Overview:
Below is a transcript of a recent interview between the Honourable Joe Oliver and Tony Clement, which is broadcast on The News Forum, a national broadcaster and media partner of Canadian Affairs. For access to the Boom and Bust episode, visit https://www.thenewsforum.ca/series/boomandbust
Tony Clement: Welcome to another episode of Boom and Bust. I’m your host, Tony Clement, here at The News Forum where all voices matter.
The federal budget is now released and being debated in the House of Commons. Canada’s challenges pile up in an uncertain and unpredictable world. Here to discuss all of this is the Honourable Joe Oliver.
He was finance minister and natural resources minister during Prime Minister Stephen Harper’s government.
Joe Oliver: Welcome. Thank you very much, Tony.
TC: I guess first preliminary thoughts on the budget, sir.
JO: Well, this was, what shall I say? Justin Trudeau’s penultimate budget. And it’s dysfunctional. And, it gets a failing grade. The budget is full of errors of omission and commission. It doesn’t deal with some of the short term problems of housing in any effective way or inflation. And it doesn’t deal with the longer term crisis of poor productivity.
TC: Right.
JO: It’s essentially a political document, a tax and spend document from a failing government that is flailing around looking for something, anything, to, restore its popularity with voters, which, as we know, has plummeted in the last six months or so.
And so it it appears like a kind of a desperate attempt to regain some political credibility. And it’s going about it from a subset of economic and financial point of view in precisely the wrong way.
TC: Yeah. One of the things, obviously, that is being discussed is, the tax hikes. Obviously one that I’m sure you’re very familiar with is the capital gains tax hike. Tell us a little bit about your reaction to that.
JO: Sure. What the government is proposing, and this was rumoured quite a bit over the last several years when it became apparent that this government was never going to get off its it’s profligate spending, [was] at some point they were going to have to start increasing taxes even more than they already have through various indirect measures like, you know, on on the regulatory side.
So, what what the government is going to do is increase the capital gains inclusion rate from 50 per cent to two thirds. That is, you know, normally when you receive, let’s say, interest from a bond or income, ordinary income, you get taxed in Ontario at a maximum rate of 53%, which is a bit, crushing. And when you had a capital gain, however, which is double taxation, but when you had the capital gain, only half of it was recognized.
So you were paying 53 per cent on half. Now you’ll be paying 53 per cent on two thirds. So that’s a, you know, fairly significant increase. And there’s a $250,000 exemption each year for individuals, but not for trusts and corporations.
TC: Right.
JO: And people have until January, until June, I should say, June 25th, to take some action in advance of this coming in. The government pretends that it will bring in almost $20 billion over the next five years. Tut that’s, I think, very optimistic because, firstly, people can arrange their affairs to delay or stagger the asset sales that generate the capital gains tax. And they can avoid it entirely by, by not selling.
And that raises one of the problems with this tax, which is it can induce decision-making which is non economic, which is tax driven. And that’s not sound over the longer term.
But, but essentially this is bad for the economy. It’s going to raise the cost of of equity capital. It’s going to discourage entrepreneurship. It will reduce, productivity. And it will make Canada a less attractive place for people to live and work.
So it’s not a constructive fiscal measure.
TC: Right. And they were driven to it because they just have sort of run out of options, right?
JO: Right.
TC: Welcome back to Boom and Bust with our guest, the Honourable Joe Oliver, former finance minister, natural resources minister, discussing Budget 2024.
Joe, you wanted to make a point about the breadth of this tax increase, which the finance minister, Chrystia Freeland, was trying to minimize.
But you have another another thought on this. So please continue.
JO: Yes. Well, she in her budget remarks referred derisively to the wealthy, the top one per cent, the top 0.1 per cent, which is 1/1000th of the population. And they’re the ones who might complain most bitterly about this, implying that this is who the the tax is going to hit.
Well, the Fraser Institute did a study a couple of years ago and discovered that more than 50 per cent of the people who pay capital gains tax earn less than $150,000.
So this is clearly the tax which will impact the middle class, right? Not just for for the wealthy. And of course, the wealthy will be able to use tax consultants and lawyers and so on to try to minimize its impact.
