Making Canada Relevant Again- The Economic Super-Thread

[SeaKingTacco]

Redeye- Good explanation.  You did better than I ever could have.

Nemo- Without going into details, Redeye is something of an expert in this particular field.  If he says it went down this way...it did.

 

[DBA]

I agree, Redeye's answer is very well done.

A Parliamentary Information and Research Service document available at the Library of Partliament:
The Insured Mortgage Purchase Program

Introduction

One of the major consequences of the collapse of the US real estate bubble in 2008 was the triggering of a significant crisis of confidence in global financial markets. In Canada, as elsewhere, the crisis made it harder for major financial institutions to secure short- and long-term financing and for Canadian consumers to obtain mortgage financing for property purchases.

To address these temporary problems in the Canadian mortgage credit market, the federal Department of Finance announced the creation of the Insured Mortgage Purchase Program (IMPP) in October 2008. The stated purpose of the program is to “help Canadian financial institutions raise longer-term funds and make them available to consumers, home buyers and businesses in Canada.” (1) The total program envelope, initially $25 billion, was increased to $75 billion in November 2008, then to $125 billion when Budget 2009 was tabled.

This document provides a detailed description of the IMPP’s operation, from funding to the mortgage purchase mechanism. In particular, it shows how the government will be able to generate revenue from this operation and the reason why there is virtually no associated risk. Lastly, it examines the possibility that the program may not be able to achieve its stated mandate of promoting access to credit for consumers and businesses.

Further on is a section titled "Is the IMPP a Gift to the Financial Institutions?".

Note this document has a date of 13 March 2009.

 

[a_majoor]

Our American neighbours seem to be getting the idea we are doing something right:

http://www.thefiscaltimes.com/Columns/2012/05/09/Obama-Should-Go-to-Canada-for-Leadership-Lessons.aspx?p=1

Obama Should Go to Canada for Leadership Lessons
By LIZ PEEK, The Fiscal Times May 9, 2012

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When President Obama nixed the Keystone Pipeline, Canada’s Prime Minister Stephen Harper moved aggressively on the alternative Northern Gateway Pipeline. The project would involve billions of dollars to construct two pipelines to British Columbia and a new port to service Asia-bound supertankers. It would also create thousands of jobs. Harper’s aggressive push for jobs and Obama’s cave to environmentalists perfectly describes the chasm between Canadian policies and ours.  Guess which are working better?

Leaders of the developed world are being bounced left and right. Though circumstances and details differ, the message is clear: People are tired of worrying about the economy, their jobs and their future. They hold the folks in charge accountable and will not reelect a leader who has failed to ease their concerns.

RELATED: Jobs: Still Obama’s Biggest Election Hurdle

Mr. Obama is just such a leader. He has shown neither a clear understanding about what might help job creation nor has he made this overarching concern his highest priority. 
Recent polls show the president is in trouble; he needs a plan. My advice: Take a hard look at Canada to study up on what our northern neighbor is doing right.

Canada may be as bland as butter tart, but the country’s economy has been anything but. From 2001 through 2010, it grew faster than any other G-7 country and, alone in that group, it quickly recouped the employment and production losses suffered during the recession. Unemployment today is just over 7 percent – lower than in most developed countries. Though the government’s popularity has sagged with budget cuts of late, Prime Minister Harper continues to enjoy high approval ratings.

Canada’s growth was not built on financial wizardry -- the country boasts some of the soundest banks on earth. (A recent report has accused the government of providing local banks with a “secret” bailout; there was apparently some temporary extension of liquidity at the height of the panic to keep credit flowing, but since then the loans from the government have been repaid.) Nor did it stem from reckless government spending. Chastened by a fiscal crisis in the 1990s, the country cut spending and posted 11 consecutive budget surpluses pre-recession. Consequently, Canada was able to enact a sizeable stimulus program without upending its fiscal stability. That’s how it’s supposed to work.



Source: Government of Nova Scotia

Canada’s net debt to GDP in 2008 was the lowest in the G-7 at 22.6 percent; the U.S. figure for that year was 53.7 percent. Thanks to its stimulus effort, Canada’s debt rose but is estimated to peak at 37.5 percent in 2014, and then decline. By contrast, U.S. debt to GDP in 2014 is projected by the IMF to be 88 percent and rising for the foreseeable future. That’s why Republicans in Congress are so cranky.


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Some may dismiss the Canadian experience as pertinent only to a small country. But Canada is the tenth largest economy in the world – bigger than India or South Korea. No, the Canadian lesson is applicable to the U.S. and it is also simple. Some years ago, Canada set out to attract businesses large and small and it has succeeded. 

It starts with taxes. In the past several years, Canada’s federal corporate tax rate was cut five times; the most recent reduction was in January of this year, when it dropped to 15.0 percent. Together with a provincial tax of 10 percent, the combined corporate tax for Canadian companies is the lowest among the G-7 nations. In the past decade, most developed countries have engaged in a race to the (tax) bottom, with the average OECD rate tumbling six percentage points. Over that period, the U.S. rate barely moved – from 39.3 percent to 39.2 percent. It is true that not all American companies pay taxes at levels that high; but the high rate and complexity of our code is widely viewed as uncompetitive. Also damaging our position, the U.S. is the only OECD country to tax profits earned abroad. 

In addition, Canada boasts the lowest tax rate on new business investments in the G-7; the lowest overall business costs, according to accounting giant KPMG; a tariff-free zone for machinery imports; R&D tax credits; low import tariffs; excellent infrastructure and superb educational opportunities. The upshot of all these efforts? A doubling of foreign direct investment in Canada over the past decade, an inflow more than twice that moving to the U.S. 

It is notable that corporate tax revenues increased during this period, despite the rate reductions. Though there was a recession-induced hit in 2008, revenues quickly rebounded to levels above those taken in under the more onerous tax regime.

U.S. business leaders would be the first to say it’s not all about taxes. In its Global Competitiveness Report, the World Economic Forum (WEF) rates Canada’s education among the top ten countries in the world and its infrastructure fifteenth. Canada’s government has aggressively sought free trade agreements, concluding eight in the past few years.

The United States, ranked fifth, still outperforms twelfth-place Canada in the overall WEF listings of global competitiveness. As recently as 2005, however, our nation led the world; its score drop in the most recent edition was the largest of any of the 113 countries studied. Canada’s score increased modestly.

A panel of international business leaders at the Milken Global Institute Conference on the West Coast recently concluded: “No one has won the next ten years yet.” All countries face challenges – even China. The United States needs to join the race, embracing the private sector and rebuilding our country’s finances – just like Canada. Unfortunately, President Obama’s attentions are on a different race. Even worse, he still doesn’t get it that these two competitions are inextricably linked. 

 

[Edward Campbell]

Neil Reynolds, in the Globe and Mail's Report on Business, analyzes Dalton McGuinty's latest blunder in an excellent column that needs to be required reading for all Canadians.

We have a pretty good, not great, not even really good health care system - but it is too expensive. So we must do one of three things:

1. Find new money ~ allow significant privatization, in other words allow queue jumpring by people with gold cards. People without any knowledge of economics will rant and rave, incorrectly, that private = for profit = more expensive. That is, demonstrably, untrue but most people believe it, because most people are poorly educated. Since most people believe a big lie governents will not consider the simple truth that the best health care systems (lower costs and better outcomes than Canada) are all mixed (public/private) systems;

2. Lower costs ~ close hospital beds, fire nurses, and now order doctors not to work (or, alternatively, work for free). This is easy because the poorly educated people like the idea of "make the rich pay;" or

3. Be honest and admit that a "single payer" system must rely upon rationing and tell obese people, for example, that they are responsible for their own heart disease and will not get cardiac surgery and tell smokers that they are at the bottom of the ist for cancer treatment. This is, in truth, the only way a single payer system can work, but it requires honesty so it is politically impossible.

I have no doubt that several of Ontario's most productive citizens - our best physicians and surgeons - will now vote with their feet and take their expensive training and considerable talents and ambition elsewhere. Too bad for us ...

Dalton McGuinty: making Canada less and less productive, one step at a time.

 

[mariomike]

Regarding the above post, some observations from my limited perspective.
Between 2005 and 2012, the number of patient transports to emergency departments in Toronto increased by 34.4%.
Those were 9-1-1 calls. T-EMS had to stop responding to non-emergency calls in the 1990's due to lack of resources.

Even so, emergency response times have been steadily deteriorating since 1996. The standard ( 8:59 minutes to curbside 90% of the time ) is now only achieved 60% of the time.

