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.

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

But that’s the U.S. right? Surely, our reality is different, eh? As the occupy movement comes to Canada in the coming week, we don’t really have reason to copy these American trouble-makers, do we?

Think again.

While inequality in Canada is not as great as in the U.S., in recent years it has been growing faster here (as noted in a recent report from the Conference Board of Canada).

As the CCPA documented in a report earlier this year on The Rise of Canada’s Richest 1%, “the 246,000 privileged few who rank among the country’s richest 1% took almost a third (32%) of all growth in incomes between 1997 and 2007.”

And here in British Columbia, the richest 1% have been doing remarkably well.

Last June, the CCPA-BC released a report on the erosion of tax fairness in BC. We found that BC’s personal tax system (including income tax, sales taxes, property taxes, carbon taxes and MSP premiums) has become out-and-out regressive –– amazingly, the richest 1% of BC households pay a lower overall tax rate than others. Meaning, in today’s BC, as a share of one’s income, the richer you are the lower your overall tax rate.

In fact, provincial income tax cuts introduced since 2001 delivered, on average, a whopping $41,000 to the top 1% of BC households.

How could the value of ten years of tax cuts be so great for the richest 1%? The answer: tax cuts are worth so much because the richest 1% have been making out so fantastically well. As of 2010, the average income of the richest 1% of BC households had reached a staggering $820,000 (that’s in one year!).

And the top 1% saw huge gains over ten years. Back in 2000, their average household income was $602,000. So in ten years, their income rose by a fantastic 36% (double the inflation rate of 18% during that time). With the market producing so much gains for the wealthiest among us, why on earth did the government feel compelled to pile on with tax cuts for those who need it least?

Quite a contrast with the rest of us: real median incomes were flat during that period.

If we are serious about addressing rising inequality, we need to increase taxes on the wealthiest British Columbians. BC’s upper income tax brackets need to be increased, and we should bring in a new high income tax bracket or two (hey, if even Warren Buffet can advocate for that in the US, we can and should be pursuing it here). Longer term, we need a Fair Tax Commission – a chance to have a full public conversation about how much money we need to pay for what we want to provide collectively, and how to raise that money in a fair and equitable manner.

It’s said that 99% of Canadians think of themselves as middle class, regardless of their income. But as our incomes grow increasingly unequal, it’s becoming more important to revisit the actual distribution of incomes in Canada and BC and come up with an evidence-based definition of middle income.

I looked at the distribution of total incomes (including all government transfers, such as EI, welfare, GST credits, etc but no taxes) for economic families of 2 and more persons and propose the following break-down according to quintiles.

So, a broad definition of the middle class in Canada (and BC) would include those with family incomes between $40,000 and $125,000. This income range spans substantial differences in standards of living and levels of economic security. With growing income inequality, it’s becoming harder and harder to think of a unified middle class experience.

For example, if a policy benefits those with incomes $90 – $125,000 but does little for those with incomes under $70,000, like much of the Conservative government’s existing and proposed tax cuts, can we still say it favours the middle class?

—-

The latest Statistics Canada release of income data for families makes all data tables available for free through CANSIM so you can double-check the calculations by looking at Table 202-0401.

With our minimum wage frozen at $8 per hour for nine years and three months now, it was about time!

The real questions in play now are how much to raise the minimum wage and over what timeframe. Different numbers have been thrown around in the media — anywhere from $9 per hour to $10 per hour immediately, with future increases up to $11 or even $12 proposed by some of the leadership candidates. Nice round numbers certainly make the math easier, but should we really be picking a number out of thin air?

In a recent piece published by the CCPA, we propose that the BC government develop a clear rationale for setting the minimum wage and stick to it. This requires making a decision about what it is that we want to achieve with the minimum wage and then setting it appropriately so that it meets the stated goals. We also recommend that the rationale be poverty reduction:

We propose that a single person working full-time year-round should earn (at least) enough to live above the poverty line. The idea that someone working full-time, full-year should be able to get out of poverty is a clear, transparent policy decision that should determine the minimum wage in BC and in other provinces.

