Prime Minister Stephen Harper said on Wednesday that his government wants to concentrate on the economy, suggesting it is too "fragile" for a "political game," played by the opposition parties. "In this period of global economic uncertainty, our government is focused - above all else - on completing Canada's economic recovery," he said. Taking him at his word, and with an election looming, it's worth reflecting on the kind of economic debate, and vision, the country does need.
The government cannot be accused of slighting innovation and productivity, either in this budget or previous ones. And yet, given the scale of the challenges (and the opportunities), the country will need to up the ante, if not now then soon. Canada's living standards will depend on creating a more productive, high-tech economy.
How do we develop the scientific know-how and the entrepreneurship to compete? How do we keep up with China's army of PhDs and India's onslaught of engineers? How do we make sure that we can afford health care and pensions when we have fewer workers and more retirees? The budget contained some constructive measures; all parties will need to offer their own strategies in an election.
It can be enervating, always talking about challenges. There are vast opportunities - such as a market for water-related technology and infrastructure worth $400-billion a year. And Canada is in as strong a position as any country to make bold investments in science, research and postsecondary education that could reap large rewards. Rather than be frightened of the challenges, Canada should be excited about the opportunities, and prepare for them.
The budget could have been an opportunity to show the way forward to a more open and competitive Canadian economy, but it was silent on foreign investment - whether inbound or outbound. After the controversy over Potash Corp., and as the debate about the proposed TMX-LSE stock-exchange merger continues, the government ought to reaffirm Canada's openness to foreign investors, or at the very least should propose a reciprocity policy on investment with other countries - for example, Australia, the home of BHP Billiton, which tried to buy Potash last year.
The government has adopted some recommendations of the Competition Policy Review Panel of 2008, and expressed its approval in general of the report as a whole. In the coming election, the Conservatives - and for that matter, the Liberals, too - should commit themselves to enacting the panel's "reverse onus" on foreign investment, so the test for approval would no longer be net benefit to Canada, but rather the absence of net harm - giving capital from abroad the benefit of the doubt.
Ottawa has also failed to lead a national conversation on health-care reform. The expiry in 2014 of the federal-provincial health care agreement, combined with the country's aging population, has created uncertainties about future funding. Already, health-care spending represents more than 40 per cent of provincial budgets.
The federal budget offered a few carrots - $40,000 for family physicians who practise in rural areas; and tax credits for those who care for infirm family members - but no strategic policy on how to improve primary care, adopt health information technology and programs for home care and pharmacare.
The current system is antiquated, inefficient and unaccountable. Patient delivery needs to be modernized. Only 15 per cent of doctors have online communication with patients, and only 10 per cent receive computerized reminders for follow-up care, compared with levels of 90 per cent and higher in northern European countries, the U.K., Australia and New Zealand. Canada's per capita spending on health care is also higher than in most of these countries.
The main fiscal priority for the federal government, the constraint that needs to guide all other decisions, must be a return to balanced budgets, given Canada's increasing debt load (federal debt alone is now more than one-third of national GDP). And despite its claims of prudence, the Conservatives' plan is, at best, uncertain, with an $11-billion hole to be filled with unspecified cuts.
The other parties are no better, and the Liberals, in particular, misleadingly use their opposition to needed corporate income tax cuts as a way of justifying their own spendthrifty plans. The federal NDP, unlike their provincial counterparts, seem unaware that there is a spending problem at all.
The main route to deficit reduction requires precision - declaring which programs will be cut, and being willing to come out and say so - and a taming of electoral appetites, especially on dubious tax credits for the middle class for things like piano lessons and home renovations.
With a high deficit and a low GST rate, the federal government has little room to move on tax rates. But if an opportunity was available, EI premiums should be reduced. They were increased this year, despite the fact that the economic recovery was not yet complete. The budget's EI premium credit for small businesses hiring new workers is laudable, but does nothing to help those workers who have seen their standard of living decline.
So, Mr. Harper - and Mr. Ignatieff - let's have that conversation.
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