The EMS community medicine program ( CREMS ) is facing an uncertain futre. Community medicine paramedics refer patients identified as "frequent flyers" to community support networks instead of transport to hospital. This approach reduces the number of patients transported by ambulances to emergency rooms and decreases the number of repeat 911 calls.
CREMS now has 1000 patients enrolled in their Integrated Client Care program, and are projected to make 1,400 CREMS referrals in 2012.
CREMS is also responsible for an Immunization Program (PCM), environmental exposure, and the Safe City program.

The EMS Dedicated Nurses Pilot Program which began in 2008 has had a positive effect on Off-Load Delay ( OLD ).

More cuts to EMS are in The City of Toronto 2012 operating budget. Among them:
Biomedical engineering technologist position eliminated.
Reduced overtime.
Reduced Multi-Patient Unit ( MPU bus ) fleet.
Office of Emergency Management (OEM) service reduction.

 

[a_majoor]

The scoop on EI. Finding people who are not working when foreigners are being imported to do these same jobs is one indicator that the system is indeed broken.

http://fullcomment.nationalpost.com/2012/05/24/john-ivison-new-ei-reforms-show-that-there-are-work-shy-living-in-every-province/

John Ivison: New EI reforms show there are ‘work-shy’ living in every province

John Ivison  May 24, 2012 – 5:18 PM ET | Last Updated: May 24, 2012 8:06 PM ET
THE CANADIAN PRESS/Ryan Remiorz

Atlantic Canadians resent the negative stereotype of being a region of loafers, who rely on pogey to pay for their beer and popcorn through the winter. And so they should. The government’s new Employment Insurance reforms shows that the work-shy live among us in every province.

Atlantic Canadians resent the negative stereotype of being a region of loafers, who rely on pogey to pay for their beer and popcorn through the winter. And so they should. The government’s new Employment Insurance reforms shows that the work-shy live among us in every province.

Take Alberta — there are currently 347 people claiming EI whose occupational classification is “food counter attendant.” At the same time, there are 1,261 foreign workers filling those jobs.

Ontario, there are 648 people claiming EI who are listed as “baby-sitters, nannies and parents’ helpers,” while 668 temporary foreign workers have been imported to take similar positions. In Prince Edward Island, there were 294 claims from out of work fish plant workers, while 60 temporary workers from overseas were approved to work in the same occupation.

Some employers may have chosen to employ foreign workers deliberately. And, clearly, not all the vacancies are in the same proximity as the local workers who are qualified to fill them. But it’s also evident a significant number of Canadian workers prefer to sit on their duffs and claim 55% of their average insurable earnings, safe in the knowledge that their benefits will not be cut off if they don’t look for work.

In any given year, there are 1.4 million Canadians claiming EI and yet 250,000 jobs go unfilled. The government’s reforms are designed to better connect employers and prospective employees – and “encourage” those who prefer not to work to fill some of those jobs.

National Post Graphics

Diane Finley, the Human Resources Minister, released details of EI reforms Thursday that could cut off the benefits of 5,000-10,000 claimants, if they do not satisfy the new criteria.

She portrayed the reforms in a softer light, as an attempt to connect Canadians to available jobs. “These changes are not about forcing people to accept work outside their own area or taking jobs for which they are not suited,” she said.

But the new legislation will oblige healthy workers to take jobs within a one hour commute.

The one fifth of all claimants who fall back on the EI system frequently – that is, people who have received over 60 weeks of benefits in the preceding five years – will be most affected. They will be expected to expand their job search beyond the job they normally perform at the outset of their claim and be prepared to accept wages starting at 80% of their previous hourly wage. After receiving benefits for seven weeks, they will have to accept any job they are qualified to perform and accept wages starting at 70% of their previous hourly wage.

Needless to say, the prospect of a 30% pay cut has the labour unions up in arms. Ken Georgetti of the Canadian Labour Congress said he was “astonished” that Ms. Finley would even suggest it.

Peggy Nash, the NDP finance critic, took issue with the whole EI system, saying these changes will further restrict access to benefits for which only 40% of Canadians qualify.

“EI is an insurance policy owned by the people who paid into it, not the Conservative Party of Canada,” she said, undermining her own argument. “The real problem is people paying into an insurance plan and not getting the benefits.”

This is, of course, nonsense. EI is an insurance policy that pays out to those who have paid in and qualify. Currently, 83% of those laid off have enough hours to get EI. To qualify, you need to have worked roughly 12 weeks in high unemployment areas or 19 weeks in lower unemployment regions. But like any insurance policy, you can only claim if you have paid your premiums.

The critics may carp but the system has allowed the evolution of a culture of entitlement, where it is seen as a badge of honour to work the 420 hours as quickly as possible and then retire on half pay for the rest of the year.

In Ms. Nash’s world, everyone’s a victim and we should all weep for stranded jellyfish. “This is an attempt to demonize people who through no fault of their own are unemployed,” she said.

Yet it’s clear that a minority of EI claimants prefer to be unemployed.

One refinery worker in Fort McMurray wrote to say that Cape Bretoners at his plant boast openly about filling their 420 hour quota and then heading home to take the rest of the year off.

That cozy arrangement is set to come to an end, thanks to the reforms announced Thursday and a $21-million allocation in the budget. Some of that new money will be spent sending job postings twice a day to EI claimants; some of it will be allocated for enhanced enforcement – workers will have to submit evidence supporting their job search activities or face loss of benefits.

This carrot and stick approach is designed to give Canadians first crack at available jobs before employers are allowed to import foreign workers. The provisions in the legislation appear reasonable and well-designed.

They will help small businesses fill job vacancies, reduce the EI bill and will have the added bonus of making the rest of us feel less like we’re being fleeced by the minority of EI claimants who are gaming the system.

 

[Edward Campbell]

The National Post's Andrew Coyne is not exactly a fan of Prime Minister Harper so this column, reproduced under the Fair Dealing provisions of the Copyright Act from the National Post, is pretty favourable:

Stephen Harper’s hidden agenda is the economy

Andrew Coyne

May 25, 2012

It is becoming more difficult to accuse this government of having a hidden agenda. Not because it hasn’t tried, mind you. But while it remains as obtuse as ever about its intentions, the signs of an agenda are by now unmistakable. Where before it had attitudes, or at best stances, it is beginning to sprout what look remarkably like policies.

To be sure, they are modest, even piecemeal. They are often poorly communicated, where the Conservatives deign to communicate them at all. More often they are simply dropped on the unsuspecting public without consultation, or jammed through Parliament with little debate or scrutiny, quite apart from monstrosities like the omnibus bill.

But put them together and they have all the markings of an agenda:

+ Reform of Old Age Security, not only raising the age of eligibility by two years (starting in 2023, and phased in over six years) but offering higher benefits to those willing to keep working past the standard retirement age.
+ Free trade agreements, now being negotiated with virtually everything that moves: Europe, India, Japan, the Trans-Pacific Partnership, the ASEAN group.
+ Reform of immigration policy, across every category: skilled immigrants, refugees, investors, entrepreneurs, with an emphasis on recruiting immigrants with demonstrable economic prospects.
+ Reform of employment insurance, announced this week, to give repeat users, in particular, fewer excuses to refuse available work.
+Moreover, the government is at last beginning to implement the Red Wilson report on productivity, four years after it was delivered, with recent reforms opening the door to foreign takeovers in the telecommunications sector (for companies with less than 10% of the market), and raising the threshold asset value for automatic review of foreign takeovers to $1-billion.

All this, and mild restraint in spending, too! And, lurking just over the horizon, the promised tax rewards for balancing the budget: income-splitting for couples with children, and the doubling of the amount that can be sheltered in tax-free savings accounts.

Much of this was foreshadowed by the prime minister’s Davos speech near the start of the year, and all of it can be tied together as a response to the problem of population aging, with the grim future it implies: lots of costly codgers, with fewer people of working age to pay for them. The government’s agenda thus has three broad objectives. One, curb (somewhat) the growth in transfers to the elderly, whether for pensions or, via federal transfers to the provinces, for health care. Two, increase the supply of labour: bring in more immigrants, encourage people to work longer, be less tolerant of idling.

And three, raise productivity, mostly by putting more competitive heat on business — that is to say, by opening the borders to competition from without — but also by raising national savings, providing the wherewithal for productive investment. Hence the cuts in taxes on savings, and hence, again, the greater openness to foreign investment.