This should be a pretty easy rationale to get behind — few people will argue in favour of maintaining a group of working poor.

Equally important is to legislate regularly scheduled increases tied to inflation, to ensure low-wage workers do not face what amounts to a pay cut as a result of rising prices.

Since poverty reduction is the goal, the minimum wage should be indexed to the consumer price index in order to maintain the purchasing power of workers.

The next question to settle would be what the appropriate poverty line measure is, and this is a legitimate question that I’d like to debated. Because I want working poverty to become a thing of the past in my province, I support picking the broadest measure of the poverty line so that no worker in any community would be left behind.

The most appropriate measure of the poverty line in this case is Statistics Canada’s before-tax low-income cutoff (LICO) for a single individual with no dependents living in a large city—which was $22,229 in 2009, the latest published LICO calculation. This is equivalent to a minimum wage of $11.11 per hour (at 40 hours per week, 50 weeks per year).

Recognizing that going from $8 to $11.11 is a big jump, I would recommend staged increases to get the minimum wage to that level.

How much can business afford? Considering that they’ve been getting reductions in the minimum wage (in real or inflation-adjusted terms) over nine years now, they should be able to manage an increase that — at a minimum — brings us back to the real value of the minimum wage when it was set. I calculate that if we had annual April 1st increases to the minimum wage based on last year’s inflation in BC starting in 2002, this April we’d be setting the minimum wage at $9.48 per hour. So moving to $10 immediately would reflect a very small increase in the real value of the minimum wage compared to its 2001 level.

A government that’s serious about reducing poverty in this province, would raise the minimum wage to $10 immediately and then commit to 50 cent increases every six months until we reach the appropriate level to cover the LICO income (note that it’s a moving target). At that point, inflation-based annual increases would be all that’s required to maintain the value of the minimum wage. Such a policy will benefit employers by providing certainty and allowing them to plan ahead for labour costs.

Setting a poverty-based rationale for the minimum wage is not the only possibility. The minimum wage can also be set with inequality considerations in mind, for example by setting it at a certain percentage of the average (or median) industrial wage in the province, and then annually index it to keep up with increases in the industrial wage. Such a policy would embody the notion that we, as a society, would not allow any workers to get too far behind the rest of us in terms of earnings.

Arguments can be made for a number of other policy rationales as well, and while I personally favour poverty reduction as a rationale I’d welcome a broad public debate on these issues. I’m curious what the leadership contenders think.

Well, here’s a very different proposition: the leader and party who gets out ahead of the crises we face – who articulates an understanding of their severity, matched by a willingness to meet these challenges with bold solutions and rally us to action – will be politically rewarded.

Take for example the case of climate change and the false debate during the last provincial election over BC’s carbon tax. Both major parties, in effect, told the public, “You won’t have to pay for the changes we need to make.” The Liberals said, “Yes, we will have a carbon tax, but we will return all the money to you in recycled tax cuts in other areas.” The NDP said, “We will go after industry, not you.” No one was speaking the truth, namely, “This challenge is great, and in the near term, we’re all going to have to help pay for climate action, and make some major changes to how we live, work, move around and play.” Ideally, coupled with an inspiring vision: “But done right, the result will be a better quality of life, more inclusive communities, new green jobs, and a more equitable society.”

Who among those vying for leadership today will say, “I firmly accept the overwhelming scientific evidence that climate change is a pressing reality; the defining issue of our time. Its effects are already being profoundly felt in British Columbia. Meeting this challenge will entail fundamental changes, and time is of the essence. If you don’t want a leader who will be guided by this reality, then vote for someone else.”

In the face of the widening gap between the rich and the rest of us, who will say, “I believe public policy should be guided not by the demands and anxieties of the wealthiest among us, but by the needs and wellbeing of the poorest and economically insecure, and I will make policy decisions through that lens.”

Who is willing to say, “I think there is no excuse for poverty and homelessness in a society as wealthy as ours, and their elimination will be a core priority of my government.” Indeed, who might say, “Judge my government by this measure, not by the increasingly less relevant measure of GDP growth.”

