No progress without addressing inequality – Himelfarb

Alex Himelfarb says taxes are a proxy for the kind of government we want, yet for too long taxes were the third rail of Canadian politics – you couldn’t talk about it.

If we can’t talk about the future, we lose the ability to exercise democratic control.

With protest movements growing around the world, the conversation is beginning to change, and remarkably, it is happening at a time of great economic crisis.

Former Clerk of the Privy Council – the most senior bureaucrat in Ottawa and an advisor to two Canadian Prime Ministers – Himelfarb spoke in Toronto last night as part of the TVO Big Ideas series.

Himelfarb says we need to talk about the future, especially given increasing inequality is happening much faster in Canada than the United States.

While Canadians have traditionally believed in the public good, “something strange is happening.” Himelfarb says that all parties are competing for the crown of austerity and tax cut king despite deficits and a widening income gap.

“In Toronto we got tax cuts, but we’re still looking for the gravy,” he said. Mayor “Rob Ford will teach us the fallacy of the tax cut agenda.”

Canadians have been sold a bill of goods by the suggestion that tax cuts are free, that they will pay for themselves.

He says we have had three decades of assault on government by a free market ideology that is about getting government out-of-the-way. The best way to accomplish this is to starve it through tax cuts.

“Free is so seductive,” Himelfarb says, “even if we know that free turns out to be very expensive.” We want to believe in this free lunch, which is why politicians promise not to cut services, but instead cut waste and “gravy.”

“We will always agree on cutting waste and overhead,” he says, “there is always some example,” but it’s never enough to pay for the tax cuts politicians promise.

By focusing so much on waste, you also can’t do your business. Himelfarb gives the example of a bar owner who takes such extreme measures to cut waste that he cannot retain staff nor offer a place where the public will want to come, putting himself out of business.

By focusing on waste we are also eroding public trust. This has enduring consequences. The absence of trust is as damaging as blind trust, he says.

“Creating a distance between us and government is not the answer. The constant attack on a bloated bureaucracy is making everything worse.”

The result has been expensive layers of oversight and control, something Himelfarb says makes government less willing to take chances or to be creative about finding solutions.

He says the obsession with the travel and lunches of bureaucrats and politicians is a smokescreen that takes our attention away from the bigger, more important issues.

“You can check on it – what restaurant I went to and how much I had to eat,” he says. “Whether I travelled first class or economy.” However, people have no idea that cutting two per cent off the GST cost the Federal government $13 billion. “There was no debate.”

“This isn’t transparency,” he says, “this is obfuscation.”

More insidious is the rapid growth of social inequality. Quoting historian Tony Judt, he said “extreme inequality leads to citizens turning against each other.”

“All believe in luck until they become successful,” he says. “People at the top believe they deserve to be there.”

Yet the top earners in Canada are paying less in taxes than their counterparts in the United States.

With the rungs of the social ladder becoming too wide apart, people believe the game is rigged.

“When the game is rigged you don’t want to play. You don’t want to vote. You don’t want to pay taxes.” This is reflected in protest movements both on the left and the right, he says.

“Blunted aspirations go to the heart of the matter.”

Himelfarb says there are all kinds of opportunity to turn the corner. “We need to recognize how much we have taken out of the place and how much we have to put in.”

He cautions that nostalgia is not what we need, nor cynicism about the future.

“We can’t change the future until we believe the future belongs to us, not the market,” he says. “No progress is possible without addressing inequality.”

Himelfarb says taxes to reduce inequality are one thing we could all agree upon.

A modern economy needs talent, something that is going to waste in our current economy.

At the root of the rebuilding should be a strong commitment to social values – this is not something that comes later.

We have to be responsible about taxes. Unlike many countries, we have room. Taxes are low as a proportion of our overall economy.

Himelfarb says we can start by taxing the rich and taxing those who have done the most damage. Only when that happens will people see the system as being fair and be prepared to take their burden.

“There is no systemic evidence that cutting the taxes of the rich creates jobs,” he says.

Himelfarb believes the public is ready for a different way of thinking, that we’re tired of fairy tales around free lunches.

“All great change starts outside of government. “ he says. In the current protests people across the generations are joining with young people.

They want to put people; democracy and the environment back at the center.

“They are not writing a political platform,” he says. “They are changing the conversation.”

The fact that this is happening at a time of crisis is extraordinary, Himelfarb says.

In the streets of Europe they are saying the majority will not pay for the mistakes of the few.

“This is really powerful… if people believe the system is fair, then the rest is easy.”

The event was co-sponsored by the Canadian Centre for Policy Alternatives and the Literary Review of Canada. Himelfarb’s speech will be reproduced in the Globe and Mail this weekend and will air on TVO in the coming weeks.