Is Morneau to blame for Trudeau's slump?

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Finance Minister Bill Morneau's recent tax-sprinking backlash is not the sole reason Justin Trudeau's Liberals are hurting in the polls.

If we are to believe a few opinion polls, the Justin Trudeau government is experiencing a mid-term slump. There is, in fact, one poll that shows the Liberals and Andrew Sheer-led Conservatives in a near tie.

Some commentators attribute this apparent slump to the kerfuffle over the government’s plan to tighten the tax rules around private corporations. Doctors’ groups have mounted an effective lobby against proposed measures that would make it harder for them to sprinkle income from their corporations among family members. New rules would also limit private corporations’ ability to passively invest their money, and thus avoid personal income tax.

Trudeau — and others, including most NDPers — points to other health professionals, such as nurses, who do not have the same opportunity to shelter income as doctors. And the Liberals calculate that there are more nurses, orderlies and technicians than doctors in the voting population. Plus, to the average Canadian voter, doctors do not appear to be economic hardship cases.

The Liberal calculation may not be working. Public opinion on the tax changes may not be clear and well defined, but there is a malaise out there, and Liberal MPs are hearing about it.

What happens when you entrust a novice with a key role

To explain that malaise, some commentators have pointed to Finance Minister Bill Morneau’s lack of political experience. Trudeau, they say, took an unnecessary risk in naming Morneau to the most senior and influential job in cabinet — the first rookie MP to hold the position. 

That said, Morneau is not the first finance minister to backtrack on a major policy initiative.

In 1981, Pierre Trudeau’s finance minister, Alan MacEachen, came out with a budget that eliminated a whole series of loopholes — “tax expenditures,” he euphemistically called them. The next day, you could hear the howls from corporate boardrooms and posh sitting rooms across the country. MacEachen was forced to back down on much of what he had proposed. He did so, in haste, on a Friday afternoon, when he hoped reporters would not notice. Fat chance.

The truth is that MacEachen’s original budget would have meant greater tax fairness overall. Most taxpayers would have been net beneficiaries. No matter. “Most taxpayers” were not the ones with the loudest voices.

Tom Axworthy, who was deeply involved the 1981 budget as the prime minister’s principal secretary, explained it this way, in an article for Policy Options magazine in 2012

“The budget proposed a fairer tax regime and it increased resources for many worthwhile programs. But while the losers in tax reform knew exactly who they were and how much they had lost, there were no clear winners…”

To that, Axworthy added this mournful conclusion: “Fairness has lessened in our society since then, as executives pay themselves compensations hundreds of times greater than the average wages of their workers.”

MacEachen, we should note, was a politician of considerable experience. He had a reputation for shrewdness, as a great many of his friends and admirers noted after his death a month ago on Sept. 12. In 1981, the veteran politician’s unerring political instincts failed him.

Flaherty tried to act as though there was no recession

More recently, Stephen Harper’s very experienced finance minister, Jim Flaherty, was forced to back down from his disastrous fiscal update of 2008. The Conservatives had just been returned to power with an increased minority. In the fall update (sometimes called a mini-budget), Flaherty tried to claim, during the deepest worldwide economic downturn since the 1930s, that, somehow, miraculously, Canada would continue to run a (small) surplus. He foresaw no need for economic stimulus, even though the prime minister had, only days earlier, committed to such a course at a G20 meeting. 

To add insult to injury, Flaherty also included a measure to abolish per capita funding for political parties — something the Conservatives had never before mentioned.

All of this provoked the opposition parties to put aside their differences. They pledged to vote down Flaherty’s update, which would constitute a non-confidence vote and cause the government to fall. Rather than force another election, mere weeks after the previous one, the opposition offered a plan for a Liberal-NDP coalition government, with tacit support of the Bloc Québecois.

That coalition never materialized. Harper, famously, prorogued parliament to head it off.

When they got to back business in 2009, however, Flaherty sang an entirely different tune. The government would now invest heavily in infrastructure, in order to stimulate an economy that was bleeding jobs. And, of course, it would have to run deficits for a number of years into the future. (The measure to kill per-capita funding for political parties also disappeared, although Harper brought that one back as soon as he won a majority in 2011.)

Jim Flaherty was no political novice. He had held a number of senior portfolios in Mike Harris’ Ontario Conservative government, including finance, and had been Harper’s finance minister from the beginning, in 2006.

And so, it is not only rookies who commit major political blunders. In MacEachen’s case, the error was one of inadequate communication. In Flaherty’s, it was ill-conceived, or, to be blunt, dishonest policy. Bill Morneau is a political novice, but he is in good company.

Great on the symbolism — what about results?

In any case, it is quite unfair to place all of the blame for the Trudeau government’s loss of public esteem — if, indeed the polls are accurate, which is not a given — at Morneau’s feet.

Overall, the Trudeau government has not done well when it comes to delivering on much of its promises:

  • It is not meeting its own 2020 greenhouse gas emission targets;
  • It has not moved very far on providing equal education and child services to First Nations communities;
  • Low-income and low-skilled Canadians have yet to see much, if any, benefit from the government’s so-called middle-class-focused tax and spending measures;
  • Young people are still facing an insecure, gig economy, where precarious work is becoming the norm; and
  • The government has backed away from a number of its marquee democratic reform promises — most notable among those, the solemn promise that the 2015 election would be the last held under first-past-the-post.

There are plenty of reasons for voters to be disillusioned.  And now there are fresh faces leading both the Conservatives and the New Democrats.  The prime minister is suddenly the senior citizen among party leaders.

Up to this point, the Trudeau government has seemed to be most intently focused on a series of symbolic gestures, such as renaming a slew of federal departments. Indigenous people might prefer that the department that deals with their issues be renamed from aboriginal to indigenous affairs. Such a gesture, however, will not get them decent schools, control over natural resources, or economic development.

The same goes for adding climate change to the name of the environment department, or changing industry to innovation and economic development, or yoking families and children to social development — and we could go on.

During the last campaign, the Liberals promised a great deal more than symbolic gestures. Indeed, in 2015, Trudeau chose to abjure the time-honored strategy of such eminent predecessors as Mackenzie King and his father, who under-promised during campaigns only to over-deliver once elected.

At the time of the last election, the current Liberal leader decided that he had no choice but to offer a wildly ambitious, far-reaching, activist program. He believed that was the only way to differentiate his party from both the backward-looking Conservatives and the too-cautious-by-half NDP.

Electorally, the strategy worked — but maybe too well. With a big majority in the House, Trudeau cannot now place blame for any of his failures on the recalcitrance of other parties.  He has no choice but to deliver on his promises. And he must start doing so, in earnest, now.

Photo: flickr/ Prime Minister of Canada

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