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Bob Rae’s economic speech: We can’t take prosperity for granted: leadership in turbulent times

Posted on November 9, 2011 | No Comments

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The theme of my speech is simple and direct – much public policy debate seems to assume that Canada can take its prosperity for granted. Politicians squabble about how to divide up the cake. The truth is that you need to bake a cake first.

The issues facing Canada and the world are too important to be met with bromides, whether they come from the right or the left. The massive destruction of jobs and wealth that has taken place in the last few years, the real assaults on the prospects and confidence of middle class families force us to think more deeply and act more strongly.

Jim Flaherty recently told Canadians that Canada’s strength is a regulated banking system, a progressive tax system and a strong social safety net. Liberals should take a bow. He is paying tribute to us. Let us remember that the Conservative Party has opposed every one of these measures. They opposed Medicare and the Canada Pension Plan; they voted against family allowances and the Canada Assistance Plan, just as they did the original Old Age Pension in the 1920′s. They fought against the introduction of the Canadian flag and the Charter of Rights and Freedoms. They may want to take credit for Canada’s position in the world but truth to be told it had nothing to do with them.

When it comes to Canada’s strengths today, the Conservatives were born on third base and think they hit a triple.

But with their adherence to ideology, complacency, populism and partisanship there is every risk the Conservatives will fritter away the Canadian advantage unless we convince them to change course.

Canada made an historic decision in the 1990′s to get our financial house in order, because a small, open economy like ours has no choice. We resisted the siren calls to dismantle national regulation which came from the political right, and to ignore financial and fiscal realities which came from the wishful thinking side of the political left. We got the books in shape, and (just as we did after the end of the Second World War) we began paying down debt, reinvesting in health, education, innovation and infrastructure, and cutting income taxes when we could afford it. In short the Liberals took a balanced approach from the outset that included spending restraint and strategic investments, such as the Infrastructure Canada Works Program. All of this depended on growth in the international economy, a growth that is unfortunately not there today.

When we talk about these things, it’s good to understand the facts. About two thirds of Canadians make less than $40,000 a year, and about 5% of Canadians make more than $100,000. At the same time, 84% of income taxes are paid by people in the upper 40%. People who are less well off pay payroll taxes if they’re working, and of course everyone pays the GST and sales taxes whether they’re working or not.

A million and a half Canadians are out of work, and hundreds of thousands more are either working part-time or have given up looking for work. Food Bank use is up 26%. Incomes have not kept up with the pace of inflation, especially in life’s most important areas, such as groceries, fuel and housing costs. In October, Canada shed 72,000 jobs and underlining that bleak statistic was a CIBC report indicating that quality of jobs in this country has been in decline for seven months.

Canadians have borrowed too much to maintain their standard of living and this becomes more worrisome when we face up to the likelihood of little or no growth in the immediate future.

Companies are, on the whole, better off and go into this period with money in the bank. After a fifteen year period of paying down public debt, the federal government and the provinces are once again, with a few exceptions, in deficit. Our net debt as a country is affordable (because we paid down debts and raised Canada Pension Plan payments in the Liberal years and because interest rates are low), but we also know what happens when things go south. We also face another risk – a gap between provinces that are energy and resource rich, and others that are not. A commodity based dollar is hurting our manufacturing and tourism, and we have to address that issue.

And, of course, all this is happening in the context of a rapidly changing global economy. The biggest economies in the world will soon no longer be the familiar “rich” ones of the past. China, India, Brazil and others are becoming fierce competitors with better growth prospects, better debt ratios and increasingly sophisticated global companies. Governments that close their eyes to these changes invite de-industrialization and a whittling down of Canada’s economic place in the world.

Yes, there are problems, but there are also great opportunities in this brave new world, of which Canadians can take great advantage with the right supports and the right encouragement. We can use the demand for our commodities throughout the world to put us on the radar screen, to sell our services and to make sure Canadian value-added manufacturing isn’t short changed. The opportunities we have as a country are also opportunities for individual Canadians.

We need support for middle class prosperity, because that has always been the key to our individual and common success. We also need support for the pillars of middle class life in Canada

- jobs, jobs, jobs. Jobs that pay well, work that is interesting and rewarding, and businesses that are innovative and profitable
- good, affordable housing and cities that work
- quality education without a lifetime of debt
- a strong health care system that doesn’t allow you to go under financially when you’re sick and ensures access to timely care
- a retirement with dignity – hence the Liberal insistence on a new supplementary plan for the CPP and better protection for existing private plans

We can’t shore these up with grievances and complaints or with declarations of class warfare. We need to have a positive, constructive, affordable approach.

