Brar and Raise the Rates managed to attract a fantastic amount of media attention, and sparked a much-needed and long-overdue public conversation about the inadequacy of welfare benefit rates. Simply put, the MLA on Welfare initiative was a huge success and fantastic public awareness exercise.

Such public awareness matters. Opinion polling we at CCPA commissioned a few years ago found, for example, that British Columbians, when asked cold, are generally split evenly on the question of whether welfare rates should be increased. But if the question is prefaced by simply telling people what rates are, support for an increase jumps to three-quarters. Meaning, when people move past the myths and learn the reality of how low benefit rates are, and how hard life on welfare actually is, they don’t like it. That’s good.

While most of the coverage of Brar’s month was sympathetic, a few negative voices were heard. In particular, the Minister responsible (Stephanie Cadieux) and the Fraser Institute made a number of media interventions in defense of BC’s abysmally low welfare benefit rates. Their comments indicate they truly need to get out of the office more — they simply have no understanding of what life on welfare is actually like.

Among the key points made by the Minister and Fraser economists was that we needn’t worry about the $610 basic rate, because a majority of welfare recipients receive more (either because they have children or a recognized disability), an amount they deem “adequate.” It’s true that most welfare recipients get more than the basic rate, but calling those rates “adequate” is way off the mark.

As the National Council of Welfare notes, those on welfare with children and those with a disability still live thousands of dollars below the poverty line. And extensive research conducted by the CCPA (a study I co-authored called Living on Welfare in BC, which followed real people on welfare over a two year period, rather than just pondering numbers as the Fraser folks have) found that even those in receipt of the higher (supposedly “adequate”) rates were still frequently reliant on food banks and other charities to meet basic needs.

Indeed, we found low rates often force people to make destructive choices – such as remaining in abusive relationships – that are harmful, and for which we are all paying.

Adequate? The family welfare incomes don’t even reach the Fraser Institute’s own thin-gruel poverty line – a line that is itself significantly lower than every other low-income measure produced in the country.

The government and Fraser Institute maintain they don’t want welfare to be “attractive.” Well, we are a long way from that. The reality is that life on welfare is a day-to-day struggle in which all one’s time and effort is spent merely meeting basic needs for food and shelter, which ironically makes it harder to find work.

If Brar’s month-long experiment teaches us anything, it is that rates need to be substantially higher, and that we need a better – more rational as well as compassionate – way to set welfare benefit rates. That’s just what Steve Kerstetter proposed in his 2006 CCPA-BC policy paper A Better Way to Set Welfare Rates. It is unconscionable that governments are content to hold welfare rates frozen year after year, as inflation eats away at the real value of a welfare cheque. And currently no clear rationale guides the setting of rates. Instead, rates should be tied to the actual costs of basic needs (ensuring that shelter, nutritious food, clothing, transportation, and other core needs are affordable) – something that is clearly not the case today. And then benefit rates should increase annually in line with inflation.

Compared to other provinces, BC ranked dead last in 2009, with the largest gap between the top 20% and the bottom 20% of income earners.

The report starts by looking at how Canada ranks in international comparisons (badly) and then goes on to look at British Columbia.  It points out that BC does much worse at using its tax and social programs to mitigate inequality than other provinces.  BC ranks 5^th on income inequality just looking at market income (excluding government transfers and before taxes) but last after transfers and taxes. As BC Stats notes, this indicates that other provinces:

have had more success in terms of redistributing income through tax and benefit systems than have British Columbia and Alberta.

The report concludes:

In a free market society like Canada there will always be some that are better off than others, but the challenge is figuring out how large a gap between the highest and lowest earners should be considered acceptable. Given the size and vehemence of the Occupy protests, one would suspect that the current income gap is too large.

And one would hope the government itself would begin to acknowledge the problem. BC remains one of the few provinces without a poverty reduction strategy.

But don’t hold your breath that new progressive tax changes are in the offing.

First, a closer look at that expert panel: You can find the government’s announcement of the panel’s terms of reference and a list of the panel members here. Sadly, the panel is not mandated to examine the fairness of the overall tax system, nor is it to propose ideas to restore the BC tax system’s progressivity (something that is sorely needed, as we found in this CCPA study last summer).

Rather, the mandate is narrowly to advise on how to improve the “business competitiveness” of BC’s tax system, and to offer recommendations on “administrative improvements to streamline the Provincial Sales Tax.”

The membership of the “expert” panel is entirely made up of business representatives. Not a single person on the panel is an academic economist (the one person with an academic connection is Grace Wong, a former assistant dean with UBC’s Sauder School of Business). There are no representatives from labour or the community or non-profit sectors. The panel chair, Sarah Morgan-Silvester, is the current chancellor of UBC, but has spent most of her career as a senior banking executive.  In short, there is not a single person on the panel one might expect to offer a dissenting voice ­– a perspective that is interested in anything other than how to lower taxes for the corporate sector.