Not only does this show signs of unaccustomed coherence in this government, but it represents a marked shift in emphasis. In the minority government years, and in the first months of the majority, the Conservatives preferred to cast themselves in the “guardian” role: strong on defence, tough on crime, vigilant against threats to public security or national sovereignty. For a variety of reasons, those messages have tended to have less resonance of late, or at any rate have been downplayed.

The continuing F-35 fiasco has made expensive purchases of military hardware a less appealing talking point. Indeed, after the rapid military buildup of recent years, the government has begun to cut defence spending, in line with its general policy of restraint. The government’s latest turn on Afghanistan — no troops after 2014, for any purpose — may have been conditioned by this reality; so, perhaps, is its recent reluctance to splash out for so-called Arctic sovereignty intitiatives, such as the Radarsat satellite program.

Likewise, the recent budget was at pains to note the government would not be building any more new jails, notwithstanding the crime bills’ expected contribution to the prison population. And, of course, the crime bills are now passed into law. For as long as they were in play (repeated prorogations didn’t help), it suited the Conservatives to keep them front and centre. But you can only pass the same bills so many times. Meanwhile, Bill C-30, the internet snooping legislation, gives every sign of having been withdrawn.

For all these reasons, the emphasis has shifted, from guardianship to the economy. A government that looked adrift earlier this year, beset by scandal and buffeted by events, is building a greater sense of direction and purpose. Though courting controversy with each of these reforms, it is setting the agenda rather than passively reacting to others’. Governments can afford to make a few enemies. What they cannot afford is inertia.

Not that this lets it off the hook for any of its alleged misdeeds. The F-35 purchase remains deeply troubling, as much for the initial failures of oversight as the parade of lies that followed. The questions raised by the robocalls affair are even more disturbing, and unlikely to be resolved soon. And the packaging of so many disparate pieces of legislation into one omnibus budget bill is as disgraceful as ever: an assault on Parliament, and an abuse of power, or rather another in a long line of such abuses.

The Conservatives are as accountable for these as they were before. But it is harder now to say that that is all their government amounts to.

[iPostmedia News[/i]

So the "hidden agenda" is out in the open and guess what? It aims to put he national economy on a more sound, long term footing ~ it is a very conservative (classically liberal) agenda.

 

[a_majoor]

Today's NP is full of good stuff; David Frum on how Canada's oil wealth is changing the economy and how the NDP, in particular, is reacting to it. The questions of interprovincial barriers and the creation of internal monopolies (i.e. the example of unionized nurses aides to exclude competition) is probably far more important in the long run than the current price of oil. If the price were to crash (die to another bout of recession when Greece leaves the EU, for example, or US unconventional oil plays hit the market and drive down prices), then we have a short term problem; but barriers remain despite outside influence so are a long term problem:

http://fullcomment.nationalpost.com/2012/05/26/david-frum-dutch-disease-we-should-be-so-lucky/

David Frum: ‘Dutch disease’? We should be so lucky

David Frum  May 26, 2012 – 7:00 AM ET | Last Updated: May 25, 2012 5:03 PM ET
   
Thomas Mulcair has taken a deserved media beating over his “Dutch disease” remarks. He’s been criticized for bad economics and divisive politics. He’s been compelled to travel out West and meet the angry premiers. Not a good month for a new party leader.

But as bad as it’s been for Mulcair, he hasn’t yet been beaten enough. Because here’s the bottom-line ironic joke: The more correct Mulcair is about the Canadian dollar, the more appropriate the Harper government’s policies look.

Suppose it’s all true about the Dutch disease: Suppose that it’s because of the oil sands that the Canadian dollar has soared so high. Suppose that it’s because of the high dollar that central Canadian manufacturing is stressed. What should be done about it?

Mulcair’s answer: tax carbon. A carbon tax may be a good way to respond to greenhouse-gas emissions. It would do nothing to help Central Canadian manufacturers. Manufacturers use energy, too — lots of it. A carbon tax will raise the price of their energy inputs and thus the cost of their products.
Related

Ah, you say, but Canada can remit the carbon tax if products are exported; and impose a carbon tax on imports, thus enhancing the competitiveness of Canadian products at home and abroad. Okay. But if Canada remits carbon taxes at the border, then the carbon tax will not raise the price of Canadian oil and gas sold to U.S. buyers. Which means the oil and gas will continue to flow south, and will continue to raise the value of the loonie, Mulcair’s main complaint. Mission pathetically unaccomplished.

What’s a better response to a currency pushed higher by resource prices?

In a perfectly functioning market, a high currency should not lead to increased unemployment. Instead, it should lead to an employment shift, from traded goods to non-traded services. A factory worker who loses her job in Quebec should be able to find work as, say, a nurse’s aide in Alberta.

Unless, say, the Alberta nurse’s aides are unionized to exclude competitors. Or unless there exist inter-provincial barriers that refuse to recognize out-of-province credentials. Which side is Mulcair on in those debates?

A currency pushed higher by resource prices also creates opportunities to increase national savings, both public and private. How to do that? Start by reducing the dis-saving of budget deficits, as the Harper government proposes to do — and as the NDP does not. Follow by creating incentives for more private saving, by reducing business and investment taxes, as the Harper government also proposes to do — and as the NDP opposes.

New investment will create new employment opportunities in expanding sectors — many of them better-paid than manufacturing ever was — if federal and provincial governments don’t get in the way. And again: Which side of this debate is Mulcair on?

When fretting about “Dutch disease,” it’s worth remembering that even now, through the Great Recession and the Euro crisis, the Netherlands remains one of the world’s most successful economies. Ranked by GDP per capita, the Netherlands stands about 10th in the world, depending on whose numbers you use. (The International Monetary Fund says 9th.) Before the recession, according to the Netherlands central statistical agency, household income averaged 50,000 Euros, including government transfers — a handsome standard of living by any definition. About 57% of Dutch families own their own home. And despite “Dutch Disease,” manufacturing remains about 14% of GDP in the Netherlands, not dramatically lower than Canada’s 16%. Quality of life is high. The country is not exactly a sob story.

The bottom line: Canada’s oil and gas are products hugely in demand. Those valuable resources will be developed, and they will be sold. The economic consequences — both the positive and the negative — must be dealt with. Canada’s record in dealing with those challenges has to date been highly successful. All Canadians benefit from a thriving energy sector, if only because the liveliness of that sector has cushioned Canada from the global recession. The Mulcair alternative to present policy is economically empty-headed, even on its Quebec-first terms.

Nor is Canada the first country in history to encounter the challenges presented by high resource prices. There are good examples to learn from, if learning is your goal. On the other hand, if the goal is enacting inter-regional envy and discord, Mulcair need not waste any time learning from others. He’s a natural, all on his own.

 

[GAP]

I think the CPC have taken this into account in the EI changes.................



Don’t mess with Atlantic Canada
Article Link
By Peter McKenna, The Ottawa Citizen May 25, 2012

Am I missing something or has the Harper government placed Atlantic Canada in its cross-hairs? With proposed changes to several key areas of public policy, it’s hard not to think that this region is being singled out for special punishment.

For instance, possible changes to the owner-operator and fleet separation provisions of the fishery are certain to put fishers in Atlantic Canada in a precarious position — most likely seeing their boats and gear eventually bought up by companies and individuals with deeper pockets.

Perhaps the deepest cut of all comes in the form of the newly released adjustments to the Employment Insurance (EI) program, which will surely penalize numerous seasonal workers in this region by trimming benefits to repeat users, imposing stricter rules for eligibility, and by altering the “suitable employment” requirements.

Still, the federal minister responsible for the Atlantic Canada Opportunities Agency (ACOA), Bernard Valcourt, is adamant that the Conservative government is not out to get Atlantic Canada. But Newfoundland and Labrador NDP MP Ryan Cleary is not so sure, telling one media outlet: “We need to be supporting the economy, not putting up roadblocks. Stephen Harper claimed years ago that Atlantic Canada has a culture of defeat, but it is the Conservatives who have a defeatist attitude toward our region.”

Of course, the critical questions here are obvious: why and why now? More important, does it make political or electoral sense? One is hard-pressed to explain why the Harper government is so hell-bent on making these changes. Besides an ideological or philosophical rationale, I can’t quite figure it out.

Perhaps the majority government secured by the Harper Conservatives last May presented them with the opportunity to do what they were unable to do under a minority situation. That is, to put in place a series of policy measures to seek greater efficiencies and marketization; but those same initiatives will also inflict substantial pain on Atlantic Canadians.