And perhaps most daring but honest of all: who will admit that to successfully accomplish these tasks –– confronting climate change, doing so in a manner that provides economic security for modest and middle income families, and eradicating poverty –– will require substantial increases in government spending and investments, which in turn will require an overall increase in taxes. (Now there’s a reality precious few politicians want to admit to, even though most business leaders quietly share this view.)

I could name many more environmental and economic truths that politicians dare not speak, coupled with bold policy ideas they may privately support but which advisors convince them are not realistic. Beneath them all is a simple question: Who will articulate a vision for a province that is truly ecologically sustainable and socially just? (CCPA senior economist Marc Lee offers some of his ideas for what might constitute such a vision here.)

Perhaps one of the reasons that voter turnout is so poor is that a sizable chunk of the electorate is simply uninspired and disaffected, having come reasonably to the conclusion that none of those vying for power is truly speaking to the severity of the challenges we face.

In contrast, one of the reasons behind the recent election of someone like Rob Ford in Toronto, or the historic successes of people like Mike Harris, is not that what they espouse corresponds to the values of the majority of voters (and their “solutions” are simplistic in the extreme), but rather, people like that these leaders brashly say what they think and do what they say.

Or for a more “progressive” example, take the case of recently departed premier Danny Williams (paradoxically a millionaire conservative). He led a bold poverty reduction plan, and asked that his political future be tied to its success. And he brashly stood up to resource corporations (oil companies and AbitibiBowater), demanding that Newfoundlanders receive a fair social contract from these firms. Newfoundlanders hugely rewarded such leadership, making Williams the most popular politician in Canada.

Political boldness such as this comes as a blast of fresh air into the otherwise stale re-circulated air that characterizes politics-as-usual, in which caution is the watchword (and in which progressives vying for leadership fail to offer up a competing vision with as much clarity).

And so a plea to the leadership contenders: trust the public. Trust that we can handle an honest conversation about the challenges we face.

A risky political proposition? Perhaps. But then again, perhaps winning without a mandate to lead us through major change – rooted in fairness and security – isn’t worth the victory.

On the other hand, social psychologists like Stanley Milgram and Philip Zimbardo have shown how situations can override a person’s usual inclinations and cause them to do something which they would normally abhor, such as killing other people in wartime.

Our understanding of human behaviour has grown dramatically with the development of neuroscience. Many of my future posts will consider what these discoveries tell us about creating healthy human beings, and healthy societies.

Of course, these are very political questions.

One key concept is that of  “outside-inside” (in the words of psychologist Arthur Janov). We tend to internalize what we experience in our environments. Food and air, for instance, are obvious examples. It matters whether our food and air are clean or if they are polluted with various toxins.

A second key concept is “neuroplasticity.”  Neuroscience has shown that our brains are not static and unchanging. For instance, every thought and feeling in our minds corresponds to a physical change in our brains. Learn something new, and your brain changes.

In other words, every experience in our lives alters our brain.

A third element are the so-called “mirror-neurons,” which are a fundamental to our “social brain” (Dr. Dan Siegel). In brief, these neurons fire in our brains when we observe the feelings of others. In fact, we absorb the feelings of other people so much that Siegel suggested that we call them “sponge neurons.”

Finally, people tend to absorb the dominant values and beliefs of their culture, including its political ideology. Marx wrote that the ideas of the ruling class are the dominant ideas of society, and Gramsci elaborated on the concept of this ideological hegemony.

As political scientist Gary Olson wrote in Capitalism Short Circuits Our Moral Hard-Wiring, “Capitalists maintain domination, in part, through subtly but actively creating society’s prevailing cultural norms.”

Our brains as well as our beliefs are shaped, more than we realize, by the ideology of capitalism, with its emphasis on greed, selfishness, competition and individualism.

In the words of  Frans B.M. de Waal, “You need to indoctrinate empathy out of people in order to arrive at extreme capitalist positions.”

These norms and expectations often overrule our natural compassion, even though it is now clear that “the human brain is hard-wired for empathy,” in Olson’s view.

