Making Canada Relevant Again- The Economic Super-Thread

[a_majoor]

Another union goes down in flames:

http://canofcontemplation.blogspot.com/2011/04/union-boss-gives-up-on-his-members.html

Union Boss Gives Up On His Members

To use an UFC analogy, the head of TCEU Local 416 Mark Ferguson, the union that does garbage collection in Toronto, has found himself in a triangular choke hold and has basically tapped out to even trying to save his members' jobs...because he apparently doesn't know how.

Yesterday on the 'Live Drive' with John Tory on Newstalk 1010, Ferguson flat out admitted, in the face of the impending privatization of garbage collection in the City of Toronto from west of Yonge Street all the way to the Etobicoke border (where collection is already privatized), that he had absolutely no idea how to put together a collective bid, since Mayor Rob Ford had announced that the contracts are put up for bidding by any company, including TCEU Local 416. John Tory, who usually is a mild mannered fellow, rightly indicated that that was the stupidest statement he ever heard. I want to go one further and state that that statement is a dangerous indication of just how ineffective union management, and perhaps unions, have become.

I have questions about the usefulness of unions, but I don't think they are an impediment to society. Most of the common benefits we receive in the private sector (mat leave, vacation days, health benefits) historically stem from things that unions past have done before. But I do think that effective management and some business sense should be present in union leadership in order for them to effective represent its members. No one is asking Ferguson to be the enlightened expert, but normal minds would expect him to at least seek out or hire someone with business experience and knowledge in these matters to help TCEU Local 416 put together a collective bid for those contracts that, prior to yesterday, were effectively theirs for life. That's what normal companies do. But instead of pursuing that route, Ferguson has seemingly abdicated all responsibilities to his union members by saying he doesn't know how to get those contracts back, even though the solution is clearly spelled out in front of him.

What this behaviour reminds me of is that of a spoiled child who doesn't get what he wants. Mayor Rob Ford promised to privatize garbage collection, which he is getting done. This self entitled union boss doesn't like it, so he does everything he can to stop it, and fails. Now that the new reality is setting in, instead of adapting Ferguson, by basically throwing in the towel, is saying that the only way to save those jobs for his members is to NOT privatize collection. Wah wah wah! I didn't get what I want, so I'm leaving! I have to at this point ask the card carrying members of TCEU Local 416: What are you paying union dues for? Why do you let this quitter represent you? Is this what you expect from your leadership?

Ferguson taking his ball and going home, sadly, doesn't hurt him since he's pretty well off. But it does hurt those he purportedly represents, and that's the real story.

 

[a_majoor]

Personal responsibility, taxes and debt:

http://www.technicalbard.com/archives/765

On Taxation and Affordability
Apr 23rd, 2011 by Taliesyn in Business, Economics, Education, Politics

Two items in the news/blogosphere over the last week caught my attention and triggered a thought in my mind.

The first was the news that a survey by Environics for TD Canada Trust found that 30 per cent of respondents don’t have enough cash to pay for basic living expenses.  This was run as the headline in most papers, although interestingly 30% was inflated to “one-third” by most of them…

The second item was from the blogosphere, where Dan Tappin at MapleLeafParty.ca posted this interesting graph:

Percentage of Canadian Federal Income Tax by Income Percentile

Now, one might imagine that the 30% of Canadians who can’t afford basic living expenses would all be members of the bottom 50% of incomes.  But I don’t think that is true.  Why?  Partly because of material published in the first article I mentioned above:

    12 per cent said they can’t afford to pay their bills every month, and the same proportion admitted they’re shopping beyond their means.

    The same poll had 38 per cent of respondents saying they have no savings at all, and 54 per cent find it a struggle, if not impossible, to put money away.

Hmm.  I have trouble believing that 76% of the bottom 50% of incomes (<$35,000 per person)  in Canada don’t save anything.  Therefore, some of the people “struggling” to get by must be in the top half of incomes.

    Another factor could be Canadians’ high personal debt levels, which average almost 150 per cent of annual disposable income.

Hmm.  So, if the average Canadian has that much personal debt, then a significant portion of income must be going to debt servicing.  So when the survey says people can’t afford basics, how much of that is because they spent too much on a car, or a big TV, or an iPhone, when they really shouldn’t have?
I mean, look at it this way – if you buy an iPad 2 with all the bells and whistles, that can be up over $800.  Which is 1% of your income if you make $80,000 per year.  But are only people making over that high income buying iPads?  No…

Part of the problem is that too many people can’t manage their money and don’t understand that they can’t have everything they want.  It is a social problem.  But the solution is not government intervention.  It’s parents teaching their children the value of money.  And people taking responsibility for themselves.

 

[a_majoor]

Fun with numbers:

http://www.barrelstrength.com/2011/04/25/the-bloc-is-innumerate/

The Bloc is innumerate
April 25, 2011 8:27 am Dalwhinnie Canadian Politics

The Bloc Quebecois is insisting the federal government give to Quebec the tax points that Quebec deserves. Unfortunately for the Bloc, this is less than it actually receives.

An enterprizing journalist has calculated that, under this system, the government of Quebec would have received $8.7 billion last year. But, it actually recceived $15.2 billion. How come? ( $15.2-$8.7=$6.5).


“D’où sont venus ces 6,5 milliards? Sans surprise, ils sont venus surtout de l’Alberta dont la croissance économique a permis de gonfler les revenus fiscaux du gouvernement fédéral. Loin de s’accaparer la richesse albertaine, comme le Bloc le prétend, le gouvernement fédéral en a plutôt transféré une partie aux autres provinces, dont le Québec. Voilà très exactement comment fonctionne une fédération qui partage la richesse entre les régions plutôt qu’elle ne la concentre dans une seule. Cela implique en même temps que le Québec n’a surtout pas besoin du rôle revendicateur du Bloc pour profiter de la richesse de l’ensemble du pays. Il n’a pour cela qu’à participer à l’ensemble pour profiter du budget commun à l’ensemble. “

Translated:

“Where did the $6.5 billion come from? No surprise, it came mostly from Alberta, whose economic growth has permitted the federal government’s revenues to swell. Far from seizing the wealth for itself, as the Bloc pretends, the federal government has transferred it to other provinces, including Quebec. This is precisely why Quebec does not need the the Bloc as a claimant to profit from the wealth of the rest of the country. It has only to participate in the whole of the country to profit  from the budget of the whole country.”

