As a rule, I don’t normally debunk articles. It’s not what I like to do, but there is so much nonsense in Kay’s recent column that I just can’t let it stand. For instance:
The 2008 financial crisis created a massive rift in America’s conservative politics. Throughout the boom years of Bill Clinton and George W. Bush, voters had ignored the massive profits that were being siphoned off by the financial industry: What was good for Wall Street was good for everybody. But the backlash against Bush’s TARP program brought out the country’s anti-plutocratic populist spirit — which is why Mitt Romney, a former buyout king, seems like exactly the wrong presidential pick to many Republicans.
There are two errors here, one about free market policy and the other about the actual state of the US conservative moment.
With regard to free markets, who sez that the TARP bailout was a free-market policy? Not free market supporters. They called it crony capitalism and were its principal opponents because they thought it was a corrupt bargain between business and government. TARP’s supporters included the Democratic Congress that passed it (including Senator Obama) and President Bush, who said at the time that he had to temporarily break capitalism in order to save it.
And while it is true that the backlash against TARP split the Republican party, the “anti-plutocratic populists” were explicitly pro-small government. The Tea Parties were a spontaneous grass-roots uprising by people who were disgusted with George W Bush’s lapses and were frightened by where President Obama and nancy Pelosi were taking America. Currently, tea partiers fear that Mitt Romney is insufficiently pro-free market. Their opponents are establishment Republicans who don’t want to rock the boat.
Here in Canada, the 2008 financial crisis, and its piggyback recession and foreclosure epidemic, also has created a massive upheaval in conservative politics. Before that, the real dynamo behind right-wing ideology in this country was always, at heart, wealth-envy of the United States, which we saw as a bastion of prosperous laissez-faire capitalism.
As a conservative activist, I have somehow missed this ‘massive upheaval’. But Kay does have a legitimate point. While the US is usually more laissez-faire on average than Canada, it is a mistake to assume that everything that happens in the US is more laissez-faire than Canada. Of course, Kay makes the same mistake, this mistake being central to his thesis.
“Currently, the average Canadian household is more than $40,000 richer than the average American household,” reports the Globe & Mail, citing recent Environics Analytics WealthScapes data. ...
These numbers should be a source of pride for Canadians. Yet they highlight awkward questions for the country’s small-c conservatives: If Canada was, relatively speaking, on the right track policy-wise all along, what exactly were we doing jumping up and down, demanding that our leaders look to the United States for their policy solutions? Does the idea of being a Canadian “fiscal conservative” even make sense anymore?
Really? NAME ONE. Name a small-c conservative Canadian who feels ‘awkward’ that Canada is doing well. I travel in conservative circles and all I experience is pride that Canada is finally on the right track. When I attended the National Review cruise last fall (NR is the flagship journal of American conservatism), I and all the other Canadians in attendance felt proud of Canada, especially when our American counterparts were gushing with praise for our country.
And considering that an important reason for this turnaround is Canada’s better fiscal situation (10 years string of balanced budgets vs. trillion dollar deficits under Obama), in what way exactly does it no longer make sense to be a fiscal conservative?
David Frum — who has, without intending it, become a voice of conscience in America’s conservative movement...
Huh? Earth to Jonathan Kay: American conservatives considered him an apostate, a heretic and a RINO. South of the border, Frum is an isolated pariah with zero influence.
Yes, a lot of our wealth comes from oil and other natural resources. But unlike the United States (which has its own natural gas boom going on, let us not forget), we’ve plowed much of the proceeds back into public spending, while avoiding Bush-style budget-busting tax breaks for the rich. Nor did we let free-market euphoria permit the creation of a sub-prime NINJA mortgage market.
There are so many falsehoods in this short paragraph that one scarcely knows where to begin.
First of all, “we’ve plowed much of the proceeds back into public spending”? While general tax revenues to the federal government have increased, in what way has the federal government increased the welfare state? Stephen Harper cut the GST, raised the retirement age and is trying to restrict EI eligibility.
