- Murray Dobbin recognizes that there's more at stake on the federal political scene than merely replacing the Harper Cons - and that the most important debate may be found within the NDP. Meanwhile, Tim Harper is concern trolling on that front, demanding that Thomas Mulcair silence Linda McQuaig and anybody else whose principles might not align perfectly with Fraser Institute talking points.
- Carol Goar makes the case (as I've done before) to deal with the Senate through a new convention which simply avoids future appointments. But Andrew Coyne proposes a far more difficult path, proposing to deal with constitutional amendment procedures rather than the single illegitimate institution which cries out for action. And Don Lenihan uses that opening to argue for inaction on all fronts.
- Glen Pearson questions the corporatist orthodoxy that the rich must be appeased with preferential access and policy treatment lest they stop creating wealth for themselves. But Tony Clement makes it abundantly clear that his government isn't interested in anything but all-out war against Canadian workers.
- Finally, Jim Stanford calls for another look at the relative merits of infrastructure investment and corporate tax cuts:
Because corporations are taking in so much more than they are spending, liquid cash assets in the non-financial corporate sector continue to swell, and now total almost $600 billion. Many blue-chip companies, literally holding more money than they know what to do with, are finding ways to distribute excess cash to their owners — either through share buy-backs (like the Royal Bank and CN Rail) or boosting dividends (like Enbridge, Brookfield, and Fortis). While this may reduce the amount of cash sitting idly in corporate coffers, it will have no direct impact on real business investment, which is what the economy really needs.
The stagnation of business capital spending is a huge disappointment to the advocates of the dramatic reduction in corporate income taxes which has been a central feature of Canada’s fiscal policy in recent years. Since 2007 the Harper government has cut the federal CIT rate from 22.1% (including a former surtax) to 15% today: that’s a decline of 7.1 points, or about one-third. Many provinces also cut their rates, bringing the combined federal-provincial average rate down to around 26% today — among the lower rates of industrialized countries, and far lower than America’s 35% federal statutory rate (closer to 40% when we include state CITs). The federal CIT cut has reduced federal revenues by about $13 billion per year.
The argument has been that tax cuts would elicit more business investment spending. In 2006, the year before the Harper CIT tax cuts were announced, non-residential business investment equaled 10.5% of GDP. In the first half of 2013, with corporate taxes reduced by one-third, non-residential business investment has equaled 10.7% of GDP. That apparent increment of 0.2% of GDP represents $4.6 billion in “extra” capital spending. Motivated from a $13 billion tax cut. In other words, the government had to spend almost $3, for each $1 in new business spending. (Of course, there are many other factors influencing investment that vary from one year to another, so it’s hard to isolate the impact of the tax cut.) So far in 2013, business investment has actually declined, making a bad situation worse.
Three times as much investment would have been motivated if the government simply spent the $13 billion directly on new public infrastructure (something we badly need, and that would boost private sector productivity. And here’s the biggest irony of all: econometric evidence suggests that the biggest influence on business investment is the pace of economic growth (since businesses won’t invest, if they are worried final demand for their products will be unable to ratify the capacity added through their investment). Growth generates investment (and hence more growth) via multiplier and accelerator effects that are stronger, based on econometric evidence, than any positive effect of lower taxes on business investment.