There is remarkable resilience in the liberal idea. A respect for the dignity and freedom of the individual. A clear understanding that this requires the rule of law and good government with a willingness to adhere to democratic procedures and institutions. It requires a respect for private property, transparent and effective regulation, and measures to help ordinary people do well.

Liberals know that open and transparent markets should be there for the common good, and not just to serve greed; that the creation of wealth both fosters and is dependent on education, good health, a strong civil society, the rule of law, and a keen sense of something called “the public good”. The pursuit of wealth and social justice are not enemies. But it takes good government and strong leadership to protect the common good, the public good, and to help the pursuit of individual and collective prosperity.

Everyone (except the Harperites) understands that this depends on sustainability – of the planet, of the air we breathe and the water we drink, of our businesses and our personal and public finances, of our ability to pass on something greater and better to future generations.

This in turn is held together not by force or tyranny, but by trust. Trust is the basis of commerce, of our social dealings, of our politics. We need to understand more deeply its value as we go forward, and we need to realize that for many Canadians trust has been lost.

The “Occupy movement” is a powerful reflection of what happens when trust breaks down. But it’s more – while it’s often seen as just a protest movement of the marginalised, it’s also speaking to a clear sense among the middle class people around the world that the government is not in their corner, that it has stopped fighting for them.

For Liberals, our enemy is not government, business, labour, banks or unions. It is ignorance, greed, poverty, and hate. We do not fear debate or science. We cherish enquiry and difference of opinion, and we celebrate the freedoms that are necessary to get closer to truth.

We know that public opinion is the sea on which we sail, but we also know it changes, and that the currying of favour that goes by the name of “populism” often leads to bad decisions and short term thinking. We know opinions move and change. We respect the public’s right to decide and are unwavering in our passion for democracy, but we know that coming to public judgment requires leadership.

There is another sea on which we sail, and that is the sea of the world economy and world markets. Liberalism is a global idea. Canada’s economy is part of a vast network of competing goods, information, turmoil, turbulence, innovation and change, where companies and countries which were once trendsetters are now facing bankruptcy, where technologies which seemed innovative are now surpassed and outdated, where places which seemed to have the world by the tail are now struggling to meet their interest payments, and others are rising again. Tigers become tabby cats very quickly in this world. In this turbulent world, Canadians need good politics, good policy, good leadership. That’s where the Liberal Party has a job to do.

Let’s get down to the policy basics in Canada. We are a relatively small economy that has to be open. The best focus for public policy is to invest in education, innovation, and the physical and human infrastructure that will make it most likely we shall succeed. It’s of course true that there are limits to how much we can spend, borrow, and tax, but growth and jobs are essential to get us out of our current difficulties. We can’t just cut ourselves to prosperity, although we can’t be afraid to embrace change.

The best approach is one that recognises that only a deep collaboration between governments, business, and civil society will get us to where we need to go. The Tea Party and the Occupy movement are actually two sides of a coin, voices of anger, frustration, and resentment, which can be a source of protest, but can’t be the basis of effective policy.

We need to challenge complacent assumptions. We don’t have 3 or 4 percent growth in the US and Europe to help pull us out of the doldrums as we did 10 and 15 years ago. Christine Lagarde, Managing Director of the IMF, recently told an audience that, “If countries have solid measures to anchor savings in the medium and long term, they can do more in the short term to accommodate growth. The amount of available space depends, of course, on country circumstances.” Because Canada got its fiscal house in order 15 years ago, I believe we are one of the countries with solid measures to anchor the savings that Madame Lagarde was referring to. So the question is, what measures need to be taken?

Our problem is now that an ideological government is pushing a program of jails and jets that threatens our fiscal stability going forward.

Provinces will be forced to cut health, education and social services to pay for the high cost of incarceration. The federal “programme review” is fast becoming a joke because the Harperites have put a ring around their sacred cows: an untendered contract for jets into the next decade, whose cost estimates not one independent observer believes is credible, and a plague of prisons agenda that has been rejected by every jurisdiction that has tried it.

We need a tax system that clearly steers us to innovation, growth and a shared and fair, sustainable prosperity. Most would say that means shifting the tax burden away from payrolls, innovation and job creation. I would agree with them. The negative effects of taxes on consumption needs to be offset by deeper income tax cuts and credits for people who are less well-off.

