Making Canada Relevant Again- The Economic Super-Thread

[I_am_John_Galt]

the United States, now, where federal debt alone stands at US$7.7 TRILLION(!), to comprise roughly 75% of GDP.

US$7.7 TRILLION(!) divided by US$12.3MMMM (er, TRILLION(!)

Equals

.641666 (or 64.2% ... my earlier figure was 62.4%, so sue me, still nowhere near 75%)

 

[I_am_John_Galt]

Methinks then you should be concerned. Your figures are out of date by about 15 years. As of now, the Canadian national debt stands at just under CDN$500 Billion, for a total of roughly 40% of GDP. Compare this to the United States, now, where federal debt alone stands at US$7.7 TRILLION(!), to comprise roughly 75% of GDP. Not only that, but they have estimated their next  budget deficit at US$424 Billion, and this does not include emergency spending, military expenditures and the cost of the President's Social Service reforms, which are expected to cost the US $800 Billion dollars (over the next number of years). The one good thing for the US is that their government pays a (far) lower interest rate on  their debt, so their debt will expand slower.

More up-to-date OECD data: http://www.oecd.org/dataoecd/5/51/2483816.xls

"General Government Gross Financial Liabilities - Percent of Nominal GDP"
2004 column - Canada 70.6%; United States 63.5%
(1989 column - Canada 72.3%; United States 65.1%)

FWIW, the Government of Canada shows the Gross Debt at $701 Billion: it hasn't been $500 Billion in, uh, about 15 years (1990-91) ... are you trying to compare Canada's Accumulated Deficit with the US's Gross Debt?  http://www.fin.gc.ca/frt/2004/frt04_3e.html#Table15

 

[squealiox]

Yes, and rather than spending on research (and means) on ways to reduce pollution it is instead paid as an economic rent: it reduces profit, not pollution.   This is underscored by the fact that the notion that global warming is caused by human activity is very debateable.
The goal is to transfer wealth from more developed countries to less-developed countries under the aupicies of some international authority without any trade.   A secondary goal is to try to force some countries (particularly the US) to accede to 'internatonal institutions' (i.e., european socialists).
It depends on what the goal is ...

and the incentive now to invest in all this R&D is ... what, exactly? a nice warm fuzzy feeling for having done good? the ability to sell off emission credits would allow innovative companies to claim a true "economic rent" (ie, a return beyond their cost of capital) until their competitors find a way to catch up.

it's called "marketising an externality", just like the auctioning of bandwidth or hunting licences. Only this would be an intl market primarily between private entities and hence have greater liquidity. and btw, it's not a concept that is very popular with socialists, environmental ideologues or their soulmates on the american far right, either.

as for the scientific claims, the balance of the reported evidence would seem to suggest the problem is real. The climatology work is pretty hard to ignore. Here's what that notorious commie rag* The Financial Times has to say:
(*-sarcasm)

US scientists say man has caused global warming and warn over the Gulf Stream.

By CLIVE COOKSON
475 words
19 February 2005
Financial Times
London Ed3
Page 1
English
(c) 2005 The Financial Times Limited. All rights reserved

Leading US climate researchers yesterday released "the most compelling evidence yet" that human activities are responsible for global warming.

They said their work should "wipe out" claims by sceptics that warming is due to non-human factors such as natural climatic fluctuations or variations in solar or volcanic activity.

Scientists from the Scripps Institution of Oceanography in California have been working for several years with the Lawrence Livermore National Laboratory to analyse the effects of global warming on the oceans.

They used computer modelling combined with millions of temperature and salinity readings, taken around the world at different depths over five decades.

The researchers released their conclusions yesterday at the American Association for the Advancement of Science meeting in Washington. The study found the "warming signals" in the oceans could only have been produced by the build-up of man-made CO in the atmosphere. Non-human factors would have produced quite different effects. Tim Barnett, the Scripps project leader, said previous studies into human activities and global warming had looked for evidence in the atmosphere.

"But the atmosphere is the worst place to look for a global warming signal," he said.

"Ninety per cent of the energy from global warming has gone into the oceans and the oceans show its fingerprint much better than the atmosphere." Prof Barnett added: "The debate over whether there is a global warming signal is over now, at least for rational people."

The Scripps scientists also looked at the likely climatic effects of warming. They highlighted the long-term impact on regional summer water supplies, which would be severely reduced in places such as western China and the Andes which depend on rivers fed by melting snow and glaciers.

The conference also heard a gloomy analysis of the way the North Atlantic is reacting to global warming from Ruth Curry of Woods Hole Oceanographic Institution in Massachusetts.

Her new study showed that vast amounts of fresh water - more than 20,000 cubic kilometres - have been added to the northern ocean over the past 40 years because the Arctic and Greenland ice sheets are melting.

According to Dr Curry, the resulting change in the sea's salinity balance threatens to shut down the Ocean Conveyor Belt, which transfers heat from the tropics towards the polar regions through currents such as the Gulf Stream.

 

[Nemo888]

Forcing scientists, economists and beaureaucrats to work together, no wonder Kyoto blows.

