The Canadian province of Quebec held elections on April 7th, only 18 months after the last ones. Unsurprisingly, the separatist Parti Quebecois (PQ) miserably failed to stay in power under the struggling economy, losing by a landslide. Premier Pauline Marois even lost her own seat by nearly 800 votes. As Bill Clinton famously said, “C’est l’économie, niaiseuse.” Or, for Quebecois with a better mastery of English, “It’s the economy, stupid.”
To voters, the PQ seemed to want to push Quebec’s economy further down than the Liberals (PLQ) had done in their previous nine years in power. In hopes of eliminating the deficit, they created a new income tax bracket of 25.75% (previously 24%), raised taxes on cigarettes and alcohol, and by make the health tax progressive despite previous promises to abolish it.
As an economist, Finance Minister Nicolas Marceau should have known a thing or two about the power of incentives. Taxes are a disincentive for whatever product they are levied on, be it income or cigarettes. Raising taxes almost always results in lower consumption and production.
As a result, PQ’s tax hikes didn’t yield the expected revenues, and Quebec still has a $2.5 billion deficit instead of a balanced budget as promised. This gloomy outlook was met with a frown from Fitch ratings, which gave Quebec’s credit score a negative grading. Despite Marois’ dismissal of the warning, it must be taken seriously.
Indeed, interest payment on the debt takes nearly 12% of all spending, and gross debt is 54% of GDP, the highest rate in the country according to the Fraser Institute. Since interest rates can’t stay at the current low of 1% much longer, a smallest increase could drastically increase the cost of borrowing. Some columnists like Eric Duhaime have even started to see similarities between La Belle Province and Greece, which isn’t farfetched. Indeed, when the PQ had a majority government in sight at the start of the campaign and talked about separation, the bond rate differential with neighboring Ontario nervously jumped 20.5 basis points.
These concerns were of no importance for the PQ, who mostly focused on its xenophobic Charter of Secularity (Charte de la Laïcité). This proposed legislation is aimed at attacking the non-existing problem of public employees and government institutions displaying ostentatious religious signs. If passed, it would have basically barred all people who wear obvious religious signs such as a kippa, cross, or hijab from public employment.
The PQ also attempted to rile fear against non-French languages. One notorious infraction that was the subject of much attention this election was is known as Pastagate. In 2013, Quebec language police inspectors forced an Italian restaurant in Montreal to put Italian words from its menu in French. The inspectors acted in conformity with the infamous Bill 101, which imposes wall-to-wall French in every business; other languages can only be exposed if French is substantially bigger. Bill 101 would have been beefed up with a PQ majority government. Among others, businesses with more than 25 employees would have had to function in French.
This fear manifested itself during the campaign when the PQ complained that a supposed massive influx of Canadian students tried to register to vote. Not only hasn’t the Chief electoral officer found any irregularities, but many of those who did try to register did it in ridings like Westmount-Saint-Louis that elected Liberals with such crushing majorities that any evidence of voter fraud would have made no difference.
The PQ’s ousting from power at the hands of a new PLQ government is good news for Quebec’s economy for at least the next four years. Although the PLQ’s obsession with big government is still disturbing, at least the party won’t reignite drama for a potential Quebec secessionist referendum. Especially if PLQ keeps its promise of reviewing every single government agency, Quebec could finally experience a decrease of it mammoth state apparatus, which is currently indebted at over 75% of GDP according to the Montreal Economic Institute.