Quebec's Nanny State Running out of Gas

In her  inaugural  speech as Premier of Quebec, Pauline Marois outlined her government's plan for the next legislative session and while the media focused on her agenda of fighting corruption and strengthening language legislation, buried among the more controversial themes was this bizarre statement that caused hardly a ripple in the press.

"A parliamentary commission will be created to study the relevance and impact of a law which would regulate book prices. The Government wishes to support authors, publishers and booksellers from Quebec who can not compete against the big box stores that offer discounts from 25% to 30% off the suggested retail price of bestsellers." Link{Fr}

Yikes!!!!
What Pauline has proposed is more interference by the government in the free market, something that nine times out of ten makes consumers big losers and which enriches special interest groups unfairly.

Of everything Pauline has said, this more than anything else defines the PQ's philosophy of governance, which is state intervention in just about every aspect of our life.

Because the sovereignty and language debate takes up practically all the political air, little or nothing is ever discussed on the issue of these government interventionist policies.

Of course we in Quebec are painfully aware that we are the most heavily taxed citizens in North America and that our salaries are not keeping pace with gains made in other parts of Canada.

As you can see in the chart above, Quebecers make less and pay proportionally more taxes than most other Canadians.
But that is only half the story.
Quebec families, already handicapped by less disposable income, face the double whammy of higher prices in the marketplace, attributed to the high consumer taxes imposed by a desperate government in search of revenues.
Consider just one element, Quebec's 9.5% sales tax as compared to Alberta's 0% tax. This one tax alone can remove an additional $3,000 from the average family wallet, something Albertans don't face at all.

But a third element, the paternalistic desire by government to protect local markets, is another costly element driving down disposable income in Quebec.

Let us start with the very subject Pauline brought up in her speech, French language books, wherein she proposes to protect small book stores from competition from the big box stores that typically sell new arrivals at 20-40% off list price.
For Pauline this 'unfair' competition puts local booksellers at risk, so she proposes that no retailer be allowed to discount these new arrivals for a certain period of time.
Sounds like a plan....

Now anybody who has ever purchased a French language book knows that the prices are very high compared to English versions, no doubt because of the limited printing runs.
Take for example, one of the hottest (no pun intended) bestsellers on the market, 50 Shades of Grey which sells in paperback for $9 at Amazon.com while the French version, Cinquante nuances de Grey, where no paperback is available, sells for $22.99.

Perhaps someone might remind Madame Marois that books are not gasoline, which must be purchased locally.
Unless she intends on telling Amazon.com in the United States that a product may not be sold to Quebecers because of protective pricing, her plan is doomed to failure.
And no, dear readers, she cannot enforce a floor price on Amazon, there is the little problem called NAFTA.

The larger issue is how in good conscience she can raise the price of books that are already astronomically expensive?

Quebec remains North American champion in imposing floor prices, sometimes with perverse effects.
In Quebec,  milk production and retail prices are controlled by the government. The consequence of course, is that consumers in Montreal pay in the neighbourhood of $1.50 per litre, while New Yorkers pay about 78¢, a whopping difference of over 90%!
You can see the minimum prices that the government sets for milk HERE

The same goes for cheese products and especially fresh butter which sells for about $5.75 a pound in Quebec, while in a Costco in the USA, it can be found for $2.00.
The sad part about all this is that Quebec dairy farmers don't really benefit, they've got to pay interest on heavy loans that they needed to take out in order to buy expensive milk production quota.

Read an interesting report written by the Montreal Economic Institute about the problem of supply management in the agricultural field. Download

Minimum prices can only be imposed on those things not easily purchased outside Quebec and so that is why gasoline remains so expensive. Even going across the border makes no sense when you've got to spend time and burn gas just to get it.
And so the Quebec government has always been comfortable charging huge taxes at the pump.

Recently, regular gasoline sold for about $1.25 in Montreal, 99¢ in Calgary and about 77¢ in Miami.
You can see the minimum prices that the government sets for each region HERE

The Quebec government is very protective of small gas stations, making sure they make a profit by ordering a minimum price that no retailer may sell for less, even if they wanted to. I once filled up at the Costco gas pump in St. Jerome and was surprised to see this letter attached to the pump;

Dear, Costco members,

The Regie d'energie of Quebec has recently imposed a 3¢ per litre increase on gasoline sold in St.Jerome.