Soldiers would do no better. My political skills are best described as a toolbox with only a hammer inside.

But its a darn good hammer STFU!

 

[a_majoor]

OK so this is turning into the Global Warming thread.

Some points to consider:

Global climate has fluctuated throughout history, and even in human history there have been periods of global cooling (which may have ended the Bronze age civilizations of Eygpt, Mycenea and the Hittites), global warming (which made Greenland, well, green, for Viking farmers), the "Little Ice Age" from the late 1600s to the early 1800s (which may have been a contributing factor to the Industreal Revolution) and so on.

I have serious doubts that anyone can claim the Myceneans, Vikings or Georgian Britons could affect the global climate, and indeed, there are reasons to believe this is beyond the capabilities of human civilization even today (a volcanic eruption can put an amount of particulate matter into the upper atmosphere equal to the entire year's output of all the industry on Earth, as a very simple example).

The idea that people are manipulating the science of climatology for political ends is only novel in the sense that climatology is the newest science being targeted, other things like the "Treaty of the Sea" which placed sea bed resources as "the common heritage of mankind" were explicitly designed to remove the profit motive from undersea mining and prevent the Americans from accessing these resources on their own. Once Global Warming has been proven to be caused by an increase in the Sun's brightness or some other equally natural cause, I'm sure the global busybodies will think of another means of attacking the American or Western economy.

 

[I_am_John_Galt]

and the incentive now to invest in all this R&D is ... what, exactly?

If you are willing to may more for an otherwise-identical product that was produced using reduced emissions, then go ahead and fill your boots.

a nice warm fuzzy feeling for having done good? the ability to sell off emission credits would allow innovative companies to claim a true "economic rent" (ie, a return beyond their cost of capital) until their competitors find a way to catch up.

Well, actually Kyoto is an agreement between sovereign nations, not corporations.  Emissions credits might be traded between companies, but there is no mechanism to do this.  The United States has proven that it's economy is sufficiently diverse and robust to trade emissions credits internally (Clean Air Act) and reduce pollution: why would they willingly kowtow to some other international authority?  What do you think the motivations of this international authority might be?  Given the difficulty in getting European countries to respect their existing treaty obligations, even amongst themselves (EMU SGP comes to mind), it seems almost a certainty that this is merely a club to be wielded against the United States but ignored under any other circumstance.  The fact that ALL of the EU members (except the UK and Sweden) are on track to miss their Kyoto targets (in some cases by huge margins) while criticism remains focused on the US's failure to ratify, lends even more credence to this contention.

it's called "marketising an externality", just like the auctioning of bandwidth or hunting licences. Only this would be an intl market primarily between private entities and hence have greater liquidity. and btw, it's not a concept that is very popular with socialists, environmental ideologues or their soulmates on the american far right, either.

I've never heard of that: it is simply a means of rationing a public good (clean air).  It is the Tragedy of the Commons (which I think I just mentioned elsewhere), but the solution depends on the co-operation of all of the participants (basically the Prisoner's Dilemma in game theory).  In practice, the United States is 99% certain that the EU countries will cheat, given their records and their motivations.

as for the scientific claims, the balance of the reported evidence would seem to suggest the problem is real. The climatology work is pretty hard to ignore. Here's what that notorious commie rag* The Financial Times has to say:
(*-sarcasm)

Yeah sure, and 10 years from now when we haven't all been incinerated, they are going to 'discover' that that it actually a normal occurrence (much like El Nino was supposedly proof of Global Warming at one point, too).  Face it, they come up with a different smoking gun every six months: so far none of them have convinced anyone but the (already) true believers.

The fact of the matter is that the only thing scientists and statisticians agree-upon is that we really can't make accurate models of weather or climate: check out Chaos, by James Gleick for some (accessible) background into the difficulties in modelling weather vis-a-vis Chaos Theory.

All I Really Need to Know I Learned In High School Science

My high-school had one of the best science departments imaginable. Probably 4 of my top 5 teachers in my life were in that department. There was one lesson we had in 9th grade I wish everyone would have had. I genuinely think it would change the world.

We started the fall semester with an introduction to the metric system and the scientific method. We were required to keep a journal of all our observations about the lessons in class. One homework assignment was that we had to read the newspaper or watch the TV weatherman everyday and record the times for sunrise and sunset. Then we had to calculate the amount of daylight and dark for everyday.

After we had a few weeks of data we were required to graph it and "draw a conclusion" about our findings.

Everyone came up with the same "inescapable conclusion".... We were "losing" about 3 minutes of sunlight a day and by mid-July, the earth would be plunged into 24 hour darkness. As we did the graphs, all but one of us got the joke. (One guy really thought we were doomed.)

After giving us a few minutes to admire our graphs and chuckle, the teacher slammed us with the power of that lesson. Just when you think you have things all figured out, there is another force of nature waiting to impale your finding.