The author, Martin Coiteux, teaches international business affairs at Hautes Etudes Commerciales at the University of Montreal. Bravo, M. Coiteux!

 

[a_majoor]

Canada's demographic situation is in some senses even worse than that of the United States; are there lessons here for us?:

http://pajamasmedia.com/instapundit/  May 12 2011

DEMOGRAPHY AND ECONOMIC GROWTH: Tyler Cowen links to this study on shifting demographics of a society in relation to financial market returns, and cautiously suggests there might be something to it.  I agree perhaps there is.  But strikingly, it is precisely what I’ve been turning over in my mind since reading Tyler Cowen’s fine, short essay, The Great Stagnation: How We Ate All the Low-Hanging Fruit.  I think, actually, it should have been subtitled, How We Ate All the Low-Hanging Fruit and After That All the Next Generation’s Seed Corn.

The essay suggests that we’ve already absorbed the easy gains that more or less follow on the genuinely history changing Industrial Revolution, and that incremental gains are much tougher to come by, unless we are fortunate enough to find some new scientific or technological breakthrough of a kind that is difficult to predict, let alone will into being. (I’m simplifying and perhaps editorializing.) Even as I read it, however, my reaction was that it did not take into account – in multiple directions – the effect of an aging population.  Which is what the cited paper attempts to do.  Aging populations take less risk, innovate less, make fewer breakthroughs in new technology, consume more but not necessarily in ways that produce increases to the general standard of living.  And when the aging generation has political power from numbers, they tend to think in terms of themselves – and call it social justice.  Insofar as they have not produced lots of new children, they are less invested in the future after themselves, and are perfectly willing to eat the next generation’s seed corn.

I think all those effects have a huge impact on Cowen’s “low-hanging” thesis, which seems – perhaps I am mistaken – to oddly operate from a demographically static model.  Yet thinking there is something right about this thesis is not the same as saying that investors can easily benefit from it, precisely because it is a generalized effect across markets, asset classes, investment opportunities.  The growth rate in innovation slows – in part for the reasons that Cowen’s essay identifies, and in part for reasons that older populations simply innovate less. The general mean in innovation shifts, perhaps only slightly, but with impacts on the future.  How do you short that?  Go long on populations with lots of young people?  That assumes that they have not just youth and energy, but also education, societies that provide the coherence necessary for innovative ideas to pay off, and lots of other things … that almost none of them has.  The places that have lots of youth are not the places that have the other elements necessary for innovation to take hold and become sources of increase in the standard of living.

(Also, if this sounds like I think my Baby Boomer Generation is morally the most preening and objectively The Worst … yeah.)

 

[GR66]

Canada's demographic situation is in some senses even worse than that of the United States; are there lessons here for us?:

http://pajamasmedia.com/instapundit/  May 12 2011

Perhaps the standard current economic model of attempting to counter an aging population through immigration is only helping to reinforce such stagnation.  As long as the older portion of the population remains in control of the majority of the capital (as well as remaining in the leadership positions in industry) while at the same time there remains just enough young labour to continue "business as usual" there is no major incentive for innovation.

Necessity is the mother of invention as they say and perhaps allowing the economy to become increasingly reliant on a smaller and smaller portion of the workforce would force the economy (and government) to become more efficient and innovative. 

I'm not sure there is a real world example we can look at to see the possible effects of such a policy decision.  Japan might offer some insights since they are certainly world leaders in many areas of technological and industrial innovation but despite that their economy still remains stagnant.  However their rigid social structures, general lack of natural resources and "room to grow" might make their situation much different than what Canada (or the US) might face.

 

[mariomike]

Another union goes down in flames:

"Union Boss Gives Up On His Members:
"To use an UFC analogy, the head of TCEU* Local 416 Mark Ferguson, the union that does garbage collection in Toronto, has found himself in a triangular choke hold and has basically tapped out to even trying to save his members' jobs...because he apparently doesn't know how.":
http://canofcontemplation.blogspot.com/2011/04/union-boss-gives-up-on-his-members.html





* Toronto Civic Employees Union. TCEU has "done" EMS in Toronto since 1933. Mark Ferguson himself is a Paramedic, and the elected President of TCEU.
We tried to go our own way,  but the only way out is death or retirement.

I do not expect to see TCEU go "down in flames" anytime soon. But, I see their wages and benefits joining the "race to the bottom". The loss of the sick bank for new hires is an example of that. That was a benefit they negotiated over 50 years ago.
I expect soon to see a knight in red shining armour ride to the "rescue" of Mark and his fellow Paramedics. On the other hand, the Grim Reaper also rode a horse.  ;D

Driver-Loaders ( garbagemen ), if their jobs get contracted out, will likely be taken over by Teamsters.  That is what happened in Etobicoke in 1994.
"Satisfaction Guaranteed or Double Your Garbage Back!"

From the angry ( smelly ) summer of 2009,
"Is Mark Ferguson the most hated man in Toronto?":
http://www.thestar.com/news/insight/article/668198

 

[mariomike]

Another union goes down in flames:
http://canofcontemplation.blogspot.com/2011/04/union-boss-gives-up-on-his-members.html

Reply to add.
As mentioned in my previous post, the last TCEU strike was in 2009. It was over workers banking our unused sick days and cashing them out upon retirement ( as I did ). The union won. The new sick plan will only apply to future hires.

When the contract expires at the end of this year, the battle will be over the so called "jobs for life" - with no decrease in pay, seniority or benefits - guarantee. It will dramatically elevate the risk of a lockout or strike.
“We’re going to have the same situation as (the strike in 2009), but instead of being about banking sick days, it’s going to be about whether people have jobs or not. We thought it was nasty last time? This time you’re going to have private collectors trying to cross the lines of picketers whose jobs are on the line.":
David Doorey, professor of employment and labour law at York University.

"Jobs for life" goes back to 1999: “Mayor Mel Lastman closed one of the biggest deals of his political life early yesterday when he confounded his critics and averted a strike by civic workers. Job security through the life of the contract for employees with 10 years seniority.”
In 1999 Metro was preoccupied with surviving amalgamation, not contracting out jobs.
In 2002, "Jobs for life" was the cause of the first strike in 30 years: "The province called them back. We tried to take it away from them because they had us by the balls." Mayor Mel Lastman.
It was World Youth Day, and the Pope was coming to Toronto:
http://www.ewtn.com/wyd2002/news_articles/wyd_numbers.htm
TCEU won the ruling on job security during arbitration.

