John McKay on Income Inequality
Text of the motion:
Hon. Scott Brison MP (Kings—Hants, Lib.) moved:
M-315: That the Standing Committee on Finance be instructed to undertake a study on income inequality in Canada and that this study include, but not be limited to, (i) a review of Canada’s federal and provincial systems of personal income taxation and income supports, (ii) an examination of best practices that reduce income inequality and improve GDP per capita, (iii) the identification of any significant gaps in the federal system of taxation and income support that contribute to income inequality, as well as any significant disincentives to paid work in the formal economy that may exist as part of a “welfare trap”, (iv) recommendations on how best to improve the equality of opportunity and prosperity for all Canadians; and that the Committee report its findings to the House within one year of the adoption of this motion.
Text of John's Speech:
Speaker : Mr. McKay
Time : 07/06/2012 17:31:15
Context : Debate
Hon. John McKay (Scarborough—Guildwood, Lib.): Mr. Speaker, it is a great honour to rise today in support of Motion No. 315 by the member for Kings—Hants, in which he quite properly raises the issue of income inequality, a growing inequality in this country and others in the OECD.
This country is blessed to have some very able civil servants, none more able than Mark Carney, the Governor of the Bank of Canada. When he was asked about what he thought about the occupy Wall Street movement, he did not lapse into banker's speak. He did not lapse into that mumbo-jumbo that passes for this kind of rarefied conversation that occurs among bankers and to which very few are admitted as privileged conversationalists. Rather, he said what he thought, which was we actually have a point that there is growing inequality among people, particularly in the U.S.
I do not particularly care to isolate or point to the United States because what is true there is also true here, but the U.S. operates on a much larger scale than we do. Indeed, the occupy Wall Street movement pointed to an income inequality which is far more exaggerated, I would say, than here. Some of the executives on Wall Street have incomes and wealth that would be comparable to the GDPs of small countries with a, how shall I say, dubious contribution to actual wealth generation. In many instances, it is just moving money around in various circles with no corollary whereby wealth is increased.
In Canada we are developing a similar problem and article after article talks about the difference between Main Street and Bay Street, but both the left and the right of the political spectrum are aware of the problem. I do not often quote David Frum, but he had the issue quite well nailed when he stated:
Equality in itself never can be or should be a conservative goal. But inequality taken to extremes can overwhelm conservative ideals of self-reliance, limited government and national unity. It can delegitimize commerce and business and invite destructive protectionism and overregulation. Inequality, in short, is a conservative issue too.
For those who think that tax cuts or market deregulation are the be all and end all in both industrial policy and addressing the issues of income inequality, I would encourage them to read Mr. Frum's thoughts in his article on this matter. Those, of course, on the Liberal side see social equality as a goal in and of itself. Regardless of where one finds oneself on the political spectrum, if Mark Carney says we have a problem, then we have a problem.
Lack of opportunity leads to a sense of hopelessness and a withdrawal from the basic grease that makes society function. If it can be observed that people do not participate in NGOs, charities or various social functions, et cetera, and that has been observed in the literature, then the core of our social fabric starts to fray. This, in turn, leads to some forms of antisocial behaviour, not necessarily among those who do not participate, and increased criminality, which is a draw on the resources of the state for security and other forms of cost. In other words, costs go up, cohesion goes down and frustration runs rampant.
The policy thinkers on both left and right recognize the importance of designing policies that respond to these issues. To carry on with my theme of we are blessed with very able civil servants, I would quote the deputy governor of the Bank of Canada, Tiff Macklem:
Markets work better than anything else. They have proven over time to be the best generator of prosperity. But, markets need to be guided by sound policy frameworks with clear rules that must be enforced with consistency and transparency. Effective inflation control, combined with well-regulated financial systems are critical ingredients to sustained economic growth and shared prosperity. The forces of globalization and technology change that have propelled global growth and driven rising inequality within many countries are not likely to abate. We need to harness those sources of growth while increasing opportunity for all citizens.
That is not exactly what one would expect from a deputy governor of the Bank of Canada. It is an insight into the fact that not all of the people can hoard the wealth.
I would point to, as well, this month's Atlantic Monthly which has a discussion about the issues of capital ratios. I know that will put a lot of people to sleep, and my colleague from Kings—Hants is snoring as we speak.
The issue is, in the great recession, what precipitated that, was it capital ratios or was it incentives? The author argues in the article that we had the wrong incentives, particularly in the United States, not so much here. However, we had the wrong incentives.
The capital ratios, how much capital has to be kept compared to how much money is actually being lent, were not all that different from historical norms. However, we had the wrong incentives.
The wrong incentives were essentially greed incentives. If someone is a broker, they have to do the churn because their income is based upon the churn. If someone is a CEO, they have to make that quarterly dividend or they are out the door. The market has a responsibility, so also do governments.
It is not as if the governments, and by that I mean both Liberal and Conservative governments, have been unaware of this issue. I remember when I was in finance, we worked on the working income tax benefit. It was probably one of the most intellectually intriguing but also intellectually challenging issues. I remember sitting around the finance table, trying to grapple with this as we would try to move it into the budget.
I am pleased to see that in fact the momentum of that initiative has gone forward with the current government. The universal child tax benefit was another issue that we dealt with. Again, it is an attempt to not only recognize the benefit of bringing children into the world and the costs of raising those children, but also the social inequality that comes from parenting. The Canadian child tax benefit, as well, is a less subtle way of dealing with that issue.
As I finish, I want to urge all members to support the hon. member for Kings—Hants in his quest or attempt to address issues of income inequality. I think it is a worthy motion. I think it is a thoughtful motion. I think it would be worthwhile to be referred to the finance committee and reported back to this House.