And how about that cool new online BC Budget simulation tool for the public? You can access the “My BC Budget” website here.

Now I love online tools, and I’m told I’m somewhat nerdy when it comes to the BC Budget, so I was all ready to geek-out on this.  And thus, my disappointment is deep.

The stated intent of the online tool is to:

“Let people see the effect of raising and lowering revenues and spending on the provincial budget, with the goal of eliminating the 2013-14 deficit, which was forecast in September to be $458 million. Once people have achieved a balanced budget, they can send their solutions to the finance minister with their comments. The website also includes informative facts about the budget and is one of several ways the government is consulting with British Columbians in the lead-up to Budget 2012.”

The government’s ill-advised (and much-amended) balanced budget legislation commits it to balance the 2013/14 budget (an entirely arbitrary deadline). And so, only when someone has used the online simulator to model a balanced budget does the tool allow you to submit your “solution”.

But the tool is much sillier (and nefarious) than that.

You can reduce any tax you want by as much as 100%, but you can’t increase any tax by more than 10% (which is certainly interesting, given the stated intent of trying to balance the budget).

When you start to fiddle with personal income tax levels, the “information” window kindly informs you that, “BC families generally have one of the lowest overall tax burdens in Canada, and BC currently has the lowest provincial personal income taxes in Canada for individuals earning up to $119,000 a year.”

What’s more, while you can adjust personal income taxes overall, the simulator does not allow you to adjust the income tax brackets (let alone propose one or more new upper-income ones, as I recently did here). Meaning, you cannot modify the progressivity of the tax system (the distribution of taxes by income) – Minister Falcon apparently isn’t interested in hearing about that.

And don’t go trying to propose increases in corporate taxes. If you do, the simulator responds with a finger-wagging note warning: “Raising corporate income tax would make the province less competitive compared to other provinces and countries, and would reduce long-term economic growth. Companies would decide to move to lower-tax jurisdictions, costing B.C. jobs and investment.”

This despite the fact that BC has among the lowest corporate tax rates in the country, and global accounting firm KMPG consistently finds BC to be one of the least expensive places to do business among major industrialized nations. Surely, we have room to move on this front.

Oddly, the one tax increase the simulator does not actively discourage is further increases to MSP premiums, the most regressive tax in the province.

Overall, the simulator is quick with warnings if you try to increase taxes to close the budget gap, but oddly silent when you try to lower spending. No bias there I guess.

(My thanks to both Shannon Daub and Iglika Ivanova for drawing some of these ridiculous features to my attention.)

We do indeed need a fulsome review of BC’s tax system, and the public certainly does deserve a chance to weigh in with our ideas for how to rethink the ways in which we raise and spend revenues. Sadly, neither this expert panel nor the online simulator will give is that chance. As I’ve said before, we need a full Fair Tax Commission, with an extensive public-engagement process that lets us genuinely deliberate on these matters.

The two, climate and profit, are very much related. The gains from doing this are “odious profits” that exist only because of massive costs externalized onto third parties (I’m riffing off the term “odious debt” — that incurred by dictators, usually for military hardware, for which the people are forced to pay even after the dictator has been deposed). Anyone who advocates well-functioning markets, as opposed to unbridled capitalism, should see the logic of ensuring that all costs of production are captured in the market price. The huge negative externality associated with fossil fuels is what prompted Nicholas Stern to call climate change the biggest market failure in history.

How much are we talking here? The pipeline itself is a $5 billion investment so it will have to make back a decent annual return. Enbridge’s estimates for toll structure and throughput imply revenues of just under $900 million per year. Based on financial statements in Enbridge’s 2010 Annual Report, profits from pipeline operations (after-tax earnings plus dividends) averaged 34% of revenues over the past three years. At this rate, profits from NGP would be over $300 million per year. These are not trivial amounts, and they do not include “costs” such as lucrative executive compensation – for example, Patrick Daniel, the CEO of Enbridge, made more than $6 million in 2009, and several other executives had more than $1 million in compensation.

Beyond the pipeline itself, we can also include the gain in profits to oil sands producers from higher market prices in Asia, estimated to average $3.6 billion per year by Wright Mansell, a consulting firm whose report is included in the application. So call it $4 billion in annual profits and you can see why a government with no morals would want to cozy up to the pipeline and start calling it ethical oil.

But at what environmental cost? There is a certainty of oil spills from the pipeline itself and tankers on the BC coast. Enbridge pipelines had 800+ oil spills on its pipelines over the past decade and a bit, and the record of other pipeline companies is no better with 5,600 incidencts in the US alone gong back to 1990.