In 2005, "Jobs for life" was again signed into the contract by Mayor Miller. He improved it. This time, it protected all TCEU members, regardless of seniority.

Prior to 2002, the last strike was in 1972. That year, TCEU voted to take Metro Ambulance - their "atomic bomb" - out with them. It lasted 30 days, and took three weeks to clean up the garbage ( mega overtime ). I hired on three months later. The public was still seething at us, and I do not blame them. It was the last, and to the best of my knowledge, first ambulance strike in Toronto.

TCEU was established in 1917. Things may have changed since I retired, but not as much as that blogger wants his/her readers to believe. Paramedics are not likely to be contracted out, but as other TCEU workers are forced into a race to the bottom, paramedics may find themselves riding high on a sinking ship. It may become more and more difficult for them to simply maintain, let alone improve, their standard of living.

"Toronto strike's possible link to man's death under probe":
http://www.cbc.ca/news/canada/toronto/story/2009/07/16/paramedics-strike.html
( Some understandably angry comments from irate citizens. )

"A request to adjourn the Hearst inquest was granted to the Toronto Civic Employees Union, Local 416-CUPE, a party with standing.":
http://news.ontario.ca/mcscs/en/2010/04/inquest-into-the-death-of-james-hearst-postponed.html

My guess is that is one inquest that is not going to happen anytime soon, if ever.  :worms:

We ran into "I pay your salary - I hate your union - I don't have it, so neither should you" types on the job.
Having a union of our own - like Toronto Police and Toronto Fire - will likely never happen.

 

[a_majoor]

Canada better get its house in order quickly:

http://pajamasmedia.com/blog/a-canadian-writer-to-his-american-readers/?singlepage=true

A Canadian Writer to His American Readers
We are too profoundly aligned for Canadians to think of themselves as immune to the American malady.
June 2, 2011 - 12:01 am - by David Solway
Print Decrease Font Size Increase Font Size

I’ve been asked from time to time by readers and correspondents why a Canadian, who presumably has his own national issues to consider, should engage so intently with American problems and concerns. Some have even suggested or implied that I should just mind my own business; after all, what is a Canadian doing messing in affairs that do not involve him, like an ignorant  tourist or an intrusive foreigner? But the United States is my business, for decisions and events that occur there will substantially impact my life and the lives of my fellow citizens in innumerable and complex ways, and often not to our advantage.

It is certainly true that I write far more — and far more urgently — on American themes than on the various dilemmas that trouble Canadian political waters. This does not make me a disaffected Canuck, only someone who understands that Canada and the U.S. are intimately connected and that what happens in America also happens in Canada, often in greater measure. It seems obvious that, with its ballooning debt, redistributionist policies, fractured electorate, a governing left-wing party, and a disastrously out-of-touch president, a possibly lethal bacillus has infected the American body politic which must be addressed, resisted, and expunged if we too are not to succumb. This is why I am preoccupied with things American and tend to regard my contributions, such as they are, as a kind of antibiotic writing. We are too profoundly aligned for Canadians to think of themselves as immune to the American malady.

To begin with, our two countries share the longest border in the world. They are closely bound together through trade agreements like NAFTA and defense alliances like NORAD. Our auto industry, accounting for more than one sixth of the manufacturing sector, is effectively an American branch plant and our air force flies American jet fighters, very much to America’s financial benefit. We supply the U.S. with oil, timber, and electricity and reap a handsome profit in the bargain. Mutuality is the order of the day. Domestic cross-border traffic is robust. We vacation in one another’s countries and many winter-weary Quebecers, known as Snowbirds, have made a second home for themselves in Florida, not to mention a growing community of grateful retirees. In a very real sense, we are more than merely neighbors; we are more like partners, even relatives. Yankee-bashing may be a national twitch, but Canadians who dislike Americans are only engaging in a family feud.

But there is yet another reason for my political focus on the United States. Despite its current difficulties the United States remains at the center of the geopolitical universe. The American ship of state displaces more volume in the international medium on which it sails than any other, by a degree of political magnitude. When that ship begins to list or founder, one can expect a quasi-nautical calamity to swamp the world’s various shores — and Canada owing to its multifaceted proximity would be the first to suffer. More on this later.

The recent election of a conservative prime minister in Canada would not significantly offset the possible re-election of a radical socialist president in the U.S. There is, of course, the question of renegotiating NAFTA that arises every now and then and the threat of other isolationist developments that would hit the Canadian economy hard, cost jobs, and disrupt the intricate dimension of interlocking fiscal structures. But the damage can go deeper than this. The consequences of rampant inflation in the U.S., a possible debt default, and the ensuing social and political unrest would not only constitute a heavy blow to our export industries, drastically reduce our “market share,” and potentially deprive us of our largest trading partner, but conceivably lead us into another Great Depression.

Canadian Finance Minister Jim Flaherty warned American legislators that failure to deal with their deficit problem could set back the global economic recovery. “We think it’s important for the world,” he said, “and for Canada, that there be a plan in place.” Raising the debt ceiling, as it should go without saying, hardly qualifies as a “plan.” Neither does “quantitative easing,” a surefire way of turning dollars into Monopoly money. Investing in the Ecozoic sinkhole will deplete any remaining fiscal reserves. Pumping steroids into the economy in the form of “stimulus spending” turns out to be a placebo with no demonstrable results, apart from the fact that such expedients are ultimately counter-productive.

All these matters are serious enough, but the pressing issue has an apocalyptic side to it. No more than Americans, Canadians cannot afford to revel in isolationist fantasies, assuming that if we keep our economic house intact, pay down the debt, refuse to raise taxes, and shrink our exorbitant entitlement programs, all will be well. For as America goes, so do we. If it goes ill with America, it will infallibly go ill with us. We know what happens when a great ship sinks. It creates an immense vortex and whatever happens to be in the immediate vicinity is swallowed up along with it. Compared to the U.S., Canada is a very little ship indeed, more like a kayak floating beside the grandest liner in the world. It wouldn’t stand a chance.

