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Hill Dispatches: The 2012 policy agenda, part one

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The late Mitchell Sharp, who came of age during the great depression and served in the cabinets of Pearson and Trudeau, once said that while his generation most feared the spectre of another catastrophic economic slump on the scale of the 1930s', subsequent generations were spooked by other spectres -- the spectres of run-away inflation during the 1970s and early '80s, and of uncontrolled public debt in the 1990s.

As we begin a New Year it is as good a time as any to contemplate the spectres for our time. Others will differ, but Hill Dispatches thinks the spectres that haunt us, or that should be haunting us in 2012, are: the spectres of growing inequality and of unsustainable development.

Rex Murphy and his colleagues on Peter Mansbridge's end-of-year panel could be as contemptuously dismissive of the Occupy movement as they please, but the idea of the 1 per cent versus the 99 per cent is not likely to die soon.

Charity for the top 1 per cent

In 2008 and 2009 -- when the world economy seemed about to tip into another great depression -- governments used huge amounts of tax-payers' dollars to bail out financial corporations, auto companies and others in the "private sector." No one else would lend those folks a penny and if the forces of the free market had prevailed they all would have suffered the fate of Lehman Brothers.

But governments had decided that these giants were "too big to fail" and extended them virtually free credit, with few conditions and very generous repayment terms.

And what did these corporate behemoths do when they started to get back on their feet? Like the lung cancer patient in remission who took up smoking again, they returned to their old ways and started paying out millions in inflated salaries and bonuses to their executives.

It's the free enterprise system, the corporations argued. All we owe the public is to pay back our loans, and we're doing that. The fact that those loans were really a form of charity and not a true business transaction is something we'd just as soon forget!

The people running these corporate giants counted on the rest of us to be so relieved that the crisis wasn't even worse that we wouldn't object to their outrageous greed.  We were to be grateful that we only had to endure up to 50 per cent devaluations of our retirement savings and widespread unemployment that nearly destroyed millions of families and thwarted many young peoples' hopes for the future.

After all, it could, indeed, have been worse. We could have re-lived Mitchell Sharp's nightmare of another great depression. Ours was only a dreary über-recession!

Something wrong with this picture

Well, the Occupy movement woke us from our dogmatic slumbers.

Sure, the movement may have lacked programmatic coherence, at the outset, and certainly did not have a hierarchy or structure -- the sorts of attributes that impress professional pundits.

But the Occupy people identified one key truth: the simple and obvious fact that Wall Street and its allies had made out like bandits in the wake of 2008!

While the rest of us paid the price in our reduced personal finances and employment options -- and paid for the bailouts, to boot -- the Wall Streeters were back to their champagne-caviar-and-cocaine lifestyles faster than you could say Goldman Sachs!

Somebody had to come along and say there's something wrong with this picture! Somebody had to point out that a society motivated by untrammelled greed is not sustainable. Or, as Barack Obama put it, in what was, sadly, almost a parenthetic observation in his inaugural address: " ...no nation can prosper long that favours only the prosperous."

That somebody was the Occupy Movement, and, in a very real way, it has set the agenda for 2012. The challenge, now, is to translate the basic truth that Obama uttered nearly three years ago into policy.

On the 2012 policy agenda

In Canada, it is going to be hard to have an honest and serious national policy debate with the current shove-it-through-Parliament-as-quickly-as-possible and let-the-devil-take-the-hindmost government.

Nonetheless, if, for 2012, we were to frame the policy challenges on the Canadian agenda in terms of equality and sustainability, they might look something like this:

1) Taxes and spending

As we begin the New Year, the big economic news is that corporations are sitting on mounds of uninvested cash. Those corporations have just seen their federal corporate tax rate reduced to 15 per cent, more than 7 per cent lower than it was only five years ago. But they are already keeping their money in the mattress, so to speak. It appears that the Conservative government is determined to make its own fiscal situation even worse in order to further inflate those stuffed corporate mattresses.

The result will be major spending cuts in the coming federal budget. Federal spending, of course, has a direct and positive impact on consumption and other economic activity. A dollar spent on a federal program will have far greater economic impact than a dollar of tax relief stuffed into a corporate mattress. The economy is now stagnating.

Unemployment is creeping up. Graduates are having a devil of a time finding work. Is there any rational justification for a further round of corporate tax cuts accompanied by corresponding spending cuts now?

2) Aboriginal rights

Attawapiskat helped shine a light on the ugly reality of life for far too many Canadian First Nations' people.

But it is not the first time that light has been shone on this reality, without bringing about significant progress. In her last report as Auditor General, Sheila Fraser was eloquent in denouncing the reasons for which we have horrors such as Attawapiskat in this wealthy country. She talked about underfunding of aboriginal services and of a dysfunctional system for providing basic services to First Nations communities.

The Deputy Minister of Aboriginal Affairs agreed with Ms Fraser when he appeared before a Parliamentary committee in the fall. He said we have to get away from the archaic and inappropriate "contribution agreement" system of First Nations funding and provide for a legislated framework for services such as housing and education. He even predicted that we will see some of that necessary legislation in the current session of Parliament.

At the same time, there is a voluble group arguing for the implementation of a property rights system on First Nations reserves that would unlock some of their potential. Its advocates have a point in that the current paternalistic Indian Act system is worse than absurd. However, property rights will not be a panacea, and would not have much impact on remote communities such as Attawapiskat. The kind of property rights those communities need are rights to some benefit from the natural resources on their traditional territory, such as the diamonds De Beers is mining at the doorstep to Attawapiskat. In the short term, a new, legally-enshrined funding system, accompanied by enhanced financial management capacity, will make a far greater contribution to the well-being of First Nations peoples.

3) Health

We have five years of predictable and stable federal funding for health care, and the Canada Health Act is still on the books. But that funding will decline in the years to come and we cannot be at all certain of this government's commitment to the Canada Health Act.

We are going to start hearing a drum beat for more "flexibility" and "choice" in the system (for those who can pay). And we will hear the argument that Canada's public-private health funding model of 70 per cent to 30 per cent is out of whack with other countries with systems that are similar to ours.

However, the fact is that Canada is not an outlier in the manner in which it funds health care, when compared to other OECD countries.  Canada is in the middle of the pack and quite typical of countries with largely publicly funded systems.

There will be a lot of statistics bandied about as this debate takes shape.

Here is one set of numbers, for now.

In 2009, Canada spent 11.4 per cent of its GDP on health care, of which 8 per cent was public and 3.4 per cent private. For France, the proportion of GDP figure was 11.8 per cent, of which 9 per cent was public and only 2.8 per cent private. Germany, the Netherlands and Austria were all similar to France. Canada's private sector share of health spending was, in proportional terms, greater than all of theirs.

Of course, the real outlier was, and is, the USA. In 2009 the USA spent 17.4 per cent of its GDP on health care, more than half of which was private spending.

In many ways, the public private funding debate, to the extent that it will happen, will be a pointless distraction, aimed at building support for a weakened or repealed Canada Health Act.

The real conversation should be about concrete ways of improving health care and health outcomes, and reducing costs.  It is a big topic, about which more in coming days and weeks.

More... next time

There are number of other policy areas on the agenda for 2012, among them: criminal justice, climate change, public services and pensions
… but they will have to await the next Hill Dispatches.

Happy New Year to all!

Bonne Année!

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