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Shawn Whatley: Canada’s conservatives care about freedom—except in health care

Commentary

Canadian conservatives—particularly these days under Pierre Poilievre’s federal leadership—say they embrace freedom, free enterprise, and limited government. But too often conservatives at the federal and provincial levels have abandoned these intellectual commitments in office. Their past and ongoing support for central planning in health care is a good example.

Canada’s health-care system is marked by a government monopoly on certain types of insurance and similar top-down restrictions on the delivery of health care itself. Conservative governments across the provinces have been unwilling to liberate Canadians from this dirigiste model.

The paradoxical relationship between Canadian conservatives’ notional commitment to freedom and their practical affirmation of central planning in health care is best demonstrated by Ontario Premier Mike Harris’s health-care restructuring in the late 1990s.

Premier Mike Harris: the best central planner in Canadian history?

Will Falk, a former management consultant, recently wrote a detailed review, analysis, and scorecard of the Harris government’s health-care agenda in a new anthology about the premier’s record entitled, The Harris Legacy. Falk’s focus is the government’s Health Services Restructuring Commission (HSRC) and its effects on the province’s overall system and patient outcomes. He writes:

The Harris health program represents exceptionally well-done central planning. This is striking and ironic because a true ‘revolutionary’ of the ‘common sense’ school should not believe in central planning at all…Mike Harris ended up being among the best health care central planners in Canada’s history.

As Falk observes, though the Harris Conservatives were generally quite committed free marketeers (he notes for instance that many young staffers were acolytes of the Nobel Prize-winning and libertarian economist Friedrich Hayek), the government’s health-care policy preached freedom but actually practiced coercion. He explains:

As neoconservative revolutionaries, the CSR’ers ‘should’ have chosen an allocative method that would allow for freedom of choice…Instead, in 1995, the Harris government imposed a highly coercive, expert regime. The HRSC central planners closed over forty beloved institutions. More than 20,000 workers had their jobs disrupted.

Falk leaves no doubt in his conclusion: “It is ironic that Mike Harris is accused of being a free market advocate in health care while overseeing one of the best central planning processes in Canadian history.”

Two sides of Keynes

Reading Falk’s description of the Harris government’s health-care reforms got me thinking about the two forms of Keynesian thinking that came to influence post-World War II public policy and remain with us today.

The first form is John Maynard Keynes’ economic thinking which included the rather banal idea that governments can help to smooth the ups and downs of the business cycle in a market economy. One can argue for instance that the Harper government’s fiscal stimulus in response to the 2008 global financial crisis broadly followed Keynes’s counter-cyclical prescription.

The second is from Keynes, the philosopher, whose technocratic ideas became something of a “generalized theory”—particularly after his death. What sometimes describes as “bastardized Keynesianism” became a justification for all types of state intervention in the economy and society. His views about business cycles, which were contingent and narrow, were moulded and shaped into a scientific socialism that was subjected to virtually no constraints.

We came to abandon parts of economic Keynesianism in the post-stagflation era in the 1970s. But the “bastardized” parts remain prevalent in public policy thinking and practice, including in parts of Canadian health care.

Poilievre, freedom, and conservatives opting out

Free enterprise offers the best way out of a socialist slough. It worked well in the era of Reagan and Thatcher. It should work for Poilievre if he’s elected prime minister.

But will conservatives affirm freedom in health care and abandon the bastardized Keynesianism that still prevails today?

One possible answer can be found in a recent interview with Hub contributor Ginny Roth in which she said:

When Conservatives are losing, sometimes it’s tempting to opt out of the policy conversations that we think we are losing on. Provincially, this always happens: ‘Don’t talk about health care and education. Conservatives lose when we talk about health care and education.’

This instinct to “opt out” may be viewed by political strategists and the politicians as they advise as good short-term politics. But the long-term result is to effectively abdicate public policy to their political opponents. What’s the point of winning if you’re simply going to implement the other side’s priorities?

Conservative Party Leader Pierre Poilievre speaks during a press conference at the Ottawa Children’s Treatment Centre wing of the Children’s Hospital of Eastern Ontario in Ottawa, on Sunday, March 19, 2023. Spencer Colby/The Canadian Press.

If conservatives are genuinely committed to freedom and free enterprise, then they should propose legislative and policy changes to the health-care system that foster more freedom (including competition and choice) and reject the central-planning instinct inherent in Keynesianism.

Put differently: conservatives have only two realistic options. They can opt out of the health-care discussion and cede the terrain to progressives or they can apply their principles to a much-needed reform agenda. They must, in the interests of Canadians and their well-being, choose the latter.

One key area for policy reform is to insist on greater provincial autonomy and in turn interprovincial competititon and experimentation. This requires clarity on federal-provincial health-care mandates and a circumscribed federal spending power—including even something as bold as a possible constitutional amendment to limit it on a permanent basis.

Regardless of what approach they take, the federal Conservatives face a wide-open field in calling for market-friendly universal health care. No other party will steal their platform. They should resist therefore the temptation to match the Liberals on boutique health policies and instead fight for policy freedom in Canada’s most heavily regulated industry. At its core, this means granting clinicians and patients to build their own solutions safe from regulators and planners.

Poilievre has offered three cheers for freedom. He doesn’t sound like a Keynesian planner. Let’s hope he expresses the same enthusiasm for freedom in health policy.