She then followed that with 2 days of giving us the history of every goofy thing mankind "knew" only to be proven mistaken. It was a powerful few days. Science can be humbling.

  it goes on ... http://wizbangblog.com/archives/005115.php

 

[squealiox]

Well, actually Kyoto is an agreement between sovereign nations, not corporations.   Emissions credits might be traded between companies, but there is no mechanism to do this.  

oh really? tell that to the international petroleum exchange in london, which is already trading in futures contracts. not to mention the hedge funds:

Is Emissions Trading the Next Hot Hedge Fund Strategy?

Chidem Kurdas, New York Bureau Chief
529 words
3 May 2005
HedgeWorld News
English
(c) 2005

NEW YORK (HedgeWorld.com)â ”Pollution quotas created for the regulation of environmental plaguesâ ”acid rain, urban smog, greenhouse gasesâ ”have given rise to a market that could in time rival the trading in major commodities.

Some large hedge funds are already on it. Tudor Investment Corp., Greenwich, Conn., is said to be looking at trading carbon allowances in Europe. People from Citadel Investment Group LLC, Chicago, recently attended a coal emissions trading conference.

Peter Fusaro, chairman of Energy Media Group, is an energy adviser with hedge fund clients. He knows some 12 funds that trade emissions rights and expects new entrants in New York, London and Switzerland.

Green hedge funds, he calls them, quipping: "Green, as in money."

From investors' standpoint, one problem is managers' lack of track record in trading such new instruments, especially if the fund is a startup. Experience in energy markets helpsâ ”someone who understands coal is better able to arbitrage emissions generated by coal burning.

Another potential competitive edge is knowing the polluting industries, such as utilities, that are the users of the allowances. Besides trading allowances and credits, some hedge funds are investing in long-term environmental projects by participating in private equity deals.

Arbitrage Opportunities

In 1995 the U.S. Environmental Protection Agency issued the first emissions allowances. Carbon dioxide, nitrous oxide, sulfur and renewable energy credits markets are now established, and others may be coming. For instance new rules proposed by the Bush administration are expected to lead to mercury trading.

There are a few futures contracts in emissions but most trade is bilateral. For investors, that raises another issue: the pricing of assets in these over-the-counter, illiquid markets. Illiquidity may be a source of returns but it is also a risk.

New allowances from the EPA are auctioned at the Chicago Board of Trade once a year in March. Prices tend to be volatile, creating trading opportunities. People trade allowances of different vintages. There are also regional markets; some states, like California, issue their own allowances.

Differences between countries' regulatory regimes are another source of trade ideas. With enforcement of the Kyoto Protocol beginning in February, industrial countries with the exception of the United States have agreed to limit greenhouse gas emissions. Prices of carbon allowances differ widely between the U.S. and Europe.

Mr. Fusaro predicts that the United States will introduce additional emission limits in a few years, even though the U.S. did not sign the Kyoto Protocol. One common trade has been to buy cheap carbon allowances and hold them. Prices are on the rise.

Sulfur trading volume is around US$8 billion to US$10 billion annually. Carbon trading is much less, at US$2 billion, but by one prediction may be up to US$10 billion this year. It is forecast to grow to US$100 billion by 2010.

Compared to US$1 trillion traded monthly in commodity futures and US$1.9 trillion traded daily in foreign exchange, those numbers do not sound like much. But green trading is just under way.

CKurdas@HedgeWorld.com

i have no idea what the us govt thinks about the rest of the world's "true motives" here (you'll have to ask mr bush about that one, not me), but the markets have already started to put their bets on the table anyway ...

 

[48Highlander]

gotta love creative statistics  ;D

 

[a_majoor]

Socialists insist we can "have it all" if we simply submit to having more wealth confiscated to fund their schemes, but to create more wealth, we need an unburdened economy. If the economy is unburdened, it seems to me the people creating the wealth would not sit still for confiscation, however. Here is a discussion about capital formation and flow with some historical examples:

The Two Faces of Paul Craig Roberts
Years ago he got tax cuts right, but he's all wrong on â Å“outsourcingâ ? today.

By John Tamny

During the income-tax debates of the late 1970s, Congressional Budget Office head Alice Rivlin argued that workers had a set idea in mind of what their take-home pay should be. If offered tax cuts, Rivlin said they would have more money in their pockets and would reduce the number of hours they worked to meet existing income goals. By Rivlin's estimation, marginal rate cuts would have no economic impact.

Replying in a Wall Street Journal editorial, Paul Craig Roberts showed the flaw in Rivlin's argument, pointing out that if the majority of workers responded in the way she predicted, economic productivity would fall alongside worker income. In short, Rivlin's understanding of the behavioral impact of tax cuts was backwards. Roberts's reply is useful today in that he recently made an argument that mirrors Rivlin's in a Washington Times op-ed.

Citing a University of California study that said 14 million â Å“white collar jobs are vulnerable to offshore outsourcing,â ? Roberts said the loss of these jobs is â Å“fool's gold for companies,â ? and that U.S. workers will eventually see lower wages and less opportunity if companies continue to move jobs offshore.

What Roberts failed to address in his op-ed is capital, and the source of benevolent capital that would fund work here that could be done more cheaply elsewhere. Germany is a modern-day example of a country that tries to keep low-value work â Å“onshore,â ? but if its high unemployment rate and trade surplus tell us anything, it is that capital flees unproductive opportunities.

