Deciphering the Liberals' double-talk on infrastructure: Neil Macdonald
When it comes to singing from the party's hymnbook, none is more disciplined than Bill Morneau
The Stepford wives and husbands Prime Minister Justin Trudeau picked for his cabinet, it turns out, are as tight a chorus as their predecessors in Stephen Harper's government.
The difference is in presentation: Conservative ministers, if they answered questions at all, would robotically issue — usually in writing — mingy non-talking points drafted by the arrogant young satraps in Harper's PMO.
Trudeau's ministers, nominally free to talk, prefer to answer practically every question with cheery, glassy references to the intrinsic value of diversity, moving forward for all Canadians, helping the middle class, respecting everybody, engaging with the world, etc., etc., until reporters begin nodding off.
Ultimately, though, it's the same approach to singing from the same hymnbook, and none is more disciplined than Finance Minister Bill Morneau.
Infrastructure bank
After his fiscal update a few weeks back, Morneau was on CBC's The House, talking about his new "infrastructure bank."
The idea here is that institutional investment titans, given the correct guidance from our government, will step in and pay most of the costs of replacing, for example, Canada's decaying roads and bridges and electrical grids.
In fact, Morneau told my colleague Chris Hall, they'd be "delighted" to do it.
"There's currently $12 trillion of money in institutional funds around the world that are attracting negative interest rates," he explained, and Canada offers much better returns. For every dollar of government money "invested" (governments nowadays never spend) in infrastructure, said Morneau, "we might find four or five or six dollars of pension fund money…"
When Hall repeatedly asked the obvious – should people expect to pay more to use all this new infrastructure? – Morneau dropped into cheery-speak, replying: "People should expect on an ongoing basis that we're going to find the most cost-effective way to build infrastructure in this country."
Morneau was avoiding the real answer to Hall's question, which, simply put, is: "Yes."
Investors want return on investment. If it's there, they're in — particularly if it's backstopped by government. They need no guidance. They have really smart people scouring the world for an extra point or two.
Yes, European and Japanese sovereign bonds, held mostly by banks, are yielding negative returns. But privately managed pension funds?
Take a look at the statements of Quebec's Caisse de dépôt et placement, one of the world's largest pension funds. It reported a 9.1-per-cent earning as of Dec. 31, 2015, with a four-year annualized return of 10.9 per cent.
Meaning it's a pretty safe bet that if the Caisse bankrolls new bridges or roads or electrical grid, it's going to want a handsome profit, and that pretty much means one thing: user fees. Tolls, higher electricity charges, that sort of thing.
If Morneau was permitted and inclined to tell the unvarnished truth, it would be something like this:
"The Canadian deal is changing. It used to be that the government would tax everything that moves, and in return would build and provide stuff. The new deal is that the government will keep taxing everybody just as enthusiastically, but you'll also have to pay extra to use the stuff we build."
Spread of user fees
For now, it's bridges and roads and electrical systems. But count on this: soon enough, it'll be everything from hospitals and elective medical care to airports and garbage removal.
"There's a breach in the social contract," says Carleton University business professor Ian Lee. It's inevitable, he says.
Governments have spent foolishly for decades. Infrastructure spending has been politicized, and often corrupt. See the "bridge to nowhere," or just about anything made of concrete in Montreal.
With a low-growth, low-tax-revenue future ahead, says Lee, there has to be some discipline. User fees are part of that, he says, and so too, probably, is the end of universality, which he calls "a squandering of public resources. Paying old age pensions to Conrad Black or Ian Lee was always absurd."
(Or, as the Quebec government once did, paying Neil Macdonald to have children).
Lee concedes that user fees are a regressive form of taxation; they hit the poor harder than the affluent. But, he says, most truly poor people don't own cars, and won't have to pay the inevitable tolls anyway.
Electricity is another matter. Governments will have to pay low-income people rebates for user fees on essential services, meaning more affluent Canadians will see already high taxes rise further.
To be more specific: the Fraser Institute calculated that the median household earned $80,593 in 2015, and paid $34,154 in aggregate taxes, or 42.4 per cent.
If our finance minister were to be frank, he'd concede that tax tithe will likely rise, and significantly, in the years to come. There's only one cow.
Bill Morneau must know that; he's actually an expert on these matters, having spent years on Bay Street. But he's learned pretty quickly how to dance the Ottawa waltz.
During The House interview, seeking to explain the magic of private-sector involvement, Morneau said this:
"When you think about affordable housing, where, you know, low housing contributions from people can help to make something economic. So there'll be multiple things that we'll look at."
Oh. Well. Okay, then.
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