David Solway is a Canadian poet and essayist. He is the author of The Big Lie: On Terror, Antisemitism, and Identity, and is currently working on a sequel, Living in the Valley of Shmoon. His new book on Jewish and Israeli themes, Hear, O Israel!, has just been released by Mantua Books.

 

[a_majoor]

A veiw of the Martin spending cuts. Tax increases and offloading to provinces was also a feature of the period, but the essential lesson of spending cuts needs to be driven home to you MP regardless of where you live:

http://www.oxygentax.com/2011/06/paul-martin-guide-to-cutting-deficits.html

The Paul Martin Guide to Cutting Deficits

The Paul Martin Guide to Cutting Deficits: FCPP - Frontier Centre for Public Policy

Most importantly, the Chrétien-era Liberals were able to balance the
budget, "not with large tax increases, but with substantial cuts in government
spending." Federal spending as a percentage of GDP went from 18% in 1993 to 13%
in 2009. And the Canadian economy prospered because of it.

During this period, the unemployment rate fell from a high of 11.4% in 1993
to 6% in 2007, according to Statistics Canada. Moreover, as the government cut
spending, more resources were freed up for the private sector. As a result,
Canada experienced high growth rates of 4-5% between 1997 and 2000.

Let's give credit where it's due... If it wasn't for Mr. Mulroney's maneuvering to get the GST through the Senate and to get NAFTA done very little of that growth would have happened, regardless of the government's spending levels.

Sure, when a government makes cuts that deeply, it is a strong signal to business that taxes won't go up and that now is a good time to buy that new piece of equipment, however the switch to the GST did more to take a tax burden off business than any amount of government spending cuts will do.

http://www.fcpp.org/publication.php/3788

The Paul Martin Guide to Cutting Deficits
Jesse Kline, National Post, May 31, 2011

Last week, the U.S. government hit its debt ceiling of $14.3-trillion -the legal limit on the amount of money the government can borrow. While the Treasury Department is using a number of accounting tricks to give lawmakers until early August to resolve the situation, both Republicans and Democrats agree that America's fiscal situation is fundamentally unsustainable.

The national debt is now about 62% of gross domestic product (GDP) up from 36.2% in 2007. In other words, the amount of money the government owes is equal to about two-thirds of the value of all the goods and services that America produces in a year. In the fiscal year 2010, the U.S. government spent about $1.5trillion more than it took in. By comparison, the total U.S. debt in 1980 was just under $1trillion. That amount of debt, which America now burns through every eight months, was enough to fight two world wars, split the atom, rebuild Europe and land a man on the moon.

Canada faced a similar situation in the mid'90s. In 1994, Canada's debt-to-GDP ratio was around 67%, but thanks to sound fiscal management, deep spending cuts and sustained economic growth, this number was reduced to 29% by 2009. A report released earlier this month by the Mercatus Center at George Mason University urges America's political leaders to look to the Canadian experience as a guide for getting out of the hole they've dug themselves.

The Liberal government under former prime minister Jean Chrétien and finance minister Paul Martin began a concerted effort to balance the budget in 1995. Between 1995 and 1998, the government cut spending by a whopping 14%. As the report's authors note, "if the U.S. government were to cut real spending by 14% over the next three years, the budget in [fiscal year] 2013 would be US$473-billion (in 2010 dollars) less than the FY 2010 budget."

Most importantly, the Chrétien-era Liberals were able to balance the budget, "not with large tax increases, but with substantial cuts in government spending." Federal spending as a percentage of GDP went from 18% in 1993 to 13% in 2009. And the Canadian economy prospered because of it.

During this period, the unemployment rate fell from a high of 11.4% in 1993 to 6% in 2007, according to Statistics Canada. Moreover, as the government cut spending, more resources were freed up for the private sector. As a result, Canada experienced high growth rates of 4-5% between 1997 and 2000.

For the report's authors, the Canadian experience shows that government can balance the books by making significant spending cuts, and that can be done without having an adverse effect on economic growth and levels of employment.

For Canadians, it highlights one of the benefits of our parliamentary democracy: It's much easier to get big things done when unencumbered by the checks and balances that are built into the U.S. presidential system. (Whether or not that's an advantage, of course, depends very much on the big thing in question). The Liberals were able to make significant spending cuts without the political infighting we have seen in the budget negotiations down south.

This case also highlights the culmination of a concerted effort on the part of the right-wing in Canada to educate the public about government spending and make "deficit" a bad word in the minds of Canadians. In the United States, groups like Bankrupting America have only recently been able to make headway on this issue.

The Americans can learn a lot from the Canadian experience. One hopes that our current Conservative government will learn a lesson from their predecessors as well.

 

[Brad Sallows]

I read that article a while back.  Those seeking to learn lessons from Canada's fiscal management never seem to get past the Paul Martin "Miracle".  Canada established a federal operating surplus in 1987 and retained it until the 2008 recession; the US isn't even close to being able to do so.  The cost of servicing debt peaked in the very early 1980s and fell steadily thereafter (causing major reductions in the federal deficit which was entirely a function of the cost of servicing debt with the operating balance in surplus); the cost of servicing debt has essentially no room to fall further at present.  Revenue growth outpaced spending growth for several years prior to the cuts and after; revenue cratered with the onset of the recession and is not recovering rapidly, let alone at a rate to outpace spending growth in the US.  In short, factors external to Paul Martin and Jean Chretien first lowered the deficit to within pistol shot, and none of those factors is present to assist the US.  Also, it wasn't the federal government that had to manage the hard work of cutting spending: the feds mostly cut transfers and left the former recipients to work out the details.  It would surprise me greatly if the US Congress found the political will to gut transfers.

The US is screwed, but roughly half the nation hasn't the backbone to deal with the situation even if their ideology would permit them to do so.  One of Sun Tzu's suggestions is to do the hard things while they are still easy.  Neither Obama nor the US Congress has much strategic aptitude; collectively, they are weak thinkers.

 

[a_majoor]

Well, here is a way to eliminate @ 50% of the deficit on an ongoing basis, without "sacrificing" any of our so called public services:

http://www.oxygentax.com/2011/06/private-public-wage-disparities.html

Private-Public Wage Disparities
Private-Public Wage Disparities: FCPP - Frontier Centre for Public Policy

According to a CFIB 2008 study, taxpayers would save $19-billion a year if publicsector wages were equalized with private-sector ones. And that only includes those civil servants with direct private sector equivalents -in other words, no police, firefighters, etc. were included.

