THE WEST BLOCK
Episode 14, Season 5
Sunday, December 13, 2015
Host: Tom Clark
Guests: Bill Morneau, Tom Mulcair, Mark Kennedy, Susan Delacourt, Evan Solomon
Location: Ottawa
On this Sunday, how did he get it so wrong? Finance Minister Bill Morneau is here to explain just how the government miscalculated the cost of the tax cuts.
During the campaign he promised he wouldn’t run deficits. Today, NDP Leader Tom Mulcair isn’t so sure.
And “voguing” on Parliament Hill lionized by the New York Times, why the world can’t stop talking about Canada’s new prime minister. We unpack the politics with our panel of journalists.
It is Sunday, December the 13th, and from the nation’s capital, I’m Tom Clark. And you are in The West Block.
Well when the government sat down to look at their numbers after the election, the story wasn’t as good as they had hoped. The government promised to cut taxes and do it without costing any money at all, but that’s not how things added up. The deficit continues to grow, but the government says that is not the number to watch. For more, here it is, your West Block primer:
Voiceover: Let’s say Fred and Ethel bring in $50 thousand dollars a year, but between mortgage, food, vacation and a roof that always needs fixing, they spent $55 thousand. Well that’s a debt of $5 thousand dollars or 10 per cent of Fred and Ethel’s revenues. Let’s call those their personal Gross Domestic Product (GDP). Now, if they don’t repay the debt and do the same thing year after year, well within three years, their debt will be more than 30 per cent of their GDP—yikes! But here’s an idea, bring in more money. The debt is still there, but it’s not as big in comparison and there’s more money around to repay it. And that’s where Ottawa is right now, around 30 per cent. The economy is growing, but slowly, and the Liberals want to borrow more money. What matters to the lenders is whether that percentage goes up. If it does, sunny ways will give way to darker days.
Tom Clark: And joining me is Canada’s new finance minister, Bill Morneau. Mr. Morneau thanks very much for being here.
Bill Morneau: It’s really great to be here.
Tom Clark: We were just talking about debt to GDP, so let me ask specifically, going forward, are you prepared to see that debt to GDP ratio in Canada increase at all, even a point as you go into deficit?
Bill Morneau: Well, I mean it’s a good question and it brings me to really what the key measures are that we’re going to look at over the course of our mandate and beyond to make sure that we’re managing the economy well. The first thing we’re going to focus on, no matter what, is going to be growth. So you heard during the course of our campaign that we were planning on making investments in infrastructure, we were planning on doing other measures like reducing middle-class taxes. These measures are really intended to enhance our growth rate in this country, but the debt to GDP ratio is really about being prudent as we do that. So making investments is the right thing to do, but we actually aspire to reduce that net debt to GDP ratio through the course of our mandate. So we don’t have any intent on raising that. In fact, we’re going to make these investments while still lowering the net debt to GDP ratio over the course of our mandate. And the final issue is, we do want to get to a balanced budget and that’s really about getting it to by the end of our mandate. So these are the measures we’re looking at, how can we grow the economy, how can we be prudent along the way, and how can we help Canadians understand where we’re going to try and get to?
Tom Clark: Well one of the things though that adds to a deficit are more costs, more expenditures, and last week you uncovered and you announced that, in fact, that middle tax cut is going to cost us money. We were told during the campaign by you and others, no, no, it’s a wash, it’s going to be revenue neutral, our hike on the top 1 per cent is going to pay for the tax cut for the middle class. In fact, that’s not the case. How’d you get it wrong?
Bill Morneau: Well, it’s important to understand that these are about estimates. These are about estimates of costs in the future from economists. So what we’re really trying to do is to say that we want to be transparent and we want to be prudent. So when we tell people that there’s a difference between those two numbers, it’s really about being prudent and saying to the extent that this is going to cost a little bit more, we want people to know. We need to factor that into our plan over the course next few years.
Tom Clark: But you said during the campaign it would be revenue neutral and there was no ifs, ands or buts or aspirations about that. That was a solid promise that you made and now, it disappeared.
