Bombshell: PM Ignatieff may hike the GST in the future

In a one-on-one interview today with Citynews’ Richard Madan, Liberal leader Michael Ignatieff said that he won’t take a GST hike off the table in dealing with the economic crisis.

Madan: “On the tax side, is it time to boost up the GST to its former levels of 6%? Do we need to that? Do you support raising the GST?”

Ignatieff: “I won’t be drawn at the moment where Canadian taxpayers and consumers are struggling with their bills, jacking up GST doesn’t sound to me like the greatest idea. But, let me be clear here: If we are in a deep deficit in year 3 or 4 you can’t exclude tax increases to get us out. Canadians understand how bad deficits are. So I’m not going to take a GST hike off the table… later, I just think it would be a bad idea now, in the recession.”

Richard Madan has the video.

Fact, fiction and speculation

Fact: “The Liberal Opposition plans to introduce a non-confidence motion in the House of Commons on Monday” (source)

But: Notice of motions are introduced regularly by the opposition. Motions are always introduced in advance. Generally five motions are introduced. The Liberals having a confidence motion on the table are simply having the confidence motion on the table as an option. Potential motions must prested in advance and today (Friday) is the earliest opportunity for the opposition to have that option on the table for Monday. They may not actually move on voting on the motion.

Speculation: Anybody wonder why Stephane Dion didn’t immediately step down after the election? His people have been quiet on his prospects as leader of a coalition government. In the Liberal constitution, if I remember correctly, the only way Dion can be replaced in a pinch is if he either dies or resigns. If Dion doesn’t resign, the Liberals may govern under Dion if a coalition is formed.

Fiction: A new Bloc-Liberal-NDP coalition government would be viable beyond their agreement on the $1.95-per-vote subsidy.

Speculation: If the Liberals-NDP believe they can form a coalition with tangential Bloc support, the GG may have no other option to call an election as 77+37=114 LPC/NDP vs. CPC’s 143. The GG may see this as the only stable option.

Fact: The Conservatives (in the broader picture) want to move forward on the economy. The opposition wanted to hold the government back on the campaign welfare package.

Fact: The Throne Speech passed in the House yesterday after the economic statement was read. The opposition approved the government’s mandate knowing full well that they’d be bringing it to the brink this weekend.

Fact: On mandates, if the Liberals were to form government, they would do so after receiving the lowest proportion of votes in their party’s history. Further, if Dion does resign and if Ignatieff does become Prime Minister, he would do so without having been presented to Canadians during the democratic process that we call elections. Talk about an affront to democracy!

Fact: The opposition accused the government of not having a plan for the economy during an election and now they accuse the government of the same now. What has changed? The Conservatives now want to end campaign welfare.

Fact: Cooler heads recognize that the American elephant will move on the economy in new year and that any action with respect to our integrated economies would be better done in coordination rather than prematurely.

Speculation: Canadians will not accept a surprise Liberal-NDP coalition backed by a party that wants to destroy the country that would stand to be dismantled under the proposed funding changes of the Conservative government. By opposing campaign welfare reform, the Liberals are sustaining the existence of the Bloc for their own ambition. Canadians will not accept a surprise Prime Minister unvetted by the electorate.

Speculation: What are the terms of a NDP-backed Liberal coalition government? Cancellation of the $50 Billion corporate tax cut? What are the Bloc’s terms?

Poor CTV

and now this:

(would someone pay the bandwidth bill at CTV!)

Consider too:

Last time I checked, funding for the CBC went up to $1.2 Billion under the Conservatives.  While we’re talking about propping up and subsidizing organizations like the Liberal Party and Bloc Quebecois, perhaps we should instead be talking about letting organizations that inspire and provide a competitive product compete on a level playing field with those that don’t and unfairly receive welfare from the Canadian taxpayer.

The trap is set

The latest news is that the potential of Bloc-Liberal-NDP coalition government in waiting is shrinking a bit now that the Conservatives have promised to remove required confidence from the party welfare issue.

This is bait of course.

If the BLN coalition backs down now, Canadians will understand that their opposition to the economic statement really wasn’t about the “lack of stimulus”, the rescue of Canadian jobs, or the “protection of rights of women and workers”.  The opposition and brinkmanship that was threatening a fresh election or constitutional crisis would have been about parties that are so fresh out of ideas, so unable to inspire, that they were ready to go to political war over their $1.95-per-vote handout from the Canadian taxpayer.