Adam Smith addressed this concept centuries ago in The Wealth of Nations. Countries that tried to shield economic effort from the markets had â Å“stationaryâ ? economies that experienced low wage growth and low job growth. England tried to protect workers with its Poor Laws, and the result was that its poorer North American colonies had laborers earning wages higher â Å“than in any part of England.â ?

Smith said capital â Å“cannot long remain in any country in which the value of annual produce diminishes.â ? Citing a report titled â Å“Outsourcing America,â ? Roberts acknowledged that in certain white-collar fields, Chinese and Indian labor can out-compete the work product of laborers in the United States.

The flipside of his point is that even if U.S. companies wanted to keep certain jobs onshore, the capital available to maintain this work would very quickly dissipate. Roberts completely ignores this reality, and instead says the natural (and very healthy) worldwide division of labor is making the U.S. labor force look increasingly Third World.

But Roberts can't have it both ways. He deplores our trade deficits all the while arguing that the U.S. is headed for Third World status. In decrying what he sees as a trade imbalance, he fails to address what causes this imbalance, which is the record foreign purchase of U.S. stocks and bonds.

Roberts might argue that part of our trade deficit is related to foreign central bank purchases of U.S. debt, but who would want to own the debt of a supposedly imploding economic power, let alone equity in its private companies? If what he's saying were remotely true, the U.S. would be the first failing economy in world history to draw massive amounts of investment capital from around the world. Not very likely.

Instead, the lesson here is that U.S. companies aren't just doing the right thing in adhering to the laws of comparative advantage, but they're also doing what's essential to attract the capital that will fund more productive employment in the future. Paul Craig Roberts should know this well, given the productivity arguments he made in defense of tax cuts 25 years ago.

Adam Smith said capital â Å“must in every country naturally increase as the value of annual produce increases.â ? In agitating for protection of work that the markets have deemed low value, Paul Craig Roberts is promoting economic prescriptions that will repulse capital and that will ultimately bring us closer to the low-wage Third World status that has him so fearful to begin with.

â ” John Tamny is a writer in Washington, D.C. He can be contacted at jtamny@yahoo.com.
 
  http://www.nationalreview.com/nrof_comment/tamny200505090837.asp       

 

[Cdn Blackshirt]

More up-to-date OECD data: http://www.oecd.org/dataoecd/5/51/2483816.xls

"General Government Gross Financial Liabilities - Percent of Nominal GDP"
2004 column - Canada 70.6%; United States 63.5%
(1989 column - Canada 72.3%; United States 65.1%)

FWIW, the Government of Canada shows the Gross Debt at $701 Billion: it hasn't been $500 Billion in, uh, about 15 years (1990-91) ... are you trying to compare Canada's Accumulated Deficit with the US's Gross Debt?   http://www.fin.gc.ca/frt/2004/frt04_3e.html#Table15

Just to elaborate on John's point, you have to recognize the huge difference in the different measures of "debt".

"Gross Debt" = "Market Debt" (bonds and treasuries) + "Non-Market Debt" (In Canada's case, unfunded pension liabilities)
"Net Debt" = "Gross Debt" - "Financial Assets" (Mix of cash, securities and loans - as long as we don't write them off!!!)
"Federal Debt" = "Net Debt" - "Non-Financial Assets" (Buildings, Land, etc.)

[note - the US debt measure is their Gross Debt.  They do not use the term "Federal Debt" which may be a Canadian invention so the relevant comparison is $700.1 million CAD to $7,700 million USD]

In any case, in monetary terms it looked liked this as of March 31, 2003:

Market Debt ($439.8 billion)
[visualize a plus sign here]
Non-Market Debt ($260.4 billion)
=
Gross Debt ($700.1 billion)
-
Financial Assets ($135.3 billion)
=
Net Debt ($564.8 billion)
-
Non-Financial Assets ($54.2 billion)
=
Federal Debt ($510.6 billion)

I think we've now paid down an additional $9 billion since this time....


One additional note.  I was watching ROBtv on Friday night and they were interviewing Criag Russell who is a Foreign Exchange Analyst from the Chicago Mercantile Exchange.  The hosts asked him a question based on how the media portrays things which was: "So is the possiblity of an election what is causing the fall in the Canadian Dollar."  His response: "No not all.  The fear is that your Prime Minister, Paul Martin in a bid to stay in power will make concessions to the left and undermined the fiscal stability of your country.  And if you look at each and every fall in your dollar it was related to a specific unwise politically driven handout."  To say the hosts were surprised by this response was was an understatement.  In short, be careful of the media assigning cause & effect.


Almost forgot, he also mentioned Paul Martin is destroying his international credibility based on what he is doing right now....




Matthew.   

 

[I_am_John_Galt]

oh really? tell that to the international petroleum exchange in london, which is already trading in futures contracts. not to mention the hedge funds:

i have no idea what the us govt thinks about the rest of the world's "true motives" here (you'll have to ask mr bush about that one, not me), but the markets have already started to put their bets on the table anyway ...

