Backstage at Ottawa
Another significant installment of the news behind the news from the nation s capital
A POLITICIAN WITH A NOTEBOOK
SPENDING these days, and a part of the nights, closeted in his East Block office, inaccessible to callers, aloof from colleagues and friends, Premier Bennett works on a document, writes, rewrites, revises. He is producing the Speech from the Throne with which, on February 4, Lord Bessborough will put into motion the most critical session of our most momentous peace-time Parliament.
Precisely what Mr. Bennett writes, nobody knows, though one may hazard a guess. He will tell of continued dislocations, shocks and setbacks throughout the world; write of their consequences upon Canada; of their enforced liquidation and readjustments; of resulting and inescapable need of retrenchment, of new national resolves and sacrifices, of drastic new orientations in our whole scheme of economics. Time-honored, hoary phrases about our “inexhaustible resources,” facile promises of costly developments —these will be conspicuous by their absence. For there is a new mood, and perhaps a more wholesome one. upon Ottawa. It is a mood which recognizes that this is no time for easy optimism or boastful platitudes, or for the playing of tinselled politics. Trade, transportation, tariffs, exchange, banking, credits, these have become the dominating issues— stark, realistic, challenging.
It is traditional journalese to write that a session will be “momentous.” This time the word is inevitable. Never before, certainly not in our time, not even during the war, has Parliament met needing so much money with money so difficult to get. There must be money to finance unemployment. money because of our railways, money to bridge a gap between revenues and expenses, money, for the first
time in our histon,’, to help out some of our provinces.
When the Old Lady of Threadneedle Street stopped paying gold from her till, she played havoc with our exchange. Dipping with the pound, our dollar went down in New York and persisted in staying down. It demoralized our provinces and municipalities, which had borrowed easily and recklessly in the good old days and found it hard going to meet their debts, plus a premium of twenty per cent in these stern reckoning days. Chickens homing to roost caught some of them unprepared, weakened the whole country’s credit structure, increasingly enfeebled our dollar, added to Mr. Bennett's tribulations and trials.
IT IS no state secret, or any other kind, that three or four of our provinces have found it difficult to txjrrow and more difficult to pay, the consequence being that Mr. Bennett, not wishing to have Canada, or any part of Canada, default, has been finding them money, taking their bonds in exchange. It is all an admirable lesson, though costly, in the danger of a system which permits a multiplicity of governmental units in Canada to borrow abroad, the borrowing involving responsibility for the Dominion but with the Dominion bereft of control.
But the financial adventurers of provinces and municipalities, bad though they lx. are but part of the Prime Minister’s worries. There is the precarious position of Federal finances—descending revenues, unceasing demand for expenditures, clamoring New York obligations, k>sses of scores of millions through railways, the spectre of a hundred million deficit. Mr. Bennett, who has borrowed, will have to borrow more, retrench more, put on more and heavier taxes. He will have to do these tilings while grappling with trade problems, transportation problems, tariff problems, the work of an Economic Conference.
Then there were, and are, unemployment relief troubles. The trouble of financing it. The Federal Government's share was roughly thirty millions, a quarter of the whole. But most of the provinces, still more of the municipalities.
were unable to pay their portion, asked Ottawa to take it. The consequence, unavoidable, was that Ottawa has been scraping up money to loot the bills, taking provincial securities while the provinces took municipal securities, needing to raise something like one hundred million dollars.
New and High Taxes are Certain
L\ST June Mr. Bennett raised taxes, budgetted for a 1 deficit of $7,(XX).(XX). He was as wrong, though no more so, than the other prophets. The revenue and expenditure returns for the first eight months of the fiscal year, up to December 1, show;
Revenues $227,872,635, or a loss of $39,000,000 from last year.
Expenditures $275.742.977, or a decrease of but ten millions from last year.
The deficit in the eight months, therefore, was over $47,000.000. nearly seven times more than Mr. Bennett expected for the entire year. Customs taxes fell olf by twenty-two millions, excise duties by eight millions, income tax by sixteen millions, miscellaneous revenue by seven millions. Only a gain from the sales tax—heightened from one to four per cent — of thirteen millions, plus a one million betterment by the Post Office, averted a revenue collapse.