It is also well known that Stephen Harper has harboured negative impressions of Atlantic Canadians for many years now. We all remember that derogatory and simplistic “culture of defeat” remark that Cleary referenced.

One wonders whether these proposed changes are part of the Harper “hidden agenda” that many Atlantic Canadians have feared all along?

Some in his cabinet no doubt are perturbed — mostly for ideological reasons — about those in the fishery who purportedly take advantage of the EI system. And there are those who cringe at the thought of Russian immigrants being brought in to work in P.E.I. fish plants because Islanders, faced with some of the highest unemployment levels in Canada, won’t work there.

It’s worth remembering, though, that the governing Liberals sought to alter the EI rules in the mid-1990s and paid a huge price for doing so in the 1997 federal election. Not only were two high-profile cabinet ministers defeated, but the overall Atlantic caucus of Liberals was cut severely from 31 MPs to 11 (losing all 11 of its seats in Nova Scotia).

Are the Conservatives not worried about electoral retribution? Have they forgotten the political lessons of 1997? By moving forward with these controversial changes, are the Harper Conservatives willing to sacrifice the few gains that they made here in the 2011 election?

Maybe the Conservative Party believes that any losses in Atlantic Canada will be made up from the additional 30 seats that will be added across Canada, many in the West, for the October 2015 election. It’s also possible that the party’s electoral prospects will be boosted in places like Ontario (and further parts West) by cracking down on Atlantic Canadians.
More on link

 

[a_majoor]

The CPC has plenty of good works they can ponit to, and lots of approval of their programs from abroad as well. IF you are looking to "craft a narrative" then you could do worse than to look here:

http://www.cato.org/pubs/policy_report/v34n3/cprv34n3-1.html

We Can Cut Government: Canada Did

Chris Edwards

Chris Edwards is the director of tax policy studies at the Cato Institute and editor of www.DownsizingGovernment.org.

Two decades ago Canada suffered a deep recession and teetered on the brink of a debt crisis caused by rising government spending. The Wall Street Journal said that growing debt was making Canada an "honorary member of the third world" with the "northern peso" as its currency. But Canada reversed course and cut spending, balanced its budget, and enacted various pro-market reforms. The economy boomed, unemployment plunged, and the formerly weak Canadian dollar soared to reach parity with the U.S. dollar.

In some ways the United States is in even worse fiscal shape today than Canada was two decades ago. For one thing baby boomers are now retiring in droves, which is pushing the federal government deeper into debt every year. America risks becoming a "first world" country like those in Europe, where huge deficit spending is wrecking economies and ruining opportunities for young people.

America needs to get its fiscal house in order, and Canada has shown how to do it. Our northern neighbor still has a large welfare state, but there is a lot we can learn from its efforts to restrain the government and adopt market-oriented reforms to spur strong economic growth.

FROM MARKETS TO SOCIALISM AND BACK

Canada has a long history of stable government and general prosperity. Like the United States, it enjoyed a relatively limited government before the mid-20th century. Early Canadian leaders leaned toward classical liberal beliefs, and they tried to keep taxes at least as low as U.S. taxes in order to attract immigrants and investment.

In The Canadian Century, Brian Lee Crowley, Jason Clemens, and Niels Veldhuis discuss how Wilfred Laurier — prime minister from 1896 to 1911 — was a strong supporter of spending restraint, low taxes, free trade, and civil liberties. Laurier was one of the country's greatest leaders, and he envisioned Canada as a decentralized federation that supported individual liberty. That sounds like the vision of America's Founders.

That vision, of course, faced major setbacks in both countries in the 20th century. In some cases Canada resisted the rising tide of big government longer than the United States. The United States was the first to establish a central bank, an income tax, a capital gains tax, and a number of social welfare programs. Until the 1960s, government spending relative to the size of the economy was about the same in the two countries.

Unfortunately, Canada veered sharply left in the late 1960s, beginning a 16-year spending binge and expansion of the welfare state. The Canadian leader during most of that time was Pierre Trudeau, who was a brilliant man but favored left-wing economic policies. He expanded programs, raised taxes, nationalized businesses, and imposed barriers to international investment. Canada also suffered from high inflation during the 1970s and early 1980s.

Trudeau's socialist grip on public policy began to weaken in the 1980s. The policies of Ronald Reagan and Margaret Thatcher were ascendant, and globalization was putting pressure on Canada to make reforms.

In the mid-1980s, the Canadian central bank adopted a goal of price stability, which greatly reduced inflation and has kept it low and stable ever since. And following U.S. tax reforms in 1986, Canada enacted its own income tax cuts under Progressive Conservative prime minister Brian Mulroney.

Thatcher's privatization revolution also inspired reforms in Canada. The government privatized Air Canada in 1988, Petro-Canada in 1991, and Canadian National Railways in 1995. All in all, Canada privatized about two dozen "crown corporations" in the late 1980s and early 1990s. In 1996 it even privatized the air traffic control system, which provides a good model for possible U.S. reforms. Privatization reduced government debt and helped spur economic growth by creating a more dynamic industrial structure.

The other major reform of the late-1980s was the free trade agreement with the United States. The debate over the 1988 agreement was a titanic political struggle in Canada. But in the years following passage, the success of the agreement has been a powerful force in reorienting Canada toward market-based policies.

SPENDING REFORMS OF THE 1990S

Canada was starting to move in the right direction, but rising government spending and debt were undermining growth and creating financial instability. By the early 1990s combined federal, provincial, and local spending peaked at more than half of gross domestic product (GDP). In the 1993 elections, Prime Minister Jean Chretien's Liberals gained power promising fiscal restraint, but this was the party of Trudeau, and so major reforms seemed unlikely. In the first Liberal budget in 1994, Finance Minister Paul Martin provided some modest spending restraint. But in his second budget in 1995, he began serious cutting.

In just two years, total noninterest spending fell by 10 percent, which would be like the U.S. Congress chopping $340 billion from this year's noninterest federal spending of $3.4 trillion. When U.S. policymakers talk about "cutting" spending, they usually mean reducing spending growth rates, but the Canadians actually spent less when they reformed their budget in the 1990s.

The Canadian government cut defense, unemployment insurance, transportation, business subsidies, aid to provincial governments, and many other items. After the first two years of cuts, the government held spending growth to about 2 percent for the next three years. With this restraint, federal spending as a share of GDP plunged from 22 percent in 1995 to 17 percent by 2000. The spending share kept falling during the 2000s to reach 15 percent by 2006, which was the lowest level since the 1940s.

The nearby chart contrasts the fall of federal spending in Canada since the 1990s with the rise of federal spending in the United States. In recent years, spending spiked upward in both countries because of the recession, but while U.S. spending remains at elevated levels, Canadian spending is now back down to 15.9 percent of GDP and is expected to fall further in the government's current forecast.

The spending reforms of the 1990s allowed the Canadian federal government to balance its budget every year between 1998 and 2008. The government's debt plunged from 68 percent of GDP in 1995 to just 34 percent today. In the United States federal debt held by the public fell during the 1990s, reaching a low of 33 percent of GDP in 2001, but debt has soared since then to reach more than 70 percent today.

Data from the Organization for Economic Cooperation and Development show that total federal, provincial, and local government spending in Canada plunged from a peak of 53 percent of GDP in 1992 to just 39 percent by the mid-1990s. In 2012, spending will be 42 percent of GDP, which compares to total government spending in the United States of 41 percent. Government spending in both countries is too high, but Canada has at least been moving in the right direction on fiscal reforms.

Aside from budget cuts, Canada improved its fiscal outlook by fixing the Canada Pension Plan, which is like our Social Security system. In 1998 Canada began moving the CPP from a pay-as-you-go structure to a partially funded system. Today the CPP is solvent over the foreseeable future, which contrasts with Social Security's huge unfunded obligations. Note, however, that Canada supplements the CPP with additional retirement subsidies out of general tax receipts.

Canada's fiscal reforms undermine the Keynesian notion that cutting government spending harms economic growth. Canada's cuts were coincident with the beginning of a 15-year boom that only ended when the United States dragged Canada into recession in 2009. The Canadian unemployment rate plunged from more than 11 percent in the early 1990s to less than 7 percent by the end of that decade as the government shrank in size. After the 2009 recession, Canada has resumed solid growth and its unemployment rate today is about a percentage point lower than the U.S. rate.

