THE WEST BLOCK
Episode 32, Season 13
Sunday, April 21, 2024

Host: Mercedes Stephenson

Guests:
Jonathan Panikoff, Scowcroft Middle East Security Initiative Director

Panel: John Manley, Former Liberal Cabinet Minister; and
Lisa Raitt, Former Conservative Cabinet Minister

Location:
Ottawa Studio

Mercedes Stephenson: Israel and Iran are engaged in an unprecedented back and forth of direct military strikes on one another. So far those strikes have been controlled and limited, but could that change?

I’m Mercedes Stephenson. The West Block starts now.

[Sirens]

Calls for calm as Mideast retaliatory strikes make history. With Israel and Iran launching drones and promising consequences for each other, where do the strikes stop? And is this a path to war?

Prime Minister Justin Trudeau: “This budget is about fairness for every generation.”

Mercedes Stephenson: And Canadians have now had time to digest the federal budget and for many, it’s leaving a bitter taste. We get takes from both sides of the political aisle.

All eyes are on the Mideast, searching for any clues that Iran will strike back at Israel. This after Israel was the latest of the two to lash out late last week, raising tensions in the region to potentially catastrophic levels.

Antony Blinken, U.S. Secretary of State: “We’re committed to Israel’s security. We’re also committed to de-escalating.”

Mercedes Stephenson: What could this mean for the future of the Middle East?

Joining me now is Jonathan Panikoff, director of the Scowcroft Middle East Security Initiative at the Atlantic Council.

Jonathan, thank you so much for joining us. I know you’ve got an extensive background in defence intelligence and security. This is obviously a situation that everyone is watching with great concern, anticipating what Iran might do next. What kind of response do you think we could see from the Iranian regime?

Jonathan Panikoff, Scowcroft Middle East Security Initiative Director: Well thank you so much for having me. Right now it would appear that the Iranians really are trying to downplay this and so you may not see a particularly robust response, if any at all. The propaganda that you’ve seen coming out of Iran actually, is that everything is normal, that the Israelis were humiliated, that there was a quadcopter or a drone that the Iran’s air defence took out. And so I think you’re only seeing Iran try to put this away and not have a big war over this, for instance. Iran’s probably not ready for massive escalation in a war, and Israel certainly doesn’t want it at a time when they’re also struggling to finalize things in Gaza and figure out what to do about Rafah.

Mercedes Stephenson: I think that’s so interesting because, of course, one of the natural concerns here is does this become a regional war, but it does seem like both players don’t want that because they could have gone to a war by now but it could, of course, still happen. How controlled are these decisions about what the targets are and what happens in terms of the back and forth we’ve seen remaining a back and forth versus an escalation?

Jonathan Panikoff, Scowcroft Middle East Security Initiative Director: Yeah, it’s a great point. The reality is I think that on the Iranian side, their initial reaction last weekend to Israeli strikes of General Zahedi in Syria was quite the escalation: over 300 missiles, cruise and ballistic missiles, UAVs were launched against Israel. It was truly unprecedented and the first, obviously, direct strike by Iran on Israel. I think Israel’s response has been very, very cautious here and very calculated intentionally. It is not a proportional response, but it is a symmetric response. Meaning, Israel hit what is clearly a military base without civilians around and had no intention to escalate this. And it’s really saying to the Iranians, look, we can hit you. You are not allowed to target us with impunity no matter what you say publicly your retaliation is going to be. No matter what our allies prefer, we are not going to allow ourselves to be targeted and we will strike back if you strike us but, we are giving you an out here. We have no interest in escalating if you don’t want to escalate. And so it’s really now in the Iranians court to make a decision about whether or not they feel a need to strike Israel again or to let it go.