Finally, research has shown that poverty (e.g. stress, overwork, poor nutrition) take a terrible toll, not only on adults, but children, and even babies in the womb. Not only is physical health damaged, but emotional and intellectual health suffer.

We need to go beyond these symptoms and address the root causes of human suffering.

This conclusion is based on a very simple, yet effective measure of housing affordability: the ratio of median housing prices to the median household income in each municipality (housing market). This price-to-income ratio measures how many years the median family (the one in the middle of the income distribution, where half of all families earn more and half earn less) would need to work to earn as much as the median house costs. Typically, a housing market is considered affordable if 3 (or fewer) years of household income is sufficient to purchase a home in the area.

In Vancouver, however, the median housing price – $540,900 – is equivalent to 9 years and 4 months of the median household income of $58,200 (both are measured in the third quarter of 2009). Wow, just wow.

The rest of BC’s urban areas aren’t doing much better: 4 of the 5 least affordable housing markets in Canada were in BC. In order of lowest affordability, these are Vancouver, Victoria, Abbotsford and Kelowna. The next least affordable housing in Canada is in Toronto.

If you’re curious, the 5 affordable urban housing markets in Canada are Thunder Bay, Windsor, Moncton, Saguenay and Saint John, NB.

What can we do about the rising unaffordability of housing in BC?

First off, we need our policy-makers to recognize that housing affordability is a serious problem and begin to monitor it regularly so they can measure their progress in addressing it (targets and timelines, anyone?). Here’s where I agree with the assessment of the folks at the FIPP that in Canada

housing affordability has received little or no political attention, even in the bubble markets where booms escalated housing prices to unprecedented heights.

It’s time for this to change.

What kind of policy reforms should we be looking at? The folks at the Frontier Institute for Public Policy recommend a market approach of relaxing zoning regulations and getting rid of agricultural land reserves, which they argue will reduce the price of land and thus the price of housing. Increase supply to lower prices – a standard textbook economics solution, but in this case it’s not going to work.

No matter how far you take it, eventually there are hard limits to low-density sprawl. We’ve got only so much land to fill with single family homes before we run out. Paving over agricultural land may postpone the problem for a few more years, but it’s not a long term solution. Moreover, as we prepare to face climate change and peak oil, encouraging urban sprawl may well do more harm than good. And if our world is about to get a lot smaller, paving over agricultural land would soon prove to be short-sighted.

It seems to me that we’ve left the invisible hand work its magic in the housing market long enough by now to know what it is good and bad at. It does an excellent job of providing luxurious condos with ocean views to the highest bidder (and we don’t lack millionaires in BC), but it fails miserably at providing affordable housing to the hundreds of working families. And I’m not just talking about the poor or near poor here – whose situation is dire – but about families with two earners with decent middle class jobs who are finding it more and more difficult to afford a home in the city. It’s time for governments at all levels to intervene in the market and ensure that a share of the new homes build are priced so that they are affordable for middle income families.

And since affordability is not just about housing prices, but about household incomes as well, I’d like to see some action on the income front. A couple of decades of making our labour market more “flexible” have resulted in stagnating earnings at the middle, and falling real (inflation-adjusted) earnings for families in the lower end of the income ladder. We need to address the rising income inequality and increase the economic security of the poor and modest income households. This can be done both through strengthening labour law and through re-distribution via the tax system.

What is surprising, however, is the lack of substantive discussion over the relative merits of each party’s proposed economic recovery policy, as stated in their platforms. Instead, we are repeatedly told that responsible economic stewardship involves keeping the business sector happy and anything that goes against the interest of “employers” (such as increasing the minimum wage, for example) is bad policy. The Liberals’ tactic seems to be to market themselves as friends of businesses while portraying the NDP as the employers’ enemy.

This tactic was used in the televised leaders’ debate last weekend, when Mr Campbell remarked:

“When you’re talking about the economy, I think it’s fair to ask the question: Why is there not one major employer group in British Columbia – in mining, in tourism, in forestry – that actually supports the New Democrats’ policies?”

