Politics in 2016

[Altair]

Who knows. Like the rest of the election promises, plenty of flash, no full costing or substance.

A step in the right direction regardless.

 

[PuckChaser]

A step in the right direction regardless.

Empty promises and platitudes is what the Tories were accused of towards veterans, but the Liberals doing it is "a step in the right direction"?

Pardon me, but if they really gave two $%$#s, they'd have had legislation tabled when the Commons opened, or a giant announcement for funding like the billions we dumped into the climate lobby in Paris. They could have dropped the appeals against Maj Brauer, like they did on every other major pending litigation, but didn't.

 

[Brad Sallows]

The deficit is simply the difference between revenues on one side and spending plus deficit financing costs on the other, in which the former is the lesser.  Given the economic situation, it is plausible that the deficit is partly driven by another slump in revenues.  The alarming claim I encountered in one article is that the forecast doesn't include much of the new spending the Liberals want to do.

I suppose if the federal government wants to give money to provinces for education, the provinces won't say no.  I don't think VA or DND are high on the list of people with their hands out.

This government and its supporters are basically advancing an idea that was popular back in the '60s and '70s - run a small deficit indefinitely in lockstep with economic growth and monetary inflation.  This includes - and seems to have mostly been meant for - borrowing to finance regular program spending (ie. like borrowing to buy groceries, except unless your salary increases predictably, you have an unlimited line of credit, and you can print your own money, you can't do it indefinitely).

I suppose that if the Conservatives won, they'd be looking at a deficit (revenue-driven) also; and, if they'd won a majority, they might be more relaxed about balancing the budget.  But overall, this much is likely: the Conservative would be trying to keep that deficit small or engineer a surplus; the Liberals don't really care and said as much during the election - they aren't even trying.

And a restatement of something I've already written here ad nauseum: neither austerity nor stimulus should shift economic growth in Canada much (by theory); neither austerity (1997) nor stimulus (2009) has shifted economic growth in Canada much (in practice).  Even those too confused to understand that only a minor fraction of the proposed Liberal deficits is supposed to support investment-grade infrastructure should realize that the borrowing the Liberals plan to do is mainly to allow them to restore and expand "soft" spending to reward supporting constituencies.

Federal Team Liberal has borrowed heavily from ON Team Liberal.  If they had good ideas, we'd have seen them already.  We haven't, so the prudent conclusion is they don't.  The government will basically conduct a one-sided election campaign until the next federal election, vesting its faith in "the commitment needs to be a commitment to grow the economy and the budget will balance itself" - except that they have to be able to fulfill the commitment.  No ideas; no growth.

 

[Altair]

Empty promises and platitudes is what the Tories were accused of towards veterans, but the Liberals doing it is "a step in the right direction"?

Pardon me, but if they really gave two $%$#s, they'd have had legislation tabled when the Commons opened, or a giant announcement for funding like the billions we dumped into the climate lobby in Paris. They could have dropped the appeals against Maj Brauer, like they did on every other major pending litigation, but didn't.

Keep your powder dry till the budget mate.

 

[Edward Campbell]

Tony Keller, the Globe and Mail's editorial page editor (and, therefore, in the eyes of many a right wing, "free market" fanatic and, in the eyes of a few, a Liberal shill), writes something with which I fully agree:

    "... The theory, which a growing number of economists support, is that sound infrastructure investments can deliver long-term benefits for the economy, increasing efficiency, raising productivity and improving everyone’s quality of life.

      It’s an idea I strongly agree with – in theory. But out here in the messy real world, I have one nagging worry, and you should too. Governments are good at spending money, but they’re not always good at spending it well. And unless
      infrastructure money is well spent, the notion of an economic boost doesn’t compute."

There's still four weeks until we can dissect the "whats," "whys" and "wherefores" in the Morneau-Trudeau fiscal plan but I will be looking for signs of "sound infrastructure investments" that can "deliver long-term benefits for the economy, increasing efficiency, [and] raising productivity." (I left out "improving everyone’s quality of life" because I'm not sure how to measure that, although I'm sure Liberals just know what's good and bad in that department ~ know with the kind of certainty that only those on the political left can have about that sort of thing.)

Any bets on how much "sound" and "productive" spending I'm going to find?

 

[Altair]

Tony Keller, the Globe and Mail's editorial page editor (and, therefore, in the eyes of many a right wing, "free market" fanatic and, in the eyes of a few, a Liberal shill), writes something with which I fully agree:

    "... The theory, which a growing number of economists support, is that sound infrastructure investments can deliver long-term benefits for the economy, increasing efficiency, raising productivity and improving everyone’s quality of life.

      It’s an idea I strongly agree with – in theory. But out here in the messy real world, I have one nagging worry, and you should too. Governments are good at spending money, but they’re not always good at spending it well. And unless
      infrastructure money is well spent, the notion of an economic boost doesn’t compute."