That's an amazing figure.  $19 billion.  That's almost 10% of the federal budget, and make no mistake, the federal budget makes up the brunt of that figure.

The opposition were asking where the $4 Billion hole in the Conservative plans to cut spending are... this is it right here.  The media party should be trumpeting this from every platform they could find... if they had a mind towards really making sure the cuts happened rather than just trying to embarrass the governing party.  Some of Mr. Levitt's proposals on how to change bargaining in the public sector are very interesting:


First, fire the advisors and lawyers who have brought us to this precipice and are comfortable with conceding.

Second, take tough positions at the bargaining table and, if the union strikes (which they are less likely to if they believe this will occur), make sure the cost of the strike is taken out of the employees future salaries and benefits before the strike is settled. With one not-for-profit client I negotiated for, we told the team-sters every time our offer was rejected, the next would be less. On the third offer, they believed us and accepted the reduced offer. The next time they didn't strike.

Third, the government should pass legislation requiring arbitrators to make comparable salary and benefits in the private sector their main criteria. Couple that with provisions requiring them to adjust wages up or down to accomplish that. If that occurred, ordering workers back to work would have teeth.
Read it all

http://www.fcpp.org/publication.php/3807

Private-Public Wage DisparitiesHoward Levitt, National Post, June 22, 2011

Years ago, I told my sister once people realized how much they were paying public servants such as her, there would be a full scale revolt. Factoring in the short work days, thrice annual long vacations, professional development days, retirement at age 55, and wildly generous pensions, no one of comparable education makes nearly as much on an hourly basis.

Although not specific to teachers, that prediction has been realized. Canadian taxpayers are nearing full scale revolt against the outrage public sector remuneration has become. It makes little sense that the employees make significantly more than their taxpayer employers do for the same jobs.

According to a CFIB 2008 study, taxpayers would save $19-billion a year if publicsector wages were equalized with private-sector ones. And that only includes those civil servants with direct private sector equivalents -in other words, no police, firefighters, etc. were included.

How did this situation arise? When I negotiate collective agreements, I find a distinct difference between the instructions I receive from entrepreneurs -large or small -who are spending their own money compared to professional managers. The former are almost invariably more parsimonious and do not succumb to collective agreement "creep" wherein, in each round of bargaining, more and more is given, until the collective agreement can be weighed in pounds, each clause providing another impediment or cost.

Voters have paid scant attention to the salary increases awarded in the public sector, and even less to the Byzantine non-monetary provisions that they barely understand and never hear about. By the time these give-aways reach the ears of the credulous public, the politicians are long gone, either from office or, at least, that portfolio.

The recent Canada Post and Air Canada strikes -with pensions at the heart of both labour disputes -were terribly mishandled. In both cases, the employers could have won with public support. In Air Canada's case, the largely unskilled positions were easily filled. In Canada Post's, most Canadians now have easy alternatives: If you don't already have an email account, any Internet carrier will be happy to oblige for free. Why would these employers want government intervention when they could win the strikes, reduce the union's power and their collective bargaining goals? There was no constituency for a forced return to work except the tremulous employers themselves.

The illusion management is being tough by asking the government to order their employees back to work is a hoax on the public. The City of Windsor understood that and pleaded with the McGuinty government to not order its striking workers back. Doing so is an admission of failure because ordering the workers back means an arbitrator will decide their remuneration and the history of arbitrators' decisions has created the very wage boondoggle the public is decrying. What arbitrators will not do is remove union members' pensions or create lower wages for new employees. By submitting their union disputes to binding arbitration, the McGuinty government has knowingly forsaken the very salary freezes they have been publicly demanding.

What should government and public sector employers do?

First, fire the advisors and lawyers who have brought us to this precipice and are comfortable with conceding.

Second, take tough positions at the bargaining table and, if the union strikes (which they are less likely to if they believe this will occur), make sure the cost of the strike is taken out of the employees future salaries and benefits before the strike is settled. With one not-for-profit client I negotiated for, we told the team-sters every time our offer was rejected, the next would be less. On the third offer, they believed us and accepted the reduced offer. The next time they didn't strike.

Third, the government should pass legislation requiring arbitrators to make comparable salary and benefits in the private sector their main criteria. Couple that with provisions requiring them to adjust wages up or down to accomplish that. If that occurred, ordering workers back to work would have teeth.

If this was implemented, there would be few strikes and the public-private sector remuneration disparity would become a thing of the past.

 

[a_majoor]

In Canada, this is known as the "Alberta Advantage":

http://volokh.com/2011/07/19/foot-voting-for-freedom/

Foot Voting for Freedom

Ilya Somin • July 19, 2011 10:31 pm

Political scientist Jason Sorens presents some interesting new data showing that people tend to “vote with their feet” for states with greater freedom when they make migration decisions. He shows that, controlling for other variables (such as climate and cost of living), people tend to migrate towards states with greater economic and personal freedom, and away from states with lower levels of either. The state freedom ratings are based on his excellent recent study Freedom in the Fifty States, coauthored with William Ruger. Economic freedom is defined by levels of government spending and regulation, while personal freedom is defined by such policies as regulation of sexual freedom, drugs, gambling, and so forth.

Sorens finds that migrants may find economic freedom attractive in part because it is associated with increases in income. Economically freer states experience higher income growth (though, surprisingly, in Sorens’ data it’s less clear that income growth is associated with higher in-migration). By contrast, personal freedom is not correlated with income growth. Migrants apparently find it attractive for its own sake. This last result contradicts Richard Florida’s famous theory that the economic growth of localities is highly dependent on its attractiveness to the “creative class,” which greatly values personal freedom. Perhaps the creative class is a less important engine of growth than Florida argues, or perhaps they don’t value personal freedom as much as we think they do. Regardless, many migrants apparently value personal freedom even if it doesn’t do much for their income.

I previously wrote about the tendency of migrants to vote with their feet for greater economic freedom here and here. In this article, I explain why foot voting decisions are generally likely to be better-informed and more rational than ballot box voting.