Like most other over-simplified messages, this one is also incorrect. Good economic policy does not mean pandering to business-based interest groups. Yes, lowering business taxes and relaxing workers’ rights makes it easier for firms to reap higher profits, which encourages them to set up locally, creating jobs for the local population and increasing economic growth. However, economic growth alone is not a guarantee that everyone (or even most people) would benefit from the increased prosperity. In BC, we’ve seen this clearly over the last 25 years, when economic growth was strong yet poverty remained largely unchanged and income inequality increased substantially.

Where does this leave us? We need to keep in mind that the whole point of having a strong economy is to benefit society by improving the standard of living of people. We cannot continue to ignore our social and environmental problems in the name of having a strong economy. We need to balance the need of businesses to keep their costs low with the needs of workers to earn enough so that they are able to afford the basics like housing, child care, education to make sure we’re all set on the right path in life.

This does not mean that we have to completely ignore the interests of the business sector. Policy-making in a recession involves some trade offs for sure, but it’s not the all-or-nothing proposition that the BC Liberals are trying to make it.

US President Obama summed it up well on March 10th, when he revealed the first details of his education plan (quoted widely in the media, for example here):

I know there are some who believe we can only handle one challenge at a time [but] we don’t have the luxury of choosing between getting our economy moving now and rebuilding it over the long term.

It’s time for our policy-makers to recognize that tax dollars are not simply a drain of resources from individuals or businesses but can and should be used for productive investments that would make the economy stronger and more sustainable in the future. These investments include building up physical infrastructure, as the current government is doing, but they also include making this infrastructure “green,” which they are not doing (as Marc explains here), as well as building up the social infrastructure we require to ensure that our children are well-educated and prepared to face the challenges of tomorrow.

The current US Administration is doing it. Let’s make sure that those we elect next week do the same.

BC’s Economic Challenges and the Liberal Platform

By Marc Lee

The BC Liberal platform features many feel-good photos and proud statements taking credit for the province’s recent boom. But read between the lines, and one realizes that after eight years in power, the Liberals have effectively run out of ideas.

The platform fails to offer any vision for the future. The Campbell Liberals made some progress on climate change actions over the past couple years, but the platform offers nothing new. Meanwhile, the Climate Action Secretariat, once residing in the Premier’s office, has been relegated to the Ministry of the Environment, which recently had its budget cut.

Premier Campbell deserves credit for bringing in the carbon tax, plus a variety of other climate measures that represent the low-hanging fruit of greenhouse gas emission reductions. While the carbon tax has its shortcomings, in my view it is a positive first step, and one that carries enormous symbolic value for environmentalists.

Still, the government enters the election without a plan in place to get BC to its legislated 33 per cent reduction in greenhouse gas emissions by 2020. And there are some glaring contradictions between the climate plan and other parts of the Liberals’ platform.

One of those contradictions is the oil and gas industry. Between 2001 and 2006, oil and gas industry emissions surged by far more than the carbon tax will ever reduce come 2020. Recently, Premier Campbell was in the Northeast, promising more new investment in oil and gas extraction, which may make it virtually impossible to reach our targets. And it is not like the oil and gas patch is a huge employer – about 2,200 direct jobs in 2008 – for all that pollution.

Highway expansion and the $3-4 billion Port Mann Super-Bridge also go against the climate-action grain. This expensive mega-project will only push more unsustainable, car-oriented development further up the Fraser Valley. This threatens valuable farmland, and means that congestion will be back within a few years. No jurisdiction in the world has ever built its way out of congestion problems.

The Liberal platform offers no real vision for the economy either, now that the great boom is over. Unemployment rose rapidly through early 2009, and with housing starts down 70%, the worst is yet to come, as construction workers finish their current projects and head straight to the back of the unemployment line.

The current economic collapse is not the fault of the Liberals, but then neither was the boom their creation. BC’s economic fortunes rest on what happens outside our borders, in particular in the export markets of the US and Asia, and in Ottawa, through the Bank of Canada and the federal government.

As cheerleader-in-chief, Premier Campbell may have pumped up the home team’s confidence, but let’s face it, the cheerleaders did not win this game. Like other parts of the world, low interest rates drove a bubble in real estate, leading to a massive expansion of construction activity. And high commodity prices driven by export markets made BC’s resource industries take off.

