Monday, February 8, 2016

Why the Manitoba Party won't win: take two

          A few weeks ago I wrote a post with the deliberately provocative title “Why the Manitoba Party won’t win”.  To my considerable surprise, the post attracted attention from my usual microscopic readership of people I know directly.  I’m guessing a google alert was set up.  Not only that, but the post seems to have been written by one of the main party people.  Hi Gary. 

          Anyway, the person who commented on the post was understandably miffed.  If I felt strongly enough about something to start a political party, then had some dick on the internet dismiss it out of hand, I’d be annoyed too.  And I’ll be honest, that post was not my best work.  Sometimes dashing off a piece in half an hour on a Sunday night doesn’t produce material of the very highest quality.  Go figure.

          So I figured I’d reconsider my initial post via the comment it inspired.  I’m kind of hoping the same person comes back.

          **If you don’t want to go through the entire thing, which is quite lengthy, at least read the last few paragraphs.**

 “Greetings,”



Hey.

“A political science student would explain much.”

          I’ll admit, that stings a bit.  I’d argue that this is faaaar from my first rodeo, but then I’d just be appealing to authority instead of dealing with the substance of the critique. 

“One, its Stuart - not Stewart.”

         Fair point, that’s my bad.  And just to show I’m fair minded, I’m going to leave my mistake in the original post as proof of my slap-dash work.  Although Taz Stuart has dropped out, so it’s a bit of a moot point.

“Two, you implicitly admit tax cuts will spur the economy, you just wonder about tax revenues.”

          No, I don’t believe I did.  I have yet to see good evidence on that point [1].  The whole economic idea behind tax cuts is that it will unleash the potential of an economy: more businesses will open, people will have more money to spend on things like consumer goods, and so on.  This is the essence of trickle-down economics: make a business-friendly climate and the entire economy grows, which benefits everyone.  As the aphorism goes, “a rising tide lifts all boats”.    

          There’s an assumption inherent in that argument, however, namely that the economy is currently being stifled by taxation.  There may be cases where a business owner decides to move because of taxation rates in Manitoba, or a productive citizen moves to another province because they’re being stifled in this province.  I’m not suggesting changing the tax structure wouldn’t have an effect on economic growth, but I contest the idea that it would lead to dramatic growth in the provincial economy.  The Manitoba Party’s website claims that through tax cuts alone, Manitoba’s economic growth could be boosted to 5, 6 or 7% a year rather than our current “sluggish growth of 1 or 2% per year”[2], which is frankly absurd.  I’m willing to give the party a fair shake, which is why I decided to write a more serious post about it.  But making those claims without adequate evidence (by which I mean evidence from other sources, not simply using one’s own calculations) is ludicrous.  Economic growth is sluggish, yes, but that’s not just in or about Manitoba.  Don’t take my word for it: ask Stephen Poloz, head of the Bank of Canada [3], or other experts [4].

          What’s more, if you take a look at a table of tax rates across Canada in 2013 (near the bottom), you’ll notice that taxation rates aren’t all that different across the country.  The Manitoba Party often uses Saskatchewan as a model, so let’s compare Manitoba [5] and Saskatchewan [6].  They’re different, sure but this is a matter of one or two percent, not a dramatic change.

  
“Well, isn't a growing or larger economy better able to fund government services, better able to fund more government expenditures?????”
         
          Not if it the government isn’t collecting taxes.  Taxes aren’t the sole way for government to raise revenue, but they are the principle way.  If government cuts taxes to the bone, it loses revenue generating capacity, pure and simple.  The health of the economy doesn’t help government provide services if it doesn’t collect any money from that economy.

          The Manitoba Party platform laments “No improvements in the substandard education given our children… little improvement in the sorry state of our roads… no reduction in health care lineups” [2].  But what they don’t explain – and this is my main issue with their platform –  is how gutting government revenue collection improves those things.

