Paul Wells' German election punditry misfires

Macleans scribe Paul Wells takes a stab at offering up a "slightly higher-value talking point" with respect to Sunday's Bundestagwahl by suggesting that "[t]he Tom Flanagan argument, that coalitions should only be valid if they advertise their makeup before everyone gets to vote, wasn’t followed in Germany."

Since Tom Flanagan is a fellow card carrying Wildroser and even a fellow Danielle Smith booster, I feel compelled to dispute the contention that the German electoral experience undermines his "argument" despite my disinclination to take up the cause of curmudgeons.

Although it may be technically true that Angela Merkel reserved for herself the prerogative of who her party's coalition partner might be, the real issue is whether the various parties clarified for voters prior to the election which coalition possibilities were on the table and which were out of the question.

On August 18 Der Spiegel published an interview with FDP leader Westerwelle headlined with Westerwelle's declaration that "'I Consider a ["traffic light"] Coalition With the SPD and Greens Out of the Question." If "the Tom Flanagan argument" is that a party's credibility may at risk if it entertains any and all coalition possibilities, the financial daily Handelsblatt effectively affirmed it by stating that in Germany "the FDP's credibility would be at risk in the traffic light coalition." Instead of calling Canadian Liberal leader Michael Ignatieff's attention to the fact that the biggest winner on Sunday was the politician who declared unequivocally that "socialists and communists must not be allowed to rule [my country]," Wells seems think that a noncommittal Liberal party should be "comforted" by the German results.

A September 21 post on a blog run by the American Institute for Contemporary German Studies makes it clear that the major German parties made a point of sending a "signal to voters" about "possible coalitions" before voting day:

This weekend the Free Democrats and the Green Party held party conventions in Potsdam and Berlin to send a last-minute signal to voters before next Sunday’s election.... the main message of this weekend was about possible coalitions...
The FDP voted unanimously in favor of a coalition with the CDU/CSU, ruling out a coalition with the SPD and the Greens (a so-called traffic light coalition) and leaving the door open for a Jamaica coalition with the CDU/CSU and the Greens. The Greens ruled out the Jamaica option and the SPD has promised not to form a coalition with the Left Party on the federal level.

If the experience of the German state of Hesse is any guide, the consequences of violating the Tom Flanagan rule may be the exact opposite of "nobody freaking out." When Hessian SPD leader Andrea Ypsilanti took a run at forming a coalition with the Left Party after the 2008 Hesse election, some of her own caucus rebelled to the extent that not only was Ypsilanti forced out of her party's leadership but the Hessian Landtag was dissolved and a new election held. The backlash against the SPD's political promiscuity was great enough that the party was hammered in the 2009 election, with enough SPD voters bleeding off to the FDP to create a CDU-FDP government for the state.

Given the very real possibility that the SPD's fiasco in Hesse contributed to the disastrous performance of the federal party on Sunday, if there is a lesson for Canadian politicians Ignatieff may be well advised to put Layton and/or Duceppe explicitly on his dance card before the next election if he intends to contemplate any tangoing post-election.

the real issue with ABC News' debate moderators

What made non-partisans uncomfortable was not the fact Obama's questioners were not lobbing him soft balls over the plate that he could knock out of the park. The candidate will have enough opportunities to pitch to himself later.

What made them unconfortable is the idea that something like the connection between terrorist-turned-teacher Bill Ayers and Barack Obama is your typical blogosphere conspiracy theory that should have been checked, or at least thoroughly patted down, at the gate of the MSM.

The problem isn't that right wingers broke into the citadel of the mass market. It's that barbarian bloggers broke into the citadel. We should be making common cause to defend it regardless of our ideologies because otherwise our national conversation will deteriorate into a cacophany.

It's somewhat like letting an Internet-only blogger into the group of syndicated pundits. It's a decision that will be rightly scrutinized regardless of whether the blogger is right wing or left wing. All men were created equal but not all punditry. Paul Wells brought me a lot of traffic when he recently linked to me in the body of one of his posts. I like to think that's because he wasn't afraid to lift my post up to the level of posts by syndicated columnists. Note that not everyone with a reaction to Wells gets their reaction out there; - Wells doesn't have comments. Which is as it should be in my opinion because I don't think it serves us to see someone like Wells goaded into leaving the citadel to engage rude Vandals in the swamps. Why? Because MOST people aren't watching out there and understandably so.

