The federal government is preparing a budget to be unleashed on the public and the financial markets sometime in March.
We can be terrified at the prospect of more huge debt taken on by our servants on Parliament Hill. Or we can hope they may take a more creative, constructive and growth-generating approach.
Here are some ideas that would ameliorate the current economic malaise and foster conditions to permanently improve our lacklustre economic growth. They could increase average personal income, improve living standards and enhance the federal government’s ability to eventually pay down the mountain of debt it’s gleefully accumulating.
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Reduce hiring costs
To encourage employment, reduce the costs of hiring to the employer and raise the net income employees receive by reducing income tax and other deductions on the first $20,000 of income.
The other principal deductions are employment insurance and government-run pension plan contributions by employer and employee.
This would reduce the gap between the value the employer believes they get from the total cost of hiring (without incorporating training, supervision, absenteeism, sick time and other things) and what the employee sees on their paycheque after deductions. This doesn’t include other costs and issues, such as travel and commuting, daycare, work clothing and cleaning, and more.
It’s not entirely clear what this wage wedge is per employee and it varies by industry, sector and level of employment. However, a precise estimate doesn’t have to be made to give credit of $1 or $2 per hour to each employee and employer to offset this, and encourage hiring and seeking of jobs. This credit would be netted against EI, CP/QPP and income tax until exhausted, to a maximum of $2,000 or $3,000 per employee per year.
Sell off Crown corporations
Begin divesting federal Crown corporations. Canada Mortgage and Housing Corp., the Business Development Bank of Canada (BDC), the Canadian Broadcasting Corp. (CBC), Canada Post, Canada Lands Co., Export Development Canada (EDC) and the Canadian Commercial Corp. have book values totalling nearly $100 billion and constitute unnecessary risks to Canadians.
The sale proceeds could make a significant dent in the public debt.
These corporations need to be put on an entirely commercial and independent footing first, which will take some time. From the start of the process to public trading of shares can take several years, so this needs to begin soon.
Divestment of these entities will also help make the Canadian economy more dynamic, just as the sale of Air Canada, Telesat, Petro-Canada, Canadian National Railway and other firms did.
Suspension of GST for the rest of the year will cost the federal government tens of billions of dollars. But it will also encourage demand for goods, which will generate more income tax from businesses and employees of those businesses.
GST should only be reintroduced gradually.
Create tax credits for losses
Allow firms that are losing money to sell their pre-tax losses to profitable businesses that can use the credits against their taxes owed.
This will help both parties and could become a permanent policy.
Cut taxes in half
Cut personal and corporate income taxes in half, or more, for the rest of the year.
This will create a great boom in economic activity that will survive the revival in tax rates.
Base pre-tax corporate income on free cash flow, rather than conventional operating income, to encourage productivity.
This will enhance capital investment, increasing living standards. And that will have a multiplier effect on job creation and ancillary business revenue generation.
No wealth tax
End any discussion of a wealth tax.
Such taxes generate little tax revenue elsewhere in the world. But they do encourage tax avoidance and evasion, deferring the recycling of capital gains into new ventures.
These taxes have made the nations implementing them far less attractive to high-income individuals and to investment, harming long-term growth and economic viability.
Lock in borrowing over the long term
When the federal government can borrow at two per cent for 30 or more years (50 or more is available), when inflation and interest rates may bounce higher than that within a year (as many financial markets forecast), it makes little sense to save one per cent by borrowing in the short term.
Lock in low rates now.
Unload government assets
Sell off other government assets, such as surplus lands and buildings, of which the government has a multitude.
The provinces should do the same, with their dysfunctional and politically mismanaged utilities, obsolete liquor store chains and monopolistic auto insurers among the first to go.
These divestments will raise billions of dollars.
Buy out government employees
Offer buyout packages to federal employees not directly engaged in health, safety, security, defence or other vital work.
Giving $500,000 on average will pay off in less than five years for a person making $80,000, plus their benefits, office space, power, internet and other expenses.
Contract out more services
Contract out more services to private companies.
Accounting, payroll, office services, information technology and many other operations can be bid upon competitively, lowering government costs by billions of dollars.
Privatize health care
Explicitly allow the provinces to use market mechanisms in health-care provision. This introduces competition, choice and price transparency.
This will enhance the quality and timeliness of service provision.
It will also reduce the money the federal government must send to provinces, which continually demand more money but rarely reform their unimaginative care systems.
Remove red tape
Streamline permitting and review processes for projects within federal jurisdiction, with transparency and full public input and licence.
Streamlining introduced by an earlier government didn’t have widespread acceptance. Ensure that this version does. That will enable quicker job- and tax-generation in mining, energy, pipeline, hydroelectric, electrical transmission, transportation and other large projects.
It will also mean projects are completed sooner with fewer delays and thus less inflation.
Stand up to the Americans
Vigorously counterattack any U.S. administration efforts to thwart or close down transborder gas or oil pipelines.
Any such efforts by Americans contravene the Canada-U.S.-Mexico trade agreement, which contains investment protection and provisions on the free flow of products.
Open interprovincial trade
Remove all interprovincial barriers to trade and business.
These unconstitutional restraints on trade within Canada stifle billions of dollars in economic activity, personal mobility and job access.
Ease into low-emissions
Instead of assaulting Canada’s crucial oil and gas industry, find market-friendly and non-destructive ways to ease Canada into a lower CO2 emission future.
This could include encouraging more use of natural gas, biomass and biogas, and removing impediments to small modular nuclear reactors and new forms of energy storage. The latter is indispensable in making intermittent renewable energy such as wind and solar viable practically and commercially.
We should also enact trade sanctions on egregious deforesting nations such as Brazil and Indonesia.
Destroying a central industry is idiotic while far worse emitters like China and India build huge new coal-fired power plants.
Give small business a leg up
Develop a big network of small business and venture capital information and matchmaking portals.
Canada has no problem starting small businesses. Publicizing the opportunities for investors and ensuring that entrepreneurs put their best foot forward is harder.
It will become easier when there’s more information, better financial and technical disclosure, and public trust in the parties marketing themselves.
Prepare for future economic disruption
Create a realistic set of protocols to avoid public health emergencies like COVID-19.
We already had such a plan but it wasn’t enacted. The government should revise it and allocate a true budget for it.
This will generate tremendous confidence and trust, enabling individuals and firms to be more confident in preparing for and investing in the future.
End municipal red tape
Provincial governments should stop municipality-driven zoning, permitting and other obstacles that impede construction of affordable housing.
Efforts to forestall new construction and higher density ramp up land acquisition and construction costs in urban Canada.
Federal help could break some of these poverty-inducing and homelessness-creating logjams.
Create a plan for balanced budgets
Present a credible plan for getting Canada out of its fiscal hole within the next few years. Business, investor and citizen confidence, and the financial capacity to deal with future challenges and crises, are all dependent on regaining top-level creditworthiness.
And it will help avoid the dire devaluation, service cuts and the other ramifications of revisiting the moribund austerity of the 1990s.
Some of these ideas may cause consternation and they’re certainly not without costs. But those costs would be far less than the nearly $1 trillion this whole panicky lockdown crisis has caused Canada.
Ian Madsen is a senior policy analyst with the Frontier Centre for Public Policy.