But I’m more interested in the climate impacts. The Northern Gateway Pipeline would transport 525,000 barrels of diluted bitumen per day. The carbon content of this fuel is translates into annual global emissions of approximately 70 Mt CO2e. In addition, there are emissions associated with extraction of the resource (6.5 Mt CO2e, according to Pembina) and emissions associated with the energy needed to run the pipeline and ship bitumen to Asia. Finally, there are emissions from upgrading and refining bitumen into oil and other petroleum products (8-9 Mt CO2e per year, although this emissions-intensive process would happen in the importing country). All in, annual emissions associated with the pipeline could be in the range of 90-100 Mt CO2 per year, and this is not counting emissions associated with construction (manufacturing and transport of steel pipe, and machinery and equipment on-site).

So what is the damage — the negative externality — from all of that carbon? The most credible recent study estimating a range of values for the “social cost of carbon”, with most estimates in the range of $150-500 per tonne of CO2, but possibly as much as $893 per tonne. To put this in more recognizable terms, BC’s $25 per tonne carbon tax translates into less that six cents per litre. Internalizing the external costs of the pipeline into market prices would require a mix of regulation, carbon pricing and removal of any caps on liability in relation to spills. Indeed, the corporate form in practice limits liability to the initial investments made by owners of stock, which could be exceeded in the form of massive clean-up costs for a catastrophic spill.

Based on the numbers above, a low estimate of 80 Mt of CO2 into the atmosphere per year with external costs of $50 per tonne would imply $4 billion per year in externalized costs. Using a higher estimate of 100 Mt at $200 per tonne, external costs reach $20 billion per year. These numbers assume that bitumen would stay in the ground in the absence of the NGP, which may not be realistic given other options, but the point is that the NGP would facilitate the combustion of large volumes of fossil fuel, and doing so imposes very large costs on third parties from future climate impacts.

Bottom line: the Enbridge pipeline makes odious profits and they must be weighed against the costs of GHG emissions and oil spills. Privatize gains, socialize losses. Which is why the industry and their government make no reference to either the profits to be gained or climate change. While there will be some jobs created along the way, they are very small in number. Governments get a cut, too, through royalties and taxes (though the latter are being phased out for people fortunate enough to be corporations), but these are like the royalties on export of blood diamonds.

So thanks to Natural Resources Minister Joe Oliver, who unintentionally shone a massive spotlight on this project. The Conservatives would have been better off had he just shut up (though I’m figuring his letter came from central command and he was forced to sign his name to it). Let’s follow the money and have a real debate about the impacts of this pipeline from Alberta to China.

Convention wisdom has it that the public heavily subsidizes post-secondary education. The illusion of a subsidy comes from the fact that tuition fees, high as they are, don’t cover the entire cost of education. But this common misconception ignores a second way in which students pay for their education: through higher taxes after graduation. When these tax payments are added up over the course of graduates’ careers, it turns out that university students fully repay the cost of their degrees and then some.

The report’s main findings are captured in this infographic:

There’s a broad based agreement in this country that higher education is important for our long-term social and economic prosperity, and that it’s something that, as a society, we should promote and invest in. My report finds that we all come up ahead when more people have access to education. Then why is it that what we’ve seen the BC government increasingly withdrawing its financial support for advanced education and downloading the costs to students?

Thirty years ago, government funding covered 88% of BC university operating revenues, but in 2009, government only paid for 58% of the costs of educating students. Universities made up the shortfall by hiking tuition fees, which now account for 44% of all university operating revenues according to CAUT (see fig 1.2 and 1.3). Tuition fees in BC now run over $4,800 per year, and, along with the erosion in student grant programs, present a significant barrier to education.

There’s no better time than now to start reversing these trends. Expanding our society’s investment in higher education today will pay dividends in higher tax revenues, lower unemployment and better social mobility for decades to come.

You can also read my op-ed on this topic in the Vancouver Sun. Or check out the full report, which contains some really interesting — and little known — tidbits about just how big the gap between men’s and women’s earnings is when annual incomes are considered.

• Who are the real ‘radicals’ – those working for a sustainable climate and environment – or those who promote carbon-bombing the atmosphere, making us all guinea pigs in one of history’s most reckless experiments?
• Who are the real hypocrites – those who drive to public meetings because we have not sufficiently invested in realistic lower carbon alternatives, or fossil fuel industry executives who enjoy mild summer days, fresh drinking water, vacations on low-lying ocean islands, or food grown next to expanding deserts – all things that will become scarcer if they continue having their way?
• Who is undermining Canada’s national interests – advocates of responsible inter-generational stewardship and careful development of our resources, or a government turning Canada into an international environmental pariah?
• What’s the more short-sighted job creation strategy – investment in labour-intensive lower-carbon infrastructure, or short-term construction projects to export unprocessed raw materials to foreign economies?

