Justin Trudeau’s Plan to Help the Middle Class, or How to Polish a Turd

So, Justin Trudeau finally released his plan to help Canada’s middle class and it’s a joke.  How Trudeau’s proposals translate into a progressive platform for “the middle class” is beyond me. This isn’t a surprise.  Trudeau once defined the middle class as anyone who earns a paycheque.  The absurdity of that definition is clear since a cashier and a bank executive both earn paycheques and they hardly belong to the same class.  He later defined the middle class as someone living paycheque to paycheque.  A lot of people live paycheque to paycheque for different reasons.  A professional couple making six figures who are spendthrifts and can’t pay their bills is very different from a Wal-Mart cashier who can barely make part of the rent — let’s be real here, minimum wage workers cannot afford to live alone — because of a meagre paycheque.  For someone who claims to know what “the middle class” goes through, he sure doesn’t know who counts as middle class.  Of course, that’s not his concern for he believes it’s up to economists to argue through that definition.

There is absolutely nothing in Trudeau’s proposals that address growing inequality in Canada, which is most deeply manifested at the community level.  In fact, too bad if you’re working poor.  Justin Trudeau doesn’t care about you even though in his radio advertisements, Trudeau’s job interview voice said the Liberals want to help the middle class and those aspiring to join it.  What’s the first point of order for Trudeau’s plan?  A tax cut for middle income earners, which means anyone who falls into the second tax bracket will see their personal income tax rate reduced to 20.5%.  Someone who makes between $44, 701 and $89, 401 is now middle class in Justin Trudeau’s Canada.  Trudeau’s advisors might have wanted to open up the stats on this because the 2011 census, as useless as it is thanks to the elimination of the mandatory long-form, shows that the median individual income in Canada is $27, 600.  That means 50% of working Canadians are guaranteed to be ineligible for Trudeau’s tax reduction.  When the number of Canadians who make less than $44, 701 are added up, Trudeau’s plan excludes 2/3 of income earners.  Nothing wins elections like a party platform that excludes 2/3 of the working population!

So, what about Trudeau’s pledge to help those who want to become middle class?  That, I suppose, comes in the form of a new Canada Child Benefit that replaces the current system of multiple benefits for people with children.  The Benefit is no longer taxable, it is income-tested, and, as the Liberal website says, it is “targeted to the middle class.”  Apparently, making $44, 701 to $89, 401 was middle class but suddenly everyone became middle class under the Benefit scenarios provided by the Liberal website.  In any case, how much help would Trudeau’s proposed Canada Child Benefit provide parents who need child care?  Well, if you’re a single mother making $30, 000 in Toronto who would get $533 a month, it does very little.  The average monthly cost of daycare in Toronto for an infant, a toddler, and a pre-schooler in Toronto is $1, 676, $1, 324, and $998 respectively.  There isn’t much else to say here other than children of the working poor aren’t getting much help as the greatest predictor of poverty in adulthood is poverty in childhood.  A lack of affordable daycare is a key obstacle in getting single mothers, who make up the greatest proportion of the working poor, out of poverty since it affects their labour market outcomes.

The final point of Trudeau’s plan is the elimination of income-splitting and adding a new tax bracket.  How exactly does this help “the middle class”?  While I am in favour of eliminating income-splitting and a new tax bracket — Canada currently has four while the US, for comparison’s sake, has seven and requires married couples to file jointly — this doesn’t do much for income inequality.  As it stands, most wealthy Canadians derive their incomes from sources other than paycheques.  These sources of income generally fall under the category of capital gains and they are taxed at rates far below that of personal income tax rates.  If Trudeau was going to be serious about a more just distribution of income, then this would be tackled.  Yet, it isn’t and nor should anyone expect Trudeau to do so anytime in the future.

Here is the fact of the matter with Trudeau’s plans.  No amount of cutting taxes will alleviate the financial pressures facing low-income Canadians and increasingly squeezed middle-income Canadians.  The elimination of income-splitting won’t improve Canada’s horrendous labour market performance.  Trudeau’s Canada Child Benefit won’t father national and affordable daycare to help working poor families improve their income.  Where is the plan to work with provinces to develop an active labour market policy?  Where are the plans figuring out how to deal with the almost 50% of the labour force who work precarious jobs?  Where are the plans for a new national social floor that reflects changed labour markets?  Where are the plans to confront the high housing costs that are a source of financial stress for many households?  Trudeau’s plan isn’t providing “the middle class” with a fair and real chance.  It provides them with illusions.  Really, as I have stated in a previous post, this is about Trudeau’s politics of nothing since that is exactly what this plan gives all Canadians: nothing.