 

[a_majoor]

The Anglosphere of the past, compare and copntrast with the situation today:

http://pajamasmedia.com/eddriscoll/2011/07/24/the-anglosphere-before-the-lights-went-out/?print=1

The Anglosphere, Before the Lights Went Out

Posted By Ed Driscoll On July 24, 2011 @ 11:00 pm In Capitalism, the Unknown Ideal,Liberal Fascism,The Future and its Enemies,The Memory Hole,War And Anti-War | 3 Comments

At National Review Online’s Corner, Daniel Pipes unearths a remarkable quote by the historian A. J. P. Taylor on an England which effectively was ended by WWI:

Until August 1914 a sensible, law-abiding Englishman could pass through life and hardly notice the existence of the state, beyond the post office and the policeman. He could live where he liked and as he liked. He had no official number or identity card. He could travel abroad or leave his country for ever without a passport or any sort of official permission. He could exchange his money for any other currency without restriction or limit. He could buy goods from any country in the world on the same terms as he bought goods at home. For that matter, a foreigner could spend his life in this country without permit and without informing the police. Unlike the countries of the European continent, the state did not require its citizens to perform military service. An Englishman could enlist, if he chose, in the regular army, the navy, or the territorials. He could also ignore, if he chose, the demands of national defence. Substantial householders were occasionally called on for jury service. Otherwise, only those helped the state who wished to do so. The Englishman paid taxes on a modest scale: nearly £200 million in 1913-14, or rather less than 8 per cent. of the national income. … broadly speaking, the state acted only to help those who could not help themselves. It left the adult citizen alone.

As Pipes adds, “In 2011, one can only dream of such a limited state.”

That passage also dovetails with a quote, from a possibly surprising source, remembered by the late Robert L. Bartley of the Wall Street Journal. In the last chapter of his 1992 book, The Seven Fat Years, his wonderful treatise on economics, written while America was in the midst of a recession far milder than today’s, Bartley looked at the then-recent fall of the Berlin Wall and wondered if it had finally meant the conclusion of a series of events that radically reshaped the world, beginning with World War I. Bartley had a remarkable flashback to Europe just before the lamps went out, as Sir Edward Grey was quoted as saying on the eve of WWI:

Against the temptation to fantasize the past, this exciting age did not bring happiness to everyone. Its denizens suffered pain from too much change, too much progress. In his [1986 book] France: Fin de Siècle, Eugen Weber explains, “This is what caught my eye about the circumstances: the discrepancy to between material progress and spiritual dejection reminded me of our own times. So much was going right, even in France, as the nineteenth century ended; so much was being said to make one think that it was all going wrong.”

Still, World War I changed mankind’s life and outlook, in ways by no means confined to France but throughout a common trans-Atlantic civilization and beyond. By now, we have forgotten the spirit that was swept away in 1914, and also the extraordinary economic underpinnings of the efflorescence of science and culture. These were once described from the perspective of London by an old friend, John Maynard Keynes:

What an extraordinary episode in the economic progress of man that age was which came to an end in August 1914! The greater part of the population, it is true, worked hard and lived at low standard of comfort, yet were, to all appearances, reasonably contented with this lot. But escape was possible, for any man of capacity or character at all exceeding the average, into the middle and upper classes, for whom life offered, at a low cost and with the least trouble, conveniences, comforts, and amenities beyond the compass of the richest and most powerful monarchs of other ages.

The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, in such quantity as he might see fit, and reasonably expect their early delivery upon his doorstep; he could at the same moment and by the same means adventure his wealth in the natural resources and new enterprises of any quarter of the world, and share, without exertion or even trouble, in their prospective fruits and advantages; or he could decide to couple the security of his fortunes with the good faith of the townspeople of any substantial municipality in any continent that fancy or information might recommend. He could secure forthwith, if he wished it, cheap and comfortable means of transit to any country or climate without passport or other formality, could despatch his servant to the neighbouring office of a bank for such supply of the precious metals as might seem convenient, and could then proceed abroad to foreign quarters, without knowledge of their religion, language, or customs, bearing coined wealth upon his person, and would consider himself greatly aggrieved and much surprised at the least interference. But, most important of all, he regarded this state of affairs as normal, certain, and permanent, except in the direction of further improvement, and any deviation from it as aberrant, scandalous, and avoidable.

And the Heinlein quote that Glenn Reynolds has referenced several times recently fits in well to cap all this off:

Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded — here and there, now and then — are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people. Whenever this tiny minority is kept from creating, or (as sometimes happens) is driven out of a society, the people then slip back into abject poverty.

This is known as “bad luck.”

Somehow, we keep forgetting how freedom and good economic “luck” are remarkably intertwined.

(Bumped to top.)


--------------------------------------------------------------------------------

Article printed from Ed Driscoll: http://pajamasmedia.com/eddriscoll

URL to article: http://pajamasmedia.com/eddriscoll/2011/07/24/the-anglosphere-before-the-lights-went-out/

and an interesting idea from the comments:

Buck O'Fama
In 1989 as the Iron Curtain fell, it was often remarked how the event was actually and finally the END of the great war that started in 1914. This made some sense: the treaty of Versailles settled nothing but set the stage for WWII. The 1917 Russian Revolution, brought about in large part by the Germans for tactical advantage, helped divide the world between two armed camps for nearly a half century after WWII’s end.

But perhaps there is one more effect, little attributed to WWI but which certainly came about in response to events caused in some part by it: the rise of the welfare state. Starting with Russia in the 1920s and in the US in the 30s and 40s, welfare states expanded almost unabated until the Soviet one collapsed in the early 1990s. Ours and Europes, began somewhat later, have persisted until now. But as they shake and shudder under their own dead weight, perhaps the final end of the 1914 era is about to arrive.

 

[foresterab]

Taken from the Globe and Mail
http://gold.globeinvestor.com/servlet/ArticleNews/story/GI/20110728/escenic_2113186/stocks/news/&back_url=yes

Productivity lag pinned on self-employed Canadians
15:42 EST Thursday, Jul 28, 2011

It is an enduring economic conundrum: Why does Canada chronically lag the United States in productivity?

The conventional wisdom is that the gap is due to Canada’s smaller market, generally smaller companies and the challenging reality of a large population spread thinly over a vast geographic expanse.

