MNI INTERVIEW: Carney Short On 'Big Bang' Reforms- Jack Mintz
MNI (OTTAWA) - New Canadian Prime Minister Mark Carney is lacking details about reshaping an economy suffering under a U.S. trade war and longstanding competitive weaknesses, government fiscal adviser Jack Mintz told MNI, suggesting vulnerability to losing global investment and a permanent drop of GDP the central bank is warning about.
“I still don’t see what's part of his platform that would be big changes,” Mintz said in an interview. The University of Calgary professor advises governments on tax policy and in earlier work at the federal finance department influenced then Prime Minister Paul Martin's focus on cutting marginal investment taxes below the United States.
With Canada facing recession amid U.S. tariff threats, it's unclear if Carney's plans can save major industries like energy and automakers, Mintz said. Early pledges of scrapping a consumer carbon tax and cutting middle class taxes seem more symbolic, Mintz said, and Carney appears to just be shifting the burden of the carbon tax to industry.
“The biggest exporter is oil and gas for Canada. And I don't see anything on the platform that would encourage it,” Mintz said. “I haven't heard anything on regulation, like would he clean up the Impact Assessment Act, which has held back a lot of energy development?” That law passed by Carney's predecessor Justin Trudeau is often faulted by industry and opposition leaders for snarling major resource projects.
REJUVENATING CANADA
Misgivings about the former BOE and BOC Governor Carney run counter to his rise to global prominence through the 2008 global financial crisis. That reputation pushed him ahead in the Liberal leadership race and recent polls show Carney has erased Trudeau's double-digit deficit to Pierre Poilievre's Conservatives.
Carney has latched onto several Conservative ideas such as killing the carbon tax, and backing away from a proposed capital gains levy, Mintz said, adding he's skeptical about a push for more consumer relief. “He talks about the middle class tax cut. I don't know what that means, whether that's really going to do much for productivity.” (See: Canada Making Fiscal And Climate Policy Mistakes: Biz Council)
Canada will move to balance the operating budget within three years while running what Carney has suggested will be modest deficits for infrastructure projects. “I just don't see anything in the platform that will rejuvenate Canada, outside of the infrastructure spending,” Mintz said. (See: MNI: Carney To Take On Trump, Be Fiscally Cautious - Ministers)
“If he's going to be like the old Liberals, just hand out incentives, grants, things like that for certain industries and things like that, I'm not sure that's going to be the real cure,” Mintz said. Carney appointed as finance minister Francois-Philippe Champagne, who in his prior cabinet role oversaw subsidy programs for electric vehicles, including to the now-struggling Northvolt.
SOMETHING MORE DRAMATIC
The country needs "big bang" tax and regulation reform for companies to invest ahead of the larger U.S. market, Mintz said. “We're in a situation now where being like others is not good enough, and that's the difference between us and stories about Ireland, for example, or even Israel, which you know undertook a number of major reforms to encourage high tech.”
Those issues are bigger than even the near-term tariff threat, Mintz said. Canada has lived in a world much less free trade in the past and its resource-based economy will still have advantages.
“If you go back to higher tariffs in the longer run, it's not going to be the end of the world, but it's going to be a major adjustment,” Mintz said. “Agriculture, fishing and forestry could still continue doing very well no matter where we sell goods to. And I think in the case of manufacturing, some real challenges.”
“If I was choosing between being in the U.S., behind the tariff wall, and being in Canada with the same corporate tax rate, effective rates are very similar, I can tell you, I'll be going to the U.S., so we’re going to have to do something a lot more dramatic.”