Mercedes Stephenson: This is, in the case of the Iranian regime, a regime that wants to develop nuclear weapons. So far, we haven’t seen evidence that’s happened and the IAEA came out and said no nuclear sites had been struck, which was apparently a deal that Israel and the U.S. had come to as well, that if Israel retaliated they would not go after nuclear sites because of that escalation. Israel is a nuclear power, however. What roles do those nuclear weapons have in potentially making this a more dangerous situation because we’re talking about nukes or a calmer situation because of the deterrent value that nuclear weapons have?

Jonathan Panikoff, Scowcroft Middle East Security Initiative Director: Well because not both of them have nuclear weapons, it’s a completely asymmetric relationship right now. Obviously, there would be a huge grow loud cry if Israel ever used nuclear weapons against Iran, and there’s no indication that they will. This is largely a deterrent for Israel in terms of their possession of nuclear weapons, something they’ve had for years.

On the Iranian side, though, Iran has been very, very delicate, back and forth about whether or not it actually wants to develop a nuclear weapon. And the truth of the matter is right now they’re probably somewhere between 10 and 14 days away from having enough enriched uranium. For a nuclear weapon, it would be crude. There’s still probably 18 to 24 months away from weaponization, actually being able to have a nuclear capable warhead put on a traditional missile. That’s not an easy thing to do. It takes some work, and that’s what you’re seeing international organizations say they haven’t really seen that progress. But obviously, Iran really views its nuclear program as one of the best pieces of leverage that it has, not only against Israel but against the—with the international community. And so the reality is, if Israel were to strike—it has been years of discussions about what would happen—it would almost certainly trigger a much, much bigger conflict and a much bigger war. It’s hard to imagine the Iranians letting that go at all.

Mercedes Stephenson: What kind of targets do you think Iran is looking at in Israel right now? I mean they knew that the Israelis has the capability to shoot down a lot of their drones and missiles, and they did thanks to a very aggressive defensive system, much of which has been provided by the United States. So, what sort of targets might we see?

Jonathan Panikoff, Scowcroft Middle East Security Initiative Director: I think it really depends on what it is Iran is trying to do. So in other words, once you’re starting to target Tel Aviv or Haifa, Elot, you’re talking about really hitting civilian populations and that is going to lead to an all-out war. What we saw really with Iran, especially over last weekend, is an effort to try and target entities that were really much more military in focus, or independently or in conjunction with Hezbollah, the Iranian proxy, obviously based in Lebanon, to target the goal on height areas that are disputed. I think if Iran keeps it to military targets, it does slightly change the calculus, and I have no doubt that the Iranians are building a target list that probably includes both the military targets for a future conflict that is somewhat contained, a civilian target that is much broader. There’s a separate list, probably, for Hezbollah as well, that they really work in concert together. And so you’ve seen rumours, for instance, that Hezbollah might target Israeli off-shore gas platforms, or even possibly target Dimona, where Israel’s nuclear program is said to be headquartered.

Mercedes Stephenson: I know that both Israel and Iran will have allies and regional powers whispering in their ear. Who will Israel and Iran be talking to, and what messages do you think those countries will be sending them?

Jonathan Panikoff, Scowcroft Middle East Security Initiative Director: For the U.S.—I’m sorry, for Israel—it’s obviously the U.S. The Israel-U.S. relationship is long and has been very strong, but it also is other allies: the United Kingdom, Germany. My guess is the message will be what it has been, they really—right—immediately are trying to avoid a regional war, but they will continue to come to Israel’s defence in the event that it is attacked again. But it has—they’ve got no interest in Israel conducting offensive operations.

On the other side, Iran is in a little bit of a place of flux. The Iranian-Russian relationship has gotten much, much closer throughout the Russian war in Ukraine and its Iranian drones that Russia’s largely using in Ukraine. But there’s questions about whether that’s just tactical or there’s actually a strategic nature to it. Will Russia come and meaningfully support Iran in the event of a conflict? Will China provide support to Iran? Probably not. China’s the biggest importer of Iranian oil and actually a conflict is the last thing that China wants to see in the region because it would disrupt their oil flows and economic growth. And so you’re going to hear on the Iranian side largely from Russia, largely from China. But the messages are different between the U.S. and Israel, which are obviously such close allies and Europeans versus Russia, China and Iran, where it’s a lot more transactional of a relationship.