Bill Morneau: Well, the promise didn’t disappear. What happened is, I sat down with department officials, department of finance officials, and we looked not at what the tax increase and the tax reduction were, but we looked at what the changes would be over time and came up to an estimate of what we thought might happen. And we wanted to make sure that we were prudent in giving people a clear understanding of what could happen in terms of the cost and the benefit of that. So, this is about us making sure that we take a good hard look at the numbers and we give people a really transparent way of understanding what might happen because that’s got to be factored into our plan. When I say we’re going to get to a lower debt to GDP over the course of our mandate, we need to take everything into account as we go there. Similarly with getting to a balanced budget over time, that means we need to take into account all of our promises and all the things we’re going to do.
Tom Clark: Let me ask you because last Friday, you made an announcement about changes to how much money people are going to have to put down to own a house, but I want to go beyond that a little bit because perhaps you’re trying to cool down or stabilize a market, but because the message of your government is about the middle class, does that in any way make it more affordable for the middle class to live in cities like Toronto or Vancouver, or does it even touch on that?
Bill Morneau: Well I think it does. I mean our objective here is to make sure that we’re making a stable housing market for Canadians across the country. So for me, one of the very first briefs I asked the department of finance people to put forward when I got into my new role was the housing market, to understand what’s going on. We looked at a couple of pockets of risk, and specifically those pockets of risk were in Vancouver and in Toronto where the cost of housing is going up more rapidly than incomes and we wanted to deal with that. By taking away those pockets of risk or by moderating the risk, what we’re doing is we’re asking people that are buying a home between $500,000 and a million dollars, to have a higher down payment in that area.
Tom Clark: But it doesn’t make it more affordable for the middle class.
Bill Morneau: It doesn’t, but it creates a more stable housing market, which is better for all Canadians and it likely takes away some of the risks, which is helpful.
Tom Clark: Fair enough, and I understand that about the risks, but I think a lot of people out there are saying, you know, if you’re a young person – first-time homebuyer or anybody for that matter – wanting to buy in Vancouver or Toronto, to pick two cities, $500,000 dollars to a million dollars, it’s not going to get you very much. It’s very expensive to do that. So if the drivers of high housing costs are, among many, low interest rates and foreign money coming in buying up property, realistically, is there anything that you can do to affect either one of those two things that would literally slow down the increase in the housing markets? Or is this something you just have to sit back and take a look at and hope for the best?
Bill Morneau: Well, what we’re doing is exactly intended to do what you just asked. First of all, we’re recognizing that we don’t want to stop the opportunities for first homebuyers because we’re not impacting those homes under $500,000 at all. The down payment there will stay at 5 per cent, so incrementally they’ll be 5 per cent more to 10 per cent for the portion between $500,000 and a million.
Tom Clark: Bill Morneau, Canada’s finance minister, I appreciate your time today. Thank you very much for joining us.
Bill Morneau: Thanks very much. Great to be here.
Tom Clark: Coming up, does Tom Mulcair still think that balanced budgets are the way to go? That’s next.
Tom Clark: In the last election campaign, Tom Mulcair promised that if he were elected, he would not run a deficit, a position that he shared with Stephen Harper. But given falling oil prices and slow economic growth, does he still believe that? Or like the Liberals, believe that the time is right to stimulate the economy by going into deficit? I sat down with the NDP leader to ask just that, among other things. Here’s that interview:
Tom Mulcair, good to have you back.
Tom Mulcair: Glad to see you Tom.
Tom Clark: In the last election campaign, you campaigned on the idea that this country should have a balanced budget right now and for many years to come. Do you still believe that?
Tom Mulcair: Well I think that what we were proposing made sense. We’ve said that there have been $50 billion in tax reductions for Canada’s richest corporations, let’s have those corporations start paying their fair share which generated billions for us to do things like preserve free universal health care and bring in universal quality affordable child care. Make the corporations pay more. That was our approach. The government that got elected said we’re going to leave that debt on the backs of future of generations. Different approach, but we thought we could do it properly that way.