Both left wingers and right wingers will approve of the idea of sending a someone on the team they are supporting down to the minors when it's understood that you can't have too many men on the ice. People want to see the big league action and that means not everyone can play.

We are all entitled to a soapbox but some voices deserve bigger soapboxes than others. Elitist? Yes. But the secret to democracy is protecting it from the daily mob. I'm not calling for a hereditary aristocracy here but a meritocracy. Old pundits whose eloquence or perspicacity has been eclipsed by some new wit on the scene need to be shuffled off the stage. To a large extent this happens naturally on the exeunt side as the audience chooses to move on. But the entrance side generally involves a conscious decision by the proprietor of the platform (i.e. the MSM) and it is healthy to have those decisions second guessed.

"Flaherty doesn't know what he's talking about"

Macleans scribe Paul Wells contends that this Alberta government source "suggests" the federal Finance Minister "doesn't know what he's talking about" when he claims that "Ontario's business taxes are currently the highest in Canada."

If one considers what Flaherty is calling for in full context instead of relying on a Toronto Star snippet, it may be noted that one must also consider capital taxes and the structure of the retail tax. Wells cites a speech by Barrie MP Patrick Brown in which Brown quotes Jack Mintz:

Ontario has one of the highest effective tax rates on capital not just in Canada but around the (industrialized) world. The government has not understood that its policies have hurt capital investment and what it does to productivity.

Is it the case that Mintz, arguably Canada's #1 tax expert, "doesn't know what he's talking about"?

The Brown speech, which Wells doubts is "prudent", explains what is really at issue here, which is the Marginal Effective Tax Rate or METR. It's true that Nova Scotia, for example, has a higher corporate rate than Ontario. But Nova Scotia has harmonized its sales tax with the federal GST. Ontario refuses, primarily because that would mean converting its retail sales tax to a value added tax, which would cause it to lose the 40% or so of its sales tax revenues currently paid by business (never mind that they might make a lot of that up in increased corporate tax revenues, as Mintz as noted elsewhere). I've worked at Finance Canada and I've seen data suggesting that harmonization would have an even greater impact on Ontario's METR than reducing its provincial corporate tax rate to zero. Economists have recognized the efficiency of a VAT for a some time now and VATs have accordingly become progressively more popular amongst developed nations. Ontario's retail sales tax harms corporate competitiveness because it applies to business inputs, increasing production costs and deterring investment.

If Wells' point is simply that the METR in the United States is higher than in Ontario, point granted. But the US tax system is no model of efficiency. Even if McGuinty were to cooperate with just the goal of a combined 25% corporate tax rate in Canada by 2012, this would still be higher than the average EU rate now. That Report on Business link I just provide there does get after the feds for not having launched "a serious reform program", but the feds, both Conservative and Liberal, have in fact made significant progress relative to 2000 and that article came out before the October 30 Economic Update.

In fairness, Wells concedes that "this is not my field of expertise" and calls for other figures. These numbers aren't very easy to provide, however, since there are so many moving parts. For example, Quebec's VAT still contributes to its (and Canada's) METR because some tax is still imposed on some capital inputs. It just happens to be very small. There's also the federal Atlantic investment credit which actually gives New Brunswick the lowest METR in the country (which may be reason why the Alberta government doesn't advertise an interprovincial METR comparison). I would simply presume that Finance Canada is giving the government valid numbers, and if there is any doubt, contact them directly. I fully grant that, given what we know about Flaherty's style, he's more likely to be aggressive with the information he is given than, say, former Minister John Manley (and, yes, it is somewhat contradictory for the feds to call for Ontario to effectively raise its VAT (by zeroing out its current PST) while the feds cut their own VAT; the Tories want us to listen to the Finance Canada economists except when they don't want us to). The current Director of the Business Income Tax Division in the Tax Policy Branch is Nancy Horsman (613) 992-1008 or Horsman.Nancy [at] fin.gc.ca.