So, have we seen crisis averted? Better yet, has the PM been successful in floating a very useful trial balloon over the heads of the opposition? If we don’t see the government fall, or a new one form, will this have instead put the issue of campaign welfare to the fore and have raised the cynical ire of Canadians to know that in an economic crisis, the ones ready to burn the house down were the Liberals, the NDP and the Bloc?

Over their entitlements?

Yeah.

UPDATE: Have we seen a crisis averted? No, not yet. The PM has pushed confidence votes back to December 8th and parties will have a chance then to bring down the government.

Liveblogging Flaherty’s economic statement

4:09pm: Persuant to a standing order I do not recall, the Minister of Finance tables his economic statement.

4:10pm: Time of unprecedented economic deterioration. Uh oh, this sounds bad.

4:11pm: IMF projects global growth weakest since ’93. Good thing the IMF puts Canada in the best fiscal position of the G7.

4:13pm: CTV reports that the Liberals will not support the economic statement. This statement is a matter of confidence and if defeated would precipitate an election.

4:14pm: Reformation of global finance will be done with global partners.

4:15pm: Trade will be expanded.

4:15pm: Opposition mocks Flaherty for saying the government planned for the downturn last year.

4:15pm: Taxes have been reduced by $200B. Investments have been made in infrastructure, S&T and training.

4:16pm: Funding for infrastructure projects. Taxes down by equivalent of 2% GDP. Sustainable and permanent tax relief.

4:19pm: Canada will come out of the crisis in a strong position because it went in a strong position.

4:21pm: Will not engineer a surplus just to say we have one.

4:21pm: Budget is balanced for now, but future injection of government stimulus may move Canada into deficit.

4:22pm: Days of chronic structural deficits are behind us.

4:23pm: Tax dollars for political parties and tax credits for donations brought up. Flaherty talking about the $1.75 per vote subsidy. Political parties should pay their own bills without excessive tax dollars.

4:25pm: $1.75 subsidy gone as of April 2009.

4:26pm: Spending growth will follow sustainable track.

4:27pm: Spending review will also look into crown corporations. Government will save $15B over the next five years because of expenditure management system.

4:28pm: re: public sector… New legislation will put in place “annual wage increases for the federal public administration, including senior members of the public service, as well as Members of Parliament, Cabinet Ministers, and Senators, of 2.3 per cent in 2007–08 and 1.5 per cent for the following three years, for groups in the process of bargaining for new agreements.”For groups with collective agreements already covering 2008–09, the 1.5 per cent would apply for the remainder of the three-year period starting at the anniversary date of the collective agreement. In addition, the legislation would suspend the right to strike on wages through 2010–11.” Some honourable socialist members: “oh, oh”.

4:32pm: Largest increase in infrastructure spending. $6B in spending. Aim is to provide new jobs.

4:33pm: Flaherty wants more power to help sustain the banking industry. These powers would include:
– Funding in the unlikely event that there is a draw on the Canadian Lenders Assurance Facility.
– The Canada Deposit Insurance Corporation (CDIC) to establish a bridge bank as a further resolution tool to help preserve banking functions.
– An increase in the borrowing limit of CDIC to $15 billion to reflect the growth of insured deposits since the last increase in 1992.
– The Minister of Finance to provide the CDIC Board of Directors broader scope of action when systemic risk concerns may result from the potential failure of a member institution.
– The power to direct CDIC to undertake resolution measures when necessary to prevent adverse effects on financial stability.
– The provision to CDIC of greater flexibility in the timing of preparatory examinations.
– The Government to inject capital into federal financial institutions to support financial stability, with appropriate provisions to protect taxpayers.

4:37pm: taking action to allow RRIF holders to keep more money in their RRIFs.

4:40pm: increase available credit to the exporting sector. $350 million injection of credit for these businesses.

4:41pm: Inject an additional $350 million of capital to the BDC to help SMEs.

4:44pm: “The greatest histories are written in the toughest times”

4:45pm: Scott Brison to respond for the opposition. Demands a “real action plan”. Brison accuses Conservatives of symbolism over substance. Conservatives have provided gimmicks instead of a game plan. “Nothing for manufacturing, autos”.

4:46pm: Brison: PM wants to change the channel from economy to politics. Canadians are hurting. They want talk on economics rather than politics.

4:48pm: Brison bringing out the personal anecdotes describing real Canadians and real concerns. Liberal are making this statement out to be about that $1.75 vote subsidy cut.