Tom Clark: But at a time when the current government is saying $10 billion plus in terms of a deficit for this coming fiscal year and two years after that, is that something you can support or are you sticking to the idea, as you did in the campaign, that the budget has to be balanced?
Tom Mulcair: Back in 2008, when the biggest financial crisis since the 1920s hit full force, we were the first ones front and centre saying, now’s the time for stimulus spending. So exceptional times require exceptional moves by the government and that type of deficit spending was absolutely called for. But more generally, you should tend, as a matter of public administration, to try to do the good things that governments are supposed to do, like remove child poverty. And those are the things that are the values of the NDP. Provide universal, free health care. You should try to do that, taking a balanced approach. It wasn’t balanced to give $50 billion in tax reductions to the richest corporations. The other thing Tom, I think that we can say is the value of most social democrats is our number-one job is to remove inequality in our society and one of the things I firmly believe is that the biggest inequality today is between generations. So before dumping more social, economic and ecological debt on the backs of future generations, you have to have a good reason to do it.
Tom Clark: Just to really nail this down though, if you feel that we perhaps are going into extraordinary times because of the price of oil and because you have said in extraordinary times you do things like infrastructure spending, which means deficit spending. In your mind, are we at that point where you could support deficits going forward for a few years?
Tom Mulcair: We’re not in a recession now. We just got the most recent figures for the past quarter which shows that Canada is actually growing despite the problems in the oil sector. So no, I don’t think that as a matter of course we should be running huge balloon deficits with nothing to show for it. If you’re going to make sure that the government is spending to do the things that we need it to be doing, then the way to do that is to make sure that the revenue side is coming in and we left a big hole on the revenue side by giving these massive tax breaks to Canada’s corporations.
Tom Clark: Let’s move on to Syria for a moment, another issue that you’re going to be facing in terms of government action in the next little while. You, like the Liberals, agree that we should not be involved in the bombing campaign. Do you agree that we should have more boots on the ground, Canadian boots on the ground in a training capacity?
Tom Mulcair: No, we don’t and we have been clear about that. Cut off the flow of money. Cut off the flow of arms. Cut off the flow of foreign fighters, that’s the approach that we would take.
Tom Clark: But not even training?
Tom Mulcair: No.
Tom Clark: But training the Peshmerga troops, they’re not invading, they live there.
Tom Mulcair: Um-hum.
Tom Clark: So what would be wrong with training them up to either defend their own lands or to try and defend the lands of their neighbours?
Tom Mulcair: And look at our NATO ally in Turkey, what has been their attitude towards the Peshmerga and who are they? They’re the Kurds, and they’re the Kurds who are a great source of concern to our NATO ally and yet they’re now our allies. So again, this is a question of cross allegiances and interests. Canada, as far as the NDP is concerned, has no interest in sending our troops in that fight.
Tom Clark: You know, I’ve known you for a number of years—
Tom Mulcair: Yes we have known each other for a long time.
Tom Clark: You know, of your many admirable traits, you’re very disciplined and you’re very focused on the policies, but you’re also a human being. Did that hurt?
Tom Mulcair: The election result?
Tom Clark: Yeah.
Tom Clark: Are you going to lead this party into the next election?
Tom Mulcair: I certainly hope so. And in our party, because we are the New Democratic Party, at every single convention, the members get to decide. So I serve at the will of the members and I’ll continue to do that as long as they desire. Across the country, I’m going to continue also to let Canadians know that there is one strong progressive voice here in Parliament.
Tom Clark: Tom Mulcair, always good talking to you. Thanks very much for the time.
Tom Mulcair: Good to see you. Thank you.
Tom Clark: Coming up next, how the world sees Justin Trudeau. From the outside in, we unpack the politics.
Tom Clark: Welcome back. Well last week, the House was back in session and apparently being a Canadian politician is in vogue. I mean really in Vogue. Joining me to talk about all this, Mark Kennedy, the parliamentary bureau chief for the Ottawa Citizen; Susan Delacourt, author and journalist for the Toronto Star; and our friend Evan Solomon, Everything is Politics on Sirius XM Radio and columnist for Maclean’s Magazine. Welcome back.