          Look, I’m not making the case that the NDP are stellar economic managers.  Despite years of reducing class sizes and spending more and more on education [7][8] , our results do not compare any more favourably when we look across the country or internationally [9][10].  Obviously, throwing money at a problem is not the only solution.  But taking money away altogether isn’t a solution either.  The Manitoba Party’s platform touts tax cuts as a panacea, which they patently are not.

 “Is it that a constrained or diminished economy better funds existing or greater public expenditure????”

          Not at all, but again, the assumption in favour of cutting taxes seems to be that it will cause a massive boost to economic growth, which is not automatically the case.  Let’s look at Saskatchewan again.  The premise of the Manitoba Party is that Saskatchewan’s economic success is due to its lower taxes (which as I pointed out aren’t that different from ours). 



          The table above is compiled from Saskatchewan budget documents.  Own-source revenue includes revenue from resources and taxation before federal transfers.  The point I’d like to draw your attention to is the fact that around 25% (and as high as an incredible 44%) of SK’s yearly own-source revenue comes from natural resources.  I would have loved to provide some comparison with Manitoba, but the way Manitoba sets out budgetary information makes it difficult to identify a single number for resource revenue.  Ultimately, though, an economic picture of Saskatchewan’s economic success that doesn’t recognizing the role of natural resource wealth (which is a factor over which governments have little control) is incomplete.   


“Elementary for those outside of the field of political science I presume.” 

Elementary indeed.      
 
“Three, we have a website at mbparty.ca”


          And a surprisingly good website it is, I’ll admit.  However, I checked around for one before I wrote my first post, so that one’s on you.  It’s not on the first three pages when you google “Manitoba Party”, and not listed on the elections Manitoba site as a registered party.  Gotta work on that SEO, man.  Part of my initial critique was that this is late in the game for a new party to be joining the fray.  To be doing so with few candidates announced and a low-profile website does not presage electoral success.

“Four, we have people of all political stripes: Liberal, NDP, PC and even Libertarian. We don't agree on much save tax cuts. If tax cuts appeal to our disparate group, then they must appeal to everyone outside of it.”


          I completely disagree with your second premise, but I don’t know that we’re going to find common ground on this one, so let’s move on.

          “Five, the reason that 42% of voters chose not to cast a ballot in the last election is because they had no basket of policies to vote for.”

          There are any number of reasons why people don’t vote.  A generation of academics, including political scientists but certainly not limited to them, have tried to pinpoint why voter turnout rates have dropped so much since 1993 federally (see below[19]).  In Manitoba[20], the numbers have been a bit more varied: the 1970s and 80s saw a spike in voter turnout, with a sharp increase in 1974 and a sharp decrease in 2003.




          Ultimately, a lot of people have studied why people don’t vote, and there are a number of reasons.  Here’s a pretty good primer, but among the reasons are: apathy, lack of knowledge, alienation from the process… there’s even a school of thought which argues that some people don’t vote because things are doing ok and they’re satisfied with the results of the process.  I don’t know about all that, but the point is that there are several explanations for non-voting.  A lack of options is one of them, but doesn’t account for all of it.  To be clear, the Manitoba Party’s attempt to appeal to non-voters is laudable.  But doing so by assuming they’d vote if only they had more policy options is, I think, only going to lead to disappointment come election day.   

          “The PCs have tried to outdo the NDP numerous times -- and failed. The Liberals are somewhere between the NDP and PCs. So there is a huge market outside the small area occupied by the 3 established parties.”

          The point that all three parties cluster around the center is a valid one, but again, assuming there’s a “huge market” of voters waiting to be lured by policies outside of the norm assumes that people only vote based on the policy options available to them (or not).  Again, there are a number of reasons people don’t vote. 

          Somewhat bizarrely, this point also seems to assume the Manitoba Party will be able to equally lure people from both the left and right.  There are dissatisfied voters on both sides, and people who don’t feel particularly strongly about either side, but the Manitoba Party’s platform, such as it is, won’t appeal to everyone equally.  As one based largely on tax-cuts, it naturally appeals more to people who are already on the right. 

