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Policy Pulse: Howard Anglin: Whether we recognize the Taliban or not, Afghan politics will flow through Islamabad

News

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.

Policy Pulse: Sean Speer: The Conservative platform highlights foreign policy while the world watches Afghanistan

News

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. — Aaron Wudrick: Ceasing pipelines and oil exploration will likely have no positive impact on global emissions

Aaron Wudrick, the director of domestic policy program at the Macdonald-Laurier Institute, weighs up a proposal to stop building pipelines and cease oil exploration:

The Green Party today released parts of its climate change agenda including an unequivocal commitment that no pipelines would be built nor any further oil exploration would occur under its watch in the name of reducing carbon emissions.

Although these measures would presumably reduce Canada’s carbon emissions, they must be balanced with a broader set of policy objectives including providing jobs and opportunity and ultimately financing the transition to new forms of energy.

Production and investment in the oil sands remain vitally important to Canada’s economy, supporting hundreds of thousands of jobs throughout the country.

Under current policy promises, global demand for hydrocarbons like oil will increase, and hydrocarbons will continue to account for the majority of global energy generation even if all signatories reach their Paris Climate commitments. This demand is being driven by the developing world. If Canada does not fill that demand, other countries will do it.

The proposal to not build new pipelines and prevent oil exploration will harm Canada economically and will have no positive impact on global emissions. Furthermore, the impacts of this decision would be principally borne by Indigenous communities who are disproportionately industry partners when compared to non-Indigenous Canadians.  

To transition to a clean future requires replacing higher-emitting sources, such as coal, with relatively lower-emitting sources such as oil and natural gas. The extractive industry also provides the funds and resources necessary for government to fund further transitions, including to wind, solar, nuclear, and other non-emitting sources, as well as toward technologies which are ultimately at the root of both mitigation and long-term carbon neutrality.

3:30 p.m. — Sean Speer: The Conservative platform highlights foreign policy while the world watches Afghanistan

Conservative Party leader Erin O’Toole broke with campaign convention and released his full policy platform this morning.

The platform, which policy expert Alex Usher described as “one of the most detailed manifestoes ever released,” contains hundreds of policy promises covering the full range of federal policy areas. It’s the type of policy agenda that could easily populate ministerial mandate letters across the government and keep incoming ministers busy for several months and even years.

The Conservative platform has short- and long-term dimensions. Short-term measures include a temporary hiring tax credit following the expiration of the Canada Emergency Wage Subsidy, an investment tax credit to stimulate business investment in 2022 and 2023 and a one-month GST holiday this fall for retail purchases. Longer-term measures include the creation of a new Canada Advanced Research Agency to support high-risk, high-reward projects, liberalizing foreign ownership restrictions in the telecommunication sector, and progressivity-enhancing reforms to the Canada Child Care Expense Deduction.

Similar to the NDP’s platform, the Conservative plan currently doesn’t provide individual costing or an overall fiscal plan. That will follow in the coming days as the Parliamentary Budget Office assesses the measures and provides its own estimates.

It’s fair to say, though, that the Conservative policy promises won’t significantly accelerate deficit reduction efforts and may indeed contribute to longer-term costs for the federal government including, for instance, a promise to increase the growth rate of the Canada Health Transfer to at least 6 percent per year. It’s remarkable how much the fiscal policy debate in Canada has shifted from the 2015 federal election when the Liberal Party first broke ranks with the other parties and committed to deficit spending.

Given the platform’s comprehensiveness, there’s much to unpack here and The Hub’s crew of experts will provide further analysis on individual policy promises — including those related to innovation, housing, and fiscal federalism — in the coming days.

But one policy area worth flagging is national security and foreign policy. The Hub’s associate editor Amal Attar-Guzman recently wrote about the big, sweeping changes occurring in the realm of geopolitics (including, for instance, the growing U.S.-China rivalry) and the need for the political parties to outline their respective plans for Canadian foreign policy.

While one may agree or disagree with the Conservative positions on these issues, it’s notable that the party’s platform dedicates as much attention to them. There are policy promises related to cybersecurity, Arctic sovereignty, military reform (including procurement), trade and investment screening, international development, NATO, the United Nations, Canadian policy around the world, and its relationship with China.