A premium is a tax, and payroll taxes discourage hiring. Make no mistake, payments to people who have no work is essential, and a hallmark of a decent society and an effective automatic stabilizer for the economy. But how we pay for them should be the subject of a serious debate. The Liberal Party is calling today for a freeze on employment insurance premiums, and a review of the tax into the future. The payroll tax increases planned by the Conservatives will put a new tax burden of 1.2 billion on businesses and workers just as the economy is slowing down. It is a very bad idea, and the Conservatives should change course.

We need to go further and address the income tax code itself. Like their other favourite statute, the Criminal Code, the Conservatives cannot resist tinkering with endless boutique tax credits and changes that respond to the flavour of the month politics that is now the hallmark of the political right.

These credits are rarely refundable, which means that those who really need help don’t get it. Out of the roughly 25 million tax filers in Canada, eight million do not have enough income to pay taxes. Those are the people who need these tax credits the most and they are the ones who don’t even get to apply.

What is true for individuals is equally true for companies. The Income Tax Act has become a haven for loopholes and exceptions, which reward legal ingenuity but necessarily don’t reward the useful creation of work and opportunity. The recent Jenkins report on research and development is a perfect case in point.

Creating a simpler, clearer tax code should be our objective, rooted in the twin principles of progressivity and support for innovation. We need to start a comprehensive review of this tax spending, to make sure we’re getting value for money. Right now we’re not.

We Liberals find ourselves competing with two other parties with simplistic messages. The Conservatives want tax giveaways for the better off, the NDP wants to raise taxes, and then throws in a “tax the rich” message for good measure.

The tax giveaway message assumes that the only thing that drives investment decisions is taxes, when we know that this is but one of a number of issues facing business and individuals: we need and want “competitiveness”, but this actually means many things – how well-trained and educated is the workforce, what’s the infrastructure like, what is the state of schools, universities and health care, and how efficient and transparent is government. People and businesses understand that you need taxes to pay for these things.

If tax giveaways and loopholes and de-regulation were the answer to everything, Ireland and Iceland would have survived the economic tsunami unscathed, but we all know that didn’t happen. In fact, it’s the opposite of what happened.

Making the cake means figuring out why Canada’s venture capital market is so thin, and what it will take to keep companies and individuals willing to invest and take risks, here and abroad. The connection between innovation, investment, and real success in the marketplace has to be understood, not with slogans, but with policies on venture capital and capital gains that will actually work and create wealth and jobs. I am asking Scott Brison to lead a debate and discussion on these issues in our party.

But the NDP has to answer the question – if soaking the rich and hitting businesses with new taxes were such great ideas, why have they been abandoned as the road to prosperity by most successful social democratic governments, from Manitoba to Norway?

The trouble with the populist narrative, whether of the left or the right, is its essential dishonesty, as if a simple bumper sticker – “tax the rich” or “tough on crime” – is really going to provide answers to the real issues we face as a country.

Liberals believe the greatest respect we can show people is to talk candidly about the problems we face and how we might deal with them, not pander to every whim or prejudice.

The rise of Asian economies, for example, now forces us to embrace globalism with openness and determination. The U.S. economy is floundering, and will not soon lead us to recovery. Europe is in recession and its problems will not get better quickly. Canada has to build a new strategy, a strategy that takes us further. Language training needs to begin early on, our kids’ curiosity about the world has to be met with opportunities to learn, to travel, to understand. Enterprises of all kinds must be as comfortable doing business in China and India as they are in Pennsylvania and California. Mark Carney pointed out recently that the depth of the American recession was costing us thirty billion dollars a year in lost exports. We have t o make up that difference and then some. There is no excuse for a “little Canada” mentality, because this will be our bread and butter as a country for the rest of the century. We can’t be afraid of the change, or think that there’s some kind of protectionism that’s going to save us. It won’t.

We have a great advantage as a country because our resource base is so strong, but this in turn is going to require more public and private investment to ensure deep sustainability. Carbon capture and sequestration, sustainable communities, the greening of our own development and industries – all these have to accompany our resource strength.
Premier McGuinty has shown the way with his commitments to greening the Ontario economy. We ignore the need to transform manufacturing at our peril, and have to create much smarter government co-operation to help craft strategies for these key sectors of the economy.

At the same time we have to address the growing gap between rich and poor. Working Canadians find themselves in a squeeze that is leaving their incomes either falling or stagnant. That means more training, stronger incentives to work, and better help for the disabled. It also means addressing the growing problem of student debt.