In February’s budget, the Liberals offered little in the way of stimulus, mostly re-announcing projects already underway or relying on federal stimulus dollars. There is much more that should be done to retrofit our infrastructure to be green – like public transit and energy efficiency upgrades – and to meet long-neglected social needs, like affordable housing, addiction and mental health facilities, or residential health care.

Bad economic times mean that the small deficit projected in the budget will inevitably turn out to be much larger. The Liberal platform promises that BC will “live within its means”, but faced with a $1-2 billion deficit, will a new Liberal government pile on more spending cuts and risk making the economic picture worse, or will it accommodate a larger deficit? What does that mean for the few new promises in the platform, like all-day kindergarten or U-passes for all Vancouver post-secondary students?

In politics, as in business, marketing is everything. The BC Liberals have branded themselves as the party of good economic times, but also the party with the long-term vision to tackle climate change. At a time when families in BC are concerned about the future on both fronts, the Liberals have put forward an unambitious “devil you know” strategy to win re-election.

Even during the good times, not all British Columbians were part of the boom. Poverty rates did not drop in any meaningful way, homelessness doubled, and inequality worsened with each passing year. BC needs a plan, with targets and timelines (just like climate change) to address poverty, especially as the recession deepens its grip.

With a lack of vision and too many contradictions, the platform does not provide any sense of how Campbell the Third will govern.

• The gap between the wealthiest and the majority of BC families has grown dramatically over the past 30 years. The share of income going to the richest 10 per cent of families has grown fast, while the share going to the bottom half of families has declined substantially. This is true for both earnings and after-tax incomes.
• Not only has inequality grown, but most BC families with children have also fallen behind in absolute terms. The bottom 70 per cent of families have lower real (inflation-adjusted) earnings than their counterparts in the late 1970s, and the bottom 60 per cent saw a decline in their after-tax incomes as well.
• Middle-class families in BC have been squeezed to an extent not seen in other provinces.

The figure below illustrates the extent to which BC differs from the rest of the country (detailed provincial comparisons can be found in Appendix 2 of the report).

The findings are startling on their own, but with the recession that’s upon us now the problem is only going to get worse.

Yet it doesn’t have to be that way. It is clear that economic growth alone does not automatically translate into higher incomes for most people, especially for those at the lower end of the scale. The BC government can and should take action to reduce income inequality while also protecting poor and middle class British Columbians from the impact of the recession. There is a range of policy options available, including making the tax and transfer system fairer, expanding public services and social programs for all citizens, reducing poverty and improving earnings and working-conditions conditions for low-wage workers.

In the end, it is up to us to decide what type of society we want to live in: a society that is growing more unequal by the year or a more inclusive one, where the benefits of increased prosperity are broadly shared.

We got great media coverage in Vancouver, so you may have heard the study mentioned on the radio or on the evening CBC news. The Vancouver Sun ran an article about the study in today’s edition.

“I want you to think about one thing. Think about the opening ceremonies of the Games next Feb. 12th. There will be lots of government officials. I expect the prime minister will be there. I expect the mayor of Vancouver will be there. I expect the premier of British Columbia will be there. Visualize those opening ceremonies with Premier Carole James.”

This riff only makes sense in the context of a long-running refrain that NDP government can only play the economic blues. In the weeks to come, we will be reminded about the bad old days when the NDP were last in power. But now that we can roughly compare two terms of the NDP with two terms of the Liberals, we find that there is little truth to the smear that the NDP have the cooties.

The average rate of economic (real GDP) growth under the Liberals has been 3.1%, whereas the so-called “lost decade” under the NDP saw average growth that was only slightly lower, at 2.8 %. But if we add in estimates for 2008 and 2009 (using latest projections from the private sector, which are too rosy in my opinion, and better than what the government itself is projecting in the budget), the average growth rate under Liberal rule falls to 2.6%, LESS than under the NDP.