And since when did the Bush tax cuts for the rich break the budget? Did Bush not increase federal spending? And not just military spending. Ever heard of the prescription drug plan? the No Child Left Behind Act? or the budget-busting Farm Bill of 2002? Doesn’t this count as public spending? And was not his worst deficit (passed by the Nancy Pelosi Congress and supported by then-senator Barack Obama) less than half of Obama’s best deficit? And what about the 14,000 pages of new federal regulations issued under Bush? Where exactly was there “free market euphoria” in the US in the past decade? Not in the District of Columbia.
And with regard to the Bush tax cuts, it was his middle class tax cuts that (marginally) reduced revenues. His tax cuts on the rich increased government tax revenue (as they always do). That’s how the Laffer curve works.
And “free market euphoria” created the “sub-prime NINJA mortgage market”? Has Kay ever heard of the Community Reinvestment Act - the law that penalizes banks if they don’t hand out mortgages to minorities in sufficient quantity? The only people euphorically pushing the housing bubble were the bloviating politicians (of both parties) who crusaded for increased minority home ownership rates by forcing banks to meet quota requirements on loans. When the banks complained that this would blow out their loan-loss and reserve requirements, the government made them a corrupt bargain: if they met their quotas, then Fannie Mae and Freddie Mac (semi-government entities) would buy all their dodgy mortgages (which they resold as asset-backed securities). It was a deal between politically connected operators (like Angelo Mozilo of Countrywide Financial) and juiced-in politicians (like Senator Chris Dodd - Democrat). At that point, the banks no longer had any free-market constraints on loaning out money. To meet their quotas, they issued NINJA (No income, no job applications) loans, a large proportion of which fell on Hispanic people. Ever wonder why the housing bubble was concentrated in California, New Mexico, Nevada and Florida? Whatever else this unholy mess was, it was not free enterprise. And yes, while Canada does have banking rules, the US has a lot more crazy, destructive, politically inspired regulations that have nothing to do with keeping the banking system secure.
Norway and Sweden both have roaring economies, despite being socialist welfare states with high rates of government spending.
The mirror image of the error of assuming that everything in the US is capitalist, is the error of assuming that everything in Sweden is socialist. In reality, Sweden elected its version of the Reform Party in the early 1990’s when socialism was driving it to bankruptcy. Sweden began implementing free-market reforms, which have continued under different governments to this day. As a result, Sweden today has a much lower corporate tax rate than the US (whose corporate tax rate is the highest in the developed world) and has an extremely deregulated labour market. The reason their economies are roaring is, at least in part, because they are still recovering from socialism.
Rather, the lesson is that nations must spend within their means — something Canada has done for the most part, but the United States hasn’t.
When Preston Manning and the Reform Party stated this principle in the 1993 campaign, they were called extremists by the Chretien/Martin Liberals. The Liberals only adopted the Reform policy of balanced budgets after Canada went broke under their watch. Afterwards, they claimed it was their idea all along.
The stability of Canadian banks and the concomitant stability in the housing market provide the clearest explanation for why Canadians are richer than Americans today.
True, which is why government meddling in the housing market to benefit politically favoured constituencies is a really bad idea. This is the entire reason why the net wealth per household is higher today in Canada than the US (that plus the collapsing US dollar, another subject).
Martin also slashed funding to social programs.
More intellectual property theft by the Chretien Liberals from those crazy free-market fundamentalist from Alberta.
The “third way” that Kay balyhoos is a bunch of incoherent tripe. Capitalism is a coherent system, socialism is a coherent system, a mishmash of the two is just that: mishmash. While it may be argued that our current system is a mixture of free enterprise and government, how many “free market fundamentalists” are there who believe in no government at all. Other than a few Randians and Barack Obama’s straw men, the vast majority of small government conservatives believe in some government. They believe that modest government is not only consistent with but enables free markets to exist (by ensuring the rule of law, among other things). So if this is the case, where is the third way?
It is a bogus slogan for a bogus argument.