The net result of this, plus a lot of other things, is that when budget day comes there is almost sure to lx a deficit of a hundred millions. Add to this—and there is no sense in not adding it—a National Railways requirement of 117 million dollars, and the total deficiency for the year is brought to over 200 millions.
Government is our biggest, our costliest business. The Dominion is now spending at the annual rate of 440 millions, exclusive of the National Railways. More than this, and worse, there is little chance of correction by economy. There is, to begin with, thirty millions for relief. Of the Continued on paste 54
Continued on paste 54
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balance, 410 millions, there are these inescapable expenditures:
Interest on Debt ....... $130,289,000
Subsidies to Provinces .. 17,435,000
Superannuation to Civil
Service ............... 1,000,000
Old Age Pensions ...... 10,000,000
War Pensions .......... 45,000,000
Post Office ............. 36,000,000
Roughly, therefore, 250 millions are fixed charges, unavoidable. The balance, 160 millions, must take care of all other Government costs, pay all running expenses, finance scores of departments and a multiplicity of Governmental activities, pay $60,000,000 for salaries of civil servants.
Economy, obviously, is not enough. Mr. Bennett may slash an estimate here and there, may kick the bottom out of the pork barrel, deny manna to the ridings, cut salaries of public officials, to little avail. A ten per cent cut in the salaries of the whole ! army of Government employees would yield 1 him but $6,000.(XX), a mere drop in the bucket. And so with all possible parings.
The truth is that unless we go on borrowing—a course that is obviously impossible— there is no escape from taxation. It is the one means, and the only means, of balancing j the budget.
A Possible Turnover Tax
j rT\ALK grows about a turnover tax. This J tax is an old friend of Mr. Bennett and I is by no means unlikely. The Prime Minister
had it in mind last year, was prevented from adopting it by the protests of business. This year, however, his position is stronger. The increased sales tax,, which was last year’s substitute for a turnover tax, will bring in but an extra twenty millions for the full year—less than one third of the ¡ expected gain. This being not enough, Mr. Bennett may well say that he must get revenue somewhere, that the sales tax and the income tax are not providing it, and j that, therefore, trial of a turnover tax cannot be objected to.
In the circumstances, it may be well to look at what Mr. Bennett means by a turnover tax. What he means, judging by his public statements, is a tax upon all business turnover, to be calculated on a monthly or a quarterly basis. There would be no exemptions such as exist in the sales tax; and the tax, unlike the sales levy, would not be added to the price of commodities. It would, of course, replace the sides tax. also a wide section of the income tax; would apply on all personal turnover or income, as well as upon all commercial and professional activities. Nobody would escape the net.
As was the case last year, business objects. It still wants the sales tax or a still higher sales tax, is sending delegations to Ottawa to say so.
They are not too certain to prevail, j Mr. Bennett has made up his mind that the i country must get out of its difficulties in some manner, that it will never get out of
them by borrowing and unbalanced budgets, that it cannot afford not to meet its obligations, and that, consequently, it must be prepared to be taxed. This was the clear note of his pre-Christmas speech in Toronto; and there is no indication that he has since changed his mind.
For the moment, and until the end of the fiscal year. Mr. Bennett is saved by the National Sendee Loan. This loan, in fact, saved the country from a financial crisis, helped us immeasurably at home and abroad, gave the Government time and a chance to discover how it may retrench and tax.
WITH the financial problem—practically a vital part of it—is the railway question. With the National Railways requiring $117,000,000 this year, and able to earn but a bagatelle of the $57,000,000 interest which it ow es the public, the position is one of unprecedented difficulty. And the position of the Canadian Pacific is hardly less precarious. Thus, in the first ten months of 1931, the gross revenues of the two roads dropped $74,000,000 from the same period in 1930, net revenues failing by more than $24,000,000. This despite that 1930 was in itself a bad year; despite, too, drastic co-operative economy by the two roads.