A new report by a trio of researchers at Statistics Canada offers another possibility.

Apparently, it’s all those self-employed Canadians. Unincorporated businesses are badly dragging down overall labour productivity in Canada, according to the report.

“The Canadian unincorporated sector contributes a sizeable portion of the gap between Canadian and U.S. labour productivity,” the authors conclude. “This contribution was more substantial in the 1990s; it has declined post-2000 as a gap between the Canadian and U.S. corporate sectors increased.”

Overall productivity in Canada was 88 per cent of the what it is in the United States in 1998. If you remove unincorporated businesses from the equation, the gap virtually disappears.

The study leaves readers wanting more, posing as it does the possibility that self-employed Canadians are less productive than their American peers. The authors warn that identifying the source of the productivity gap isn’t the same as tracing the root cause.

And on that score, Statscan only hypothesizes about possible causes, including the smaller Canadian market, a dearth of entrepreneurs among unincorporated businesses, skewed tax incentives and the harsh Canadian climate.

A different take on the productivity arguments that have been around but the article does not provide enough insight as to how to correct this situation.

 

[Edward Campbell]

Taken from the Globe and Mail
http://gold.globeinvestor.com/servlet/ArticleNews/story/GI/20110728/escenic_2113186/stocks/news/&back_url=yes

A different take on the productivity arguments that have been around but the article does not provide enough insight as to how to correct this situation.

You cannot, and I think, do not want to "correct" for that. The small, unincorporated, enterprise, while unproductive in statistical terms, is still an important contributor to a growing economy.

The good news is that when you take that sector out of the equation the productivity gap "virtually disappears," but I am a bit skeptical. Our industrial/manufacturing sectors is, I believe, still less productive than is that in the USA - our major competitor. We need to do better. It is not about workers - ours and theirs are, almost certainly, identical in skill and knowledge; we do have some advantages, including health care; but our industrial/manufacturing leadership is, in my opinion, more timid, less willing to innovate and too afraid to invest in e.g. technology than are their American counterparts. In my opinion that is where the productivity gap exists: the corner office.

 

[Kirkhill]

A higher proportion of "unproductive" self-employed could also be seen in terms of the high volumes of layoffs in the 90s. 

Canadian "unemployed" became "self-employed" "consultants" - speaking from experience  ;D

Did the Yanks lay-off as many people from corporate positions?
How many of them went on the dole, dropped off the radar, or opted for self-employment?

Maybe Canadians are Less inclined to be Wage Slaves and More inclined to be entrepreneurial after all.

 

[foresterab]

A higher proportion of "unproductive" self-employed could also be seen in terms of the high volumes of layoffs in the 90s. 

Canadian "unemployed" became "self-employed" "consultants" - speaking from experience 

Did the Yanks lay-off as many people from corporate positions?
How many of them went on the dole, dropped off the radar, or opted for self-employment?

Maybe Canadians are Less inclined to be Wage Slaves and More inclined to be entrepreneurial after all.

I would be interested in seeing the productivity numbers for New Zealand vs Canada due to the layoffs in the public sector New Zealand experienced at about the same period and the well documented shift of public sector jobs to self employed.  The other challenge is the I doubt the US productivity numbers include the large number of migrant workers/illegal immigrants that apparently have a large impact on the southern states distorting the US numbers.

Personally I believe the disconnect is not so much on the self-employed numbers or those who work for the large corporations but lack of mid sized growth companies expanding based upon innovation, investment and new designs...but that's my two cents worth and I've got no idea on how to improve the situation without inefficient government protection.

 

[a_majoor]

Progressives everywhere should be shouting with joy:

http://torydrroy.blogspot.com/2011/07/tories-cut-corporate-welfare.html

Tories cut corporate welfare!!!

I object to corporate welfare. The stare has no business picking winners and losers in business. Giving money to corporate behemoths like Suncor is a joke. This is a good first attempt to remove some of the billions HM Canadian Government hands out of our money. We need to cut all of it!! We should also continue to lower corporate tax rates and reduce capital gains taxes.

Canada Won’t Commit New Funding for Renewable-Energy Program, Oliver Says
By Andrew Mayeda - Jul 28, 2011 5:25 PM ET

Canada won’t commit new funding to a C$1.4-billion ($1.47 billion) program used by companies such as Suncor Energy Inc. (SU) and TransAlta Corp. to fund renewable-energy projects, Natural Resources Minister Joe Oliver said today.

Canada plans to cut C$4 billion in spending annually to help it balance its budget by the fiscal year starting April 2014. Oliver said spending restraint was one reason his department hasn’t renewed the ecoEnergy for Renewable Power program, which funded wind farms developed by Suncor and TransAlta as well as solar-power projects developed by Enbridge Inc.

“You’ve got to make choices. You’ve got to make decisions. Things have to be affordable,” Oliver said in a telephone interview with Bloomberg News.

 

[a_majoor]

The rest of Canada should take note:

http://www.theglobeandmail.com/globe-investor/investment-ideas/streetwise/sp-upgrades-saskatchewan-on-low-debt-burden/article2033171/

May 24, 2011
S&P upgrades Saskatchewan on low debt burden
By TIM KILADZE
From Wednesday's Globe and Mail
Province's debt rating raised to triple-A to join Alberta and British Columbia

Saskatchewan suddenly has a new shine.

The province joined an elite club of provinces on Tuesday when Standard & Poor's upgraded its debt rating to triple-A. The only provinces to share the triple-A honour are western neighbours Alberta and British Columbia.

The new rating caps off a dramatic turnaround for a province that was a fiscal mess in the 1980s, and in more recent years saw skilled workers leaving in droves for oil-rich Alberta. But no longer. Saskatchewan is now home to everything from potash to grain and oil, and the money from these resources has made balancing the provincial budget far easier.

Rather than quickly spending its newly-earned wealth, the provincial government has put its tax revenue toward paying the bills. S&P gave special credit to Saskatchewan for its "low-and-declining debt burden." As of March 31, the province's fiscal year-end, Saskatchewan's debt totalled $4.6-billion, representing 38 per cent of this year's projected operating revenues and only 8 per cent of its gross domestic product. Canada's federal debt-to-GDP ratio sits at around 35 per cent.

