Time for an economic «risque de tonnerre!»

"We need a deep reform so that taking a job does not leave one in a worse net position than if they just remained unemployed.”  ~ Philippe Couillard in an interview with me in Feb. 2013

Thursday, Quebec unveils its new budget. It should have one critical, straightforward direction. Cut taxes. Cut bureaucrats. Restart our resource base. Other than these priorities, there is nowhere left to go and nothing left to take. Taxation is not a way to raise revenues. It is time for Quebec to stop pushing people and companies away. 

I don’t say this just because the Godbout report last week recommended sweeping changes in Quebec’s tax structure. It was gratifying to read the Godbout Report state clearly and candidly that radical tax cuts are the critical necessary step to economic revival.  But frankly, it is just common sense. And M. Couillard recognized that, in an interview with me in Feb. 2013 when he said, “We need a deep reform so that taking a job does not leave one in a worse net position than if they just remained unemployed.”  

During Quebec’s “Values Charter” debate, the CAQ started billboard campaigns calling for a Charter of Taxpayers’ Rights not a Charter of Values. Jacques Parizeau for the first time come out publicly not only criticizing a PQ government’s fiscal prowess, but stating that “for the first time in thirty years” he is worried about Quebec’s economic viability, in the midst of the same debate. He stated that our standard of living is 40% below that of the United States. And just last week Quebec’s debt to GDP ratio crossed 50% and the Brookings Institution rated Montreal 285th out of 300 North American cities in economic growth.

Quebec is at an existential point of its history. If we do not have radical progress next year, the bond markets will raise Quebec’s borrowing rates thereby necessitating tax increases that Quebecers cannot afford. As the highest-taxes jurisdiction in North America, the cupboard is bare. And Canada must care because a nation cannot have a political jurisdiction within it where one-third of its population lives at or below the poverty line and almost 30% of its working men and women can be classified as working-poor. Even many union economists blame high taxes for this tragedy. 

The tax problem lies not in the social security safety net. This is capitalism’s insurance as FDR called it. The money for pensions  and EI come straight out of our pockets. It is as if we bought insurance in the private sector. But those funds have, for two generations and regardless of party, been used to fund Quebec Inc. That incestuous model of state partnership meant to create a Quebec based economic uberclass. It has failed miserably. 

It is a tort on the public that people who have paid into these plans all their working lives should be left at below poverty levels in their senior years. We like to talk of Quebec’s “ generous” social programs. Let us stop repeating this urban legend. Quebec’s programs are not generous when pensions are almost 40% below American government pensions, and in Quebec almost 60% of us have no private pensions or any substantial RRSP funds. 

This is why the first priority must be to stop the use of public trust monies for private sector investment in the hope of getting more people working thereby generating more tax revenues. It hasn’t worked and it won’t. What it will result in is an aging population nearly half of whom will end their lives living at below poverty level pensions. There is no reason why public funds totaling $400 million, for example, are going to members of the Bombardier Beaudoin family to build a cement plant in the Gaspé when cement prices are plunging or $160 million to build a phosphate strip mine near Sêpt-Isles when phosphate prices have dropped 20%.

Quebec has gone from being among Canada’s richest provinces to a have-not. All in less than forty years. Yet the sources of our past wealth are still here. Our resources. Instead of using public trust monies, the government must encourage foreign investment - fresh money - to come here and develop our resource sectors. Particularly oil and gas. That creates real new jobs with other people’s money. We must stop the mortgaging of our futures. It also means that foreign executives coming here must be freed from the yoke of Bill 101 and know that they can send their children to whatever schools they like and that their companies can communicate internally  in whatever language they choose. And for that, Montreal needs special status.

We have as much natural gas on the south shore as the Bakken shale in Montana and the Dakotas where unemployment is below five per cent. It’s time to start. And fracking fears are no excuse. Alberta and BC have been using fracking for over fifty years without a single incident. Under Anticosti Island we have major reserves of oil. We should not be paying two small Quebec-based companies to exploit the reserves.. Instead, we should be auctioning the rights to oil majors and taking in 300-500 million dollars instead of paying out 150 million just to continue Quebec Inc. Hydro-Quebec must also be monetized. That doesn’t mean selling it to private interests. It does mean using the French model when that country placed some forty per cent of Électricité de France on stock markets and actually lowered rates for French citizens. 

The most critical task will be taking on the bureaucracy. Quebec is not sustainable with a bureaucracy four times the size of California`s – which has a population equal to Canada`s – while Quebec`s population is a fifth of that. And the most important place to start is healthcare which is some 40% of our budget. We have enough money to make our system work. But not if we continue with a labor force where some 52% of all those employed in our healthcare system have nothing to do with the delivery or maintenance of our hospitals, research centres or medical training facilities. They are bureaucrats. To cite France as an example again, that country has managed to cut its healthcare bureaucracy down to 36% of those employed in the health system and is generally considered to have the second best healthcare system in the West after Israel`s. But no government has touched this issue because these are unionized workers and that means votes. If we cut the bureaucrats we’d have money for doctors and state-of-the-art equipment.

It is time to end the state engineering agencies that eat up so much of our  budgets and concentrate on growth and securing our vulnerable. The programs that need to be cut – and the money transferred to social security and debt payments -  are all those that have nothing to do with the basic job of government. The provision of services including social security, healthcare, education, policing and infrastructure are the core of governance. They’re not sexy, but they’re really what is necessary. What we need to rid ourselves of is the groaning leviathan of bureaucrats that enforce programs of social engineering and preventative prohibition that not only eat up 15-20% of our budgets, depending on the year, but also make our lives in Quebec so burdensome.

Government is called public “service” because it is about the provision of services. Not about the changing of individual human beings. It is not called public “engineering.” Imagine if we got rid of inspectors enforcing the language laws or those enforcing anti-smoking laws. The savings there alone would be in the range of almost $100 million. The role of the state in matters such as these must be limited to education and persuasion not coercion and compulsion. It is the latter that costs so much. It is the overwhelming reach of bureaucrats that forces small businesses in Quebec to spend 19 full working days a year filling out forms and reports for government compliance. That is why we’re not competitive. Between the language laws, high taxes and an invasive bureaucracy, why should investors come here?

Finally, we have to take a look at the whole complex of cultural and multicultural spending. It is one thing to encourage people to keep their connection to their origins. It is quite another to fund and subsidize those efforts as political pork.  That’s another 10-12% of our budgets. We can’t afford it anymore.

It is time to stop doing politics as usual by running between the raindrops on the way to the next election. It is time to take «les beaux risques». The great risks for the public good.  This is a majority government. It can afford to confront the public sector unions, open up our economy, take some tough knocks now and then run the next election on the benefits these decisions will produce. Quebec had a “Quiet Revolution” instituted by «l’équipe de tonnerre.» The team of thunder. Today we need an economic «risque de tonnerre» more than ever. We must hope M.Couillard and his team have the moral courage and political will to do what must be done before history beings down its deadly two-word verdict of “too late.”