We disagree with this artificial increase imposed on the citizens of St. Jerome for the benefit of gasoline retailers.

For this reason, we will be donating 3¢ per litre sold, to the Fondation de l'hopital regional de St. Jerome. 

Costco Wholesale will continue to supply members the very best quality/price value for all their purchases.

Incredibly minimum prices even apply to beer!  Link{fr}

Those who defend this 'Quebec model' always use the argument that Quebecers accept higher prices and higher taxes because the province is more socially responsible and provides citizens more entitlements than the rest of Canada.

The argument might hold water but for the fact that it is simply not true that through taxes, Quebecers themselves fund government programs such as seven dollar-a-day daycare, free prescription medicine, extended family leave, incredibly low tuition for higher education, etc. etc.
If Quebec ran a balanced budget and was not the beneficiary of so many billions in equalization payments, it might be a reasonable and fair societal choice.
But such is not the case, Quebec's nanny state has been largely funded by huge deficit spending and subsidies from other Canadians, something that the majority of Quebecer refuse to acknowledge.

Accepting free money from other Canadians to pay for Quebec entitlements may be one thing, but to ask future generations of Quebecers to pay for today's generation of entitlements is selfishly outrageous. 

 But it appears that this orgy of taxing and spending is drawing towards an ultimate day of reckoning.

In  spite of the spending cuts and tax increases announced by the PQ government in the last budget, there will be no balanced budget in the near future as government revenues aren't keeping pace with the rise in expenditures.

The problem of falling revenues can be attributed to the high taxes and crushing regulations imposed on Quebec's business community. With open borders, companies that are not geographically sensitive, can and will locate where they get the best deal.
Already Quebec is obliged to spend six times more than Ontario (per capita) on handouts to businesses in order to entice them to settle and remain in Quebec.

Recently American retailer TARGET, announced with great fanfare that the company was expanding to Quebec, buying out the failing Zellers chain.
What few in the media were willing to report is that the company set up its giant distribution centre just outside the Quebec border in Cornwall Ontario, in order to avoid Quebec taxes, regulations and yes, language legislation.
They aren't alone, Walmart also does its Quebec distribution through a giant facility in Cornwall.
These are the lost jobs that we see, but the greater tragedy is the tens of thousands of jobs that never were, as companies rule out Quebec as a potential base of operations.

It is these tiny cuts that add up. Here a few hundred jobs, there a few hundred jobs. A head office moves and poof!... perhaps five hundred or a thousand jobs are lost or never created.

And let us not forget the head office and corporate exodus that devastated Quebec in the seventies and eighties. The damage done was inestimable.
Take for example the most famous of these corporations who fled the province, Sun Life of Canada.  Today the 8,000 head office jobs in Ontario means an above-average paycheck supporting over 32,000 families and if we are to add those ancillary jobs created in other companies supporting the Sun Life concern, it amounts to well over 20,000 jobs, enough to support a city of 80,000 people in Quebec.
And in addition to all the money these Sun Life employees spend in their communities, consider all the taxes remitted to the government including income tax, sales tax, property tax, etc. etc.
And that is the story of but one company, the same story has played out a hundred times over.

In the end, we are where we are.
The nanny state that overtaxes and overburdens business with regulation, coupled with repressive language legislation has set Quebec on a course of permanent economic decline. With its high-handed and foolish decision not to offset these job losses by exploiting its fossil fuel wealth, the die is cast.

As Quebec becomes more and more inhospitable to wealth creation, it is inevitable that family income will rise more slowly than in other provinces.
Faced with decreasing salaries and decreasing taxes, the government increases tax rates and jacks up taxes on consumer goods to make up the difference, a disastrous scenario.

And remember, when defenders of the Quebec nanny state tell us that families have less personal resources than in other provinces because of choices about social issues, it is just plain not true. Debt and Canadian largess are to be factored in.

As Quebec reaches its debt and tax ceiling, taxpayers are going to be in for a shock if Ottawa cuts equalization payments significantly (which represents over 10% of the present budget) as is likely the case.

Looking forward to the gathering clouds of debt, overspending and diminished economic activity, it is painfully obvious that we are headed into our very own Perfect Economic Storm