S&P also cited a strengthening provincial economy, fuelled by global demand for commodities and strong balance sheet liquidity, stemming from ample cash and short-term investments on hand. In other words, the province has a cash buffer in case an economic downturn hits.

And just like the other provinces, S&P is encouraged that Saskatchewan isn't left to fend for itself. The federal government provides "moderate support" in the form of Canada Health Transfers and Canada Social Transfer payments

The province's real GDP grew by 1.7 per cent last year after slumping 3.9 per cent in 2009, and every industry except for agriculture saw gains. Of those, mining and oil and gas experienced the biggest jump, demonstrating just how much the province has changed. Potash Corp of Saskatchewan Inc. is now a globally-recognized name, and the province can boast about its own oil reserves, stealing some of the national attention away from Alberta. Venerable companies such as Crescent Point Energy and PetroBakken Energy have set up shop.

Saskatchewan's unemployment rate is also extremely low by national standards, sitting at 5.2 per cent, the best of any province. And the data suggests that workers are returning to Saskatchewan. The province's population rose 2 per cent in 2010, the highest annual increase in more than two decades.

The future is promising. S&P added a 'stable' outlook to its rating, which "reflects our expectation that the province's operating and after-capital results will continue to improve with its strengthening economy and operating revenue growth and that liquidity will remain strong."

Saskatchewan's rating was upgraded from double-A-plus. Alberta and British Columbia both have triple-A ratings, followed by Manitoba with double-A and Ontario and New Brunswick at double-A-minus.

The question ultimatly comes down to what sort of economic climate and culture the State is promoting; Saskatchewan was governed for decades by the NDP and had much diminised economic performance compared to Alberta, despite having a similar basket of resources. The Saskatchewan Party instituted a series of tax cuts and regulatory reform, with the results noted above.

 

[a_majoor]

Terrance Corcan on how Canada solved the deficit problem and debunking the "must increase taxation" myth:

http://opinion.financialpost.com/2011/08/12/terence-corcoran-canada’s-gst-myth/

Terence Corcoran: Canada’s GST myth
   
Terence Corcoran  Aug 12, 2011 – 10:03 PM ET

Spending cuts, not tax increases, slew federal deficits

The big push to raise taxes in the United States is gaining momentum — in Canada. An assortment of squishy commentators, economists and out-of-office Liberals are all over the Canadian media saying that the United States should just follow Canada’s example. To get out of a looming debt crisis, America needs a judicious mix of spending cuts and tax increases.

Even former Liberal finance minister Paul Martin, whose first do-nothing budget hit a brick wall on Wall Street in the early 1990s and precipitated a 10% crash in the Canadian dollar, is now offering the U.S. advice on fiscal policy. On CBC Radio’s The Current recently, Mr. Martin talked of the need to be firm on spending and to be prepared to raise taxes.

Identical advice was delivered the other day by a well-known Canadian columnist. Musing about the detrimental effects of tribal divides in U.S. politics, between big-government Keynesians and small-government Hayekians, he retold the Canadian story. “As various Canadian commentators have been pointing out in recent weeks, Paul Martin and Jean Chrétien slashed spending by 20% and increased tax revenues — largely through the GST, which they had formerly opposed.”

Before we deal with this entirely mythical claim that the GST and tax increases saved Canada from a debt crisis, a word or two on Mr. Martin’s fiscal heritage. While it is true that he ended up cutting taxes in his now-famous 1995 budget, it was not due to any ideological inclination to bring balance to Canadian fiscal policy. Mr. Martin’s first budget in 1994, a shell-game of spending increases and tax fiddles, made it clear the Liberals had no intention of curbing government spending. It was only in the face of a currency crisis that spending was cut. Despite the conventional wisdom that Mr. Martin is the man who slew the federal deficit dragon, it is the dragon that slew Mr. Martin.

From where comes the idea that tax increases — through the GST — played a role in reversing Canada’s fiscal fortunes in 1995? The first observation is that the GST was brought in by Brian Mulroney’s Conservatives in 1990, five years before the crisis. But more important, there was no increase in tax revenue from the GST.

The GST is a sales tax that was brought in to replace another sales tax on manufactured goods. As tax policy goes, that was a good move: getting rid of a distorting tax that killed jobs in industry and bringing in a broad-based sales tax that was less distortionary. But there was no increase in government revenue. Looking at the numbers, the GST initially brought in less revenue as a percent of total federal tax revenue. As a percentage of GDP, the GST is flat or even slightly lower over the same period.

Not that it matters in the fiscal crisis story. Mr. Martin’s fiscal-tightening budget, in 1995, arrives five years after the fact, with spending taking all of the hit. Federal tax revenue makes the same point. Federal tax revenue in 1995 stood at 13.4% of GDP, rose slightly to 14.5% two years later and then began falling back to 13% in 2000.

The Canadian federal government never raised tax revenue to reverse the deficits of the 1990s. Some Canadian commentators have glibly said that the United States should dramatically raise taxes. Said another well-known columnist: “Federal revenues have collapsed since 2007, down from more than 18% of national income to a little more than 14%.” the implication is that the U.S., as part of a balanced approach, should begin collecting more taxes to boost revenues.

This analysis seems simple and is allegedly based on Canadian practice, promoted as the balanced Canadian approach. Perhaps, it is said, the United States could split the difference on its looming fiscal crisis. It could raise taxes by, say, 30% while cutting spending by 20%. Such a lack of “ideology” allegedly saved Canada.

Except that nothing of the sort happened. Taxes did not increase in Canada in 1995 and in the years following, either at the federal level or across the Canadian system. As the chart above shows, spending by all levels of government hit more than 53% of GDP in the early 1990s, and then began a slow slide in the wake of the 1995 spending cuts and a broad ideological consensus in Canada that spending had to be cut. Taxes were never raised to fight the deficit and, in fact, declined as a percentage of GDP over time.

If the United States were to follow Canada’s lead on facing a fiscal crisis, it would orchestrate spending cuts and hold the line on taxes. The GST story is a myth. The road to sound fiscal policy and growth is to reduce the size of government, not increase it.

What’s missing in these tables is the fact that after Ottawa cut spending, Canadian economic growth and employment grew at more rapid rates than in other G7 countries. Here’s hoping that Jim Flaherty, Canada’s current Minister of Finance, has a clear understanding of Canada’s fiscal history.

Financial Post