Canada and U.S. responses to COVID-19 hard times are poles apart

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Prime Minister Justin Trudeau at a press conference on October 1, 2020. Image: CanadianPM/Twitter

Here in Canada, the House of Commons approved the Liberal throne speech on Tuesday night, October 6, but despite all the hoopla surrounding the speech, the vote was an anticlimax.

As expected, only the NDP supported the Liberals, which was enough to put them over the top.

The more important vote had happened a week earlier, in the middle of the night.

After some acrimonious debate over the rushed legislative process -- a result of the Liberals' capricious prorogation of Parliament in August -- the House agreed unanimously on a series of measures to continue supporting the millions of Canadians whose livelihoods have been put in jeopardy by the pandemic.

Those measures include enhanced employment insurance (EI) and a new Canada recovery benefit (CRB) of $500 per week, for up to 26 weeks, for gig and self-employed workers who do not qualify for EI.

The CRB replaces the expired Canada emergency response benefit (CERB), which the government created last spring in response to the huge economic disruption wrought by the COVID-19 pandemic.

The Liberals had, at first, planned for the CRB to be $100 per week less than the CERB, but the NDP adamantly refused to support that. As well, the NDP demanded federally supported paid sick leave for workers who come down with COVID-19, something the Liberals had promised during the summer.

The results of this New Democratic intransigence are two new measures, not previously in the government's plans: a $500 per week, 10-day sickness benefit for those afflicted with the virus, and, similar to the CRB, a 26-week, $500 per week caregiving benefit for those who cannot work because they are caring for children or other dependents stricken with COVID-19.

The Americans refer to such measures as economic stimulus. We in Canada, as in Europe, are more likely to consider them to be simply social programs.

Somebody has to make a profit

In the mid-1920s U.S. president Calvin Coolidge (Silent Cal) said, famously: "The chief business of the American people is business." A lot has changed in nearly a century, but Coolidge's observation still casts a spell over U.S. political psychology.

For most members of the U.S. political class to support any significant spending measure they must be able to justify it as contributing to the economy -- or, to put it more bluntly, to somebody's profits.

The goal of helping millions of people in need, however desperate that need, is rarely sufficient on its own.

That's why U.S. politicians and journalists have been describing a series of relief measures, similar to those we just enacted in Canada, as an economic stimulus package. The emphasis is more on the need to stimulate economic activity, less on making sure people who've lost their jobs have enough to eat.

In May, the Democratic-controlled House of Representatives passed one such stimulus package, which they called the House of Representatives Health and Economic Recovery Omnibus Emergency Solutions Act, the HEROES Act.

It included enhanced unemployment insurance and lump-sum payments for Americans whose annual income falls below US$75,000.

There was also spending on personal protective equipment (PPE), support for the crippled airline industry, and significant financial support for state and local governments. As in Canada, in the U.S. it is the states, cities, counties and towns who do most of the heavy lifting in public health care (such as it is) and other social supports.

The U.S. Senate, where the Republicans have a majority, rejected that act, and it died.

The house Democrats then returned with a scaled-down version, hoping to get the Republicans in the Senate and in the White House onside. House Democrats were in negotiations with Donald Trump's treasury secretary, Steve Mnuchin, when, on Tuesday afternoon, the president arbitrarily shut it down.

Trump did so, as is his wont, in a series of tweets, less than a full day after leaving the luxury accommodations of Walter Reed Hospital, where a large team of doctors and other medical professionals had been treating him for COVID-19.

The stock markets, which Trump seems to worship with something approaching religious fervour, reacted badly to his shut-down tweets. And so, a few hours later, the ever-erratic occupant of a now-almost-empty White House used more tweets to signal that he would be willing to support some of the items in the Democrats' package.

That seemed to calm the markets a bit. They recovered some of their losses on Wednesday, although seasoned market watchers note that investors are likely more encouraged by the growing possibility of a big Joe Biden win than anything the president says or does.

The chances of getting the house, the Senate and the White House aligned to enact any new measures before the election now look remote.

That is bad news for afflicted industries, bad news for job creation, and, most important, bad news for the hundreds of thousands of U.S. families who cannot pay their bills.

Looking beyond immediate relief to an expanded role for government

In Canada, while we cope with the second wave of COVID-19, we are moving on from immediate relief measures to a broader vision for the medium and long term. In that context, there is a significant movement to consider major changes to the tax system.

In a recent paper entitled "Paying for the Recovery We Want" former senior public servant Alex Himelfarb, economist Andrew Jackson, program director Katrina Miller, and long-time NDP operative Brian Topp argue that the Canadian tax system as currently structured is not adequate to the task of paying for a robust economic recovery from the pandemic.

The paper's authors advocate more progressive income taxes, a tax on extreme wealth, an increase in the corporate tax rate, and a surtax on what they call excessive profits.

On income taxes, the authors point out a number of the preferential measures that benefit high-income earners and undermine the progressivity of the tax system.

"Only one-half of capital gains and stock options are liable to tax," they write, "while wages are 100 per cent subject to tax." As well, they tell us that the tax credit for dividends on investments lowers taxes for only the "very few Canadians who earn significant investment income outside pension plans and RRSPs."

The paper's authors want an end to those tax breaks. They also advocate an increase in the very top income tax rate, which, they say, is lower in Canada than in many other countries.

As for the wealth tax, which has become a more popular topic of conversation of late, the paper advocates a modest tax on all financial and non-financial assets (as opposed to income). It points out that a one per cent tax on wealth valued at over $20 million would bring in over $70 billion over 10 years. That calculation comes from the non-partisan parliamentary budget officer.

A new report from the Swiss-based investment banker UBS Global and the international financial consulting firm PricewaterhouseCoopers buttresses this call for a new wealth tax. The report says that total wealth held by billionaires, globally, reached US$10.2 trillion in July of this year. (A trillion is, do not forget, a million million.)

The previous peak, three years ago, was lower by a whopping US$1.3 trillion. The increase in billionaires' good fortune, the report tells us, is due to trends that were "accelerated" by the pandemic.

Support for vigorous and interventionist economic measures also comes from such unexpected sources as former Bank of England and Bank of Canada governor Mark Carney, current Bank of Canada governor Tiff Macklem, and even the conservative U.K.-based Financial Times, which the authors of the "Pay for the Recovery We Want" paper quote:

"Radical reforms -- reversing the prevailing policy direction of the last four decades -- will need to be put on the table. Governments will have to accept a more active role in the economy. They must see public services as investments rather than liabilities, and look for ways to make labour markets less insecure."

Here in Canada, we have our political differences, which are not insignificant. But despite them, we appear to be ready to have an adult conversation about the crucial choices we must make for the future.

In the U.S., they will have to get past their election before they can engage in any kind of serious policy discussion. The American people, however, could, and should, start thinking about an idea that seems almost anathema to their deeply-held sense of themselves.

That idea is, in the words of one the world's most respected business journals, "Governments will have to accept a more active role in the economy."

Karl Nerenberg has been a journalist and filmmaker for more than 25 years. He is rabble's politics reporter.

Image: CanadianPM/Twitter

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