Mercedes Stephenson: Really interesting information and context. Thank you so much for joining us.

Jonathan Panikoff, Scowcroft Middle East Security Initiative Director: Thanks for having me.

Mercedes Stephenson: Up next, will changes in capital gains mean losses for everyday Canadians?

[Break]

Mercedes Stephenson: As the federal budget is now being analyzed by experts, a big flag is the change to the capital gains tax, and it could hit some middle class Canadians hard.

As a way to increase its own revenue, the government announced that it would increase the inclusion rate of capital gains for businesses.

And for individuals, well if you sell assets like, say, a second property at a price over $250 thousand, you’ll now pay more, too. Up from one half to two thirds.

To tell us more about this, we asked Finance Minister Chrystia Freeland to come on the show, as we have several times this season and last. But again, she has not accepted. The last time she appeared on The West Block was late 2022.

The Conservatives also declined to come on and talk about the budget with us today, unfortunate because you would think that politicians would want to talk about this. So instead, with their take, we have our panel who are going to break it all down for us.

We’re joined now by Lisa Raitt, former Conservative cabinet minister; and John Manley, former Liberal cabinet minister. Both of you have lots of experience with budgets and the economy, so I couldn’t wait to hear what your take is on this budget.

John, you’re the former Liberal so I’m going to start with you. What are your thoughts?

John Manley, Former Liberal Cabinet Minister: Well a couple of areas that are of concern. I mean, this is a budget that tried to do a lot of things and that’s always challenging and it’s really in the pre-election phase. So I understand that politically this was a challenging budget, but I’m worried first, Mercedes, about the overall level of spending, just two numbers that dramatize that. One is that the total government spending has doubled since the final year of the Harper government. That’s a—means it’s a big number. And secondly, that the interest we’re paying on our accumulated debt now consumes 100 per cent of the GST revenues. So those both indicate to me that we’re going to have to keep an eye on this or we’re going to be back to doing stuff that we had to do back in the Chrétien years and make some really hard choices to cut some of that spending. So that worries me.

And the other thing that worries me, like I always ask myself, “What problem are we trying to solve here?” And the prime minister has been very articulate, I would say, in arguing in behalf of his carbon tax by saying you tax the things you want to discourage. So if we want to slow down the consumption of carbon in the economy, we tax it. So the increased capital gains tax, seems to me like we’re trying to slow down the level of invest, which is just exactly what I would have thought was the wrong thing to do in a country where we’re struggling with competitiveness and productivity. So two areas of concern there.

Mercedes Stephenson: Lisa, I know that you know the housing file very, very well. You’ve been involved in it. This was a very big housing budget, despite the fact that housing is actually not the role of the federal government, but the Trudeau government kind of made it their role because they kept talking about it. So then they started getting blamed with the housing crisis was ballooning. Do you think that there is enough in here on the housing side to make it worth the changes on capital gains, or to appeal to young people? The title of this budget was Fairness for Every Generation, very different from fairness of the middle class, which is what they used to talk about.

Lisa Raitt, Former Conservative Cabinet Minister: When I talk about the need to address the housing crisis that we have, it’s founded on the notion that in order for us to retain our young people, to attract investment, we need to have housing that makes sense. I would never advocate for a taxation on exactly those two things: a taxation on entrepreneurs and investment, and a taxation on kids who may not want to stick around much longer because they just see their ability to be an entrepreneur not be as lucrative as it is in the United States. So I still fundamentally believe that some of the stuff that’s in there with respect to housing makes a lot of sense. It really does depend on serious cooperation with the provinces and with municipalities for it to come to fruition. The federal government does not build houses. It’s the private sector that builds houses, so they have to be along for the ride as well. But at the same time, you can’t do it and not—and punish those who are going to be adding to the long term economy at the same times.

