The election of Andrew Scheer as Conservative party leader has been described as many things over the past few days, from an sign of social conservative resurgence, to an openness of the diversity of opinion in the party, or a hostility to new ideas, but the one thing that I haven't heard is just how much of a blow it was to those free market conservatives that are in the party.
We often think of the Conservatives as the party of free markets, but under the leadership of Stephen Harper, that faded away in favour of populist policies designed to win votes rather than adhere to sound economics something that one might find strange considering that Harper trained as an economist (though he never actually worked as one). Whether it was cutting the GST when the better economic advice would have been to cut income taxes instead, or whether it was selling a swath of targeted or "boutique" tax credits instead of broad-based tax simplification, the Harper years were marked with a lot of policies that made many economists tear their hair out.
Scheer's election is a retrenchment of that move to a party defined not by free market ideals, but rather one of right-flavoured populism. By focusing his messaging on staying true to the Harper vision of the party but with a smiling face and a nicer tone, Scheer's underlying narrative was that everything was just fine during the near-decade that the party was in power, and that there wasn't a better way of being the "free enterprise" champions that they proclaim themselves to be. While it has been described as an "incrementalist" approach by Harper, what it amounts to is a collection of tax credits for everything that the party deems ideologically worthy, and for other, more problematic areas, a burdensome regulatory approach that betrays its supposed commitment to less red tape.
In Scheer's particular case, promises he made on the campaign trail promised yet-more boutique tax credits, specifically geared toward things like parents homeschooling children or sending them to private school something that he takes particular interest in given that he sends his children to private Christian schools and to make parental benefits tax-free. He also promised to remove the GST on home heating a promise that was actually something that was first proffered by the NDP under Jack Layton, and is something which economists will swear up and down is a useless gesture because it doesn't actually help with affordability and disproportionately benefits the wealthier who have larger houses. Those kinds of distributional effect tend to be more common with the kinds of boutique tax credits that Scheer's populist policies follow because these credits are non-refundable, meaning that families need to be able to pay sufficient income tax to claim them, they benefit wealthier families who can afford to spend the required amount rather than those struggling families that the party says they are trying to help make life more affordable for.
Scheer's particular animosity toward carbon taxes is another sign that the party he helms has moved away from free-market principles, given that carbon pricing is a way to use free market principles to achieve emissions reductions in the most cost-effective ways possible because it forces companies to innovate to reduce their emissions in order to lower their carbon tax burden. This was something that Michael Chong kept arguing, but was drowned out by the likes of Scheer, beating the drum beat of "tax bad, Hulk smash!" What does Scheer propose instead? While he had a policy around tax credits for environmental innovation, in post-victory interviews, he only mentioned a need to come up with a credible policy that will attract urban voters. If he continues to follow the Harper-era policies of trying to address GHG emissions by way of regulation rather than a pricing mechanism, he would continue to favour a system that is the costliest and least efficient way to reduce emissions. (Incidentally, Scheer has also been somewhat economically incoherent in attacking carbon pricing, calling it a "cash grab" despite the fact that the federal government is not keeping any revenues and provinces have the option to recycle them in any way they wish, such as by lowering income taxes as BC does. Scheer has also accused the CBC of being Liberal propagandists because they refer to carbon pricing instead of carbon taxes, as though all carbon pricing mechanisms were taxes which they aren't and because his trying to brand it all as a tax benefits only his narrative).
The fact that Michael Chong, who was best representative of the free-market conservatives in the race, came fifth, is a signal of their marginalization in the broader party ranks. The fact that he ranked below Brad Trost also sends a signal as to the kind of influence that free-market conservatism ranks with relation to social conservatism in Scheer's calculus of the policy direction of the party. I should also note that despite the fact that self-described libertarian Maxime Bernier came in second, I'm not sure that there is actually a strong libertarian presence in the party, but that his levels of support were more likely have been indicative of someone who the grassroots felt could best beat-up Justin Trudeau once Kevin O'Leary exited the race.
While Scheer has spent much of the race wrapping himself in some of the trappings of free-enterprise, his embrace of economic illiteracy for the sake of populism should be a warning that the appeal of the party to free-market conservatives is on life-support if it's not already dead. This while the Liberals are making moves on things like tax simplification, coherent market mechanisms for reducing GHG emissions, and ensuring that families are getting direct cash transfers rather than tax credits, thus benefitting those who are on the lower end of the income scale. Will this attract those free-market conservatives to join the "blue Liberal" ranks instead of sticking with a party that has grown hostile to their economic interests? Time will tell.
Photo Credit: Huffington Post