          There’s also the issue of why parties in Manitoba cluster around the center.  It’s worth keeping in mind here that parties in Canada are first and foremost machines that exist to win elections.  If they cluster around the middle, it’s because that’s where voters are: the Hotelling-Downs model predicted this 60 years ago and is a remarkably enduring model of vote choice.

          So are there dissatisfied voters waiting to be lured in by new policies?  Surely.  But to repeat my earlier point, for the Manitoba Party, counting on those voters to make the different will almost inevitably lead to disappointment.    

**

“Six, don't knock people who have far greater, trying, and richer life experiences than a young and clearly not too well informed poli-sci grad student.” 


          You know, that’s mostly fair.  I contest the idea that one person’s experiences can be inherently better or richer than another’s, but considering the somewhat snide tone of my original post, I’ll take my lumps.

          My original point wasn’t that the Manitoba Party shouldn’t win.  I have several major disagreements on policy, but a move to make the system more competitive is a good thing.  And the critique is right: I shouldn’t discourage people from trying.  But I’m telling you, as realistic observer of politics (as I said, this isn’t my first rodeo), that the Manitoba Party won’t win.  For several reasons:  the party is counting on gaining votes where there aren’t that many to be won; its platform presents a simplistic version of economic growth and doesn’t address major concerns around funding government services; and its reach and profile seem very limited. 

          I applaud the effort, I really do.  But come April 19th, I strongly suspect my initial prediction will be validated.  


[20]Author’s work, with data from Elections Manitoba 

1 comment:

  1. Hello Poseidon,

    With the tax rates in Saskatchewan and Manitoba, you leave out the basic personal exemption, which is far higher in Saskatchewan than in Manitoba. You also leave out the earnings levels at which those tax rates come into effect.

    One does far better in Saskatchewan in Taxation at a certain average level of income than in Manitoba.

    Secondly, a tax is a fine, penalty, deterrent. It is what is used to punish people for all sorts of misdemeanors like speeding. Speed moderately and one receives a modest fine. Speed greatly and one receives a heavy fine. And one is far less likely to speed at elevated rather than moderate rates. Perhaps this fact means nothing to certain of the political science crowd.

    Taxation works exactly the same way. And the highest earning among us are punished most heavily, leaving them greatly discouraged, and eager to leave or not interested in working so hard. And you expect one to believe that if one should lighten the fine, that one's activity shall remain the same, that it will not stimulate more of the behaviour no longer penalized as much? That it will make no difference whatsoever? That a fine of $500 on some activity rather than one of $2000 will not make any difference on the volume or number of one's activities or behaviour?

    Is that your argument? Because if it is, I can easily demonstrate what should occur were I to impose a charge upon exiting a room of $10 at one door and nothing at the next. You might argue that if there were only 2 exits with the room filled, expected revenues would be half the number of occupants in the room times the fee. I would argue quite differently. And if the fee were raised, then you would argue no difference in behaviour would result?

    I do not believe the political science crowd would nod in agreement with you. This is more to do with your reasoning than with your credentials.

    It has been proven time and again, that tax cuts whether in Saskatchewan or in Ontario bring in greater amounts of revenues, not less.

    In regards to Saskatchewan's resource revenue, what exactly is your point? What does this have to do with the level of business investment, the province's GDP, the fact that Saskatchewan and Alberta are have provinces supplying this shameless government with $1.7B extra in equalization payments? Which is a reward for being the most poorly managed province in the country.

    There has been a serious decline in the number of people voting since the early 70's. The process of voting is far easier today than it ever has been. Yes, there are a number of factors that push it one way or the other, but the trend as a trend line would clearly indicate is down and has been many decades. And its not because people are better off.

    Regards,
    Gary Marshall

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