“Elections have consequences”. It is a saying often repeated but the events of the past year have really driven it home. The leaders we collectively choice have a substantial impact on the direction of the nation and the tenor of our national and civic discourse. Had a few hundred thousand people in the American Midwest marked their ballots differently or had Republican primary voters had split in a slightly different way we would not be witnessing the unfolding disaster south of the boarder as Donald Trump vainly tries to negotiate the challenges of running a country. Who we elect matters. The people we elect will be the ones at the forefront of confronting the challenges of the 21st century.

The 21st century presents many pressing challenges we will not only have to grapple with but effectively address. The climate is warming, threating our cities, ecosystems and economy. The economic prosperity of humanity is at risk as the demographic tide sweeps the west, while anti-globalization forces threaten to undermine the global trade network that has been the most effective anti-poverty measure ever enacted. This is all happening as politics and society becomes ever more fractured. The rise of the alt right and other illiberal groups threatens to undermine our inclusive society. The increasingly troubled waters Canada and the rest of the world find itself in calls for a calm and measured approach to navigating through the storm. It is imperative that not only the Prime Minister be level headed and considered but the leaders of the opposition as well, for it is hard to steer a boat if someone is trying to rock it back and forth. Of the scores of candidates vying for party leadership only one has shown a eagerness to grapple with these issues in a thoughtful and well reasoned way; Michael Chong.

No challenge of 21^st century governance is greater than the confronting anthropogenic climate change. The science is indisputable, human activity is causing rising atmospheric CO2 levels and consequently rising temperatures. The potential damage is devastating. The best time to take action was thirty years ago. But the second best time is now. Sadly of the fourteen Tory Leadership candidates 13 either ignore it, deny it or offer the most token of token gestures.  It does not have to be this way. Brian Mulroney is considered one of the greenest Prime Ministers in history. Reform Party founder and conservative elder statesman Preston Manning has repeatedly called on conservatives to conserve the environment. Fortunately there is a voice for sensible, serious climate change policy, Michael Chong. His ambitious plan calls for a $130/tonne carbon tax. Like the BC carbon tax it was modelled on, every cent goes back to the people with generous tax cuts and a low income rebate to address the potentially regressive aspects of the plan. Canadians will see lower taxes, larger GST rebates and reduce emissions at the same time. Economists love it, British Columbians love it, there is little not to like about that. And to ensure it meets its goal there will be an independent panel of experts to examine the effectiveness and makes adjustments to the price of carbon so we hit our targets. The plan is not only more ambitious than Justin Trudeau’s but it is more accountable too. I long for the day when Question Period is dominate by the Tories and NDP both holding the Liberals accountable for their lack luster $50/tonne non-revenue neutral carbon price.

In order to better hold the government of the day accountable, the institutions of our parliamentary democracy need reforming. Too often MPs act merely as an extension of the party leader. And why wouldn’t they? With a system of party discipline as strong as Canada’s the MPs are much, much more accountable to their party leader than their constituents. A Party Leader’s permission is required to be nominated for election to Parliament, to sit on committees. MPs can barely wipe their nose without first getting permission from the PMO or party leadership. And in all of this the concerns of the people who the MPs are ostensibly in Ottawa to represent get forgotten. There have been many complaints over the years about the problems with our First Past the Post voting system. I have voiced many of them myself. But it is only part of the problem. Even if the MPs were selected better it does little good if they become empty suits doing echoing whatever the PMO or party leader wants. We need significant changes to the way Parliament runs. Changes like what Michael Chong advocated for in his, sadly neuter, Reform Act, that would have empowered MPs and reduced the centralized control in Parliament. With his proposed Democratic Reforms will empower MPs and ensure Canadians are better represented in Ottawa. All Canadians deserve to have their voices heard and their view and concerns represented in the halls of power.

