government "revenue neutral." But while it may be "revenue neutral" to the government, there are three reasons why it would not be to taxpayers: Studies of tax money taken by governments compared with the amount actually returned to people through government programs have shown that administrative costs and inefficiencies normally grind up 25 per cent or more of the taxpayer's dollar. The amount can be much higher when governments devise massive, theoretical and complex programs aimed at changing the behaviour of the populace. What's more, such programs always have serious unintended consequences that increase administrative costs and decrease revenue.
The Liberals no sooner got their campaign under way when party leader Stéphane Dion announced exemptions, including the fishing and trucking industries. Experience in B.C. demonstrates that this is only the beginning. B.C. Premier Gordon Campbell's supposedly "revenue neutral" carbon tax has quickly become his most unpopular and divisive policy, with the most strident objections coming from rural communities and businesses already struggling economically.
The distribution of the dollars left after administrative costs and various exemptions would see the bulk of Mr. Dion's carbon tax money redistributed in a wholly different way than to the people who paid it. Examination of the Green Shift reveals that the program largely amounts to a big tax increase to fund highly targeted tax and social program redistributions. And, together with the Green Shift, Mr. Dion's campaign promises add up to over $50-billion.
The carbon tax has wildly differing effects, depending on how you heat your home, the fuel used to generate your electricity and how you earn your living. If you heat your home with natural gas, the impact might be only 2 per cent, but if you use fuel oil it's more than 10 per cent. If you live in B.C., Manitoba or Quebec, where most power comes from hydro dams, there will be little impact on your electricity bill. On the other hand, if you live on the Prairies, in Ontario or in Atlantic Canada, where fuel oil and coal generate a significant portion of your power, the impact will be substantial, increasing the cost of generating electricity by about 10 per cent for fuel oil and more than 50 per cent for coal-fired plants.
That brings me to the Conservative Party. There are no new grand schemes. Governments seeking a new term run mainly on their record. This is both a problem and an opportunity for the Conservatives. The problem is that the other four parties can fire their guns in a damaging daily barrage. The opportunity is to rise above that to focus on keeping the Good Ship Canada on course as massive global economic waves smash into our keel. Canada enters the stormy seas in ship-shape condition. Canadian banks are solid. Our regulations prevented the foolhardy mistakes at the root of the U.S. subprime mortgage debacle. Our economy continues to create new jobs. The personal and corporate tax cuts now being phased in are even more important in the face of global economic threats.
No one knows what chapter of the global financial meltdown we're in, and whether the latest Hail Mary bailouts by the U.S. Treasury will stop the downward spiral. Few people will shed tears about job losses in firms that paid out tens of billions of dollars in bonuses as rewards for proffering toxic products such as subprime mortgage-backed securities. The real danger is that bankruptcies in the financial sector will spread to the key industrial underpinnings of the U.S. and global economies. It may well be that the astounding financial collapses we've seen so far are only, recalling Churchill, "the end of the beginning."
The unpredictable challenges of this global economic crisis cannot be navigated by another minority Parliament bound up by partisan bickering. The best hope for Canadians is to elect a government with strong, decisive leadership and the mandate needed to steer Canada around the shoals that lie in our path.
Gwyn Morgan is the retired founding CEO of EnCana Corp.