Justin Trudeau is Listening to Lawrence Summers? Nothing Bad Can Happen!

A few weeks ago, the Globe and Mail reported that Trudeau and his Liberals are listening to Lawrence Summers’s idea of “inclusive prosperity.”  I suppose this could be dismissed as another attempt by Justin Trudeau to appear as if he’s a deep thinker and it should be.  While Trudeau’s insistence that the Liberals will reveal their platform as the 2015 election nears isn’t problematic — election platforms aren’t something that should be treated nonchalantly given the nature of politics — it is nonetheless incredible that after being the leader of the Liberals for the past two years, the public should have some conception of what the Liberals want to do.  Finding a unicorn while blindfolded seems easier at this point.  In any case, the gist of Summers’s “inclusive prosperity” is as follows: rather than pursuing lower taxes and balanced budgets, governments should instead focus on investing in infrastructure, fight climate change, and invest in education.  Who would be against this?  Well, I would be against it given who authors inclusive prosperity.

Lawrence Summers has held a number of impressive posts during his career.  However, the policies that he has pushed have been anything but inclusive.  As Treasury Secretary from 1999 to 2001, Summers was the guy in the Clinton administration who ripped up the Glass-Steagall Act, thereby allowing commercial and investment banking to come together, further deregulating American financial markets.  The follies of Summers’s act was clear by 2007 when the American economy began to implode and US banks got into hot water thanks to their insistence that the sub-prime mortgage securities that they were both buying and selling — thanks to Glass-Steagall’s death since they wouldn’t have otherwise been allowed to sell securities of any sort — were perfectly fine.  Had Glass-Steagall stood, the US banking system may have been sounder than it was by that point, a liquidity crisis may not have emerged to the extent that it did, the US and many other economies may not have experienced a pointless recession, and the potential for foreseeable sluggish economic growth may not have happened.   Still, Summers’s decision to repeal Glass-Steagall had a more subtle but no less insidious effect: the further financialization of the US economy.  The consequences of financialization for American workers cannot be overstated.  Anything and everything was looked at as a liquid asset and the relentlessly short-term orientation of a financialized economy deepened throughout the US economy.  Bankers’ solutions for generating profits are fairly simple and very narrow-minded: cut labour costs or raise prices.  In the highly competitive American marketplace, the choice is often the former.  A lot of perverse incentives to make money materialize under highly financialized economic environments too.  Profitable and productive companies are worth more if they are dissected and destroyed.  Companies that should go under because they are effectively dead wood become highly valued because the promise of revived profitability offers excellent returns.  In effect, the paradigm that Summers helped shore up is one of an abused workforce who has to perpetually ratchet down their expectations because they labour in an economy that values unproductive finance over industry.  How these circumstances open the door to inclusive prosperity is about as clear as mud.

Investing in infrastructure, fighting climate change, and investing in education — whatever “investing in education” is supposed to mean — are all long-term solutions for an economy that is oriented to the short-term.  How does “inclusive prosperity” propose to occasion a paradigm shift?  It doesn’t!  Inclusive prosperity assumes that tacking these measures onto the existing paradigm will magically improve people’s lives.  At best, inclusive prosperity is an easy slogan that avoids answering the hard question of how to put an end to a destructive paradigm that relies on inequality to generate growth.  To be sure, the 2008 economic meltdown bucked the trend of everyone’s income falling during a recession as only top earners saw their incomes rise.  That this actually happened indicates something is seriously amiss with how economies now operate.  For Trudeau to import and consider the ideas of a man who helped deepen inequality is a clear demonstration of his lack of imagination.  Then again, the reason why he would do so was already given earlier in this paragraph: inclusive prosperity is an easy slogan that avoids answering the hard question of how to put an end to a destructive paradigm that relies on inequality to generate growth.  Perhaps, then, Summers’s inclusive prosperity is perfect for Trudeau: since it says absolutely nothing, expect it to do absolutely nothing.