You would think that if the Europeans had any intention of implementing Kyoto (i.e., holding themselves accountable) they would actually be involved in this: this is just proof that there is no mechanism to make it happen.  Funny how it is left to the Americans to try to make it work (does the League of Nations mean anything to you?).

 

[I_am_John_Galt]

This is interesting, too:

Kyoto Protocol--Propaganda or Censorship?
by Garth Pritchard, Canadafreepress.com
Saturday, May 7, 2005

Last Thursday, I received a telephone call from Douglas Leahey, Ph.D., representing a group of Canadian scientists under the umbrella of "Friends of Science." It seems that they had been talking to Peter Worthington of the Toronto Sun, and he had mentioned to them that they should get in touch with me.

Dr. Leahey began by asking me how they could get a 27-minute documentary on television.

I have 15 years experience of fighting with federal and provincial slush funds for that very thing.

I asked some routine questions at first: Did they have a letter of licence? Had they rolled a camera before they got permission? Had they talked to the big broadcasters? Did they have a "pitch" and a budget?

Then I found out what their documentary was about. The story was incredible: it documented scientists--from Canada--speaking out against the $10-billion scam known as the Kyoto Protocol.

Yes, the very same Kyoto Accord that our government has committed Canada and Canadians to support.

I understood instinctively that getting two scientists to agree at what time the sun is coming up tomorrow is--at best--difficult.

But here were tens of thousands, from around the world, all agreeing on one issue: that there is no scientific evidence of man-made global warming.

The numbers of scientists staggered me--17,100 basic and applied American scientists, two thirds with advanced degrees, are against the Kyoto Agreement. The Heidelberg Appeal--which states that there is no scientific evidence for man-made global warming, has been signed by over 4,000 scientists from around the world since the petition's inception. I strongly questioned these high numbers, since I've had benefit of the Canadian government's public relations machine on this issue. Dr. Leahey has since sent documentation to back his figures up.

All those scientists were in total agreement: the Kyoto Protocol was complete fiction.

The scientists are so committed to fighting the Kyoto Accord and its misrepresentation of the truth, that they produced a 27-minute documentary and paid for its production with their own money.

The research, the study, the organization, the production of a documentary â ” those efforts made up the easy part. The tough part was to get it in front of the Canadian people. ...

http://canadafreepress.com/2005/cover050705.htm

 

[squealiox]

You would think that if the Europeans had any intention of implementing Kyoto (i.e., holding themselves accountable) they would actually be involved in this: this is just proof that there is no mechanism to make it happen.   Funny how it is left to the Americans to try to make it work (does the League of Nations mean anything to you?).

not sure what your point is. it is exactly because the europeans (and the japanese and canadians, etc) are "involved in this" that the major houses see value in emissions credits, while the americans sit on the sidelines. end of story.

Morgan Stanley Expands Carbon Emissions Trading Desk

266 words
9 May 2005
11:35
Dow Jones International News
English
(c) 2005 Dow Jones & Company, Inc.

LONDON (Dow Jones)--Morgan Stanley (MWD) has hired "new resources" to ratchet up its carbon emissions desk, the company said Monday.

"Morgan Stanley has recently decided to expand further into this very interesting area of the market," Carlos Melville, a spokesman for the bank said.

The bank has brought on high profile emissions trader Imtiaz Ahmed, a CO2 trader from BHP Billiton PLC (BBL) in the Netherlands, to drive forward the bank's participation in the nascent carbon market, a source familiar with the situation said.

Morgan Stanley will join a handful of other banks that have already made tracks covering the new commodity under the European Union emissions trading scheme, which started Jan. 1.

The market leaders among the emissions-trading banks are Barclays Capital, the investment banking division of Barclays Bank PLC (BCS), and Dutch investment bank Fortis Bank (30086.AE).

Barclays did the first screen-based spot trade of carbon emissions allowances April 25, as well as the first bilateral spot trade in early March.

Fortis trades actively and also runs the MeesPierson Intertrust, which takes custody of companies' carbon positions by helping them verify actual emissions and conduct trades in the market.

ABN AMRO Holding N.V. (ABN) is involved in the market, and Merrill Lynch & Co.'s (MER) commodities trading unit aims to begin trading CO2 this quarter, according to people familiar with the plan. Calls to Merrill Lynch weren't returned. -By Johannah Ladd, Dow Jones Newswires; +44 (0)207-842-9345; johannah.ladd@dowjones.com [ 09-05-05 1535GMT ]

Document DJI0000020050509e15900103

 

[squealiox]

Just to elaborate on John's point, you have to recognize the huge difference in the different measures of "debt".

"Gross Debt" = "Market Debt" (bonds and treasuries) + "Non-Market Debt" (In Canada's case, unfunded pension liabilities)
"Net Debt" = "Gross Debt" - "Financial Assets" (Mix of cash, securities and loans - as long as we don't write them off!!!)
"Federal Debt" = "Net Debt" - "Non-Financial Assets" (Buildings, Land, etc.)

funny you should mention that. canada's debt is nothing to sneeze at, but the data john posted clearly shows the canadian government's NET liabilities at around 28% in 2005, and falling, while that of the us is at about 46% -- up there with france -- and rising. if the us govt wasn't republican, i'd almost think they were being ...(gasp!) fiscally irresponsible.

