David Rosenberg: Memo to Mark Carney: Don’t bring a butter knife to an economic gun fight

Prime Minister Mark Carney makes an announcement in Woodbridge, Ont., Feb. 5. Photo by Eduardo Lima/The Canadian Press files

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As much of a pain in the derrière as United States President Donald Trump is when it comes to the rupture in Canada-U.S. relations, the impediments to domestic growth reside with the decisions that Canadians have made themselves. We are sleeping in the bed we made.

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Before the launch of the latest trade skirmishes, Canada’s economic performance was in decay, and that remains the case to the current time. This is conveniently ignored because during the Justin Trudeau era, the immigration boom brought with it a mere illusion of economic prosperity, as while gross domestic product (GDP) growth appeared solid, it was in steady erosion in real per-capita terms.

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Canada has now endured a decade of virtual stagnation in real per-capita incomes, productivity and growth in the private-sector capital stock, as well as unprecedented net direct investment outflows. If I were prime minister, my policy platform would not be nibbling around the edges, but would be bold in the Brian Mulroney tradition.

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Mark Carney talks about initiatives to drive internal demand dynamics, but this is really all just a case of nibbling around the edges and smoke and mirrors. One year it’s a temporary GST holiday, and now it’s tax breaks on electric vehicles. Talk about bringing a butter knife to a gunfight.

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Here is what nobody is talking about: Nothing to date addresses what has truly infected the Canadian economy for decades: confiscatory top marginal tax rates.

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What I would be doing right now as prime minister is embarking on true tax reform. It’s been four decades since Canada last embarked on such a strategy to update the tax system and make it more globally competitive. My slogan would be “Make Canada Competitive.” Again, centre the economic policy plank by taking a feather from Ireland’s hat.

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Make Canada a global tax haven, just like Ireland did, to huge success, when it undertook a complete revamp of its tax system in the late 1990s. Ireland has a top marginal tax rate for individuals at 40 per cent (it’s more than 50 per cent in Canada) and 12.5 per cent for the business sector (Canada is at 26.5 per cent).

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Ireland’s fiscal numbers are far better than Canada’s in terms of deficit and debt ratios, so its move to become a global tax haven has far from jeopardized its financial position. The country has a robust public health-care system (but people can also opt for private health insurance), and the economic payback has been huge: an unemployment rate of five per cent (almost seven per cent in Canada) and average annual growth in real per capita GDP in excess of four per cent.

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What is wrong with Canadians that we continuously refuse to vote in like-minded governments aimed at promoting economic success? A true mystery.

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Let’s stop wasting time.

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What the Canadian government needs to focus its attention on more is the policy response to save the economy and rebuild the capital stock and productivity growth, which is the mother’s milk for durable prosperity.