Like the Orwellian oxymoron “ethical oil,” the double standards in political and media discourse constitute a temporary triumph of greed over reason, of vested interest over collective well-being.  A decently human future requires a reversal.

Well then, I humbly submit the following Top 10 list of reasons for upper-income tax increases (in descending order).

#10: Ridiculous real estate.

Check out Vancouver’s 40 most expensive listings. West Vancouver currently has a property listed for just under $40 million. Indeed, the top six properties all list for over $20 million. The top property includes
a main house featuring “6 bedrooms, negative edge pool, hot tub, indoor and outdoor ponds, 3 waterfalls, billiards room, movie theatre, wine cellar, gym, massage room, and 15-car garage.” And then there is the “7,000 square feet guest house and 2,580 square feet combination maids’ quarters and office.”

#9: Canada’s top 100 CEOs pocketed an average $8.38 million in 2010.

That was a 27 percent increase over 2009, and 189 times more than Canadians earning the average wage. For more, see the CCPA report here.

#8: A “Super-Yacht” with a functioning volcano.

I kid you not. See here.

#7: A $2 million diamond handbag.

Really? Yup. See here

#6: Out-of-control weddings.

Weddings have always been big business. But clearly, some people need to be saved from themselves.

#5: Oh, just look at this.

LXRY Magazine (Luxury) is a Canadian online magazine focusing on comfort and extravagant living. Got 30,000 bucks for a pair of gold earrings or $200,000 for a car?

#4: The maximum RRSP deduction for 2011 is a whopping $22,450. 

That’s the ceiling for an annual contribution (for which people receive an extremely generous tax deduction — comes right off one’s taxable income) and does not include any unused room from previous years. Who the hell has $22K in extra income to tuck into this highly publicly-subsidized savings plan? A minimum-wage earner working full-time all year would have an entire annual income of only $19,798. The RRSP is one of the most expensive and inequitable social programs in Canada. The program costs the public treasury about $10 billion a year in foregone revenues. Yet, according to the CCPA’s Alternative Federal Budget, while more than two-thirds of those making over $100,000 a year contribute to RRSPs, less than a quarter of those making less than $50,000 find themselves able to contribute.

#3: The ultra rich are growing, according to Canada’s banks, so the 99% of us should follow the money. See here.

#2: Am I the only one who finds the “driving” section of almost any newspaper really annoying?

And the #1 reason for tax increases…

Weddings for dogs! Yes, it’s true.

“You can spend anything from $400 to $10,000,” says Doggie wedding planner Scott Rinehart. Doggie I Do’s, a Canadian company that coordinates “puptials” “for mutts in love,” offers basic wedding packages for 25 guests starting around $4000.

For more see here.

And you wanted proof that the free market rationally allocates scarce resources?

Clearly some people are under-taxed.  Couldn’t and shouldn’t some of that disposable income be put to better use?

Having a little of fun at the expense of the very rich is, well, fun. But on a more serious note, extensive research in a variety of fields (most comprehensively documented by epidemiologists Richard Wilkinson and Kate Pickett in their book, The Spirit Level) shows that out-of-control wealth and extreme inequality are actually bad for everyone — for our communities, our health, our democracy, our environment, and our personal wellbeing. Taxes are one of the ways we can reduce inequality, and create a more fair society for everyone. And that’s the real #1 reason we need tax increases for the wealthy.

The paper comes out at a time when all Canadian provinces face significant pressure to reduce the rate of growth of health spending while continuing to improve access and quality of care but when there is no agreement on the specific changes needed to ensure that public healthcare dollars are more efficiently utilized. As a result, individual provinces are experimenting with a variety of reforms. In BC, the two major policy options being introduced are an activity based funding (ABF) model for hospital surgical procedures; and an integrated model for caring for people with chronic conditions and complex needs in the community. Though both of these are formally priorities of the Ministry of Health, ABF is receiving the vast majority of the financial resources and technical expertise.

Our paper raises serious concerns that the current preoccupation with reforming hospital funding is simply too narrow to effectively address BC’s most pressing health care challenges, many of which have roots outside the hospitals (in our inadequately funded community care system). This is why we titled our report Beyond the Hospital Walls: Activity Based Funding Versus Integrated Health Care Reform.

The current focus on ABF is a reflection of the conventional, hospital-centric model of health care that our system was built on. While this worked well to meet the health care needs of Canadians in the 1960s, it’s outdated in the 21st century when chronic disease management — which is better handled in the community, not the hospital — is increasingly becoming a pressing concern.