 

[Zartan]

Sorry.
But creative statistics? Hear me out!
While I was proven wrong regarding the US federal debt as GDP (and thanks too; I don't like myself spouting incorrectness - unless it is deliberate  ;D), however, to clarify, in the 1990's the Liberal government switched to a different form of representing debt- which can be seen in the 252nd reply by Cdn Blackshirt. If we were to use present statistic's using the Liberal's "official" debt calculation, Canada's debt to GDP ratio would still be around 40%-45% ($500 Billion/$1.2 Trillion) - remember, if you saw Canada's present GDP at about $800-$900 Billion, you are seeing it being displayed in USD$. Debts are generally always shown in the currency of the debtor being looked at.

 

[48Highlander]

Sorry.
But creative statistics? Hear me out!
While I was proven wrong regarding the US federal debt as GDP (and thanks too; I don't like myself spouting incorrectness - unless it is deliberate   ;D), however, to clarify, in the 1990's the Liberal government switched to a different form of representing debt- which can be seen in the 252nd reply by Cdn Blackshirt. If we were to use present statistic's using the Liberal's "official" debt calculation, Canada's debt to GDP ratio would still be around 40%-45% ($500 Billion/$1.2 Trillion) - remember, if you saw Canada's present GDP at about $800-$900 Billion, you are seeing it being displayed in USD$. Debts are generally always shown in the currency of the debtor being looked at.

Uh...wha?  Nobody was calculating our debt in US dollars.  But you can't compare Canadian NET debt to US GROSS Debt, and then say we're doing better than them.  Since you insist on looking at Canadian NET debt, you should compare it to the US net debt, which is sitting somewhere around 4 trillion dollars, or 40% of GDP.

 

[a_majoor]

One additional note.   I was watching ROBtv on Friday night and they were interviewing Criag Russell who is a Foreign Exchange Analyst from the Chicago Mercantile Exchange.   The hosts asked him a question based on how the media portrays things which was: "So is the possibility of an election what is causing the fall in the Canadian Dollar."   His response: "No not all.  The fear is that your Prime Minister, Paul Martin in a bid to stay in power will make concessions to the left and undermined the fiscal stability of your country.  And if you look at each and every fall in your dollar it was related to a specific unwise politically driven handout."   To say the hosts were surprised by this response was was an understatement.   In short, be careful of the media assigning cause & effect.

Almost forgot, he also mentioned Paul Martin is destroying his international credibility based on what he is doing right now....

That quote alone should be forwarded to every friend, acquaintance, media outlet and blogger that you know....

 

[a_majoor]

The arguments regarding the US medicaid program are equally applicable to Canada's "healthcare" system:

http://www.nationalreview.com/comment/cannon200505170805.asp

Welfare Reform's Unfinished Business
Medicaid has to be reined in.

By Michael F. Cannon

I n the 40 years since it was created to provide medical care to the needy, Medicaid has metastasized beyond this narrow purpose. According to the National Association of State Budget Officers, in 2004 Medicaid surpassed elementary and secondary education as the largest item in state budgets, consuming an estimated $309 billion of tax revenue.
 
This would be less of a problem but for the significant portion of its budget that provides coverage to those who could obtain it elsewhere. The problem is not merely (or even principally) fiscal. Like other components of the old welfare system, Medicaid harms many purports to help by lulling them into dependency. And it constantly draws more Americans toward dependency through an ever-increasing tax burden and higher health-care costs.

For the sake of the truly needy and everyone else, Congress and the states should pare this behemoth down to a flexible program focused solely on those who cannot help themselves. The Left's predictable response presents only a minor obstacle to reform. Still intent on expanding the program to cover all Americans and thus deepening the crisis, Medicaid's apologists have nothing to offer but echoes of the dire and famously inaccurate predictions the Left made about welfare reform ten years ago. The real obstacles to reform are Republicans who are willing to accept the status quo.

Medicaid's Perverse Incentives
Medicaid operates much like other components of the old welfare system, notably the now-repealed Aid to Families with Dependent Children (AFDC) cash-assistance program. In each program, Congress created: a legal entitlement to benefits for anyone who meets the eligibility criteria; a scheme where the more money a state spends, the more it receives from Washington; and centralized control over how states run their programs. Each feature creates perverse incentives that increase Medicaid spending, overall health-care costs, and dependency on government.

Medicaid typically offers services to beneficiaries free of charge, which creates the program's first perverse incentive: encouraging beneficiaries to consume medical care without regard to cost. Requiring the truly destitute to contribute to the cost of their care is of course impossible, not to mention undesirable. Yet allowing 50 million Americans to consume care as if it were free brings its own raft of undesirable consequences.