4:50pm: Brison accusing the Conservatives of huge spending and huge cuts at the same time.

4:51pm: Brison: government is selling the house to pay for the groceries.

4:51pm: Brison calls Flaherty “Deficit Daddy”.

4:52pm: NDP will not support economic statement.

4:53pm: CTV reports that the government is digging in their heels on the $1.75 subsidy.

4:55pm: Brison brings up Obama and speaks about his economic team and accuses the Conservatives of schemes.

5:00pm: Brison calls for “a new deal”. Brison’s seat mate earlier called out “FDR”

5:01pm: Gilles Duceppe responds for the Bloc. Duceppe: hat was presented was not an economic statement but an ideological statement.

5:02pm: Duceppe: government blind to urgent need to stimulate the economy. Government is attacking democracy, women’s rights and worker’s rights. Government has attacked Quebec.

5:03pm: Duceppe: government has sparked a democratic crisis.

5:03pm: Duceppe: economic statement runs against Quebec’s interests.

5:04pm: Duceppe: Bloc will not cave in on its principles.

5:06pm: Duceppe: Bloc ready to support the reduction of the size of the state.

5:12pm: Bloc Quebecois will oppose the economic statement.

5:13pm: Layton responds for the NDP. He’s got his wounded face on.

5:14pm: Layton: government has failed to act on the economic crisis. Layton is speaking quietly and slowly to show concern and disappointment.

5:15pm: Here comes the anger. Now Layton is doing some finger pointing.

5:19pm: Layton applauds Duceppe and Brison for “standing up to ideology”.

5:21pm: Layton reiterates NDP’s position that they will vote against the economic statement.

Jim Flaherty at the Fraser Institute

Last night, supporters of the Fraser Institute gathered in the Adam hall of the Chateau Laurier to listen to federal finance minister Jim Flaherty deliver an assessment of the Canadian and global economies. On Thursday, the minister will be delivering a sobering fall economic update in the House of Commons and last night, we got a hint of what might be to come.

Flaherty was introduced by former Ontario PC Premier Mike Harris, the finance minister’s former boss and mentor. Harris disappointed the crowd saying that he was not about to return to politics but that a deep-rooted fixation on Canada’s future prosperity is one that both he and Preston Manning hold. Manning and Harris are the authors of Canada: Strong & Free, a six-volume set of books describing Canada’s ideal path along internationalism, economic freedom, federalism, and education among other topics. Last night’s dinner was held to mark the release of their sixth summary volume called Vision.

In minister Flaherty’s speech, he described Canada’s position in a rapid yet sustained decline of the global economy and while trumpeting Canada’s economic leadership among G7 nations, we are simply the country that is sinking the slowest. Indeed, at a recent meeting of the G20 finance ministers, Mr. Flaherty revealed that not one minister was optimistic about their economies domestic or international. Flaherty will project a surplus through the end of this fiscal year ending April 2009, however, as he conceded the next fiscal year will present “a challenge”. The minister sketched a fiscal portrait in broad strokes declaring that the crisis will not end tomorrow, next week or in the next few months and warned that we have not yet seen the worst of the situation.

Yet despite its faltering position, Canada is an economic leader among its economic peers. Flaherty described the economic measures implemented by the federal government to prepare for such an eventuality saying that they’d never apologize or regret cutting the taxes of Canadians or bringing in more stringent regulatory frameworks to maintain Canada’s economic structure. Indeed, the IMF, as Flaherty noted declared Canada to be the best economic shape going into the global economic downturn.

In the United States, President-elect Barack Obama has conceded that he will delay the rollback of the Bush tax-cuts and in Canada, Flaherty suggests that this Conservative government will maintain Canadian tax-cuts to retain this increased spending power among Canadian consumers.

Perhaps the worst-kept secret in Ottawa is that this government will project a deficit in the near future. Flaherty has declared that he will sing from the same songsheet as other national government and use the federal treasury to stimulate growth, or rather stem the “negative growth”. For this, infrastructure minister John Baird will become a hero of sorts in Ontario as federal dollars are channeled through on road, rail and other contruction projects sustaining jobs. Prime Minister Harper days earlier declared that some deficits provide opportunity and are necessary. Flaherty promised that the stimulus would be underway by March 2009. The pairing of the temporary and artificial sustenance of Canadian jobs via government spending with the consumer spending power of a less-tax-burdened population may help the good ship Canada weather the global economic storm until it subsides. Or at least the theory goes.