This is, for all intents and purposes, a mini-foreign policy statement that seems highly relevant in light of real-time developments in Afghanistan. It should put pressure on the other political parties to put forward their own ideas and vision for Canada’s place in the world. That’s a healthy sign for next 35 days.

2:25 p.m. — Green Party leader unveils ‘three simple things’ to combat climate change

Green Party leader Annamie Paul was in Toronto today to announce what she described as “three simple things” to fight climate change.

Paul said her party will ensure not even “one single new pipeline” will be built in Canada. The Green leader also said her party would not support fracking in any form and would block any new oil exploration projects.

2:00 p.m. — Sean Speer: NDP platform promises significant new entitlement programs

The Hub’s editor-at-large Sean Speer takes a first look at the NDP’s full platform:

It’s barely one day into the federal election campaign and we already have full policy platforms from two parties.

The New Democratic Party released its full, 115-page platform on August 12 — three days before the campaign officially kicked off. The Conservative Party released its platform this morning (and we’ll have more on that later today).

Although we’ll undoubtedly learn more about the NDP’s individual policies (including its multi-year fiscal plan) over the course of the campaign, the full platform provides an overall picture of how the party is interpreting the big issues facing the country and the proper role of government to respond to them.

It’s fair to say that the NDP’s general focus is on issues of equity and fairness and its predisposition is to a more active role for government in regulating the private economy (such as “price caps” on cell phone and internet bills) and providing for direct service provision (such as a national pharmacare model). Its expanded view of the state would be paid for by a combination of ongoing deficit spending and a more progressive tax system, including higher taxes on luxury goods, a COVID-19 “excess profits” tax and a new wealth tax.

In terms of specific policies, two signature proposals are (1) a national pharmacare model and (2) a permanent $2,000 per month income support program as a well as a promise to establish a “guaranteed livable income.” These policies would represent significant, new federal entitlement programs depending on program design and generosity.

On pharmacare, the platform commits to an initial annual budget of $10 billion — though the Parliamentary Budget Office has previously estimated that a national pharmacare model would cost between $20 billion and $22 billion per year.

The NDP plan emphasizes that bringing prescription drugs into the single-payer model would generate savings for Canadian businesses who would no longer need to pay for employee drug insurance plans. The platform estimates that these savings could amount to “approximately $600 per employee with extended health benefits every year.” (It’s hard to assess the likelihood or magnitude of such savings given that (1) employees losing their employer-provided health benefits would presumably want pay increases and (2) the high costs of pharmacare may necessitate business tax increases.)

The bigger risk, however, is that the transition from employer-provided plans to a government formulary would narrow access to different medicines for Canadians. There’s evidence, for instance, that current public plans for low-income citizens or seniors cover a narrower range of drugs than most public plans and are generally far slower to add new ones. The upshot is that the large majority of Canadians who are currently satisfied with the access and affordability of prescription drugs could be negatively impacted.

As for the commitment to a “guaranteed livable income,” we’ll need to learn more about the design and generosity of the NDP’s promise. It’s worth highlighting, though, that analysis by economist Kevin Milligan shows that a basic income model invariably faces an “impossible trinity” between a basic income’s generosity, work effects, and affordability. Even in the most modest case, the incremental cost to government could be as much as $165 billion per year.

The NDP should be lauded for putting out its full plan for voters so early in the campaign. As we learn more — including its projected overall fiscal implications — The Hub’s experts will provide further independent, non-partisan analysis of what the various policies will mean for Canadians and the country as a whole.

1:30 p.m. — Trevor Tombe: The Liberals and Conservatives want to create one million jobs. Is it feasible?

University of Calgary economist Trevor Tombe evaluates the “one million jobs promise” from the Liberals and Conservatives:

Canada’s 44th general election is underway, and in his opening remarks Conservative Party leader Erin O’Toole committed to recovering one million jobs. This commitment is shared by the Liberal Party and has been a recurring commitment by the federal government leading up to the campaign.

Is this feasible? And if so, when might it happen?