As the RAND Health Insurance experiment demonstrated, removing price-sensitivity induces patients to consume more medical care â ” 43-percent more under the conditions tested â ” but fails to produce measurable health gains. Though few data exist for Medicaid, leading researchers at Dartmouth College estimate that 20 percent of Medicare expenditures purchase care that provides no clinical value.

Medicaid's second perverse incentive is that it discourages private efforts that provide for those who are eligible. Anyone who meets federal eligibility criteria (regarding age, income, assets, etc.), or a particular state's broadened criteria, is entitled to benefits, which encourages many to enroll even when they could obtain care and coverage elsewhere.

Researchers at the Robert Wood Johnson Foundation surveyed 22 leading studies on whether "free" government coverage crowds out private coverage and concluded that crowd-out "seems inevitable." While the scale is uncertain, over half of these studies found that expansions of public coverage were accompanied by reductions in private coverage. Some even found that enrollment growth in public programs was completely offset by reductions in private coverage. The lure of "free" medical care is a powerful draw, and an entitlement makes it impossible for states to focus resources on the truly needy.

The states' open-ended entitlement to more federal funding creates Medicaid's third perverse incentive. States receive an average of $1.30 from Washington for every dollar they spend. This encourages states to broaden their programs beyond what is necessary to assist the truly needy. According to the Urban Institute, close to one-fifth of Medicaid-eligible adults and children have private coverage, which strongly suggests that states have expanded Medicaid well beyond its original purpose.

Inflating Health-Care Costs
Medicaid undermines private health insurance in more ways than just giving some people a "free" alternative. It also makes private health insurance more expensive by shifting part of its costs onto private parties.

Price controls enable Medicaid to pay below-market rates, and providers make up the difference by charging private payers more. Mark Duggan of the University of Maryland and Fiona Scott Morton of Yale University estimate that Medicaid increases the price of non-Medicaid prescriptions by 13.3 percent. So if Grandma's medications cost her $1,000 per year, upwards of $110 of that is her contribution to Medicaid. When unleashed market-wide, this mix of inflated demand and cost-shifting makes private health coverage less affordable, particularly for low-income Americans who are already Medicaid-eligible or on the cusp of eligibility.

A convention among health policy writers is to hail Medicaid as the white knight that rescues the uninsured when employers find they can no longer afford private coverage. As Jonathan Cohn wrote in The New Republic this February, "If Medicaid hadn't grown to fill the yawning gaps in private coverage over the last decade, today we would probably have 50 million uninsured Americans instead of 45 million." It's a convention that turns reality on its head. Medicaid is a prime culprit behind rising health-insurance premiums.

Promoting Dependency
Because Medicaid is a means-tested program, many beneficiaries become or remain eligible by avoiding constructive behaviors â ” such as earning, saving, and purchasing private insurance â ” that would make them ineligible.

Jonathan Gruber of MIT and Aaron Yelowitz of the University of Kentucky found that Medicaid beneficiaries save less and consume more in order to remain eligible. They estimate that in 1993, Medicaid reduced asset holdings among those eligible by the equivalent of $1,600 to $2,000 in today's dollars. Those disincentives are even greater today, thanks to subsequent expansions of eligibility and benefits.

The program also discourages private insurance for nursing home and other long-term care expenses. Jeffrey Brown of the University of Illinois at Urbana-Champaign and Amy Finkelstein of the National Bureau of Economic Research found that 60 percent to 75 percent of the benefits from private long-term care insurance "are redundant of benefits that Medicaid would otherwise have paid." They estimate that Medicaid by itself discourages 66 percent to 90 percent of seniors from purchasing such insurance. Even seniors with considerable means are able to avoid tapping those resources; gaping loopholes in asset tests make them eligible for Medicaid as well.

A Familiar Ring
The congruity with to the old welfare system could not be more striking. Medicaid encourages the poor â ” and the not-so-poor â ” to become dependent on government. It encourages people to behave in ways that increase the cost of government and of health care, which makes self-reliance more difficult for their neighbors. And it encourages states to get more people to behave that way.

With so many similarities, many have proposed reforming Medicaid along the same lines as welfare: end the entitlement to benefits; eliminate open-ended entitlement to matching federal funds by capping federal payments to the states; and give states greater flexibility to pursue a few broad goals. This was the Republican plan in 1996 before President Clinton threatened to veto welfare reform if it included Medicaid reform. Perhaps wisely, Republicans sacrificed Medicaid reform and reformed welfare.

Yet if Republicans were intent on enacting meaningful Medicaid reforms ten years ago, and welfare reform was an enormous success, why are we no closer to Medicaid reform today?

[EDITOR'S NOTE: Read part II of this article tomorrow...]

â ” Michael F. Cannon is director of health-policy studies at the Cato Institute. Parts I & II of this article are adapted from his upcoming book, Healthy Competition: What's Holding Back Health Care and How to Free It, co-authored with Michael D. Tanner (Cato Institute, forthcoming).