Deficit spending will be accomplished in order to sustain the “real” economy. Flaherty promised no ‘structural’ deficit.

For my part I asked the minister during the dinner about conservative opportunity describing this as a time when Conservatives in power could be allowed to make cuts to government spending and suggested that a reduction in the size of government rather than its growth would help balance the books in a real rather than artificial way. The finance minister unfortunately balked at the question suggesting that some areas of growth are necessary such as the rescue of the state of the armed forces. If given a follow-up, I would have suggested that some cuts are necessary too. Even in a recession, the government is a growth industry. The minister described a treasury board review of all programs to measure value for money and promised to extend this review through both core and non-core assets.

As for the public sector, wages will not increase faster than the private sector. This has caused some concern among public sector employees and the minister reached a deal with PSAC, it’s largest union late yesterday. The two parties have settled on a wage increase of 6.8% over the next four years.

On interprovincial trade barriers, the minister promised to break these down and suggested that the current economic climate behooves governments to allow uninhibited trade within Canada. The minister welcomed a cooperative spirit among provincial and territorial ministers on addresses the economic downturn domestically.

The minister declared that the government would not artificially engineer a surplus. Perhaps this is a reflection by the minister on Paul Martin’s method of balancing budgets by slashing transfers to the provinces and “fixing” healthcare for a generation. Ontario has warned Ottawa not to balance its books on the back of the province and what is needed is economic stimulus in the province through reduction of its corporate tax rate. For the part of the Conservative federal government, Flaherty described a $37B debt reduction, a reduction of the tax burden by $200B and a 2012 projected corporate tax rate of 15%.

On securities regulations, the minister promised the creation of a single national securities regulator. The federal government will seek to regulate leverage and large pools of capital. A more transparent market infrastructure is needed according to Mr. Flaherty.

The sum of Flaherty’s speech was to say that this government is acting to sustain economic activity for the foreseeable future as economies around the world reconfigure to recover. Taxes will remain low, spending is temporary and a deficit would be a temporary and an short aberration from Canada’s economic plan.

John Tory stopping by

Ontario opposition leader John Tory will stop by at 3pm EST today to take your questions on Premier McGuinty’s economic update. This space will host a live video chat where your economic questions to Mr. Tory.

UPDATE: Thanks to everyone that joined the discussion. Here is the recorded video of our townhall.

Will we see “panicked buying” on the markets?

Thanksgiving day came and went for Canadians as they sat down with their families, ladeled the gravy, passed the potatoes and tucked in the turkey. But as we were under tryptophan’s trance, our neighbours to the south were buoying American stock markets by snapping up shares at a maddening pace. In fact, the Dow Jones by the end of trading was up over 930 points increasing the value of indexed shares by over 11%, the S&P500 was also up over 11% and the NASDAQ up just under 12%. It was a record setting day on the American markets.

So, what does this mean for Canada? While markets in this country were closed on Monday, there stands a excellent chance — absent an unforeseen event — that our markets will see the same frenzied buying that we saw stateside.

And what does this mean for a Prime Minister who has represented himself as a steady hand in turbulent economic times? While Conservatives have historically been electorally handicapped when the economy is poor, a surging market may deliver an economic stimulus for Stephen Harper on election day.

For Canadians, it will indicate some return of confidence to markets and bolstered optimism for this country’s economic outlook. For traders, tomorrow may see a flurry of panicked buying and for more casual bystanders of the market economy, retirement savings may similarly bounce back.

Election day may in fact be bullish. Will it benefit the incumbent Conservative Prime Minister?

Dion will implement carbon tax even if there’s a recession

After a joint address to the Empire Club and Canadian Club yesterday, Stephane Dion faced reporters. The exchange between Richard Madan from City and Dion was interesting.

MADAN (Voiceover): But Dion has shifted his own tune lately, suggesting that Canada may be headed into recession. And he only mentioned his controversial Green Shift plan just once at the end of his speech.

MADAN (to Dion): You mentioned “recession” in your speech. So if indeed Canada does hit a recession will you delay implementing your carbon tax?

DION: First, it’s not that. It’s the Green Shift.

MADAN: No, I know. But the question is: if things get worse, will you delay implementing a carbon tax, Green Shift, whatever you want to call it? Will you delay it?

DION: It’s not carbon tax, it’s a Green Shift. It’s to put a cost…

MADAN (interupts): Will you delay it?

DION: No, because it’ll be good for the economy.