The latest data from Statistics Canada shows Canada’s overall employment in July was just under 18.9 million. This is roughly 760,000 fewer jobs than if pre-COVID trends in employment growth continued, though nearly three million jobs above where we were in April last year. Projecting forward, employment of 20 million was likely by next year.

Though a large commitment, achieving it is feasible. It requires returning to pre-COVID trend plus modest growth afterwards. As the overwhelming majority of employment not yet recovered is accounted for by accommodation, food services, recreation, retail, and other sectors directly affected by the pandemic, large employment growth appears possible as public health conditions improve. 

Ups and downs are surely to come, but increasing employment by one million jobs over the next year or two appears feasible without significant effort by whoever forms government.

11:25 a.m. — Liberals promise to extend pandemic recovery hiring program

Speaking in Longueuil, Quebec, today, Liberal leader Justin Trudeau promised to extend the recovery hiring program for businesses hit hard by the COVID-19 pandemic.

Trudeau also announced support for especially hard-hit industries, like tourism and the arts, with temporary wage and rent support of up to 75 percent of business expenses throughout the winter.

The Liberals would also launch a new arts and culture recovery program to match ticket sales for performing arts and live theatres to compensate for reduced capacity due to the pandemic.

11:05 a.m. — Conservatives reveal party platform

In Ottawa this morning, Conservative leader Erin O’Toole revealed the party’s entire platform. We’ll be digging into it today and throughout the campaign.

O’Toole said the Parliamentary Budget Officer is in the process of costing the platform and the Conservatives will release an updated version when that is finished.

This afternoon, we’ll have analysis on the newly-released NDP platform from The Hub’s editor-at-large Sean Speer.

10:50 a.m. — NDP would go after ‘hundreds of companies’ that paid dividends after using wage subsidy program

NDP leader Jagmeet Singh was in Toronto this morning to announce that an NDP government would go after companies that took pandemic relief from the government and then later paid out dividends to shareholders.

Singh said that “hundreds of companies” used government programs — such as the wage subsidy for companies that experienced a drop in revenue during the pandemic — and then paid “millions of dollars in dividends” or increased executive pay.

Reporters pressed Singh for more information on how enforcement would work, but the NDP leader didn’t offer any details.

10:40 a.m. — In elections, all event start-times are rough guesses

Each morning the candidates issue press releases letting reporters know where and when they will be making announcements. One long-standing tradition of election campaigns is that these times are wild guesses, at best.

We’re still waiting for Liberal leader Justin Trudeau’s 10 a.m. news conference to start and NDP leader Jagmeet Singh’s announcement is also delayed.

We’ll have updates as soon as they begin.

6:00 a.m. — Party leaders fan out for first full day of campaigning

The itineraries for the party leaders are trickling in for the first full day of campaigning.

Liberal leader Justin Trudeau will be in Longueuil, Quebec, this morning at 10 a.m. to make an announcement about Canadian businesses.

Conservative leader Erin O’Toole will be in Ottawa to provide details on the party’s plan to rebuild the economy in the wake of the COVID-19 pandemic. O’Toole will be speaking to reporters at 11 a.m.

NDP leader Jagmeet Singh will be in Toronto Monday morning “to announce measures to make the ultra-rich pay their fair share.” Singh’s news conference kicks off at 10:30 a.m. ET.

Green Party leader Annamie Paul will also be in Toronto to make an announcement about the party’s climate platform at 2:25 p.m. ET.

Stay tuned for more details about the events and real-time analysis of the policy announcements.

Sunday — Trudeau visits Governor General to kick off the campaign

Prime Minister Justin Trudeau brought his family to Rideau Hall on Sunday to ask Gov. Gen. Mary Simon to dissolve Parliament, triggering the country’s 44th federal election.

We’ll be bringing our readers instant policy analysis on every issue that arises during the campaign but, as we get ready for the flurry of campaign announcements, University of Calgary economist and The Hub contributor Trevor Tombe has some general advice for evaluating the proposals from each party.

“During the election, voters should ask what problem proposals are aiming to solve. If it’s unclear, that is a red flag,” wrote Tombe on Sunday.