But what’s worse is that ABF is not just a distraction from the real problems in our health care system: it may actually reinforce the silos and fragmentation within the health care system, hindering efforts to improve overall system integration and coherence (this stand in the way of priority #2). This is why jurisdictions where ABF has been in place for a number of years are increasingly looking to move away from it towards funding mechanisms that incentivize integration across the system (among hospitals, family doctors and community care services like long term care and home support).

The paper outlines a strategy for health care reform that is timely, practical and evidence-based, and that will address the root causes of problems in our health care system.

Our review of the international evidence on health systems reform suggests that the best performing systems are the ones that have developed mechanisms to collaborate and share accountability across services and providers. The key to their success is understanding the patient experience across the continuum of diverse health services the patient needs at any one time. High performing health systems are organized in a way that allows providers to be jointly accountable for providing cost-effective care in whichever venue is medically appropriate – the patients’ home, the family doctor’s office or the hospital. There are many examples of how this can be done, both internationally and from our own backyard (Northern Health Authority is a leader in this area). All that’s needed is for the BC government to show leadership, look at the evidence, and actually implement the initiatives that have proven successful province-wide.

We hope that Canada’s premiers, who are currently meeting to discuss health care in Victoria, find a way to avoid getting bogged down into narrow issues like hospital funding reform and engage in a broader discussion of how to improve quality, increase access and ensure the cost effectiveness of the overall health care system.

New Brunswick Auditor General Kim MacPherson joins public auditors in Nova Scotia, Quebec, Ontario, and British Columbia who have previously issued reports critical of P3 projects.  With P3 private partners put in all or part of the money for construction and in return get multi decade contracts to manage the projects with guaranteed inflation protection.

MacPherson’s report was critical of the process undertaken by the previous Liberal government.  She declared that a Value for Money report that had claimed the province would save money on the schools was in error.

The project involved schools in the communities of Moncton and Rexton.  The government committed to pay a private partner $5.1 million annually for 30 years to construct the schools and to manage operations, maintenance and rehabilitation.

The New Brunswick auditor found that the province had decided to proceed with a P3 despite the fact there had been no analysis justifying the decision. MacPherson said:

Neither the Department of Supply and Services, which executed the design, nor the Department of Education, which manages the Agreement after the schools open, were officially involved in the decision making process.

The transfer of risk is one of the reasons traditionally given to use public private partnerships.  MacPherson said,

We did not find evidence that the Department compared the total amount of quantified risk with the actual experience from prior school construction projects to assess the reasonableness. In our view, historical cost information is an important tool to validate project costs including estimated risks.

For the bottom line the Auditor General found that instead of saving the province $12.5 million by using a P3, it had actually spent $1.7 more than it would have with traditional procurement.

In British Columbia public private partnerships remain the default model for large provincial projects.  All new hospital projects in particular have been subjected to P3s with their multi-decade contracts.

Here’s what I just submitted:

Submission to the BC Legislature’s Select Standing Committee on Health

From: Seth Klein, BC Director, Canadian Centre for Policy Alternatives

Re. Sustainability of the Health Care System

Date: Jan 13, 2012

Thank you for this opportunity to offer this written submission to your committee’s deliberations.

Given the topic you are investigating, I want to make sure that you are familiar with some relevant peer-reviewed reports that have been published by our institute.

Of most direct relevance is a 2006 report by our senior economist Marc Lee entitled Is BC’s Health Care System Sustainable? A Closer look at the Costs of Aging and technology. The report can also be found here.

Like your committee’s mandate, this report estimated the financial implications of demographic trends on the health care system into the 2030s. Among the report’s key findings:

This paper finds that population aging, in and of itself, is but a small contributor to rising cost pressures in the health care system. Based on current projections there is little to suggest a demographic time-bomb about to go off. Instead, the real challenge for financing the health care system is advances in technological possibilities, broadly defined to include pharmaceutical drugs, new surgical techniques, new diagnostic and imaging technologies, and end-of-life care. These challenges can be addressed most efficiently and equitably in the context of a public system…

• Population aging has been a cost driver in the system, but a very small one compared to other sources. The impact of population aging was 0.9% per year over the 1995 to 2005 period. This is consistent with other studies of population aging.
• Inflation (as reflected in salary increases and higher cost of supplies) has been the biggest cost driver over the 1995 to 2005 period, with increases averaging 2.4% per year, followed by population growth at 1.2% per year.
• The expansion (or “enrichment”) of health care services over time (such as new technologies, long-term care, home care and pharmaceutical drugs) is also an important factor. The average British Columbian receives one and a half times more health care services as his or her equivalent 30 years ago.