Then, of course, there is the fall in trade. In the first eight months of the year imports declined by nearly $250,000,000, exports by about $180,000,000. Fortunately, and providing one gleam of sunshine, the percentage of decline in imports was greater than in exports, with the good consequence that the balance of trade, running steadily against us in recent years, has become favorable. The favorable balance in the last three months for which statistics are available was $24,000.000. Nevertheless, the decline in imports has paralyzed customs revenue; while the fall in exports, involving small demand for Canadian funds, has had much to do with the depreciation of the Canadian dollar.
The tariff, like the poor, is always with us. But while it will be the big debating issue of the session, with the old ghosts of Free Trade and Protection walking again, actual fiscal changes will figure slightly in the Ministerial programme. The reason is that under the new Customs Act—changed in September, 1930—the Government can make tariff alterations, lowering it or raising it by order-in-council. Mr. Bennett, in fact, has made some sixty changes during the recess, some of them affecting scores of articles. The truth is that Canada today has a flexible tariff, thus eliminating the need of extensive budget revisions, and, incidentally, largely removing the necessity of a Tariff Commission. In other words, while the tariff is in politics as much as before, and perhaps more than before, it is now' removed to a considerable extent from the legislative field.
But there is another reason, a very sufficiënt one, why tariffs will not figure much in this year’s budget. It is that Mr. Bennett will consider it unwise to change customs schedules on the eve of the Economic Conference. He will want to have clear decks, the freest possible hand, to meet the other delegates.
Conference In London?
INCIDENTALLY, there is just a possibility. perhaps more than that, that this Conference will not meet in Ottawa after all. Ottawa, of course, was and still is Mr. Bennett’s idea, but the other Dominions, who cannot be deprived of a say in the matter, may prefer London. South Africa, nearer England, is cool about Ottawa; New Zealanders seldom forego a chance to go “home;” and the new Government in Australia is understood to be undecided.
Perhaps, all things considered, London would be better. Mr. Bennett, in the first place, would be playing with fire in having the meeting here, unless certain of its success. Then, again, there is the matter of entertaining, no mean question in a Conference. London, which has been doing this
thing for centuries, is a past master as host. Long ago Sir Wilfrid Laurier complained that the British used to destroy his constitution to help the Empire’s; and there is no doubt that what with the freedoms of cities, and gold caskets, and week-ends at country houses, and lunches with the Duke of This and the Lord Mayor of That, and nights at the theatres or in Piccadilly, London has it all over Ottawa wfith even the sternest of statesmen.
The main thing, of course, is that the Conference is assured, that it will meet in a changed and better atmosphere, that it has j some basis to w'ork upon. Britain today is a tariff country, has done things that the late great Joe Chamberlain never even dreamed of; is in a position to give preferences. Moreover, New Zealand and Australia, judging from recent talk by their statesmen, are in a bargaining mood.
So, judging him also by his talk, is Mr. Bennett. While overseas in December, Mr. Bennett talked in accents surprisingly strange in an apostie of “Canada First;” talked almost like Mr. Amery or Mr. Winston Churchill. Whether he is actually prepared to translate this rhetoric into practical legislative concessions, it is impossible to say, though his attitude looks interesting.
So far as Britain is concerned, she has made a beginning with an offer of a wheat quota, this accompanied by a businesslike statement that it is subject to a “real and genuine quid pro quo.” Moreover, Mr.! J. H. Thomas, addressing himself directly to Canada, is reported to have said: “Canada may say we are interested mainly in wheat, | and from the standpoint of Great Britain the most important, and indeed the only > factor, is what they will do in regard to our manufacturers.”
Up to the present, Mr. Bennett’s idea has been not to do overly much for their manufacturers. Whether he is preparing to abandon this ground remains to be seen, but it is considered fairly clear that if we expect to sell England wheat and flour, and butter and cheese and bacon and beef, then we must be prepared to buy some British textiles, and boots and shoes, and some electrical and steel supplies. Preferences can’t work any other way.
So far as the wheat quota is concerned, everybody appears to have a different version about it. Mr. Bennett appears to have one idea, Mr. Thomas another, and British millers still another. The only thing perfectly clear is that the quota is to be at a world price, not a fixed price. The details of the policy are probably not yet decided.