 

[a_majoor]

Is Canada doomed? Look at the character of the people who weild power in this country:

http://andrewcoyne.com/2005/05/proof-there-are-no-more-rules.php

Proof there are no more rules

They were careless people, Tom and Daisy -- they smashed up things and creatures and then retreated back into their money or their vast carelessness, or whatever it was that kept them together, and let other people clean up the mess they had made.
-- The Great Gatsby

The people I feel sorry for are Belinda's placemen: all those Mulroneyites and main-chancers gathered around her, taking her pay and filling her head in the honest belief that she was going to buy the Conservative party for them. Now what do they do?

Because Belinda can't buy the Liberal party for them, not even with her billions. The Liberal party has more money than she does. It has government money, among other sources, and if it has to use it, it will. So rather than buy the party, the party bought her. Or perhaps we should say it was a merger, an asset swap between Magna International and the government of Canada, on terms to be disclosed later.

I had thought the feeling of nausea that washed over me at the news was one of disgust. I now realize it was vertigo. The bottom has fallen out of Canadian politics. There are, quite literally, no rules any more, no boundaries, no limits. We are staring into an abyss, where everything is permissible.

Those exquisites in the press gallery who were so scandalized at the suggestion that the Liberals would stoop to scheduling the budget vote around Darrel Stinson's cancer surgery might now have the decency to admit: of course they would. It should be clear to everyone by now that this government -- this prime minister -- will go to any length to assure their survival in power. And I do mean any. All governments are loathe to leave, all think themselves indispensible, but I cannot recall another that clung to office so desperately, so ... hysterically.

They may yet succeed. We can see now what the nine days were for: why the government refused to resign, or call an immediate confidence vote, after it was defeated in the House last Tuesday, but instead insisted, against all precedent, that it was entitled to remain in office until a week Thursday. The loss of a confidence vote is no longer to be taken as a fundamental loss of democratic legitimacy, but rather as a signal to spend more, threaten louder, and otherwise trawl for votes on the opposite benches, for as long as proves necessary. It took only a few days this time, but after all nine days can stretch into two weeks, and two weeks could as easily be three, and then we're into a month, and then it's recess. Indeed it is an open question whether the Liberals would have even held the budget vote if they hadn't made this deal, or whether they would have promised one if it were not already in the works.

Impossible? Outrageous? But outrage depends upon a sense of where the boundary lines are, and a willingness to call people out when they cross them. But the Liberals have been crossing these lines, one after another, for years, and their own conspicuous lack of shame has educated the rest of us into shrugging complicity. It's only outrageous until it happens -- then we forget we had ever felt otherwise.

For example: Last Wednesday, The Globe and Mail published a stinging editorial calling upon the Liberals to seek an â Å“immediateâ ? vote of confidence, to call an election â Å“nowâ ? or to put its budget bill to a â Å“quickâ ? vote. â Å“With each moment they linger,â ? the Globe wrote, â Å“they will expose themselves as so desperate to hang onto power that they spit in the face of the Commons and call it respect.â ?

By Friday the Liberals were still there, the government had been defeated two more times, the budget vote had not been held -- and the Globe wondered what all the commotion was about. â Å“To say the government has lost all legitimacy,â ? it lectured the opposition, is â Å“a wildly disproportionate response.â ? Poof: all that outrage, down the memory hole. In two days.

Is it a constitutional crisis if no one understands it is? A government without the support of a majority of Parliament has spent billions it has no legal authority to spend and dangled offices that are not in its power to bestow, in hopes of recovering that majority. It was a mistake, in hindsight, for the Tories to have relaxed their grip; to have allowed the business of the House to resume; to have taken the Liberals at their word. But now that it is known to all that the government acted in bad faith, the Tories would be well advised to boycott the vote, and all subsequent parliamentary business. They won't of course -- they're too spooked. But I liked the suggestion I heard in one quarter: that when Parliament resumes, every question to the new minister of Human Resources should be put in French.

Oh, Belinda, when you stared into the mirror in the morning, wondering if you could go through with it -- knowing that you would, but liking yourself a little better for the struggle -- you must have felt a certain thrill. I've grown up, you thought. This is what grown-ups do; it's what players do. You put away childish notions of honour and loyalty, and you do what you have to do, and that's all there is to it. It's nothing personal. It's just business.

But Belinda, you do not know the people you are dealing with. You think your soul is black but you have no idea. You will hold your office for a couple of days, or perhaps a few months, but only for as long as you are useful to them. And then they will discard you.

Daisy Buchanan drove away from the wreckage she had made. You will not.

 

[Zartan]

48th Highlander,
I never said that our debt was being calculated in USD$ - I said that it was probable that our GDP was for some of the calculations present in this topic. And where did you find the numbers for the American Federal Net Debt? Perhaps the only way to look at this is by comparing each budget: Canada - surplus (though probably not anymore - thanks PM PM) vs USA - deficit (amounting to over $400 billion dollars, and that is excluding war spending). At that rate, their "net" debt of $4 trillion would be increasing by 10% in one year. Plus, they are charging 4.0% interest to attract investment from overseas, against a rate of 2.0% for Canada. While we could argue that the USA still may be in a more favourable financial position than Canada, the question is: for how long?

P.S. sorry for the long response time. :-[