But overall, the real problem, as I said, is that it it will have a negative economic impact and it will exacerbate the capital flight problem.
TC: Right.
JO: That Canada is currently, suffering from. And that, of course, has an impact on productivity, which is a subject I think we should discuss at some point.
TC: Yeah. I mean, if you I want to put it in a bit of a context, obviously when you were a finance minister, I was president of the Treasury Board, and this latest statistic came out showing a 100,000-person increase in the federal public service since the time that we were in office. Much more growth in terms of federal employees than in the private sector, as an example. So that’s a sustainability question.
I’d like you to comment on [that], as well as other things that are affecting our productivity.
JO: Right. I mean, that’s, you know, that’s quite an astonishing increase. And of course, there have been increases in the provincial level as well.
The government says that they’re going to be, you know, very prudent, and they’re going to seriously cut back on the public service by about 5,000 people through attrition.
And this, Justin Trudeau’s, BFF Jagmeet Singh says is an outrageous instance of austerity.
Well, they’ve increased by 100,000, and now they’re going to, over the next five years, reduce it by 5,000. It’s like someone gaining 100 pounds and say, says, well, I’m going to I’m going to reduce my weight by seven pounds.
I might not, being very, very frugal with my diet.
TC: Right. It’s nonsense.
JO: But if you’d like, I can talk a bit about the productivity issues, which the government really hasn’t, hasn’t done anything to address. Quite to the contrary. We have a serious problem.
TC: Indeed.
JO: It’s a crisis in productivity. And the best way to measure it is by looking at what’s happened to GDP per capita, right? It is a measure of individual prosperity.
And in that regard, the growth rate of GDP per capita has been a meager 0.3 per cent since the Liberal Party took office in 2015.
TC: Right.
JO: I mean, that is really bad. And it’s worse than most other countries. And so I think we’ve discussed in other episodes, the OECD forecasts what GDP per capita will be among the 38 wealthiest countries over the next 40 years. And Canada is ranked dead last.
I mean, this is appalling. It’s really a disgrace for a company that is so blessed with our natural resources and our intellectual resources for us to be dead last. Really, it is a sign that our fiscal policies are basically in deep trouble.
And, of course, it means that the average person is not seeing any improvement in his or her standard of living.
And relative to other countries, all of the wealthy countries we’re falling behind.
You know, in 1948, two new countries earned their independence: South Korea and Israel. They were very poor. They both had existential military threats to confront.
TC: Welcome back to you, Boomer. I’m continuing this conversation with the Honourable Joe Oliver.
Joe, finish your point about Canada’s relative success. [It] sounds like we’re going to be overtaken by more and more countries. Then I have one more question that I want to ask you about this.
JO: Sure. And I’d say two examples, South Korea and Israel. Two countries that started way behind us and may actually overtake us in GDP per capita. I mean, they’re hardworking, creative countries. And good for them. But, shame on us for falling behind.
TC: Yeah. One of the things that Chrystia Freeland, utilized to say this was all worthwhile was saying we’re doing it for young people. That young people need help to access being in the middle class, to afford a house, to afford our standard of living.
And that’s what this is all about, sweetie. Any higher taxes or other decisions are for the best interests of our youth. What’s your take on all that?
JO: Well, she definitely is going after the Millennials and Gen Z, because for the first time in my, memory the Conservatives are way ahead with that younger demographic. And this is a serious political problem for the government. And that’s why Chrystia Freeland has been focusing on them.
But, you know, they’re they’re not doing any, what is substantial, substantively needed, to be helpful on housing, for example. The problem is that we’ve had huge immigration, much greater in numbers than the amount of new housing stock.
TC: Right.
JO: So that’s that’s been part of the reason prices have gone up. And the other reason is that inflation has, you know, exacerbated the whole situation.
And, and then, of course, we have onerous regulations and have made construction much more time-consuming and risky.
So this is another example where the government is now trying to solve problems that it created.
And the other issue about younger people is that this debt that she has created, which is moving towards $1.4 trillion; interest on the debt is now, around, I think $55 billion.
TC: That’s right.
JO: It’s greater than health transfers and it’s moving up to what what we pay for GST. So this is going to have a major impact on millennials and Gen Z for their lifetime. Unless we do something about it.