Well okay, let’s start first of all with the session. We have now seen Justin Trudeau as the prime minster. We’ve seen Rona Ambrose as the leader of the Opposition, so let’s rate it over the week, how did everybody do? Susan?
Susan Delacourt: I’m giving it a six. You know, it hasn’t been scintillating. I’ve appreciated a slight elevation in tone. You see them falling back into their bad habits. But six with room to improve.
Tom Clark: Mark?
Mark Kennedy: A-.
Tom Clark: A-, now you’ve confused me.
Mark Kennedy: Yeah, I know. So listen, I think all around, we’re seeing some leaders that are performing well in the House of Commons. We always knew that when Justin Trudeau was the leader of the third party way back there in the corner, standing up reading his canned lines, he didn’t do it well. And he didn’t do it well because he didn’t believe in the place. He didn’t believe that the fake outrage was him and that it was necessary, so he always bombed. As prime minister, we’ve always known haven’t we that when we’ve sat down with him and we’ve interested him that he’s comfortable in that setting where he takes questions. I think we’ve seen a man stand up, relaxed, he knows he performed well in the campaign and he thinks he’s going to perform well on his feet.
Evan Solomon: I’d give it a seven and a half, B-, B+. Trudeau has done really well. He had a bad first day looking nervous and then all of a sudden, it was a new leaf. He threw away the notes. He was very confident, he looked good doing it, he seemed happy, he just looked very much in command, even as they were breaking promises the way you break eggs. I mean they were breaking promises on their budget. They were breaking promises possibly on deficit sizes, on Syrian refugees, mail delivery, yet, you know what? They look good doing it, so that is important. Rona Ambrose has been the big surprise. She has been absolutely superb, concise questions, confident questions. As a minister, you never got anything out of her. This is the most unexpected turnaround. I think she’s done really well. And Tom Mulcair does extremely well in the House, but he does look like someone stole his red bike, and it was a red bike.
Tom Clark: Yeah. And one little note, and this is maybe a little bit inside baseball, but I noticed that Justin Trudeau on his second day in the House stop referring to his notes for his answers, as did most of the ministers. One of the hallmarks of the last Parliament was that every question was read and every answer was read. The Opposition for the most part are still reading their questions and discovering their outrage in the second line, but this may be a positive move in the House that if it really becomes a place of discussion where you don’t read from notes and talking points, this could be a real change.
Susan Delacourt: Well, where did we learn that? It was during the debates, during the election. I think we remember that the first couple of debates were, for Trudeau, were rough for him because he was reading. He was standing still and not relaxed and then we saw the Munk debate happen where a) there was an audience and also he seemed to find his centre of gravity or whatever. So, I think we don’t even have to go back to the last Parliament, but just to the debates to see where the lessons were formed.
Mark Kennedy: But there’s no doubt. Listen, one of the dispiriting things about the House of Commons that we’ve all witnesses over the last number of years is how smart people, people who get elected in their own constituencies and are people of stature back in their own towns, stand up and read lines written for them by people in their early 20s. They don’t have to do it either on the government side or on the Opposition side, so this is a good sign.
Tom Clark: I can’t—I’ve got to jump on because I just can’t help myself any longer. The picture we all are talking about, and I’m talking about what appeared in Vogue Magazine. With not only Justin Trudeau, but his wife Sophie Grégoire-Trudeau, as she now wants to go by. And also, a cover story in the New York Times Magazine. The rest of the world, and especially the American media machine, is now beginning to devour the Canadian prime minister.
