Welcome to The Hub’s Federal Election 2021 Policy Pulse, where we’ll be tracking all the policy announcements from the major parties, with instant analysis from our crew of experts.
With the election scheduled for Sept. 20, we’ll be monitoring 36 days worth of policy ideas, so watch out each morning for the day’s live blog where we’ll be tracking every announcement as it happens.
4:00 p.m. — Howard Anglin: Whether we recognize the Taliban or not, Afghan politics will flow through Islamabad
The Hub contributor Howard Anglin examines today’s foreign policy news:
Conservative leader Erin O’Toole and Liberal leader Justin Trudeau have both announced that a government led by them would not recognize a Taliban government in Afghanistan.
Last night O’Toole added that he would make sure aid to the Afghan people does not end up in the hands of the Taliban. When the Taliban first took power in 1996, we hadn’t had diplomatic relations with Afghanistan for 17 years, so this would be a return to that status quo ante.
How long this lasts will depend on the rest of the world, not Canada. For comparison, after the Iranian revolution of 1978-79, Canada closed our embassy in Tehran in 1980 but we eventually sent an ambassador to the Islamic fundamentalist regime in 1990.
The U.S. has never resumed diplomatic relations with Iran, but it does meet and negotiate with them out of necessity, recognizing their de facto status as government if not their legitimacy. And the Islamic Republic of Iran is recognized by the UN.
In the case of Afghanistan, Canada severed diplomatic ties in 1979 when the Soviets installed a puppet government under Babrak Kamal and didn’t restore diplomatic ties until after the 2001 invasion that ousted the Taliban for the first time. During the Taliban’s previous time in power, from 1996-2001, Canada provided aid to the Afghan people but did not recognize the Taliban government. Presumably that state of affairs is what O’Toole and Trudeau contemplate returning to.
The problem Canada and the world face with Afghanistan is that under the new Taliban government, it is effectively a client state of Pakistan and a target for indirect Chinese influence (and, to a lesser and more complicated degree, Russian influence).
For the foreseeable future, Afghan politics will flow through Islamabad and Canada could do more than any party has currently announced to organize international pressure against the Pakistan government.
3:00 p.m. — Trevor Tombe: Crunching the numbers on the proposed ‘GST holiday’
University of Calgary economist Trevor Tombe evaluates the proposed GST holiday:
The Conservative Party of Canada proposed today a one-month “GST holiday” in December where “all purchases made at retail stores will be tax free.” While some details remain to be determined, and some technical issues may arise, the implications of such a holiday for households and the economy can be broadly mapped out.
Not all goods are subject to GST. We don’t pay GST, for example, on most groceries, prescription drugs, hearing aids, music lessons, and more. And the proposed GST Holiday appears to apply only to purchases from retail outlets, which means some items like new home purchases won’t be affected. But for all other goods, Canadian consumers can expect a five percent savings on any purchases made that month. Overall, this tax reduction is potentially valued at roughly $4 billion. (It’s uncertain because consumers will respond by shifting their spending across months.)
What does this mean for household pocket books? The average household spends approximately $180 per month on GST. Below I illustrate these savings across all households. Savings are larger for households with higher incomes (they buy more taxable goods and services, after all) but savings are a larger fraction of household incomes at the lower end of the income distribution. This makes the proposal a progressive tax change. Those households with incomes below $30,000 per year may see savings equivalent to approximately 0.4 percent of income, or roughly double the overall average.
What effect might this have on the broader economy? That’s tough to say. Evidence from Saskatchewan produced by Finance of the Nation co-director and University of Toronto professor Michael Smart finds retail sales respond to tax rate changes — though this is not in the context of a one-month holiday. That is, lower sales taxes may lower prices and boost retail sales. Evidence on tax holidays from other jurisdictions suggests consumers will shift their spending (see this analysis for sales tax holidays in Massachusetts), which could potentially accelerate (or at least move forward) recovery in Canada’s retail sector.
2:30 p.m. — Samuel Duncan: Early signs indicate the major parties are being flexible on child care
The Hub contributor Samuel Duncan looks at how the two major child-care plans could work:
Today, Liberal leader Justin Trudeau re-affirmed his commitment to reduce average fees for childcare by 50 percent in the next year and introduce childcare agreements with the provinces and territories that would bring the average cost to $10 per day within five years.
Despite the political rhetoric of the campaign, no party is denying that childcare costs or the impact they have on the participation of women in the labour force are not a major concern for Canadian families. Conservative Party leader Erin O’Toole outlined his party’s approach which would introduce a refundable tax credit of between $4,500 and $6,000 per child, aiming to cover up to 75 percent of child-care costs for low-income families.
This demonstrates that politicians understand the important role that family plays in our society and our economy, even if there is debate on how that support is allocated.
In the case of the Liberal policy, we have the benefit of looking at what details are publicly available from the provincial agreements that were signed prior to the election. It appears that the Liberals are comfortable with federal support going towards early childhood learning, not just childcare, as in the case of the deal Saskatchewan signed (where children in registered activities up to the age of 6 are eligible for the support).