Mercedes Stephenson: John, when it comes to capital gains, I was talking to a few senior folks in the business community. They were initially somewhat relieved with the budget, although they were not happy about capital gains. They were concerned that that windfall tax on corporations would be in there, that if you had a big profit—this is something the NDP was pushing for—grocery stores or oil and gas, that the government was going to go hard, but there was a lot of concern about potential capital flight from Canada if that happened that these big companies, especially around oil and gas would simply turn around and leave. And we had the environment minister on the show a couple weeks ago and he basically said that himself, which is really interesting from Steven Guilbeault. Do you think that the capital gains tax was sort of the lesser of two evils in this, if they had to choose between windfall taxes on large corporations or these capital gains taxes on individuals?

John Manley, Former Liberal Cabinet Minister: Well I think that they recognized that the notion of some kind of windfall tax is poorly founded because yes, this year oil prices could be high. So you can say well look at how much their profits increased. Next year, oil prices fall and nobody is saying well, we better throw some money into the pot to help these companies out. So, you know, you can’t have it both ways. I think the—what they turned down was a general increase in overall taxes and either on the consumption tax side or even on the income tax side. The truth is that if you want real revenue, you increase general taxation. And that might actually be the most honest way to do it because it then says to Canadians we’ve decided the government should be bigger. And if you like that, then you’re going to be paying for it. That’s honest. It’s also rather difficult politics to sell. So I think they chose against a general tax increase and they were looking for cash from somewhere and this was perhaps a chance that they were willing to take, that they would annoy some people but not as many as would be the case if it was a generalized tax increase.

Mercedes Stephenson: Lisa, what does the capital gains tax mean for the average person because I get a lot of questions about this? What does it look like for most Canadians?

Lisa Raitt, Former Conservative Cabinet Minister: Well that’s the point isn’t it? I mean the Liberals would have you think that it’s only people who have cottages in Muskoka who are being impacted and quite frankly, that’s not the case. The people who live in Muskoka with really nice cottages can afford people to do tax planning for them in order to be able to mitigate the impact of this capital gains change. The people who get stuck are the people like, I guess, a house cleaner who decides that she wants to buy a second property, a condo. And it serves almost as her retirement fund and she does collect rent on it, but she pays down the mortgage. And one day, she’s going to sell it and that’s going to be her retirement income and now she just lost a big chunk of it because there’s no way that she can sell it in time for May. And it’s those kinds of stories. A lot of people got into real estate and have a second residence because they wanted to invest their money in something that they knew would appreciate in value and there it is.

The other mistake, I think, is that they’re going after—and I don’t think they realize this, Mercedes, but Gen Z is a very different group—a very different demographic than before. They are extremely entrepreneurial. They want to have their own gigs. They’ve got side hustles going all the time and they aspire to make a lot of money. They aspire to have their companies sold and for them to do well. And now you’re just telling them go start it in the United States.

Mercedes Stephenson: John, this obviously was a budget that was designed to try to pull the Liberals out of a bit of a political downward spin that they’ve consistently been in for months. You’re raising concerns about what this could mean for productivity, for the economy. It also has some things in there that they think will be appealing. In your opinion as a former politician, is this enough to turn things around for the Trudeau government?

John Manley, Former Liberal Cabinet Minister: No, I don’t. I don’t think so, Mercedes, but that’s partly because—and I’ve said this before—I subscribe to what I call the Seinfeld theory of political longevity, which is, you know, Seinfeld, great show. Lasted nine seasons.

Mercedes Stephenson: I love Seinfeld.