All Canadians haven’t always been well represented by the Conservatives. Too often conservatives have fought to preserve institutions that promulgated injustices towards minority groups. The Tories lagged too far behind on LGBT issues and recently many of the other leadership candidates have been taking a page from Donald Trump’s playbook and playing up fears over immigration. Rather than unite Canadians, the Kellie Leitchs, Steve Blaneys and Kevin O’Learys of the race have been seeking to divide and play the politics of fear of the other. As we watch that mentality take root in American and Britain it is imperative Conservatives and Canadians decisively reject that divisiveness. Nothing would send a stronger message that Trump’s style of politics is not welcome in Canada. Michael is not only the son of immigrants but has run a campaign geared towards reaching out to immigrant communities. He has repudiated and condemned the subtle and not so subtle race and religion baiting that has surfaced during the campaign. And he was the only one not to give into the hysteria surrounding the inconsequential anti-Islamophobia motion M-103. A Conservative Party run by Michael Chong would focus on the substantive issues facing Canada and not play the worst sort of right wing identity politics. I am sympathetic to a lot of Conservative positions, on defense, foreign policy and free markets. I have hated every election having to go into the voting booth and weigh supporting policies I like with potentially empowering social conservatives. Finally there is a candidate, who I can vote for without having to make that tough choice.

There is a clear choice, we can have a Conservative Party and likely next Prime Minster that ignores the threat of climate change, that lets our democracy degrade and the forces of divisiveness set in. Or we can have a Conservative Party and Leader of the Opposition that has a credible and ambitious plan to tackle climate change and parliamentary dysfunction. A Conservative Party that is inclusive and wont play to the politics of fear and division. A Conservative Party and leader with substance and principles that will fight for what they believe in the market place of ideas, not the market place of 30 second attack ads. The choice is clear, Michael Chong is the right person to lead the conservatives. This May, I will be casting my ballot for Michael Chong. And if you value climate action, effective democracy and inclusive politics, you should too.

But that can not happen if you don’t get involved and vote. The membership deadline to participate is March 28^th at 2pm Pacific.

Last week the Toronto Sun published article with the alarming, but not out of character headline Buried government report reveals looming fiscal crisis about the Update of Long-Term Economic and Fiscal Projections report from the Department of Finance Canada, which was released just prior to Christmas. The Department of Finance’s report projects the federal budget will remain in deficit until the year 2055. In a reaction that will surprise no one, the Conservatives and right of center pundits worked themselves up into a frenzy over the news. I got fundraising emails railing against Trudeau’s reckless spending from more or less the entire slate of Conservative leadership candidates. They do have a point. When the previous conservative government left office the budget deficit was around  $5 billion and projected to be balanced in the upcoming fiscal year. And even when Trudeau promised deficits they were to be small and end by 2019. Even with the new spending the debt to GDP ratio would decline every year. Going from a 4 year deficit to a 30 year deficit is understandably a cause for concern.

Fortunately politics is ever the lover of hyperbole and the damage to Canada’s fiscal health falls far short of “crisis”. Projected federal debt to GDP peaks at 31.9% in 2018-2019 FY. The trend line goes in the wrong direction but does not cross into the Danger Zone. Furthermore as Yogi Berra is alleged to have said “predictions are hard, especially about the future”. The projections are based on extrapolating current spending forward and applying demographic and economic forecasts to those extrapolations. The probability of no change in government spending beyond merely adjusting to changing demand over the next 29 years is low, its very low. Even Justin Trudeau doesn’t hope he is PM in 2055.  Long run governments do keep the same policies in place year after year, they change as circumstances and the political winds change. This is the scenario where the budget is left to balance itself, as Trudeau famously quipped. In all likelihood some Prime Minister between now and 2055 will endeavor to balance the budget.

Chart 4 – Federal Debt to GDP Ratio

Whether those efforts will be successful is another question. A lot can happen on the time span of decades [citation needed]. There is too much uncertainty to brush off the concerns with a “don’t worry everything will be alright”.  As Chart 4 in the report shows there are a wide range of possible outcomes just from moderately adjusting the variables in the model. We could pay off the whole $636 billion federal debt or have a spiraling debt that pushes debt:GDP up by more than 20 percentage points. By far the biggest factor is labour productivity. With sufficient productivity growth the deficit gets overwhelmed by economic growth. Unfortunately Canada generally has lower productivity growth than many other developed nations. Although this has been a long running concern the current government has placed little emphasis on addressing the country’s anemic productivity growth.

