Maybe not the whole nine yards, but a few

ANDREW COYNE on the Speech from the Throne

That was one of the more economically literate Speeches from the Throne in recent memory, even at the cost of saying rather little (and taking rather too long to say it). But what was there was at least mostly in the right direction.

Throne Speeches are tricky things. Lines that seem innocuous turn out to be freighted with meaning. Momentous-sounding announcements turn out to mean not much at all, or never make it into legislation. A pledge to “reform and strengthen education,” for example — meaningless boilerplate, or the beginnings of a national education strategy? An “aggressive” plan to “close unfair loopholes” — a couple of technicalities of interest only to accountants, or wholesale tax reform?

Still, the general tendency of the Speech, at least in its economic chapters, was clear: smaller government, freer trade, less intervention in markets. If hardly a major change in direction — did anyone think that’s what “recalibration” meant? — it does signal the government is turning up the volume on some conservative economic themes that had hitherto been buried in the mix. The government can read the opposition’s body language as well as anyone, and can see they are not spoiling for an election. So it has taken the opportunity to steal a few yards for conservativism, without being unduly provocative.

Indeed, it’s an achievement of sorts that so much of the reaction to the Speech seemed to be in the ho-hum, is-that-all-there-is vein. For it contains at least a couple of potentially important policy initiatives. Opening the doors to foreign investment “in key sectors,” including — but not limited to — telecoms and satellites, is the most startling, even if it was telegraphed in advance. Not long ago this would have been considered a political third rail, and yet it seemed to occasion very little response from the opposition. Good: aside from offering greater choice and competition for consumers, foreign investment will be a vital source of the capital needed if Canada is to improve its dismal productivity performance — as it must, to pay for the coming wave of baby-boom retirees.

The other potentially significant development was the pledge to freeze departmental operating budgets. Again, this seemed to escape notice, with most commentary focused on the symbolic but fiscally insignificant salary freezes imposed on ministers and MPs. But a freeze on departmental budgets, depending how long it is in force, could mean quite sharp cuts in spending in real terms — not enough, certainly, to balance the budget on their own, but perhaps a sign of what is to come in the budget.

It had better. Despite the nod to restraint, the Throne Speech maintains the government’s official line that the budget can be balanced without either raising taxes or cutting transfers to the provinces and elderly. It’s true that you can grow your way out of a deficit, if you don’t care how long it takes: give it 10 straight years of growth, and even the worst profligate can balance its books. But the more leisurely the schedule, the greater the chances of a recession or other unexpected event wrecking all those pleasing fiscal forecasts. And of course, the longer you take to stop adding to the debt, the higher it climbs.

What we need is a serious plan to balance the budget in three or four years, that is within the usual economic or political cycle, coupled with a strategy to tackle the longer-term demographic challenge. That will certainly require either significant cuts in spending or substantial tax increases. I’ve argued it can and should be done by cutting spending. But whether it’s one or the other (or both), it can’t be neither.

A couple of other important omissions from the speech. On the plus side, there were almost none of the usual giveaways to politically powerful industries. To be sure, there was the expected list of shout outs to the forestry, fishing, and farming sectors. But rather than shower them with subsidies and special treatment, the speech proposed to help them by cutting red tape and opening new markets: what might be called “small government activism.” (The glaring exceptions: shipbuilding and supply management.)

More distressing was the absence of any mention of the economic union. To be sure, there is a pledge to press ahead with the creation of a national securities regulator, in place of the current provincial hodgepodge. But until lately the government had much more ambitious plans. A previous Throne Speech, in 2007, vowed to take aggressive action to dismantle provincial trade barriers if they did not do so themselves, if necessary by use of the federal “trade and commerce” power under the Constitution. The Conservative election platform in 2008 added a deadline to this commitment: 2010. Well, here it is 2010, and in a document devoted to competition, productivity and free trade there is no mention of the economic union.

Fine words, as they say, butter no supply-managed parsnips.

FOR THE RECORD: Here’s what the October 2007 Throne Speech had to say about the economic union:

Our government will also pursue the federal government’s rightful leadership
in strengthening Canada’s economic union. Despite the globalization of
markets, Canada still has a long way to go to establish free trade among our
provinces. It is often harder to move goods and services across provincial
boundaries than across our international borders. This hurts our competitive
position but, more importantly, it is just not the way a country should
work. Our government will consider how to use the federal trade and commerce
power to make our economic union work better for Canadians.

And here’s that 2008 platform commitment:

A re-elected Conservative Government led by Stephen Harper will work to eliminate barriers that restrict or impair trade, investment or labour mobility between provinces and territories by 2010. In 2007, the government announced that it was prepared to use the federal trade and commerce power to strengthen the Canadian economic union. Since that time, we have seen progress among the provinces and territories in strengthening the existing Agreement on Internal Trade. We hope to see further progress, but are prepared to intervene by exercising federal authority if barriers to trade, investment and mobility remain by 2010.