Another lesson from Canada is that the rise of groups outside of the major political parties can pressure governments to make reforms. Canada's version of the Tea Party was the Reform Party, which arose in the early 1990s and pushed the major parties to support spending cuts, tax cuts, decentralization, and parliamentary reforms.

The Reform Party elected numerous members to parliament in 1993, and it became the main opposition party in parliament in 1997. In the 2000s, the party went through structural changes and ultimately merged with the Progressive Conservatives to become the Conservative Party of current Canadian prime minister Stephen Harper.

TAX REFORMS OF THE 2000S

As the new millennium dawned, a slimmed-down Canadian government under the Liberals enjoyed large budget surpluses and pursued an array of tax cuts. The Conservatives continued cutting after they assumed power in 2006. During the 2000s the top capital gains tax rate was cut to 14.5 percent, special "capital taxes" on businesses were mainly abolished, income taxes were trimmed, and income tax brackets were fully indexed for inflation. Another reform was the creation of Tax-Free Savings Accounts, which are like Roth IRAs in the United States, except more flexible.

The most dramatic cuts were to corporate taxes. The federal corporate tax rate was cut from 29 percent in 2000 to 15 percent in 2012. Most provinces also trimmed their corporate taxes, so that the overall average rate in Canada is just 27 percent today. By contrast, the average U.S. federal-state rate is 40 percent.

U.S. policymakers are currently considering a corporate tax cut, but they are concerned that the government may lose revenues. But Canadian experience shows that governments don't lose money when they cut high corporate tax rates. That's because rate cuts induce an expansion in the tax base as economic activity increases and tax avoidance decreases.

Canada's federal corporate tax rate has been cut from 38 percent in the early 1980s to just 15 percent today. Despite the much lower rate, tax revenues have not declined. Indeed, corporate tax revenues averaged 2.1 percent of GDP during the 1980s and a slightly higher 2.3 percent during the 2000s.

Now compare Canada with the United States. In 2012, Canada is expecting to collect 1.9 percent of GDP in federal corporate income taxes with a 15 percent corporate tax rate. The United States is expecting to collect 1.6 percent of GDP at a 35 percent corporate tax rate. Thus, the high U.S. rate is not only bad for the economy, but it also doesn't help the government collect any added revenue.

THE FEDERALISM ADVANTAGE

One of Canada's strengths is that it is a decentralized federation. The provinces compete with each other over fiscal and economic matters, and they have wide latitude to pursue different policies. Federalism has allowed for healthy policy diversity in Canada, and it has promoted government restraint.

Government spending has become much more centralized in the United States than it has in Canada. In the United States, 71 percent of total government spending is federal and 29 percent is state-local. In Canada it's the reverse — 38 percent is federal and 62 percent is provincial-local.

The federalism difference between the countries is striking with regards to K-12 education. While federal control over U.S. schools has increased in recent decades, Canada has no federal department of education. School funding is left to the provinces, which seems to work: Canadian school kids routinely score higher on international comparison tests than do U.S. kids.

The countries also differ with regards to the amount of top-down control exerted on subnational governments through federal aid programs. The United States has a complex array of more than 1,000 aid-to-state programs for such things as highways and education. Each of these aid programs comes with a pile of regulations that micromanage state and local affairs.

By contrast, Canada mainly has just three large aid programs for provincial governments, and they are structured as fixed block grants. It is true, however, that one of these grants helps to fund the universal health care system, which is a big exception to the country's generally decentralized policy approach. Nonetheless, having just a few large block grants is superior to the U.S. system of a vast number of grants, each with separate rules and regulations.

A final federalism advantage in Canada is that provincial and local taxes are not deductible on federal individual tax returns. That structure promotes vigorous tax competition between the provinces. In the United States, state and local income and property taxes are deductible on federal income tax returns, which has the effect of blunting competition by essentially subsidizing high tax states and cities.

MORE REFORMS NEEDED

While Canada has made a great deal of progress, it still has a large welfare state. One problem is the huge government-run health care system. Health care spending is soaring, and wait times for medical procedures are a serious problem.

Another problem is the large deficit spending in some of the provinces. Unlike U.S. states, Canadian provinces can freely borrow and spend without having to balance their budgets each year. During the 1990s many provinces trimmed their budgets and enacted reforms such as cutting welfare. Spending as a share of GDP fell. But over the past decade spending has risen again. Ontario, for example, has a spendthrift premier who has driven the provincial debt up to 37 percent of provincial GDP.

Canada's structure of high individual income tax rates is another weakness. The top federal-provincial rate is 46 percent, according to the Organization for Economic Cooperation and Development.

That is higher than the top U.S. federal-state rate of 42 percent, although the U.S. rate would exceed Canada's next year under President Obama's proposals. Either way, the top rates in both countries are too high. Higher rates penalize the most productive people in the economy, who respond by working and investing less, which in turn stunts overall growth.

Canada is thus far from being a free-market nirvana. However, its reforms have been impressive and its economy has grown strongly. Its score on "economic freedom" in the Fraser Institute's Economic Freedom of the World report is now higher than the score for the United States.

All this raises a question: Why can't U.S. policymakers make major fiscal reforms like the Canadians have? One answer is that the U.S. governing structure — with its separated powers — makes rapid policy change more difficult than does the Canadian parliamentary system.

A more important factor, however, has been that the Democrats in the United States have moved so far to the left on economic issues that it makes the type of pro-market reforms Canada enacted very difficult to achieve. Many of the Canadian reforms were enacted by a Liberal Party that moved from the political left to the center. At the same time, the rising Reform Party essentially displaced the old Progressive Conservative Party, which had moved too far to the left. Voters did their part by supporting the reform-minded parties at the ballot box.

In 2010, American voters demanded cuts to government spending and debt. Some members of Congress are heeding the call and introducing plans to restructure entitlements and terminate programs. However, most policymakers are still resisting the major spending cuts, privatization, and other Canadian-style reforms that we need to avert a fiscal crisis and restore strong economic growth to the United States.

OTOH, before we pat ourselves too hard on the back, Canada has a Federal unfunded liability of over $500 billion (mostly Federal pensions and benefits to government workers), very high levels of personal indebtedness and of course, Ontario's rapidly increasing debt and credit downgrade watch could destabilize the rest of the nation since it is so large in proportion to the national debt (The current Provincial debt is heading towards $300 billion; the Nationa debt is just over $500 billion...). 

We can make similar observations about how the current models of healthcare and education consume far too much of the provincial budgets, especially considering the results (we may be better than the US in school test scores, but we are also competing with the Koreans, Chinese, Tiawanese etc.)

So overall, we are in a good starting position

 

[a_majoor]

A look at some of the drags on the system which limit Canadian productivity. This is something the government could start highlighting as a means of preparing the battlespace for 2015 and beyond:

http://opinion.financialpost.com/2012/06/04/the-euro-loonie/

The euro-loonie
Special to Financial Post  Jun 4, 2012 – 8:52 PM ET

Our currency union has problems similar to the eurozone’s

By Finn Poschmann

What makes a good currency area?

It was a popular question in the 1990s and later. Political leaders in France and Germany were convinced they knew the answer: Whatever was the definition of a good currency area, the two of them had to be in one, along with their economically and politically similar geographic neighbours.

Their counterparts in southern Europe knew that whatever the answer was, they wanted to be in one, too; and in the United Kingdom, the government knew that whatever the answer was, they did not. Elected princes in Denmark pondered whether to be, or not to be, part of the euro, gave up, and asked their voters — who said no.

Economists at the time said what made a good currency area was a set of countries that were tied together by trade, were exposed to similar economic shocks and business cycles, had free labour mobility among them, and had a system of supranational risk-sharing, such as a fiscal-transfer mechanism.

In their analyses of potential euro members, however, the economists tended to focus on the first two criteria, at the expense of the latter two, and they did not much contemplate the potential effects of banking system inter-linkages or the impact of bank capital adequacy rules emanating from Basel. Nor did they focus on the possibility that low-income nations, which would benefit from reduced trade and financial frictions within the euro, might show heady growth rates that would lead to overheating and asset bubbles.

Signatories to the Maastricht Treaty, which set the euro in motion, were well aware that decent fiscal probity was required among members. Countries with new and improved access to bond markets, owing to their abilities to borrow at low interest rates — in a strong currency jointly backed by neighbouring economies — could more easily run large deficits, which could become a problem for the eurozone and its nascent central bank.