John Manley, Former Liberal Cabinet Minister: And if you think in terms of modern political history in Canada, you know, think back. Brian Mulroney, nine seasons. Jean Chrétien, 10 seasons. Stephen Harper, nine seasons. Even if you go back to Pierre Trudeau, he got an extension after being defeated after 10 seasons. Margaret Thatcher, 10 years. And even in France, at the end of the de Gaulle era, the crowds in the streets were chanting, “Dix ans ça suffit”. So winning again after three governments, after nine or 10 years, it’ll be 10 years in October 2025, that’s a tough sell. So I don’t think it’s enough because I think people are going to say ah, let’s, you know, enjoyed the show, but it’s time for something new.

Mercedes Stephenson: Well Lisa, speaking of something new, last question to you. Pierre Poilievre obviously is not going to support this budget. He said that there are some things in here that are really popular for folks, though, like birth control, diabetes medication. Things that certain people—it’s going to make a big difference in their lives. How does he decide what stays and what he promises to get rid of in terms of a campaign because it’s always easy to poke holes? It’s a lot harder to put out a platform.

Lisa Raitt, Former Conservative Cabinet Minister: Yeah, but you’re not going to campaign on I’m going to take this away from you. I mean obviously they’re going to have to have a communication strategy on how they’re going to deal with those questions and quite frankly, they’re the only questions that the Liberals are going to shoot at them all the time. That’s a truism. It’s already started already. You know they say that they’re going to decrease the size of government. What are you going to cut? Which isn’t a fair comment because quite frankly, if you think that the size of our government is delivering productivity to you as an individual citizen, then I think you’re kidding yourself because it’s not helping at all and it is an incredible drain on the tax dollar and the resources. So him taking a look at the overall size of the government, determining which projects still make sense, which projects don’t make sense. Who is actually retiring? Do we need to refill that space? Along the same lines of what the Liberal government is doing already right now, or they say they’re going to do, that’s the kind of, I guess, lens he’s going to be looking at. But he is going to promise to take away that carbon tax and he is going to promise to help get houses built. What he says he’s going to do, Mercedes, is exactly what he’s going to do. Take him at his word and he’ll find a way to do it.

Mercedes Stephenson: I’d love to any politician at their word. But I’ll take both of you at your word. Thank you so much for joining us today. Great insights.

Up next, one last thing. And it’s something that hasn’t been seen on Parliament Hill in more than 100 years.

[Break]

Mercedes Stephenson: Now for one last thing…

Parliament Hill is the seat of our democracy but sometimes, some of the politicians up there can make it seem like a shameless place. It’s easy to feel jaded with all of the politicking, political manoeuvring, spin and lobbying.

That cynicism was not helped last week when the ArriveCAN scandal returned to the spotlight, where for the first time in over 100 years a private citizen was questioned in the House of Commons.

Kristian Firth, co-founder of GC Strategies, the company behind the controversial and expensive ArriveCAN app, was grilled in the chamber after being found in contempt of Parliament for previously refusing to answer MPs questions at committee.

Elizabeth May, Green Party Leader: “Aren’t you ashamed?”

House Speaker: Mr. Firth.

Kristian Firth, GC Strategies: “Mr. Speaker, do I have to answer that?”

House Speaker: “Yes. Yes, you do.”

Kristian Firth, GC Strategies: “No. I am not ashamed.”

Mercedes Stephenson: It was a rare show of the actual power Parliament has. But behind the political theatre are real questions about rooting out allegations of mismanagement and potential fraud in federal government procurement and contracting.

Navigating the COVID-19 pandemic was hard for everyone, including governments. There was so much unknown and the situation just kept evolving. And while we can be understanding of those difficulties, the global pandemic does not equal a free pass for government accountability.

Anita Anand, Treasury Board President: “And I will take you back to the pandemic, David, and I will take you back to very difficult days when we were under extreme pressure to ensure that our country had the PPE, the rapid tests and the vaccines to survive.”

Mercedes Stephenson: If the Liberals want Canadians to restore their trust in them and believe that they are fiscally responsible following last week’s budget and ahead of the next election, they will need to take the lead on reviewing their own billions of dollars in pandemic spending with a critical eye.

That’s our show for today. Thanks for watching, and we’ll see you next week.