Mike Moffatt and Cara Stern: The dream of Canadian homeownership is dying. Here’s how to revive it

Commentary

If you want a well-functioning economy, people must have hope that hard work will lead to success. But in Canada, people are giving up. A recent poll by Abacus found that a full 74 percent of Canadians believe housing affordability will get worse for first-time homebuyers in 2024 and that 57 percent of non-homeowners are either pretty pessimistic or have given up hope entirely of ever being able to buy a home. That’s up from 48 percent since September 2023. 

Locking young people out of home ownership is bad for the political fortunes of incumbent governments and bad for the economy. It is also a threat to the social stability of Canada, according to a recent RCMP report. Therefore, all orders of governments need to restore the dream of homeownership to Millennials and Generation Z, while creating abundant options for renters.

Additional housing supply for both owners and renters is necessary. But building new supply will take time. Governments cannot expect people to feel good about the measures taken to increase housing supply if they’re living in unsuitable spaces, with only the promise that supply may restore affordability in a decade or more. Canadians need solutions now, so the government needs to find ways to get existing homes into the hands of first-time homebuyers. 

We believe it’s possible to attack the demand side of the equation to get first-time homebuyers into homes sooner. This goal can be accomplished through a three-part plan of scaling back international student enrollment, creating incentives for investors to return single-family homes to the ownership market, and making it easier for first-time homebuyers to qualify for mortgages. The key is that all of these reforms must be implemented together for it to have an effect.

Getting more single-family homes back into the hands of families

The only immediate way to increase homeownership for younger families is to make it easier for them to buy homes that already exist or are about to be completed. In Ontario alone, there are nearly 700,000 single-detached, semi-detached, and row homes that are not occupied by their owners but are serving some other purpose. 

While homes being left unoccupied or turned into short-term rentals receive a great deal of attention, the majority of these investor-owned homes are being used as long-term rentals, often for university and college students. With the international student boom, entire neighbourhoods are getting converted into student rentals. These conversions reduce the number of homes available for families but also cause inefficient use of existing infrastructure. It leaves local elementary schools underused because these neighbourhoods then lack children.

International students and other non-permanent residents add to the social, cultural, and economic fabric of Canada. However, for them to thrive, they must have adequate housing. Canada’s international students and temporary foreign workers programs need to be scaled back even more until Canada’s non-permanent resident population returns to pre-pandemic levels. The scale of the international student program, in particular, should be tied to the construction of on-campus or near-campus housing. This could help prevent the loss of single-family neighbourhoods in our cities.

Governments should then create incentives for the current owners of those student rentals to return them to the market to be used as homes for actual families. A time-limited and temporary reduction in capital gains tax or provincial land-transfer taxes when selling a secondary property could act as such an incentive. For example, the capital gains inclusion rate could be lowered for any single-family home or condo unit purchased before January 1, 2024, so long as that unit is sold to a buyer using it as a primary residence, and the sale is completed between July 1, 2024, and July 1, 2027. This measure would incentivize investors to return those units to the ownership market. Over the longer term, the tax system should be designed to disincentivize investors (from mom-and-pop investors to large domestic and foreign corporations) from buying up existing single-family homes and instead incentivizing them to provide capital only to new home construction (rental and ownership).

While having investors sell their portfolio of single-family homes will increase the supply of homes available for purchase and put downward pressure on prices, it will still likely not be enough to allow first-time buyers to purchase these homes. Last year, home sales dropped by 11 percent due in part to high prices and interest rates, causing first-time homebuyers and young families to be unable to qualify for a mortgage at all. The drop in sales can be addressed by recognizing that the current rules could be better designed for younger homebuyers. 

For example, the current 25-year amortization rule helps ensure homebuyers will not still be paying off their mortgages when they are in their 80s or 90s. However, these rules do not take into account the age of the buyer and treat a 50-year-old and a 30-year-old the same. Because younger buyers have more time left in their working careers, they should be allowed to choose longer amortizations if they wish. A 35-year-old buyer with a 30-year amortization would still have their mortgage paid off before retirement. The federal government could create an amortization length of 30 years, but only for first-time homebuyers of primary residences. Ideally, this would only apply if one of the buyers is under 40 years old. It could even introduce 35-year amortizations for buyers under age 35. The reform would allow more young families to qualify for a mortgage and give an advantage to first-time homebuyers when they are competing with investors and older buyers for a home.

A real estate agent puts up a “sold” sign in front of a house in Toronto, April 20, 2010. Darren Calabrese/The Canadian Press.

Finally, the current stress test rules are not particularly well-designed for young professionals. The stress test is an important tool to ensure that homebuyers can continue making payments if interest rates go up or if economic circumstances change. However, the current test may be excessive for young professionals, who are likely to be earning more five years from now than they are today. Canada should consider reducing the stress test rate from 200 basis points to 50 basis points, but only for first-time homebuyers of primary residences. Or, for buyers under 40 (and the home will be used as a primary residence), who choose a fixed-rate mortgage of five years or more. As with the amortization changes, it would allow more families to qualify for a mortgage, while giving an advantage to families over investors.

It is critical that these ideas be implemented together. Policies designed to increase homeownership that do not take into account the rental market risk displacing renters. A program in the Netherlands that banned investor ownership of some housing types did manage to increase first-time ownership. But it also led to increases in rents, as lower-income renters were displaced by middle-income families. It left more renters chasing fewer rental properties. A plan to scale back international student enrollment until sufficient on-campus and near-campus housing can be built would help minimize this effect, ensuring rents do not skyrocket as rental housing is converted into ownership housing.

Governments cannot afford to wait for new supply to come onto the market to address the dying dream of homeownership in this country. Canadians cannot afford to wait that long. Demand-side policies must be a part of every government’s toolbox in 2024.