The EU’s answer was the Growth and Stability Pact, which would impose hefty fines on member nations whose deficits exceeded 3% of gross domestic product. However, as David Laidler and I wrote in 1998, “it is hard to see much logic in, and therefore much likelihood of, subjecting a country that is already under fiscal pressure to more of the same.”

As we have recently seen, as massive deficits and unmanageable debts have festered across Europe, there is not much talk of the euro’s foundational penalties for fiscal laxness. Once Germany had turned to giant deficit-financed “stimulus” packages, the jig was up for the pact.

Then there is the banking system. Bank loans to OECD member nations carry a zero risk weighting under the original Basel accord on minimum capital standards, meaning that banks need reserve no capital against them. Revisions to the standard, which would have assigned risk weightings that were better tuned to government credit ratings, did not make it into place before the crisis hit.

So what happened? Many banks lent freely to European sovereign borrow ers. They in turn pledged their claims on those governments, as collateral, in repo transactions with national member banks of the European Central Banking System. It is only recently that Greek government bonds have become debita non grata as collateral at the European Central Bank (ECB). The result is that significant portions of regional fiscal problems have been “federalized” through transactions at the ECB.

That means Germany is in a pincer. It can back the creation of more ECB debt — eurobonds — which means more financial exposure for Germany, and which this past weekend political leaders finally agreed was a possibility. The nasty alternative for Germany is to risk the costs of others’ messy exits from the euro, to which it is exposed directly through the ECB and indirectly through the turbulence that inevitably will follow.

This poses questions for Canada, like, if Europe is not a decent currency area, is Canada? Our regional economies respond very differently to high energy and other commodity prices and a high dollar. NDP leader Thomas Mulcair is all too quick to seize on this point, yet the truth is that the provinces’ international terms of trade are very different from one another.

Across regions, labour mobility, too, is a burning issue. Some aspects have got better over the years, and the federal government has made unsuccessful feints toward giving teeth to its constitutional powers over interprovincial trade and commerce, but the Agreement on Internal Trade remains, in a word, moribund.

For instance, skills matching is key to the ordinary business of making labour markets work, and the matching up of badly needed workers to skilled-trades positions in provinces that need them. Yet while in the Atlantic provinces there may be one or more apprentice carpenters for each journeyman on a site, in Quebec, which has big infrastructure projects on their way, there may be only one apprentice for every five journeymen. That is a surefire way to inhibit productivity and job mobility and advancement.

Some provinces’ real estate self-regulatory bodies exploit their delegated authority, and concomitant free pass under the Competition Act, to prevent outside parties from offering accredited continuing education courses. That leads to balkanization, missed opportunities and missed economies of scale.

Much more damaging, Crown electricity corporations preside over provincial fiefdoms in generation and distribution, which means higher costs, poorer grid resilience, and poorer environmental performance — not a brilliant system.

Provinces have a wide range of fiscal policies, too — mostly profligate, and some have faced credit downgrades. Meanwhile, the federal government grapples with a fiscal transfer system that is certainly expensive, delivers benefits to provinces that effectively compensate them for choosing bad economic policy, and teeters under the weight of the differences in incomes between regions that are rich in resources and those that are not.

Choosing just one flaw in the system, fiscal-equalization entitlements are reduced for provinces that charge full market rates for hydroelectricity, encouraging provinces to sell hydro below what the market will bear — meaning that federal taxpayers foot the bill for provincial subsidies to electricity consumers.

When Lucien Bouchard said Canada is not a real country, he went too far. Yet he had a point: There are mountainous ranges of federal and provincial policy that keep the nation balkanized.

The risks to Canada are not the size of those now tormenting the eurozone, where financial-market angst increases by the day. Yet Canadians should think carefully about the characteristics of an optimal currency area that we possess, and those we do not, and address the latter. Labour mobility, smarter provincial fiscal policy, and a revamped fiscal-equalization mechanism would be good places to start.

Financial Post
Finn Poschmann is vice-president, research, at the C.D. Howe Institute.

 

[a_majoor]

This could probably go in the "Occupy" thread as well (or perhaps Libertarians or Election 2015), but if this signals a change in attitudes amongst the millennials, then it is a good sign for Canada. Pass this along to as many millennials as possible, a large enough fraction who think and act this way will be able to carry and lead the nation for another generation.:

http://fullcomment.nationalpost.com/2012/06/08/james-miller-forget-the-generational-war-blame-the-government/

James Miller: Forget the ‘generational war.’ Blame the government
James Miller, National Post  Jun 8, 2012 – 6:30 AM ET | Last Updated: Jun 7, 2012 4:53 PM ET

Within the pages of the National Post, a spat has erupted between writers David Cravit, John Moore and Barbara Kay. In light of the Quebec student protests, Moore attested that millennials (people born between 1977 and 1995) are facing bleak prospects due to oldsters greedily emptying the public piggy bank of entitlements. Cravit, who is vice president of ZoomerMedia, responded with data showing the Boomer generation is still providing a significant amount financial assistance to their children. Kay conceded that while boomers are willing to fight the battle of the ballot box to maintain their benefits, today’s youth are desperately out of touch with how the real world operates.

As a millenniaI, I can say all three make valid points but miss the mark entirely. Yes, a portion of today’s youth sincerely believe they are deserving of a good paying job that requires little effort after a four- to five-year stint at university. And yes, the Boomers have voted themselves plenty of government pork over the decades for which the tab must inevitably be paid. Both are guilty of shameless extravagance and self-delusion. Both show little opposition to feeding at the public trough.

But what is the actual source of this corrupting influence? Nineteenth century political theorist and former U.S. congressman John C. Calhoun once wrote, “…the necessary result, then, of the unequal fiscal action of the government is to divide the community into two great classes… to divide it into tax-payers and tax-consumers.”

Throughout history, this is precisely how the dynamic between government and the people has played out. Politicians make careers out of redistributing wealth. Persistent inflation and the running up of public debt have proven that governments are incapable of spending within their means. Retaining elected office hinges too much upon buying votes.

With the post-war boom years came increasing amounts of tax revenues. This was all too enticing for politicians to pass up. Entitlement programs were created to ensure a steady supply of votes. Mr. Moore is correct in alleging that younger generations were thrown to the wolves for these promised benefits as they had no say in the matter and are now forced to foot the bill.

At the same time, millennials themselves have been fooled through years of pervasive government and nanny-state decrees into not only expecting entitlements but also misunderstanding the value of prudence. Living standards only rise when the majority of the public produces more than it consumes. This age-old lesson has been slowly forgotten with years of the expansionary welfare state and popular economic theories which favour consumption. When youth are made to believe the most important rule in all economics is “in the long run we are all dead,” is it any surprise when financial discretion takes a back seat to overindulgence?

What has had an equally devastating effect on the ability of all generations to save for the future is that government, by its very nature, is a net consumer of resources. When Austrian economist Ludwig von Mises stated that “the total complex of the financial policies of the federal government, the states, and the municipalities tends toward capital consumption,” he referred to the fact that government itself only operates on what it forcefully expropriates from the private sector. There is little incentive for public officials to spend tax money diligently when it hasn’t been painstakingly earned through the sweat of their own labour. Almost a century’s worth of escalating government spending has decimated whatever saved capital existed before Leviathan’s growth.

Rather than exploitation, free markets require social co-operation in order to function. The so-called “generational war” between millennials and Baby Boomers is really just a tug-of-war between which generation is better mobilized to soak one another at the voting booth. It is the existence of the state which doles out special monetary privileges that introduces this class conflict.

The real culprit for decaying societal norms and prosperousness is not one generation or another but the small minority who occupy political office. Arguing over whether the Boomers are deserving of entitlement programs or millennials are short-sighted, spoiled brats only avoids recognition of the true guilty party.

To my fellow millennials, here are a few words of advice. The college or university degree for which you gave up almost half a decade of income means little. It is irrelevant how hard you worked or how many hours you spent with your nose crammed in a textbook to get it. The decision we must now make is what new path we will take individually to triumph over adverse circumstances. This means further development of specialized skills, entrepreneurship and learning life’s lessons through experience rather than in the classroom.

The bill of goods we were sold was not the same given the previous generation. Is it fair? No, but neither is life. We may be living in a world passed down by to us by the Boomers and their profligate government but we can still choose to give our children a better opportunity. The key lies in not looking to our neighbour for what we think we deserve but realizing what it takes to serve our fellow man and earn our own way.

The cycle of entitlement can end with us.