Working with Premier McGuinty on the province’s learning agenda a few years ago brought home to me how central this issue is for the whole country. The investments we made then – in student access, in improving the quality of institutions, in giving attention to the need for higher standards – need now to be matched by a broader, national approach. Canada needs to become a leader in learning, and we can’t allow jurisdictional issues to get in the way.

Nowhere is this more important than in aboriginal communities. On reserve education, housing and health are below any acceptable standard, and in our cities and towns across the party the challenge of ensuring access to quality education is simply huge. It must also be said that filling our nation’s prisons with aboriginal youth is hardly the better or wiser course. It costs more money every year to send a young man to prison than to spend a year at Princeton. Let’s get smarter on this issue.

As the party that made medicare available across the country, Liberals have to lead the debate on how to ensure the system will be there for future generations. Sustainability is about a willingness to change and innovate, and I know how difficult change in this sector can be. Home care, access to medication, the growing awareness of mental health and those things that determine health care – it is not good enough for federal governments to repeat the bromide that six percent increases are there forever, and refuse to lead the national discussion on the need for change. Running the fifth largest health system in Canada you’d think the feds would make that a model for change. Quite the opposite. But change must come, and must be part of any new health accord. And in that change let us recognise clearly that the premise and the promise of medicare is access for everyone regardless of income, but we need to show an openness to innovation in the ways that care can and must be delivered. The federal government has to lead the way in broadening access and pushing change.

We have to move beyond the “public-private” debate to focus attention on what care is needed, and how to ensure real value for money in how that care is provided.

The economy needs stimulus, clearly, but it has to be of the right kind. We don’t need gazebos or a “plague of prisons”, or untendered contracts for jets.

Fifteen years ago Mr. Flaherty, Mr. Baird and Mr. Clement cancelled subways and GO trains, wiped out social housing in Ontario and cut support for poor people by over twenty percent.

Today we should learn from these mistakes. We need to invest in mass transit in our cities and complete the studies for a new fast train to link the Quebec City to Windsor corridor. Having been absent from the housing field for too long, Ottawa has to start addressing the challenge of homelessness – half of whom are suffering from mental illness – and make sure this economic slowdown doesn’t lead to even more poverty.

The watchwords in whatever we do are innovation, learning and leadership – in business, in government, in civil society. And that, let it be said, is also the hallmark of an open, liberal society. We don’t resent success and we don’t punish failure. Things can be made to run better, more efficiently, more effectively. We have to pollute less, and create more jobs and opportunity. We embrace the world with all its challenges. We build infrastructure – often financed in new ways – and we understand that it is in the real economy that choices are made, chances are taken, and hopes are realised.

I am calling today for a real focus on jobs and growth, and an end to government by ideology and pandering. That means an immediate freeze on payroll taxes and a commitment to tax reform and tax change. Change that will produce work, growth, and fairness. I am calling for renewed federal commitment to long-term infrastructure and renewal to make sure we are stronger at the end of this slowdown. I am calling for new federal strategies on health because just throwing more money at the system won’t make it sustainable. I am calling for new national leadership on learning, aboriginal issues and poverty because leaving these problems unaddressed will leave us all further behind. We need a new politics in Canada, a politics that is not about pointless confrontation but recognises we need to create more jobs, more wealth, and more opportunity, and that a forced choice between the right and the left, between the Tea Party and the Occupyers will leave us further behind, not further ahead.
I am calling today for a real focus on jobs and growth, and an end to government by ideology and pandering. That means an immediate freeze on payroll taxes and a commitment to tax reform and tax change. Change that will produce work, growth, and fairness. I am calling for renewed federal commitment to long-term infrastructure and renewal to make sure we are stronger at the end of this slowdown. I am calling for new federal strategies on health because just throwing more money at the system won’t make it sustainable. I am calling for new national leadership on learning, aboriginal issues and poverty because leaving these problems unaddressed will leave us all further behind. We need a new politics in Canada, a politics that is not about pointless confrontation but recognises we need to create more jobs, more wealth, and more opportunity, and that a forced choice between the right and the left, between the Tea Party and the Occupyers will leave us further behind, not further ahead.

Let me end with the words of Wilfrid Laurier – who governed himself in a turbulent time, a time of change.

“I am a Liberal. I am one of those who think that everywhere, in human beings, there are abuses to be reformed, new horizons to be opened up, and new forces to be developed… (1877)”
“Banish doubt and hate from your life. Let your souls be ever open to the prompting of faith and the gentle influence of brotherly love. Be adamant against the haughty; be gentle and kind to the weak. Let your aim and purpose, in good report or ill, in victory or defeat, be so to live, so to strive, so to serve as to do your part to raise even higher the standard of life and living. (Speech to Young Liberals of London, November 20, 1918)”

In our time, as in Laurier’s, it is the standard of life and living that really counts. And that is where the heart of the Liberal Party must always be.