It will be interesting to see if Saskatchewan is able to use federal money to fund primary provincial education programs (as most four-and five- year-olds are in junior and senior kindergarten), which potentially could free up provincial fiscal resources to be allocated directly to parents and families who do not use regulated childcare options.
Provincial flexibility in the funding agreement could potentially explain why conservative premier’s have been willing to sign agreements with a Liberal federal government despite their hesitation about a one-size-fits-all model of childcare.
It is then possible that the result of these federal/provincial agreements could mean that both the Liberal plan and Conservative plan would stand to benefit middle-class families who choose non-regulated forms of childcare. However, it could mean that, if the Liberals are re-elected, provincial governments may be the ones who are able to take the credit for it.
1:30 p.m. — GST holiday could encourage spending, research suggests
With the Conservative Party proposing a “GST holiday” in December to help boost the economy, there is research suggesting that these kind of tax cuts do get passed along to the consumer and encourage spending.
“A GST cut would encourage consumers back into stores and to take vacations, thus unlocking some of the extraordinary level of personal savings accumulated during the pandemic,” wrote Michael Smart, the co-director of Finances of the Nation and professor of economics at the University of Toronto.
One month might not be long enough to have the intended economic effect, though. Canadians could simply plan to make pre-existing purchases in December, rather than increasing their spending overall.
The solution to that would be to extend a GST holiday for a long period of time — Smart recommends an 18-month window — and then temporarily increase the tax when the holiday is over, spurring Canadians to front-load their spending.
“That would give consumers even greater incentives to spend their savings now, as well as generating revenue later to help restore fiscal balance,” wrote Smart.
Smart calculates that a 18-month GST holiday would cost the government $36 billion.
1:05 p.m. — O’Toole announces plan for GST holiday in December
Conservative leader Erin O’Toole was in Toronto today to announce that he would implement a month-long “GST holiday” in December to juice retail sales as the country recovers from the COVID-19 pandemic.
O’Toole estimated the “tax holiday” would save Canadians $1.5 billion.
11:55 a.m. — Estimating the cost of a national, $10/day childcare system
The Liberals government has made $10/day childcare an early priority. But how much would such a program actually cost?
A Cardus report examining the proposal as laid out in the last federal budget suggested the Liberals could be underestimating the true costs of their five-year plan.
The study, titled Look Before You Leap: The Real Costs and Complexities of National Daycare and authored by Andrea Mrozek, Peter Jon Mitchell and Brian Dijkema, attempts to incorporate assumptions primarily relating to staff-to-child ratios, per-space payments for home daycares, square footage per child, and Early Childhood Educator salary growth.
On the low end, they calculate that the program costs will come in at $17 billion total in year five, with the federal contribution being $9.2 billion and parents covering $3.6 billion through user fees. This leaves a remaining $4.2 billion that will most likely be left to the provincial governments to fund.
On the high end, they estimate the cost at $36.3 billion total in year five, with the federal government again covering $9.2 billion and parents covering $3.8 billion through user fees. The provinces must then cover the remaining $23.3 billion in this scenario.
11:20 a.m. — Peter Jon Mitchell: Child-care plans should prioritize flexibility and fairness
Peter Jon Mitchell, the family program director at Cardus, weighs up the three major child-care plans:
The party that forms the next government will commit substantial federal dollars to child care. The question is whether money will go to spaces or to parents.
The Liberal plan promises $30 billion over five years to cut parent fees in licensed care by half by the end of 2022 and to an average of $10-a-day by 2026. This would help the minority of families with kids in licensed care.
The Conservatives have countered, promising to replace the federal Child Care Expense Deduction with an Ontario-style refundable tax credit. The geared-to-income credit allows parents to choose the care that works for their family, recouping up to 75 percent of child care costs with the program paying out over the year. The claw back likely begins around $50,000 annual household income and phases out completely at $150,000 annual household income.
The NDP platform is light on details, but champions a fully public, universal child care program.
Fully flexible and fair child care policy would recognize that child care is the care of a child, no matter who provides that care. So far, no political party has embraced that important principle.
10:50 a.m. — Trudeau highlights $10/day child-care plan in Ontario
Liberal leader Justin Trudeau was in Markham, Ontario this morning to highlight the $10/day child-care program that was announced in the spring budget.
Before Parliament was dissolved on Sunday, the government was in the process of negotiating funding deals with the provinces and territories to implement the plan. On Friday, Saskatchewan became the latest province to ink a deal that would create the subsidized spots by 2026.
The government of Ontario, where Trudeau is campaigning today, has not signed an agreement with the federal government but the Liberal leader expressed optimism about a deal getting done.
7:00 a.m. — The leaders spread out for the second full day of campaigning
Liberal leader Justin Trudeau will make an announcement about support for Canadian families at 10 a.m. in Markham, Ontario.
Conservative leader Erin O’Toole will make an announcement at 1 p.m. ET in Toronto.
NDP leader Jagmeet Singh will propose a job creation plan at 9 a.m. local time (noon ET) in Coquitlam, British Columbia.
Green Party leader Annamie Paul will make an announcement at 12:15 p.m. in Toronto.