National Post

 

[Edward Campbell]

The Globe and Mail's Kevin Carmichael goes where angels fear to tread in a very good article in today's edition. Even the best, most productive and competitive Canadian businesses, he notes, are held back by very unproductive, uncompetitive and, therefore, overpriced national infrastructure in three fields: air transport, bank business loans and telecommunications.

I agree with him on the first and last: our air transport and telecommnications sectors would be (will be?) vastly changed (and not all Canadians will like all the changes) if/when more foreign competition is allowed. I'm not so sure our banking 'problem' is caused by the banks - it may be that Canadian business risks are, inherently, higher than in, say, the USA.

 

[GAP]

it may be that Canadian business risks are, inherently, higher than in, say, the USA.

I would say, mainly by the size of the economic base, than anything else. We are small potatoes, doing well in a small patch environment. We do not and probably never will compare to the US.

 

[Edward Campbell]

Yesterday, in the Ottawa Citizen, Matthew Fisher (well known to many here for his coverage of our (Canadian) operations in Afghanistan) opined that "Canada's status as a first-tier nation becomes stronger every day, while even its closest European cousins, Britain and France, are now paddling very hard against the prevailing economic currents to avoid slipping from the first tier ... the Harper government's reluctance to throw Canadian taxpayers' money at the continent's deep-seated economic problems at this time seems prudent ... [and] a fellow who helps to run a fund that invests large sums of money globally told me in London last week that the international economic out-look had become so grim this year that except for a few specific buys in energy, high-tech and high-end manufacturing, there was only a very short list now of countries worth investing in. They were, he said, China, South Korea, Singapore, Norway, Australia and Canada."

Today, in the Globe and Mail, Jeffrey Simpson, ever petulant when Prime Minister Harper is given some credit for anything, fires back, saying, "The Harper government, however, rejects the idea of contributing to an IMF fund. Canada, therefore, stands alone with the United States, which unlike Canada is in terrible fiscal shape. Worse, various Canadian politicians, rather than at least using a sympathetic tone, prefer a hectoring, morally superior one toward Europe – a tone ill-becoming a G8 country ... Canada is about to be spurned in its efforts to join the emerging trade bloc, the Trans-Pacific Partnership. Canada's Commonwealth partners are worried the Harper government might wreck the next meeting in Sri Lanka because of its hectoring of that country's government, a policy that curries Conservatives' favour with the large Tamil community in Toronto. Canada's feeble non-climate-change policy is universally panned ... [and] It is all so penny-wise and pound foolish, especially for a country that once prided itself on punching above its weight and, more important, understood that this is a relatively small country with huge international interests. Now, Canada has retreated into an anglospheric worldview coupled with a focus on trade deals, but lacking any sense of a wider conception of international affairs."

Simpson dreams, longingly for the resurrection of Pierre Trudeau and a return to the 1970s, when we were declining, precipitously, in hard power but were becoming "cool." Fisher, equally longingly, dreams of an Anglo resurgence led by America and Britain ~ something that is unlikely to happen in the lifetimes of most members here.

The truth, at least as I see it, is that Harper is tacking on an upwind course that aims to shift us away from Europe and even to decrease our strategic and economic reliance upon America and
push us into a somewhat safer harbour across the Pacific.

 

[GAP]

oh....like not putting all our eggs in one basket....at least when one basket get dropped, you still have few eggs left...

 

[Edward Campbell]

Also worth a top to bottom read today, is this column, reproduced under the Fair Dealing provisions of the Copyright Act from the Globe and Mail's Report on Business:

http://www.theglobeandmail.com/report-on-business/economy/the-unseemly-nature-of-the-welfare-state/article4253907/

The unseemly nature of the welfare state

NEIL REYNOLDS

OTTAWA — The Globe and Mail
Published Tuesday, Jun. 12 2012

For a few days in May, Canadians engaged in a desultory debate about the dole, which can be defined as the portion of an Employment Insurance cheque that exceeds a worker’s own premiums. Financed either by other workers, by employers or by the state itself, the dole is a straightforward welfare program.

The Conservative government has introduced rule changes that could tend, over time, to induce people on the dole to work more – a laudable objective. Predictably, the opposition parties dissented – implicitly championing a dole that does not induce more work. Here the government and the opposition appeared to square off about the merits of the dole as social policy. In fact, they squared off on the industriousness of the country.

You can track government programs by economic cost and consequence. You can also track them by moral cost and consequence. The latter was once the more important of these considerations. In the 19th century and well into the 20th century, the New World embodied the word “industry” – meaning not a category of commerce but a virtue of hard-working people.

This moral perspective on the worth of work had practical consequences. Writing in the 1830s, Francis Grund, a German observer of the U.S. economy, could pen this comment: “No country in the world has such a small number of persons supported at the public expense.” Mr. Grund erred only in ignoring pre-Confederation Canada – which shared the virtuous American obsession with work.

This brings us full circle to noted U.S. political scientist Charles Murray, the Harvard- and MIT-educated scholar whose most recent book, Coming Apart, argues that a U.S. economic, political and cultural renaissance awaits a revival of American “founding principles” – foremost among them, industriousness. “If just one American virtue may be said to be definitive,” he says, “industriousness is probably it.”

Coming Apart abounds with statistical analysis of the erosion of these founding principles, most particularly since the early 1960s when traditional values, in what once amounted to a civil religion, began a prolonged period of disintegration. In encyclopedic detail, Mr. Murray documents the U.S. decline in industry – creating a country that tolerates, abets and rewards different kinds of idleness.

He assumes that the modern welfare state will collapse within the next decade or so. It will do so primarily, he says, because it can be sustained only by successively higher debt. However, it will also do so because the 20th century swap of economic freedom for economic security will ultimately prove illusory. “Separated from the moral discipline of work, he writes, people “cannot lead satisfying lives.”

By his analysis, the impossible economics of the welfare state will soon become apparent to everyone. “Most Americans have enough income now,” Mr. Murray asserts, “that the entire welfare state could be dismantled tomorrow and people would be fine.”

In the richest economy on Earth, governments distribute $2-trillion (U.S.) in transfer payments to people who, for the most part, don’t need the help. Poverty once meant not having food to eat. Now, it means having less – in some cases, a little less – than people who are relatively well off.

By U.S. Census Bureau measurement, poverty soared in the country in 2009 and 2010 (to 43.6 million people). But the Census Bureau assumes, perversely, that higher social welfare spending payments document the need for higher spending – that the extension of the dole proved the need for it. In this sense, stimulus programs pulled many people into poverty. (The U.S. poverty line is family income of $22,000 a year – not counting food stamps or tax credits.)

Mr. Murray advocates a return to the old-fashioned notion of “seemliness” as a way to measure society’s comfort level with excess. He makes a good point. Unseemliness is not an ideological abstraction. It expresses a people’s common sense. For Mr. Murray, unseemliness is television producer Aaron Spelling’s decision to build a house of 56,500 square feet and 123 rooms, the misogyny of rock and rap music, the common use in public conversation of four-letter words, the “hooker look” in fashion, and the ubiquitous tattoos of the American proletariat, all of which, he argues, document the hollowed-out soul of the cultural and political elite.

If so, the dole – the deeply entrenched practice of paying people not to work – is perhaps the most definitive unseemliness of them all.

Coming Apart is worth a read.

 

[Brad Sallows]

Contributing to an IMF EU bailout fund is simply a transfer of money to Europeans.  Germans are not going to work to 67 and make transfer payments which enable others to retire at 60, so the number of nations in the currency union is going to shrink. Whatever consequences follow are going to happen.  I got used to this idea a long time ago; it is high time the highly and prestigiously educated political and media elites got it through their apparently thick skulls and started working on mitigating the consequences rather than pretending they can put off the reckoning indefinitely.

First-tier nations chart their own courses; they don't follow the politically correct and self-interested wishes of others.

 

[a_majoor]

Why worry about the Europeans when we have the NDP right here? Obviously they don't read newspapers or check websites, the UK has seen revenues dry up with their tax increases under David Cameron, and multiple US States have imposed "millionaire taxes" only to see "millionaires" vanish next tax season. Canada has seen a constant shift of business, capital and skilled labour to the west; both to follow opportunity and also to conserve their wealth in the generally lower taxed provincial jurisdictions.