And they’re the ones who are going to be bearing the bulk of the burden over the longer term.
TC: I’d like to switch gears, of course, because I mentioned at our intro that these are uncertain, unsecure times in the world and that that affects Canada more than the government admits. This past week, at the time of recording this interview, Israel had been struck by or Iran attempted to strike Israel with over 300 missiles and drones. That was successfully repelled by Israel and her allies. What’s your take on the state of the situation in the Middle East right now?
JO: Well, it’s very fraught. Of course, it started with Hamas’ deadly attack on October the 7th, where 1200 Israelis and other nationalities who were in Israel, were slaughtered, brutally, tortured, kidnapped men, women, children, even, even infants.
And then the Israeli, you know, incursion into Gaza. The tragic loss of life. And, the double standard, which is, you know, was almost immediately imposed on Israel, a standard which the world would never impose on itself and never and never has.
And then following that, of course, was this unprecedented direct attack from Iran, with an onslaught of missiles and drones. They had been confining their attacks, through the use of proxies. So now it’s really sort of fighting the four-fronted war against Hamas, against Hezbollah, against the Hutus and against Iran.
TC: Right.
JO: And, fortunately, they have some friends and allies starting with the United States. France, right, and the UK were important and Jordan also.
TC: Yeah, yeah.
JO: And I think that Saudi Arabia played indeed and established the fighting intelligence.
TC: Sure, sure. So we’re just going to take a brief break again. Hold that thought. It’s a very important topic. We’ll be back after these messages.
TC: Welcome back to Boom and Bust. We continue our conversation with the Honourable Joe Oliver. Joe, you were just talking about the situation in the Middle East. Please continue with your thoughts.
JO: What we need is both strategic and moral clarity. Right? I think on the strategic side, we have to understand that there are terrorist organizations and a terrorist state, Iran, that has objectives that are genocidal towards Israel, but highly hostile to the region and beyond, including the United States, which Iran refers to as the Great Satan and Israeli citizens.
TC: I think the little Satan.
JO: That this is a government that doesn’t operate within the law or within the constraints that civilized countries have or in conformity with international human rights guidelines. If they are enemies of Western civilization and democracy and they have a kind of a cultish, death fetish, they must be recognized for what they are.
And we’re not talking about the people of Iran, the Persian people. We are talking about the regime in Iran. And we have to conduct ourselves accordingly, without naivete, without double standards.
And in terms of moral clarity, there is a clear distinction between a genocidal terrorist group that has murdered men, women and children and wants to continue to do so. And, countries, or a country in this case, that is trying to defend itself, protect its sovereignty and its citizens.
And the clarity has been absent in some quarters.
TC: Well, let’s talk about the Government of Canada’s reaction to all of this. Maybe go into that a little bit.
JO: Well, exactly. You know, at this time, when what Israel needs [is] friends diplomatic support and military hardware, the Canadian government counted the votes, lost its moral compass, and voted for the resolution in the House, sponsored by the NDP that basically rewarded Hamas for its terrorism.
This was very disappointing.
And, I think, history, will judge the party, and the government accordingly.
It’s very disappointing. And it also exacerbates a related problem, which is the really extraordinary rise in antisemitism in Canada and in much of the Western world.
I mean, I cannot recall the time ever in my lifetime or reading Canadian history any time, in which there was this level of physical and verbal assaults on the very small Jewish community. And, you know, this is not, what Canada stands for.
We rightly take pride in our in our tolerance and protection of minorities.
And, it’s, you know, frankly, disheartening, if not alarming, to see that happen.
Well, it was, alarming as well to see the ceasefire crowd, all these anti, anti-Israel protesters who wanted a ceasefire, then celebrating a breaking of a ceasefire by the Iranian government with all the missiles and drones.
TC: Right.
JO: And there’s a story there. Some of the fellow travellers are, you know, suffering from an extraordinary level of cognitive dissonance.
TC: You know, Joe, we’ve got to keep it at that. I’m sorry to interrupt, but we are out of time. I really do appreciate all of your views, on such a wide range of issues. Obviously, we have to have you back, very soon. But thanks for being here today.
JO: Okay. Thank you. Bye, bye.
TC: Thanks for being with us today.