In terms of family incomes, average after-tax income in BC (constant dollars) was $46,340 in 1991. By 2001 it rose to $50,248, an increase of 8.4%. And by 2006 (last year for which we have data) it grew to $55,583, an increase of 10.6%. This masks some important differences in distribution, with average incomes further down the income distribution lower than they were in the early 1990s, while incomes up higher soared much more than average.

How about employment? During the “lost decade” of 1991 and 2001, BC employment grew by 344,100, an increase of 22%. Between 2001 and 2008, BC employment grew by 392,700, an increase of 20%. However, BC also just lost 35,000 jobs in January, and the prospects for rising unemployment in 2009 are severe. By the time the election occurs, it could well be the case that more jobs were created under the watch of the NDP than under the Liberals.

In terms of the unemployment rate, it was about 10% when the NDP came to power, and fell to 6.9% in May 2001. In the following boom years, the unemployment rate fell to record lows of around 4%, but at last glance (January) it was 6.1% and rising. By the time of the election I would not be surprised if the unemployment rate was higher than when the Liberals first came to power.

My point here is not a partisan one – the NDP were far from perfect in office; they benefited from immigration to BC in record numbers; but also got sideswiped by the Asian crisis of 1998-99. Rather, it is to remind people that BC’s economic fortunes generally swing on decisions made outside our borders. Politicians will inevitably try to take claim credit when times are good, and just as quickly will shift blame onto others when times get bad. The BC Liberals have rode as astonishing wave of luck by coming to power in 2001, just as BC’s real estate boom got underway in the cities, and just as exports surged and commodity prices soared, taking with them the rest of the province.

The Thone Speech may claim that all new jobs in BC have arisen due to tax cuts implemented in 2001 and 2002, but the reality is that BC benefited from: low interest rates as determined by the Bank of Canada that launched a housing boom; an extra $3 billion per year in transfers from the federal government; huge growth in export demand from the US and Asia. At best the government can claim that the downturn of 2001 and 2002 was softened by its deficit-financed tax cuts, although even there so much of the gains went to the top earners in the province that it was a weak stimulus.

That the housing and commodity booms are now over, and BC is in a recession that is getting worse each week, points to structural weaknesses in BC’s economy that were not cured with a tax cut. Alas, the Premier is once again getting bit in the backside by his own penchant for populism, as BC’s fixed election date guarantees two and a half more months of bad economic news in the press in the lead-up to the next election. Given the choice, most politicians would have held a snap election last fall when plausible denial about the state of the economy was still possible (our Prime Minister even broke with his own fixed election date for this very reason).

But since that was not the call, expect a rugged and ugly election season, with a lot of finger-pointing and name-calling. That is a shame because now more than ever British Columbians need a real democratic debate about where the province is headed.

A policy to make sure all government contractors pay a living wage to their employees would mean hundreds of parents could afford to afford have just one job, rather than running between 2 and even 3 jobs, and never having time to see their children.

Families want the dignity to buy their own shoes. They should be able to. Income inequality is growing and charity isn’t the answer.

To our credit, and thanks to the work of tireless parent and professional advocates, BC now has a child and youth mental health plan.  Funding through the Ministry of Children and Family Development for prevention, treatment and family supports has increased significantly over the past 5 years.   BC has doubled the number of children receiving mental health services to about 20,000, but another 70,000 kids are still not getting the help they need.  Think these figures might be related to the rising number of people with mental illnesses who are homeless and on the street?

Some children are born with or develop mental health problems regardless of their family or social circumstances. But cutting edge research also tells us that poverty can create physical and psychological stress leading to illness.   Children with learning disabilities who don’t get the diagnosis and specialized help they need in school are vulnerable to developing mental illnesses. [PACFOLD study]

So let’s ask these questions of anyone who wants our vote:

• Will your government sustain and increase the funding that will keep BC’s child and youth mental health plan alive?
• Will the erosion of funding for special needs services and supports in schools continue or be reversed in tough times?
• Will you commit to a poverty reduction strategy for the province so we lower the risks of mental illness for more children?
• What will you do to reduce waitlists for young children needing early intervention services?

Preventing and reducing harm while children are still developing – cost effective, smart and the right thing to do.