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  1. Avatar of Aaron Bergbusch Aaron Bergbusch said on

    Great speech today Bob! Well done.

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  2. Avatar of Denis Sabourin Denis Sabourin said on

    It’s great to hear a Liberal talking like a Liberal once again. A Liberal prepared to lead the debate, address the issues important to all Canadians and demonstrate to the Harper government that there are alternatives.

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  3. Avatar of Jane Taylor Eastwood Jane Taylor Eastwood said on

    Energising and thought-provoking, as well as intelligent, broad-ranging and absolutely on the mark. The Liberal Party at its best has always appealed to the best instincts in people. A positive view of the world, based on classic human values, rather than a negative view of the world that plays to people’s insecurities and fears.

    This speech marks the beginning, in my view, of a comeback for the Party. I hope that all of us are “big” enough to support Mr. Rae and the directions he has laid out, whatever past disappointments and disillusionment may have been.

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  4. Avatar of suebaker07 suebaker07 said on

    “For Liberals, our enemy is not government, business, labour, banks or unions. It is ignorance, greed, poverty, and hate. We do not fear debate or science. We cherish enquiry and difference of opinion, and we celebrate the freedoms that are necessary to get closer to truth.
    We know that public opinion is the sea on which we sail, but we also know it changes, and that the currying of favour that goes by the name of “populism” often leads to bad decisions and short term thinking. We know opinions move and change. We respect the public’s right to decide and are unwavering in our passion for democracy, but we know that coming to public judgment requires leadership.”

    I loved Bob Rae’s speech. Well written, timely and delivered with passion.
    To me, the most important part of the speech was the excerpt above. It was not perhaps the most central aspect of his speech but it helps explain what to me has been the puzzling phenomenon of people abandoning the Liberal Party for the extremes of the Conservatives and the NDP.
    The Conservatives have succeeded in using hate (of ‘criminals’, of civil servants, of government itself). They have used greed to offer their little middle class tax breaks like subsidies for ballet lessons and tax breaks above all. They have used ignorance by discontinuing the long form census and spending billions on incarceration despite evidence that indiscriminate incarceration is not effective. They have also succeeded in removing the issue of poverty from the nation’s consciousness. Conservatives want poverty to be the business of charities rather than a concern for all people and a concern for their government.
    Hate has become in vogue. The conservatives want us to hate criminals (unless, of course, you are Conrad Black), welfare recipients, union members, public sector workers and people who still have a pension. The NDP want us to hate corporations.
    The popularity of is ignorance, greed, poverty, and hate as motivators has made Canada a poorer meaner smaller place. If the Liberals can succeed in exposing the policies based on these values they will be successful.
    How do Liberals accomplish this? I’m not sure but it is a necessary fight if Canada is once again going to be innovative, prosperous, compassionate and successful.

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    • Avatar of John Deverell John Deverell said on

      The extent to which Canadians moved away from the Liberal Party and toward the NDP and Conservative parties is greatly exaggerated by the pre-democratic voting system with which we are still saddled.
      It is entirely possible that significant numbers of Canadians could respond positively to Bob Rae’s balanced and rational message and, with their votes, produce no significant effect whatsoever on the Parliament of Canada. The miserable truth is that the system ignores about half of all ballots cast and does not deserve to be called democratic.
      It’s time, indeed well past time, for the Liberal Party to join and lead the call for equal effective votes and proportional representation.
      John Deverell
      Pickering-Scarborough East

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  5. Avatar of jacques lee jacques lee said on

    great speech,merci,Bob。喜欢这样的演讲,呵呵。Bob您太伟大了,说出了我们加拿大人的心声啊,支持您!!

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  6. Avatar of Patrick Hamilton Patrick Hamilton said on

    Look no further….the man has the right stuff….Bob Rae for LPOC leader in 2013!

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  7. Avatar of said on

    To create long term economic growth and jobs programs that stimulate fixed capital formation are necessary.

    By upgrading Canada’s public health care technology and facilities, we encourage innovation and expansion in Canadian businesses that supply and service these technologies. There is a strong export market for health care technology. Upgrading our public health care technology and facilities contributes to long term economic growth.

    Government purchases of advanced technology can provide great incentive to private sector innovation and investment. There are strong export markets for public transportation technologies and renewable energy technologies, as well as health care technology.

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