Never the less, Ontario's NDP leader attempts to flow water uphill again (hopefully triggering an election that eliminates the McGuinty government once and for all). The anticipated results are in line with the historical evidence:

http://fullcomment.nationalpost.com/2012/06/14/kelly-mcparland-c-d-howe-pokes-a-big-hole-in-ndps-high-tax-fantasies/

Kelly McParland: C.D. Howe pokes a big hole in NDP’s high-tax fantasies
Kelly McParland  Jun 14, 2012 – 10:12 AM ET | Last Updated: Jun 14, 2012 6:22 PM ET

It's not as easy to squeeze money from taxpayers as Ontario NDP leader Andrea Horwath thinks

Comments Email Twitter A C.D. Howe Institute report pokes a big hole in the pleasant notion that raising taxes on rich people is the easiest, most effective and most equitable way to fill up a depleting tax treasury.

As much as it may leave Occupy protesters and NDP leaders feeling good about themselves, it’s bad for revenue, the report says. In fact, a new wealth tax in Ontario, to take effect in July, will not raise anywhere near the revenue projected, and will cost the country dearly within a few years.

Alexandre Laurin, author of the report, notes that the ease with which high-income earners can adopt strategies to reduce their taxable income means the new levy will probably be applied to a smaller pool than anticipated by New Democratic Party leader Andrea Horwath when she strongarmed Dalton McGuinty’s minority government into adopting it, in return for allowing the Liberals’ budget to pass.

The government hoped the new tax — an extra 2% on incomes over $500,000, which translates into a 3.1% increase when an additional surtax is applied — would raise $470 million. Laurin estimates the number will be closer to $450 million initially, falling to zero by 2019 as wealthy taxpayers adjust, and a net loss of $200 million by 2027.

Ottawa will also be affected by the expected tax-reduction strategies, producing a combined revenue loss of about $800 million a year a decade from now, according to the report.

Laurin notes that Ontario already redistributes taxes from rich to poor more extensively than most other provinces. “The top 1% of earners shoulder more than one-quarter of all income taxes, while the bottom 75% shoulder about 12%,” he writes. The share of taxes paid by the wealthiest earners is more than double their share of taxable income, while the top 10% pay two-thirds of all net income taxes.

The difficulty in grasping this appears to arise from the general level of financial illiteracy that pervades much of the population, the same limited grasp of basic economics that fuels a society deep in debt and willing to pay usurious rates of interest on credit card debt, as long as they can handle the monthly payment. It’s a weakness shared across geographical and social lines, and seems to pervade New Democrats and their adherents. The simple notion that rich people should pay more sells well, if you assume the government can simply raise the rates and happy millionaires will fork over the cash. But that’s generally not what happens: there are plenty of legal and wholly ethical ways to reduce the share of income that’s exposed to tax, and the higher the rate, the greater the motive there is to do so. That’s why jurisdictions that once levied draconian levels of taxation — at one time Britain’s marginal rate could reach 98% — eventually reduced them, finding they just didn’t work.

But each generation has to learn anew, and some never do. Sitting around a park with your Occupy buddies, moaning about the raw deal society has dealt you, it’s easy to agree that higher taxes on other people are both necessary and just. It’s also easy to agree that capitalism is bad and a society ruled by freebies would be much better. And it probably would be, if it worked. But it doesn’t. Just like higher taxes.

 

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Taken from the Globe and Mail:
http://gold.globeinvestor.com/servlet/ArticleNews/story/GI/20120614/escenic_4264748/stocks/news/&back_url=yes
Hopefully link works.

Sticking close to home paying off for Canadian manufacturers
KEVIN CARMICHAEL, RICHARD BLACKWELL AND TAVIA GRANT
18:43 EST Thursday, Jun 14, 2012
 

Against the odds, Canadian factories suddenly are among the busiest in the world.

In the United States, President Barack Obama preaches weekly about a manufacturing renaissance, and Germany?s ability to compete with lower cost rivals in Asia continues to astonish. Yet neither of those countries is hiring more factory workers now than Canada, a country burdened by relatively high labour costs, a strong currency and weak productivity.

?Things are flying,? says Kelly Youngdale, who has increased staff at his label-making business in Ottawa to 45, from less than 30 a couple of years ago.

Canada created almost 115,000 manufacturing jobs over the past six months, the most over any similar period on record, according to Statistics Canada. The surge is also the biggest increase among the 34 rich countries that belong to the Organization for Economic Co-operation and Development, says Stéfane Marion, chief economist at National Bank Financial in Montreal. Canadian factories operated at 81.3 per cent of potential capacity in the first quarter, the highest level since the end of 2007, Statistics Canada said in a separate report released Thursday.

The strength in manufacturing defies conventional thinking about Canada?s economy: at a time when factory owners are being told the future lies in spreading their goods throughout emerging markets, factories are getting a boost from sales at home.

For more than a year, the Bank of Canada has cited the country?s poor competitiveness as one of the reasons for leaving interest rates at ultralow levels. In April, Mark Carney, the central bank governor, told an audience in Waterloo, Ont., that the Canadian economy?s immediate prospects were limited because companies do too little business in the fast-growing emerging markets such as China and Brazil. The extent to which Canadian companies ?refocus, retool and retrain will do much to determine how rapidly our prosperity grows in the decades ahead,? Mr. Carney said.

But for now, at least, Canada?s factories appear to be benefiting from their notorious contentment with sticking close to home. The jump in hiring occurred with little obvious help from exports. For example, international shipments of machinery and equipment were little changed through April compared with 2011, according to Statistics Canada. Yet factory jobs have increased for six straight months, accounting for 10.4 per cent of Canada?s 17.5 million working population in May, the most in more than a year.

Mr. Youngdale?s Label Innovation Inc., which posted sales gains of 19 per cent in 2010 and 32 per cent in 2011, does almost all of its business in Canada, where the economy has rebounded from the financial crisis better than most of its peers.

Label Innovation does ship about 15 per cent of its production to the U.S., whose economy is growing at an annual rate of about 2 per cent. That?s modest growth, but better than Europe, which is struggling to stay out of recession. China, India and Brazil, the high flyers of the global economy for the past several years, are falling back to earth as the European debt crisis takes a toll on global trade.

?Our Canadian business is strong, while our global business is less strong,? says Mel Svendsen, chief executive of Standen?s Ltd., a Calgary-based maker of vehicle springs and suspensions for trucks and trailers. ?A lot of Canadian manufacturers have had to reduce their participation in the U.S. markets with the stronger dollar, so those that are focusing primarily on Canada will show some resiliency and growth.?

In Waterloo, Mr. Carney urged Canadian companies to take greater advantage of the boom in oil, mining and agriculture. The strength of those industries, which are concentrated in Western Canada, represents an outlet while the global economy finds a new footing. Sales of petroleum and coal products increased 4.5 per cent to $7.5-billion in March, the highest level since July, 2008, according to Statistics Canada.

Factories that service the energy sector are ?busier than all get out,? says Harvie Andre, the former chief executive of Calgary-based Wenzel Downhole Tools Ltd., which has a standing help-wanted ad for machinists to help craft its drilling equipment.

There?s reason to be skeptical about whether Canada?s manufacturing strength will last.

Mr. Andre, who now works as a consultant for Wenzel, says there are growing worries that the drop in oil prices this year will result in less capital spending by drillers in 2013.

That would be a blow to the manufacturing industry because the recent gains aren?t widespread, nor have they made up for the losses that occurred during the recession. There were 1.8 million factory workers in May, compared with 2.1 million in January, 2007.

?In 21 years in this business, we are treading in waters we have never been in before,? says Darren McDonald, president of Nova Doors and Windows Ltd., a maker of doors and windows based in Dartmouth, N.S. Mr. McDonald says 2011 was ?horrible,? and so far this year business is only coming in ?dribs and drabs.?

The Canadian market is probably too small to support a significant manufacturing revival. But for now, it?s the best bet for many companies. Guy Bianchi, who runs MR Kitchens, a kitchen-cabinet maker based outside Ottawa, says he hasn?t received an order from any of his U.S. distributors in four years.

But he?s doing fine in Ottawa, thanks to the housing boom, boosting his work force to 55 in the past few months, a 20-per-cent increase. While the housing market likely will cool, Mr. Bianchi is betting the renovation market will remain strong: He plans to build 10 retail outlets over the next eight years stretching from Ottawa to Windsor.

?We want a bigger piece of the pie,? he says.


I find this interesting as the employeers cited are medium sized independent operators that appear to be fairly nimble on chasing new markets...whether internally Canada or at least examining international oportunities.    The only questions to me are a) is how widespread the hiring is and b) can they keep the momentum going once top notch employees become scarce.

Either way..a positive note.