As with all projections the quality is only as good as the assumptions and scope. While the demographic assumptions appear to be reasonable (any demographers out there; feel free to correct me), the fiscal assumptions are less solid. Notably the Canada Health Transfer (CHT) only growing in line with nominal GDP. As the recent circus around renegotiating the CHT attests there is constant political pressure from the provinces to increase the rate well above nominal GDP growth. A factor that will only grow more pronounced as the population ages and the strain on provincial health budgets magnifies. It is well within the range of possibilities that a future government will acquiesce to the provinces’ demands and grow the CHT well above NGDP growth. The projections also fail to account for unforeseen negative economic events. And while that is quite reasonable within the context of this document, as the economics profession has yet to develop a reliable method of predicting recessions, it never the less presents a more rosy picture than actually exists. A deep recession with a resulting large deficit could blow these projections apart and leave the country in much worse fiscal shape.

Perhaps the biggest limitation of the Department of Finance’s projection is the projection is of Federal not national fiscal situation. The federal debt to GDP ratio is a healthy 31.8% thanks to multi-decade and multi-partisan governing philosophy of fiscal resistant. But the federal government is not the only government with debt in Canada. The provinces have considerable debt putting the total government debt to GDP ratio at 91.5%; up from 66.5% in 2007. While there is no hard and fast rule regarding when a country’s debt load becomes too great, the rule of thumb is that ratios over 100% are cause for concern. While most of the 25 percentage point growth in debt to GDP can be laid at the feet the recession it highlights the vulnerability of the debt to recessions. With the recession over and the economy experiencing slow but positive growth now is the time to bring the deficit and debt to GDP ratio down so we have fiscal maneuvering room should another recession hit. The many provinces, including the two largest, Ontario and Quebec, have large debts and are facing increasing budgetary pressure from bearing the brunt of the demographic related rising healthcare costs. There is precious little room to absorb another economic shock without adversely impairing the fiscal health of the country. Should a provincial bail out become necessary or a future Prime Minister decide to take on more of the load from an aging population at the federal level the health federal balance sheet could rapidly deteriorate.

There no guarantee such a scenario does happen. I certainly hope it does not. The projection gives an overall positive outlook for the federal government’s fiscal situation.  However it would be prudent to prepare for the possible negative scenarios not outlined in the report. With an uncertain global economy and a looming demographic bomb on the horizon now is the time to strengthen our fiscal position at all levels of government. Unfortunately the short term trend lines are moving in the opposite direction. Fiscal discipline and policy of only incurring debt for productivity enhancing infrastructure investments would be an excellent first step. I will be eagerly watching the course this government lays in the 2017 Budget.

CPC Leadership Candidate Michael Chong

This past Friday I attended a meet and greet for Conservative Party leadership candidate Michael Chong, hosted by the Vancouver-Centre EDA.

As listeners to the podcast know Michael Chong has piqued my interest by breaking with some of the more orthodox big “C” Conservative positions on climate change, carbon pricing and advocacy for major democratic reforms in how Parliament functions.

I recorded the speech and following Q&A segment. Apologies  for the poor sound quality. The event was held in a loud bar with bad acoustics and I recorded on my phone.

I asked Michael Chong the question I had brought up in episode 6 on the short term fiscal impact of his carbon tax plan. His plan calls for $18 billion in tax cuts to offset the new carbon tax. The tax cuts take effect in 2020 but the carbon tax gets phased in over 10 years. I wanted to know how he reconciled that with his pledge to keep a balanced budget. Unfortunately the audio is unusable from when I spoke with him after the Q&A had finished. He answered that yes there would be some short term fiscal stress but it was both manageable and there would be a stimulus effect from such a massive tax cut. Their internal models show up to $7 billion in additional federal revenue from such a stimulus but this was left out of the policy paper in order to be conservative about the fiscal situation.

Please give these a listen, there were a lot of interesting questions asked from his stance on LGBTQ issues, to ISIS to free movement between Australia, New Zealand and Canada.