I would also like to draw you attention to a number of other CCPA reports relevant to your work:

• Why Wait? Public Solutions to Cure Surgical Waitlists, by Alicia Priest, Michael Rachlis and Marcy Cohen (2007), available here.
• What’s in a Scan? How well are consumers informed about the benefits and harms related to screening technology (CT and PET scans) in Canada, by Alan Cassels et al (2009), looks at how unnecessary and sometimes harmful scans can drive up health care costs. It is available here.
• An Uncertain Future for Seniors: BC’s restructuring of home and community care, 2001-2008, by Marcy Cohen et al (2009), looks at how inadequate investment in community care is placing more pressure on the more expensive acute care system. It is available here.
• Innovations in Community Care: From Pilot Project to System Change, by Cohen et al (2009), is a companion paper that highlight successful innovations that, if scaled-up province-wide, could take pressure off the acute care system. It is available here.
• The Cost of Poverty in BC, by Iglika Ivanova (2011), looks at how poverty increases costs to the health care system. In particular, it finds that poverty in BC is adding an additional $1.2 billion per year to the province’s health care system. It is available here.

Thank you for this opportunity.

Presumably they would like to return to a more “normal” debate.  You know, one disproportionately influenced by well-heeled corporate-funded market fundamentalist think tanks and pseudo-grassroots “astroturf” industry front groups (see Donald Gutstein’s book, Not a Conspiracy Theory: How Business Propaganda Hijacks Democracy); by tax-deductible corporate lobbying, subsidized to the tune of $100 million a year, according to Democracy Watch; by a public relations industry that now outnumbers under-resourced professional journalists by three or four to one; and by a “majority” Conservative government that was opposed by over 60% of Canadian voters but that avoids democratic accountability and steamrolls its agenda through Parliament as much as it can get away with.

One commentator suggested that Canada may be descending towards becoming an authoritarian petroleum state.  Now is the time for anybody who cares about a democratic and sustainable future to make sure that doesn’t happen.

But there is one idea to promote jobs in communities we won’t be hearing about from the province. It is an idea that is creating thousands of jobs in communities across the United States. The idea is simple. Local governments should support small businesses in their communities by giving them an advantage when bidding on government work.

Here in BC, thanks to interprovincial trade agreements, it is forbidden for local governments and school boards to give a price advantage to local businesses. And if Canada signs the Canada European Union Trade Agreement (CETA) with support from BC, the situation will get worse.

One example of how a local preference program works is in the City of Los Angeles. The City instructed its lawyers to create a bylaw that would give local businesses an eight percent advantage when it came to bidding on projects. According to a study by Charles Swenson of the University Of Southern California Marshall School Of Business, this move by itself will create 10,000 jobs locally.

According to news reports:

When Mayor Antonio Villaraigosa unveiled the proposed ordinance in September, he said the city “spends approximately 84 percent of its procurement dollars with businesses that are located outside of the city of Los Angeles; therefore, out of $1 billion allocated for governmental contracts, only $180 million goes back to local businesses.”

The City also allows a bidding advantage for local businesses that are certified as minority, women, disabled veteran or disadvantaged-owned business.

This idea is not unique to Los Angeles.  In the US dozens of cities and states have local preference programs for local business. According to the Institute for Local Self Reliance:

A 2007 survey by the National Association of State Purchasing Officials, found that 26 states have preferences for in-state bidders or products grown or manufactured in-state.  These policies may apply broadly or only to certain types of goods and services or in certain situations.  They may be absolute preferences or, more commonly, percentage preferences  (i.e., if a bid from a local business is within a certain percentage of the lowest non-local bid, usually 5 percent but as high as 15 percent, then the contract goes to the local business).

Ironically, the government has acknowledged the value of local purchasing at the same time it has prevented local governments from doing it.  In December 2006 the then Minister for Small Business Rick Thorpe expressed the idea eloquently in the Fort Nelson News when he said:

I’d like all British Columbians to consider the direct, positive impact you can have, on your neighbours, your local businesses, and your community’s growth – simply by supporting local small businesses. By shopping at home, you show that you value your friends and neighbours and the investment they’ve made to keep your community vibrant and growing. Most retailers I know are interested in meeting your needs and earning your business. However, one retailer summed up his dilemma this way:

 ”I’d love to expand my selection – but if it’s not going to leave the shelves, it just becomes a liability for my business.”

 When you buy from sellers outside British Columbia, you just help retailers elsewhere to keep their stores well-stocked at the expense of local businesses. Shopping at home also supports local hospitals, schools and important public services. Provincial sales tax revenues totalled almost $4.2 billion last year. When you choose to shop locally and pay the provincial sales tax on your purchases, you know you’re helping to pay for services of importance to patients, students, seniors, people in need and, in fact, all British Columbians. I’d like all British Columbians to consider the direct, positive impact you can have, on your neighbours, your local businesses, and your community’s growth – simply by supporting local small businesses. By shopping at home, you show that you value your friends and neighbours and the investment they’ve made to keep your community vibrant and growing.