Apart from financial matters, railways, taxation and tariffs, the major questions of the session will be what to do about Beauhamois, about the St. Lawrence Seaway, about unemployment, if it continues. Negotiations over the St. Lawrence Waterway have become somewhat bogged. Washington is having trouble with New York, and Ottawa is having trouble with Quebec, and what with Governor Franklin Roosevelt worrying Mr. Hoover, and Mr. Taschereau worrying Mr. Bennett, our Mr. Herridge fails to get anywhere with Washington’s Mr. Stimson. Politics, of course, has appeared upon the scene; and we have already heard how Mr. Hoover is J plotting to annex part of Quebec, including the Eastern Townships. All these things, of course, will iron themselves out in time, though the ironing may be painfully slow.
Obscure, too. is the present position of Beauhamois. Whether Mr. Bennett, like the newspapers and the public, has largely forgotten it, one cannot tell, but there are no signs of his having worried greatly over it during the last two months. Meanwhile, the project is being proceeded with, but precisely under what financial arrangements is not clear. No clearer than the political aspect of the matter, which was the cause of so much sensation and of such brave promises last year.
Possible Cabinet Changes
POLITICALLY, apart altogether from lesiglation, the session should be interesting. Casualties in the Cabinet will compel,
j or at least hasten, ministerial shuffles.
1 Having slaved himself to the point of a breakdown. Senator Gideon Robertson can hardly be expected to resume his post, may llave to be relieved. Mr. Caban, in impaired health, is likely to retire, and this goes also for Dr. Murray MacLaren, carrying the ¡ heavy burden of Pensions. Finally, there ! are Mr. Rvckman and Mr. Guthrie, both of whom are believed to lie willing, if not anxious, to step out. Replacing these men. all of them, would involve a major cabinet reorganization; all the more so should Mr. Bennett decide, as he is bound ultimately to decide, to get a Finance Minister.
And it may just happen that in this reorganization Mr. Bennett will not have things entirely his own way. Ottawa, at all events, is just now discussing a story which ! tells that when Mr. Bennett was going overseas and wished to have Mr. Ryckman act as Finance Minister, a few colleagues in his Cabinet changed his mind. Mr. Stevens and Dr. Manion have wills of their own— sometimes.
Mr. King, meanwhile, has his own troubles, his own sad moments. True, a meeting of Liberal captains in Ottawa early ! in the autumn swore him allegiance, eulogized him. But among the captains missing I was Mr. Charles Dunning, and likewise Ontario’s Liberal Whip. Captain Sanderson, while Mr. Ralston, sometimes mentioned as Mr. King’s successor, was too late to be present for the resolution of confidence.
At this committee meeting, too, a curious thing happened. Curious and significant.
Mr J. T. Thorson. former Liberal Winnipeg M. P., called for the excommunication from the Liberal party of Senator Wilfrid Laurier McDougald—reason, Beauharnois. The anathema, however, was not pronounced; not pronounced because Mr. King said that Senator McDougald's fate was in the hands of the Senate, that the matter was therefore si ib judice, couldn’t be dealt with. So the committee passed on to other things.
One of the things it passed on to was to get somebody to look after the party dollars that used to be looked after by Senator McDougald, also by Senator Haydon. This somebody happens to live in Toronto, is exceedingly prosperous, bears a famous Celtic name. One of his tasks will be to put up money to keep Mr. King from clipping newspapers (see his London, Ontario, complaint) and to provide the party with an Ottawa headquarters, an organization and propaganda staff. The cost, so it is said, will be §>50,000 a year.
Meanwhile, political clouds are lowering over the prairies. The farmers, it is told, are once more in revolt, and there are echoes of 1921. So far there is no leadership, no organization, no war chest, no concerted revolt; but the fires of revolt are there, ready to blaze forth.
Repercussions from these things of course, will be heard in the House. Whether it will be a long session, or short, nobody knows. There is just a possibility that it will adjourn for the Economic Conference, resume in the autumn to give legislative effect to whatever the Conference does.