All Business

THE SILENT TREATMENT

In Paul Martin’s Ottawa, the less said about economic issues, the better

STEVE MAICH October 17 2005
All Business

THE SILENT TREATMENT

In Paul Martin’s Ottawa, the less said about economic issues, the better

STEVE MAICH October 17 2005

THE SILENT TREATMENT

In Paul Martin’s Ottawa, the less said about economic issues, the better

STEVE MAICH

All Business

AN AMAZING THING happened last month. Even more amazing, it happened twice. Two major developed countries held election campaigns that focused primarily on economics and business. The countries in question, Germany and Japan, were sharply divided over questions of entitlement, growth and progress. And, not only did party leaders face these debates, they staked their careers on them. In this country—where politicians handle such issues like live explosives—it was all rather startling to watch.

Consider Germany: the two main parties presented starkly different visions for economic

reform and for tackling its brutal unemployment rate, which remains above 11 per cent. The race between incumbent Gerhard Schröder and challenger Angela Merkel ended up in a dead heat, leaving them to form a “grand coalition” capable of pushing ahead with an ambitious reshaping of the nation’s social structure. Among the ideas up for debate: a flat income tax, increases to the controversial value-added tax, and sweeping changes to Germany’s notoriously rigid labour laws, which discourage hiring.

One week earlier in japan, Junichiro Koizumi led his Liberal Democratic Party to a landslide victory after demanding a mandate for massive economic reform. Koizumi’s plan is to privatize the nation’s sprawling US$3-trillion postal system, which includes more than 400,000 workers and acts as a central player in its decrepit financial sector. His opponents in parliament stymied his plans, so the prime minister called a snap election, taking a bold plan directly to the people.

KIM CAMPBELL once said elections were a bad time to discuss serious issues. Paul Martin’s government has taken that approach to absurd new heights.

Now try, for a second, to picture Paul Martin taking that kind of stand on economic reform. Can’t see it? That’s because financial issues have become this country’s most powerful political taboo. The Liberals will say trade, taxation and growth are important. But make a loud noise, and they’ll run away screaming. Just last week, cabinet ministers told the Globe and Mail that enhancing productivity is now a top government priority. But ministers said they still need to sell the idea to Canadians in a way that “doesn’t frighten people.” Note to cabinet: it’s not the public that’s afraid, it’s you.

The latest initiative to fall into the government’s abyss of procrastination is the next round of corporate tax cuts, scheduled to take effect in 2008. They were in Martin’s February budget, but were sacrificed to buy the temporary support of the NDP. The Liberals promised the cuts would be back, but now, with an election looming, politics has again trumped policy. The tax cuts are off the table until after the next election.

Whether or not you support the tax cuts really isn’t the point—there are compelling points on either side. One could reasonably argue that tax rebates for technology investment, or even targeted gas tax relief, would make more sense than an across-theboard cut to corporate income tax. But don’t hold your breath waiting for that debate to happen. The feds would rather not talk

about it. Talking raises the possibility that someone might disagree, and disagreement leads to turmoil. Unilateral action is much more efficient. If the Liberals pull off a big win in the next election, the tax cuts will happen. If not, not. In either case, the less said about it, the better.

The same goes for Ottawa’s never-ending Hamlet routine on bank mergers. Way back in 2003, the government promised to release guidelines for mergers by June 2004. The industry and its opponents tromped off to Ottawa and made their case, and have been waiting for an answer ever since. The Finance Department has missed successive deadlines, and last month Finance Minister Ralph Goodale announced yet another postponement. Now it appears a policy won’t be tabled until well into next year and perhaps as late as 2007—almost a decade after the issue first arose. Here again there’s an opportunity to have an important debate on the future of our most pivotal industry, but the Martinites want nothing to do with arguments.

“I just don’t think it’s appropriate to throw this very important question, that has to do with the financial system of the country, into a political free-for-all,” Goodale said.

Think about that for a minute. This issue is simply too important to discuss openly. And yet, as long as the government delays its ruling, bank mergers are effectively banned, and the Liberals aren’t saddled with the onerous responsibility of explaining why. How tidy.

If you’re wondering how the latest controversy over income trusts is going to work out, listen to the silence emanating from the bank merger file. The tax treatment for corporate trusts is a critical issue. On one hand, they have stimulated investment in a host of low-growth businesses. On the other hand, they’re a potentially crippling drain on the tax system. But for now, most Canadians wouldn’t know an income trust if they found one in their soup, and Ottawa is happy to keep it that way until a quiet compromise can be found—preferably one that doesn’t invite too much discussion.

Read Steve Maich’s weblog, “All Business,” at www.macleans.ca/allbusiness

There is a splendid irony in all this. Back in 1993, Kim Campbell’s political career crumbled when she said election campaigns are a bad time to debate serious issues. Little did anyone know that the Liberals would soon take Campbell’s approach to absurd extremes. Not only have complex ideas disappeared from the campaign trail, nowadays in Ottawa it’s never a good time to tackle a difficult question.