If this is such a good idea for individuals you would think it would be a good idea for our local governments. However, BC’s Trade Investment and Mobility Agreement and the New West Partnership Trade agreement specifically forbid measures that provide for any “preferential treatment of a province’s people, investments and goods, except for justified actual cost-of-service differences.”

Canada is now in the process of negotiating an international agreement with the European Union and one thing the Europeans are pushing hard for is access to local government procurement.  Because local governments fall under provincial jurisdiction, however, the provinces get a say in this. But British Columbia refuses to say what they are putting on the table. If past agreements are any example, BC will give up far more than anyone else will. 

What are the arguments against this? Some people argue that taxes will be higher but the investment in the community will create far more economic value than it will take out in taxes. The government argues we need to give up these rights to get access to trade deals, but the US has managed both to get trade deals and to leave their states and cities with the right to local procurement policies. And yes there are no communities in BC the size of Los Angeles but surely the program could work at a regional or provincial level and in many less urban communities as well.

We now have a situation where American cities and states can give preferential treatment to their local businesses and we cannot.  Soon, under CETA, the Europeans may have access to our local procurement.

Perhaps we should be asking the premier just how that builds jobs in British Columbia.

In the United States Michael Shuman has written extensively on buy local campaigns.

Here in BC this website discusses the value of shifting some of our consumer spending to local businesses.

A few year-end reading recommendations: Victoria Times-Colonist editorial writer Paul Willcocks wrote a terrific piece on the subject (you can find it here); and similarly, a group of UBC economists (including CCPA research associate David Green) authored a series on inequality for the Vancouver Sun (which you can find here).

Now we need to have a serious conversation about what to do to reduce the gap. Tackling inequality means focusing on a poverty action plan for those with low incomes, strengthening the economic security of those with middle incomes, and redistributing more of the income of the wealthy.

For lower-income individuals and families, we need our governments to adopt comprehensive poverty reduction plans (provincially and federally). The BC Poverty Reduction Coalition has been actively promoting the former, while nationally a similar call has been spearheaded by Make Poverty History, Canada Without Poverty, Citizens for Public Justice, and Campaign 2000. For how to enhance economic security across the low and middle-income spectrum, look no further than the CCPA’s Alternative Federal Budget.

But rising inequality hasn’t been driven by low incomes. Rather, as the Occupy movement rightly highlighted, the growing gap has been driven by the runaway-rich; the wealthiest 10% of households, and especially the wealthiest 1%, have been breaking away from the rest of us (as outlined in this CCPA report a year ago).

So if we are going to reduce inequality, we need to revisit our top tax brackets.

Here in British Columbia, thus far, Premier Clark seems resistant to doing so. But in a year-end interview with the Globe’s Gary Mason (available here), BC NDP leader Adrian Dix indicates that he is prepared to look at the tax rate of BC’s highest income earners:

“I don’t think there is a massive amount of room on the income tax side to get more money,” Mr. Dix said. “I haven’t really landed on the high-income stuff. But I don’t think there is any room under $100,000 or even $150,000 for that matter.”

“So, in the short term in B.C., the rich are not going to have to pay more,” I say.

“I haven’t said that,” Mr. Dix replied. “These are the issues we have to review.”

Currently, BC has five income tax brackets, and the top rate kicks in at about $100K of income. So it would seem from the above that Mr. Dix is open to considering an upward adjustment to that top rate and/or a new tax bracket that kicks in at $150K or higher. That’s good – much needed and long overdue.

Most British Columbians would be unaffected by such changes. Only about 4% of British Columbians make over $100K a year, and only a little more than 1% make over $150K. A new bracket at $250K of income would impact only about 0.5% of BC taxpayers. Yet such increases could yield some much needed income to the public treasury (the amount would depend on the new rates, but, for example, a new 20% tax rate on incomes over $150K could generate about $400 million in new revenues – enough to build about 2,000 new units of social housing per year, to give but one comparison).

As we noted in a CCPA report last summer, BC’s wealthiest 1% have been doing extremely well in recent years. Most would be willing to pay somewhat more in taxes, particularly if we could demonstrate that such revenues would help to reduce poverty and homelessness.

I’d argue that the BC government should not restrict itself to adjustments to the top rate alone. I think there is room to modestly increase the 3^rd and 4^th brackets as well (which kick in at incomes of about $73K and $84K respectively; again only impacting a small minority of taxpayers). As I noted in a blog post a couple years ago, I find my personal income tax rate to be remarkably low, given what we receive in public services, and the scope of unmet social and environmental needs.