Evan Solomon: Well look, Trudeau has proven one thing. He speaks a language that neither Harper nor Mulcair understood. The language of the image, and he’s very comfortable in it and they’re very crafty in it. During the campaign they had a Chatelaine issue where he talked about his family. Why? Internal polls show Canadians did not view Justin Trudeau as a father figure. They viewed him as a kind of cool single guy. They wanted to make him a family figure, so they had those pictures. Now there’s a Vogue issue. He’s very cleverly mastering the image. I think the Vogue image is interesting. The most potent and powerful image, if there is one of the week, it is Justin Trudeau greeting the Syrian refugees for the entire world, especially given what’s happening in the United States. A prime minister, much of his cabinet, the premier, showing open arms to Syrian refugees is one of the singularly most powerful images, not just nationally, but internationally in this crisis. Very sophisticated management there.
Susan Delacourt: And at Christmas time, perfectly imitating the opening scene of Love Actually at Heathrow Airport. Yeah, I agree with Evan, these guys know exactly what they’re doing image-wise. I was intrigued by the timing because magazines, as we all know, have long production times and Justin Trudeau, in a busy first few days, gave a huge interview to the New York Times and to Vogue Magazine, not to Canadian outlets, which shows that he wants something from the United States and I think we should ask him what it is that he wants.
Mark Kennedy: Justin Trudeau knows the power of symbols. The fact that he decided to go to the Toronto Airport and personally greet families, show them the clothing they would need because we do have a cold climate, remarkably symbolic and powerful, emotionally powerful. And the fact that he’s now on the world stage speaking to American outlets, having that picture out there. Also he knows that, I think, Canadians want a celebrity. He knows that Canadians want someone who would out in the world stage—
Evan Solomon: Hard power versus soft power. Harper’s hard power and boy did the Liberals and Trudeau understand the power of soft power.
Mark Kennedy: The question is though; people may become tired of that. I mean it might be fine now. A year or two or three years from now, if they don’t deliver on their platform, people may quickly become fatigued of that.
Tom Clark: But take a look at the accelerator factor that’s going to happen. There’s going to be an official dinner. It’s not a state dinner, it’s an official dinner, but nevertheless, it’s the most glittering affair that Washington can put on. It’s going to be jammed with celebrities—
Mark Kennedy: And he’s boasting of that isn’t he? Mr. Trudeau is boasting of that.
Susan Delacourt: Twice this week he’s been boasting about it.
Tom Clark: But it’s been 19 years since an American president has hosted a Canadian prime minister at the White House in that fashion. It was Bill Clinton with Jean Chrétien. They had a very special relationship.
Susan Delacourt: Even though Chrétien always said he never wanted to be fishing buddies with the president of the United States—
Tom Clark: They didn’t fish, they played golf. So he was—
Evan Solomon: My question is what do you catch? Obama’s already killed the Keystone XL pipeline. He’s already moving into his almost lame duck phase where he’s throwing a lot of parties and saying a lot of stuff, but you know, it’s really what Hillary Clinton thinks and what whoever emerges from that Republican morass thinks. But Trudeau, whoever it is, is clearly saying Canada matters in Washington and that is going to be important.
Tom Clark: But when you use celebrity-hood, as you say Mark, there’s two sides to that coin. But it does give you an opportunity to do things that you wouldn’t have the opportunity to do if you hadn’t been that celebrated around the world. If you’re smart, you take advantage of it.
Mark Kennedy: You’re smart because when you go to Washington, the Washington Post and the New York Times is going to sit up and notice and they’re going to write that. It’s a story. An American reporter, suddenly you’re going to care and that is probably going to put pressure on the White House.
Tom Clark: And what’s the biggest question any Canadian in Washington always asks: how do we get noticed? Well, now, I guess Canada’s back. Actually, we’re not back because we’ve never been there, but we’re in uncharted territory. I want to thank you very much and I want to thank you for bringing up the movie Love Actually because only Susan Delacourt can do that.
Evan Solomon: It’s only movie references in this new world, is that it?
Susan Delacourt: That’s right.
Tom Clark: Susan Delacourt, Mark Kennedy, Evan Solomon thank you all very much for being here. I appreciate it.
Well that is our show for today. We’d like to hear from you, your comments on the issues and the guests that appear on this show. Here are the addresses where we can be reached. In the meantime, have a great week ahead. I’m Tom Clark. We’ll see you back here next Sunday.
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