Canada’s economic stabilizers are broken
TheStar.com – opinion/editorialopinion – The reason this recovery has been so slow is that Canada’s economic stabilizers – including Employment Insurance and welfare – are broken.
Feb 13 2013. By: Carol Goar Editorial Board
You wouldn’t drive a car with worn shock absorbers unless you wanted a bumpy — and sometimes dangerous — ride.
At first it might seem tolerable. Your stopping distance would increase. Your turns would be wider and looser. You might find a few bald spots on your tires.
But as time went on, the shakes, rattles and rolls would worsen. You’d notice a vibration in the steering wheel. Eventually, you’d lose your ability to operate the vehicle safely.
Canada’s economic shock absorbers are badly worn.
Employment insurance, which once softened the blow of losing a job, has dwindled to the point that only a minority of the unemployed are eligible for benefits.
Welfare, which once prevented people from hitting rock bottom, now leaves recipients 60 per cent below the poverty line.
The income tax system has become flatter and more rigid. There were 13 income brackets in 1981. Today there are four. This means people’s tax bills don’t go down as quickly when their earnings fall.
Governments at all levels say it would be a costly mistake to protect Canadians from the jolts of a volatile economy.
A more progressive tax system would deter people from working harder and earning more, Finance Minister Jim Flaherty argues. A more generous employment insurance program would encourage laid-off workers to stay at home and loaf, Human Resources Minister Diane Finley insists. Higher welfare rates would only perpetuate poverty, Ontario’s last six social services ministers have maintained.
Despite these discouraging signals, there is a faint stirring of hope that this budget season will bring modest relief.
It is unlikely to come from Ottawa. Flaherty has ruled out “risky new spending schemes” — by which he means improved social programs. His March budget might include a couple of targeted poverty-alleviation measures for aboriginal Canadians, but nothing broadly based. On the tax side, he aims to reduce the number of brackets, making it less progressive and allowing high-income earners to keep more of their money. (Canada and the U.S. are going in opposite directions on this issue. Washington’s top personal tax rate is 35 per cent. It is slated to rise to 39.6 per cent next year. Ottawa’s top rate is 29 per cent. It is expected to remain stable or go down.)
While the finance minister holds down the brakes, his colleagues seem bent on yanking the tubes out of Canada’s diminished shock absorbers.
Finley is making it harder to get employment insurance. Immigration Minister Jason Kenney is making it harder for new Canadians to rebuild their family support networks in this country. Revenue Minister Gail Shea is making it harder for Canadians without Internet access — typically the poor and the elderly — to claim tax refunds and credits.
Infrastructure Minister Denis Lebel is making it harder for the provinces and municipalities to plan public works projects and hire workers. And Labour Minister Lisa Raitt is weakening the collective bargaining system.
Fortunately, the provincial outlook is more favourable. Ontario’s new premier, Kathleen Wynne, has pledged to increase welfare rates as a first step in the sweeping overhaul of social assistance commissioned — and then shelved — by her predecessor.
Acting swiftly will be a tall order for newly appointed Finance Minister Charles Sousa, who has just six to eight weeks to prepare the government’s spring budget. But any sign of good faith would be welcomed by Ontario’s most vulnerable households.
Neither level of government is expected to provide any respite for the working poor, people with disabilities and those still struggling to get back on their feet after the recession.
The problem is not just austerity. It is austerity imposed with no regard for the hardship caused by a stop-and-start, up-and-down, lurch-prone economy.
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