Entering the era of 'big government' means more taxes

Photo: World Bank Photo Collection/Flickr

The era of big government isn't over, as Reagan, Clinton and Blair claimed. In fact its hour may be about to strike. Why?

Take tax reform. To U.S. Republicans, it means one thing: cuts. It's their ultimate "reason for existing" (Financial Times). They staggered into the light this week to say (again) that Americans should keep their hard-earned money to pay their medical and university bills. Ha ha ha. There's no way tax cuts will cover most such costs, though you might be able to repave your carport. What would help? More taxes. That could fund national "free" health care or tuition. But it would mean bigger government, levying higher taxes.

Up here, take the maltreated Sears workers, set adrift and in danger of not getting their pensions because -- oh, the usual greedy reasons. I support the NDP plan to prioritize workers' claims in these disasters. But consider also this: 68 per cent of Canadians have no private sector pension plans -- and that percentage is declining. Even with NDP-type rescues, most people will still be private pensionless.

Where are they? Many in the gig economy: deals between individuals, details to be negotiated, often off the books. Fifty-two per cent of people in the GTA now do precarious work with few or no benefits. The gig economy proper is at 30 per cent and rising. Where will they get pensions? They won't. The obvious solution is the health-care model: public programs like CPP not to supplement private pensions but to replace and amplify them -- i.e., bigger government.

The mystery is why anyone ever thought private companies were the way to cover huge costs like health or pensions. It's costly and patchwork; public programs make far more sense. They're stabler, better funded and include some democratic oversight. But before the economy got financialized, and mighty companies turned into hedgies' playthings, they could at least pretend to fill the need.

Public programs, however, mean you need revenues to fund them. And presto, you're back to taxes. So the gig economy would have to open up, versus being deliciously furtive. I know part of the appeal of precarious work, with its generational draw, is that you're on your own, you’re not hooked into the system, man, like those union workers of old who sold their souls to the company store for summer cottages and pensions. But to run national programs, taxes must be accumulated, not just endlessly cut.

A caveat: Individual tax cuts aren't useless. They're good for one thing: stimulating the economy, if they go to the non-one per cent, where they tend to be spent creating more demand for, say, gig or precarious workers, rather than to those who simply save, or buy villas in Europe. Then, if the additional income is reported and taxed, even at lower rates, it can, aggregated, fund "free" tuition or meaningful universal pensions. If left unreported and untaxed, it'll never be sufficient to finance (non-existent) retirements or health emergencies.

It's a simple picture and it's amazing how Finance Minister Bill Morneau managed not to paint it with his summer tax "reform" rollout: get more tax revenues from the rich, who can afford it, to fund big programs; and give cuts to those who'll spend to stimulate the economy, generating more revenues. He muffed it, maybe because he's a tin-eared rich kid himself. (Why weren't we told his vaunted business success came from having money to start with?)

Still, it's been fun this week watching the deficit maniacs at Postmedia and the Globe hyperventilate over Morneau's refusal to pour all, versus just most, of his surplus into deficit reduction. Their deficit-itis lacks its old verve and freshness; they lug it around like Sam McGee's frozen corpse, unable to offload it, fretting about "this blizzard of new spending." As if Morneau had to search wildly for useless projects, since there are no unmet needs in housing, transportation...Deficit hysteria was always more a cultural (or psychic) issue, than economic.

Lastly, a personal perspective on big gov. In recent weeks I've had (public sector) fire trucks at the house twice -- for a fallen branch on power lines, then two false CO alarms in two days. They came swiftly, cheerily and competently, unlike my private gas provider, who effectively said, from wherever on the globe, that they didn't give a flying leap. So who's afraid of big government? Well, actually, I am, but you have to choose your fears, line them up and prioritize them.

This column was first published in the Toronto Star.

Photo: World Bank Photo Collection/Flickr

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