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 Title

Madly Off in One Direction

 Synopsis

An unwary observer might suppose vast philosophical issues divide Canada's political parties. But where's the beef?

Originally published in the National Post.

 Author

John Robson

 Author Notes

Senior writer and deputy editorial pages editor at the Ottawa Citizen. Dr. Robson holds a Ph.D. in American history from the University of Texas. He has his own web site at which contact information and some of his works can be found.

 Essay - 11/24/1999

The Republican party has just moved too far to the extreme right. The Democrats are too far to the left. I believe the Reform Party can be the true centrist party. - Donald Trump

While Mr. Trump's candidacy may fortunately be dismissed, his rationale for it unfortunately may not. Politics in the past 20 years or so has seen a variety of third ways aiming to avoid the left- and right-wing extremism that allegedly plagues us. From Joe Clark through John Anderson's 1980 presidential bid to the B.C. Liberals, Mario Dumont and the United Alternative, everyone but Bill Vander Envelope is looking for the middle road.

It's true in the U.S., too. After the 1998 American elections, Newt Gingrich rushed before the cameras to announce his priorities were saving social security and cutting taxes. The Democrats said the same thing. Even Jesse "The Body" Ventura only seemed right-wing because for some reason saying what you actually think is almost always sufficient to land you on the "right" even if what you actually think is the usual confused mish-mash.

In Canada the recent lurid tone of our politics might lead an unwary observer to suppose that vast philosophical issues divide the parties. But where's the beef? Ralph Klein not only didn't invoke the notwithstanding clause regarding the Supreme Court's Vriend decision but enthusiastically endorsed abortion on demand at the United Alternative convention (and wasn't booed off the stage).

On economics it's far worse: Who, from Mike Harris to Bob Rae, challenges the Canada Health Act, compulsory savings for retirement and old age or the desirability of employment insurance? The sound and fury is impressive: Paul Martin said this year that "Reform says you can cut taxes to the level of crippling government because they don't think government has any role to play. Well, I do." But both Preston Manning and Monte Solberg, the Reform finance critic, have called Mr. Martin the Dr. Kevorkian of Canadian health care for spending too little on that government program. (And when Reform introduced its Fresh Start, spokeswoman Line Maheux assured us that it was "not supply-side, voodoo economics.")

To see just how bad it is, consider this line from a major national columnist: "In a campaign where the ... main parties largely agreed on the big issues - spending more money on health care and education, lowering taxes ..." Okay, now, which parties and which election? You can't possibly guess, can you? The last federal election? Ontario? Saskatchewan? Manitoba? Actually it was Roy MacGregor, in the National Post, writing about the two main parties in New Brunswick. But it could even have been the Tory leadership race, in which Brian Pallister endorsed "lower taxes, balanced budgets and guaranteed health care" in a bid to take on that awful Jean Chrétien, who told the most recent Liberal convention that before 2002 "We will have significantly reduced taxes. We will have reduced the burden of our national debt ... we will have made major investments in our national health-care system."

As Establishment pillar Jeffrey Simpson wrote this May, "Canadian politics, with two exceptions, now revolves around two issues: Who can spend the most on health care and by how much should taxes be lowered." But he went on to say "Health care's appetite for huge additional spending is so great that every other policy area -- from the environment to education, from crime control to transportation -- has to make way for the juggernaut. Right wing, left wing, centrist: It doesn't matter what kind of political party rules."

He's right. The trouble, for politicians and voters alike, is that the welfare state doesn't work. All welfare programs end up encouraging the very behaviour they seek to prevent, which accounts for their appetite. For instance, if you support people who are unemployed, the quest for work becomes less urgent and they become choosier. (Back in 1994 Maclean's reported a classic, albeit unintended, experiment with this thesis "For nine months in 1990, because of a parliamentary stalemate over amendments to the UI program, workers in regions where the unemployment rate was high had to work 14 weeks to qualify for benefits, instead of the traditional ten. As a departmental study showed, thousands of workers were suddenly able to find four more weeks of employment: In Atlantic Canada alone, almost eight times as many employees worked for 14 weeks, the new minimum qualifying period, before applying for UI.")

Likewise, support for single mothers makes women less afraid to become such, without altering anything else about their lives. And means-tested state pensions discourage saving by the less wealthy. There is no preventing it.

In health care the main problem is perverse incentives on the supply side. The agreement by all our governments to restrict medical school enrolment in the early 1990s was perfectly rational: Fewer doctors means fewer bills, which holds costs down. It's bad medicine, but once you abolish prices, there's no point complaining that bidding for resources has stopped. Yet what party is willing to support even two-tier, let alone private health care? What party understands the need for it? Listen to Reform finance critic Solberg responding to a defence of high taxes by the prime minister: "He's saying if we cut taxes, we won't have medicare. Well, we used to have much lower taxes and we had medicare, so how can he say that?" If incentives didn't matter, that would be a good question. Instead it's just a revealing one.

The failure to understand incentives produces an almost Latin American pattern in which politicians (say, John Savage in 1993) promise sincerely to preserve essential programs without raising taxes, then discover that programs cause taxes and hike them, only to be turfed by a successor who repeats the cycle. As Bill Watson noted recently, "Canada's 'total government current receipts' are at 43.4% of GDP, according to the OECD's standard measure. That is the highest percentage ever recorded [even in wartime]." It's so frustrating that Liberal MP Tony Valeri, parliamentary secretary to Paul Martin, responded to criticism from the Canadian Taxpayers' Federation's Walter Robinson by saying "He's making the assumption that politicians want to overtax people. Personally, what I want to see is a balanced budget and an ability to provide some tax relief - as soon as it's realistic to do that."

That won't be soon. The problem of perverse incentives wasn't solved by Lloyd Axworthy in 1994, nor by Marc Lalonde's 1973 Orange Paper, commissioned to deal with incentive problems when the welfare state wasn't even ten years old. No one could disagree with Allan Rock's 1994 statement that "We have to spend more wisely." But as former Oakland Raiders' quarterback Kenny Stabler liked to say: "Easy to call, hard to run." The airport paperback crowd has been endorsing new ideas since long before former liberal Democratic Massachusetts Senator Paul Tsongas' 1981 book The Road From Here. But no one has managed to have one.

So here's an old idea instead: The simple, insoluble problem of perverse incentives is that the more you pay for something, the more you get of it. You can't spend smarter because the problem isn't money that gets wasted, it's money that gets where it's going and rewards exactly the behaviour you were trying to prevent. Either you don't believe this, but it happens anyway, or you reject it, and with it the welfare state.

That sounds risky. And Reform's Rick Anderson, a smoother operator than Line Maheux, explained in 1996 that supply-side economics is "legitimate from an economic point of view, but not from a political point of view." Still, I told Reformers five years ago that they had no attractive low-risk strategy for beating skilled centrists like the Chrétien Liberals (least of all eschewing ideological differences and battling it out on grounds of competence and compassion).

Of course, it's not just Reform. Joe Clark admitted in September 1998 that "One of the weaknesses of the 1997 Tory campaign last time, with the benefit of hindsight, was that the tax cut proposals we made seemed disconnected from an overall policy of more spending in some areas." A lot of people are still having that problem.

And until someone faces perverse incentives, everyone will continue to. None of their policies will work. And yet everyone from Jesse "The Body" Ventura to The Donald will be trying to elbow their way into the imaginary gap between identical "extremes."


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