WE CAN'T IGNORE NEW U.S. TAX BILL

OTTAWA - A STRANGE surrealism is settling on the national capital in the
weeklong, post Victoria Day absence of parliamentarians. With too much time
on their hands, politicians are amusing themselves on the furthest fringes
of public policy while something with real implications for Canada is
happening in Washington.

As President George W. Bush prepares to make good on his election promise
to give U.S. taxpayers the biggest break since Ronald Reagan's sadly
misguided 1981 budget, political debate here is focused on - wait for it -
legalizing marijuana and the future of the monarchy.

Marijuana and the monarchy are, of course, among the hottest of hot
buttons. They stir emotions and give politicians the chance to capture
valuable air time in a noisy, competitive environment. They also don't
matter much.

Apart from fuelling talk shows and exacerbating existing differences, the
issues are as superficial as their resolution is certain. With few rational
reasons to defend the status quo, Canadians will eventually accept
marijuana as a legitimate sport-drug rival to alcohol and reject the
monarchy as a quirky colonial anachronism.

Someday, a younger generation will look back on the soft drug debate with
the same puzzlement today's teenagers reserve for their parents' forgotten
dispute over the national flag. And some time after that, history will
catch up to Foreign Affairs Minister John Manley's fearless prediction that
a Canadian will, one day, be head of state.

Canadians would be wise to drag themselves away from those arcane arguments
long enough to consider the cross-border influence of the more than $1.3
trillion tax bill Bush hopes to sign into law as early as tomorrow.
Dubiously promoted as an economic stimulus, Bush's tax package, to be
implemented over 11 years, is a windfall for the wealthy and a worrisome
harbinger of more trouble to come for the already frayed U.S. social safety
net.

Not surprisingly, the legislation is contentious within the concentric
circles that surround the federal government. Those who believe in small
government see it as another step in the right direction of turning the
state over to the private sector. Others fear it will further undermine the
role of government, as well as the once sacred Canadian notion that public
spending advances broad nation interests.

Walter Robinson, an effective Ottawa tax lobbyist, is one of those who
happily argues that the Bush plan will only accelerate Canada's move away
from the profligate tax-and-spend policies of the past. But in the longer
term, the head of the Canadian Taxpayers Federation suggests aggressive
U.S. efforts to reduce taxes, debt and government spending will force
Ottawa to keep pace - or become less attractive to business. For a
homegrown comparison, Robinson points to Alberta, where debt is
disappearing, giving the province a competitive advantage over other
Canadian jurisdictions.

Robinson's worries about Canadian competitiveness will vanish along with
the U.S. role model if the Bush cut proves as wrong-headed as Reagan's 20
years ago. While the Great Communicator's lavish spending is often credited
with bankrupting the Soviet Union, it also choked the U.S. economy on debts
and deficits for almost 15 years and deepened recessions here.

It's true that much has changed since then, including Canada's shift closer
to the U.S. and to its economic conservatism. After balancing the budget at
the cost of social spending, Finance Minister Paul Martin introduced in
time for last fall's election a $100 billion, five-year tax cut that, along
with being the largest in Canadian history, is also roughly comparable to
the Bush plan. But even so, economist Mike McCracken of Ottawa-based
Informetrica, worries that the Bush plan will ultimately cost this country
more of its already limited financial flexibility. It would be tempting for
Canada to counter any changes in capital gains, estate and corporate
taxation that make the U.S. an even stronger magnet for money and brains.

For McCracken, it is more worrying that Washington's narrow thinking will
make it harder to combat the twisted notion that public services can best
be delivered by private enterprise. Despite contrary evidence on both sides
of the border - think of Walkerton water and California power blackouts -
it is increasingly difficult to make the case for public education and
health care. That case falls particularly flat with those who can afford to
pay their way out of problems largely created by inadequate funding or the
dogma-driven indifference of conservative governments.

With all respect to those who still fear the dreaded weed or can't imagine
Canada without a Queen, those issues are minor distractions. The real
action is about taxes and this week the action is in Washington.