If you too think that our upper tax brackets should be increased, may I recommend that you let our political leaders know. Too often our leaders are overly cautious, and presume we will not abide such increases. If we really want action on inequality, we need to tell them otherwise.

Many of us found the explosion of the Occupy movement onto the local and North American scene particularly exciting. Notwithstanding some misgivings about some tactics, I feel immense gratitude towards what these mainly young activists have accomplished. We at the CCPA have been struggling to put the issues of inequality and corporate power into the spotlight for years. We first noted the phenomenon of the run-away rich in a report called The Rich and the Rest of Us a few years ago, and have been systematically highlighting the growing gap ever since. But the Occupy movement brought those issues to the forefront of public consciousness in just a few short weeks.

Occupy hit a nerve, and invigorated people. It broke through people’s isolation, and told us we are not alone in our distress about these trends. Creatively and peacefully, Occupy has fundamentally shifted the political discourse.

Now we need to regroup and build on that was accomplished last fall. We need to show people that there are known policy solutions to reduce inequality, restore economic security, rise to the challenge of climate change, and reign in the power of the corporate sector in our democracy. No clear demands? Nonsense. The alternatives abound. And we at the CCPA have been assembling them for years. Now the task of us all is to popularize and promote them, and to push our political parties to give these bold ideas political expression. Together, we need to Occupy the media, Occupy the public debate, creatively Occupy real sites that highlight solutions, on the one hand, and the untenable influence of corporations on the other. And Occupy the ballot box. And we should have fun doing so.

And consider this hopeful prediction (with a hat tip to US activist Van Jones): a remarkable demographic transition is underway, as the “Millennials” (the largest demographic group in history) come of age. This is a largely progressive cohort, managing more diversity with less strife than any before it. Many are non-plussed by the prevailing system. And many many have a strong environmental orientation. The point is this –– arguably the days of right-wing governments who refuse to act on climate change and inequality may well be numbered. Will this younger demographic (who we saw starting to flex their mussel in the Orange Wave during last spring’s federal election) really abide these guys? Or, over the next 10 years, will they come into their own politically just as the reality of climate change is unavoidable (a powerful alignment), and be ready for the new ideas groups like the CCPA must have at hand.

Our task is to prepare for those tipping points. To create political-cultural space. To lay the groundwork. To seed the public discourse with bold ideas, in anticipation of those moments – and they are coming – when the seemingly impossible is suddenly inescapable.

Best,

Seth Klein, CCPA-BC Director

The report shows progress, but often in the wrong direction. You can find the whole report here but it will take patience. It weighs in at a hefty 20 MB in PDF format.

The report shows a decline in BC’s standing in Canada in many important areas in the last 10 years. We have gone from 4^th to 5^th place in the economy, from 3^rd to 4^th in personal income and from 5^th to 7^th in jobs.

In terms of social conditions BC sits in 9^th place among the 10 provinces. BC sits in last place in terms of people in poverty (below the low income cut-offs). We are second worst in terms of long term unemployment.

Some of the information is an eye opener given 10 years of very business friendly government. Business productivity grew by 6.3% between 1997 and 2000 and by about 3% in the next ten years. More surprising was that BC ranks 25^th out of 34 OECD jurisdictions when it comes to exports per capita. We ranked 4^th in Canada on per capita spending on research and development.

We did better on items like the environment, university completion and business investment.

In its final press release the Board says:

The provincial government demonstrated great vision and courage when it established the BC Progress Board in 2001 to monitor British Columbia’s performance and advise on ways to improve it. What was remarkable, and what remains unmatched, was the board’s dedication to transparency and independence.

As well as great “vision and courage” the government showed great caution. The Board was made up entirely of captains of industry supported by a few academics and consultants. This may explain why it took the Board several years to publish its first report on social conditions in the province. A more representative group might have noticed people were hurting earlier.

Despite that, over the years the Board has produced reports that shone a critical spotlight on many issues, particularly social issues, in BC.

The Vancouver Sun’s Craig McInnes was moved to tweet:

No wonder Clark’s shutting down Progress Board, no progress to report.

The business dominated Board will now be replaced by the new Jobs and Investment Board.

According to a government press release:

The BC Jobs and Investment Board will provide advice and direction to government on policies and programs to help attract sustainable investment, foster economic development and support job creation. It will focus on the eight key sectors in the BC Jobs Plan – forestry, mining, natural gas, agri-foods, technology, tourism, transportation (ports, marine and aerospace) and international education.

Presumably the awkward issues of poverty and unemployment will no longer be considered.

The government has promised the new board will be more broadly representative. The first two appointments this month have included as co-chairs a business boss and a First Nations Chief.  I guess we will just have to wait and see if the other appointed members are more than the usual suspects.