Did you get that? If Canada falls into recession, Dion believes his “don’t call it a carbon tax” Green Shift will be just want Canada needs to get out of the storm.

Recently, Maclean’s editor Andrew Coyne has stated that he believes that there may be something to it when Harper complains that Canada’s opposition is “cheering for a recession”.

The Opposition parties have gone mad with attacks explaining that Mr. Harper doesn’t care about the economy because he’s not panicking. The opposition will be upset to learn that the World Economic Forum has declared Canada’s banking system the most stable in the world.

There have been cries of dissent from Dion’s own ranks on the Green Shift and it’s timetable for implementation. Liberal candidate Shawn Murphy told the Charlottetown Guardian on September 12th, “This winter, I don’t think you’re going to see the green shift even if the Liberals got elected.” Former Minister of Revenue John McCallum conceded about Dion’s carbon tax, “I cannot say to you that no Canadian will be unharmed by this… it’s not going to be totally painless for every human being”.

Even former NDP Ontario Premier Bob Rae is
sounding more lucid on the economy as he suggested yesterday that the implementation of the carbon tax should be delayed.

There’s an old saying that “if it ain’t broke, don’t fix it”. While Mr. Dion’s plan aims to address environmental concerns with his plan, the ballot question will ask who is the best manager of the economy as crises become a daily occurrence in foreign markets. Canada has a sound economic position — indeed, the fundamentals are strong — and while members of his own team have second thoughts about his carbon tax, Mr. Dion is ready to add new untested variables to the economic equation in a time that calls for the kind of stability that comes from an economist Prime Minister rather than untested tax theory from a man who is not.

Is Harper’s campaign in decline?

Recent polls would indicate that the Conservative campaign has experienced a steady softening in support since both federal leader’s debates. When polls go well partisans treat them like gospel and when they go poorly, the methodology is questioned. Supporters will point to a good poll, frame it, put it in the window well past the time it fades with age and relevance. And for bad polls, well, polls simply for dogs aren’t they?

With respect to one’s worldview, in recent weeks that of many Canadians — not to speak others around the world — has been shaken by the global economic crisis. Up is down and then up again before it goes back down and while Canadians are captivated by their investment portfolios, they find as much uncertainty with the future of politics as they do the economy and thus politics captivates us all as well.

In a time of global economic uncertainty, are we seeing a natural inclination of Canadians to be uncertain of politics as well? As the stock markets take dips and dives affected by factors outside of our borders it is understandable that Canadians are in a state of uncertainty on how they would shape the future political landscape of this country.

In the next week, Canadians will be forced to make a choice early, before all of the dust has settled worldwide and Canadians will look to what they know but they will be largely affected by what they will come to understand over the next week. These 6 days before the election are critical for the leaders to make their case and for them to shape perceptions of their ability to lead, to show stability and convince Canadians that their vision represents stability to allow the Canadian ship to weather the global economic storm.

I write this as I watch Stephane Dion address a joint meeting of the Empire Club and the Canadian Club of Toronto. The Prime Minister addressed the same organizations the day before at the Royal York and such speeches at this junction of the campaign can shape perceptions, firm up expectations and bring stability to uncertain political times.

Yet such hallmark opportunities to address Canadian business and economic leaders can be an early political indicator for the final close on election day. Declining campaigns show declining momentum; in the last days of the 2006 federal election, as John Tory’s bid for Ontario Premier came to a close last year, as Ernie Eves ushered in last dying battle cry of the common sense revolution, reports indicated dwindling numbers at rallies, diminished interest in speeches and rooms left half-full as leaders could do little to hide realities of a halted momentum in their campaigns. As an indicator of campaign viability, the Prime Minister’s campaign has positive momentum during these final days of the campaign. As suggested by Steve Paikin’s tweet just one hour ago from the Royal York, the same cannot be said for Stephane Dion, “the royal york is starting to fill up. dion is en route. harper had 1000 yesterday. only 300 for dion today.”

So, what of these polls that suggest a tightening between the Harper and Dion campaigns? Unlike financial markets that show volatility in real-time where investors can gain or lose their fiscal security in one single day, Canadians are fortunately not faced with the same demands as they make political decisions. As the economic world spikes and plunges before them, Canadians are taking stock of the political landscape and are doing their research before they lock in their investment on election day. The question is, when they vote, will they be bullish and choose high risk with uncertain yield or will they go with a safe investment which has shown a stable modest return?