There's still four weeks until we can dissect the "whats," "whys" and "wherefores" in the Morneau-Trudeau fiscal plan but I will be looking for signs of "sound infrastructure investments" that can "deliver long-term benefits for the economy, increasing efficiency, [and] raising productivity." (I left out "improving everyone’s quality of life" because I'm not sure how to measure that, although I'm sure Liberals just know what's good and bad in that department ~ know with the kind of certainty that only those on the political left can have about that sort of thing.)

Any bets on how much "sound" and "productive" spending I'm going to find?

Truly hard to say.

What I'm hearing is that a lot of those sound productive projects are not shovel ready and might not be for another year or so.

I suspect a lot of money will be going into the in unsexy maintenance of the system, replacing old buses and the like.

 

[Edward Campbell]

Truly hard to say.

What I'm hearing is that a lot of those sound productive projects are not shovel ready and might not be for another year or so.

I suspect a lot of money will be going into the in unsexy maintenance of the system, replacing old buses and the like.

"Unsexy maintenance" is, almost always, productive, unless you are, for example, maintaining a system well after the end of its economic life cycle. But (and there's always a but, isn't there?) the "unsexy maintenance" should have been part of the original life cycle costed plan for the system, so you seem to be suggesting that Ottawa will just pick up spending that is, rightfully, the responsibility of, say, Queen's Park or even a local transit commission. If the feds make "infrastructure investments" in, say, public transit, in, say again, Vancouver, Toronto, Ottawa, Montreal and Halifax, but not in,say, Calgary, Saskatoon and Owen Sound, then it's going to look a lot like partisan political favouratism, and just about the only things political parties do worse than "picking winners," which they almost never get right, is "playing favourites," which always goes wrong.

 

[Rocky Mountains]

Replacing old buses is great.  Building new passenger rail lines leads to perpetual future losses.  I'm not sure that passengers can afford operating costs much less any recovery of capital cost.

 

[Altair]

Replacing old buses is great.  Building new passenger rail lines leads to perpetual future losses.  I'm not sure that passengers can afford operating costs much less any recovery of capital cost.

I was actually thinking earlier that someone might want to swing this as the perfect time to build that high speed rail link between quebec city and Windsor that is always talked about and never built.

 

[Kirkhill]

Tell you what.  We'll let you trial the Bombardier prototype here in Alberta between Calgary and Edmonton.  We're a little short of cash right now but lots of willing hands available.

 

[a_majoor]

"Unsexy maintenance" is, almost always, productive, unless you are, for example, maintaining a system well after the end of its economic life cycle. But (and there's always a but, isn't there?) the "unsexy maintenance" should have been part of the original life cycle costed plan for the system, so you seem to be suggesting that Ottawa will just pick up spending that is, rightfully, the responsibility of, say, Queen's Park or even a local transit commission. If the feds make "infrastructure investments" in, say, public transit, in, say again, Vancouver, Toronto, Ottawa, Montreal and Halifax, but not in,say, Calgary, Saskatoon and Owen Sound, then it's going to look a lot like partisan political favouratism, and just about the only things political parties do worse than "picking winners," which they almost never get right, is "playing favourites," which always goes wrong.

I'm going to blame "Mr Dithers" for this one, since he essentially broke the unwritten rule that Federal money pays for Federal things, and started offering Federal money for municipal things in order to buy votes for the LPC (much good it did him then). We are now in an era of "Tin Cup" federalism, where provinces and municipalities stand on the boulevard by intersections with their tin cups out hoping to get a few coins tossed in from Ottawa.

This of course fuels two dangerous trends; local governments are encouraged to spend beyond their means, and push spending towards things that are uneconomic and outside of their purview on the promise that Ottawa will pick up the tab, and;

local levels of government are less accountable, since their funding is no longer tired to their tax base.

However milking voters in the hinterlands to pay for vote rich constituencies is an old and well practiced technique, so I doubt I'll see the end of it through any sort of controlled drawdown of spending or rollback of State power.

 

[Brad Sallows]

Maintaining things we already have doesn't get us ahead; it just keeps us from backsliding.  Bus replacement isn't an investment; it's preservation of status quo.  Something serving new routes might be an investment, provided the ridership is large enough.

Replacing a four-lane bridge with another four-lane bridge is not an investment.  Upgrading to more than four lanes is an investment.

For anything to qualify as an investment, it has to be new or an improvement over something it is replacing (enough of an improvement to pay for any additional cost above that of a straight replacement).

 

[a_majoor]

The problem, Brad, is you can parse these things into finer increments.

If my new buses are more fuel efficient or can carry more passengers, that might be enough of an improvement to be considered a positive investment.

A four lane bridge which is built using more modern techniques so I pay less over the projected lifetime for maintenance could be considered a positive investment, or a new 4 lane bridge at a different point which reduces transit time from point A to point B will also qualify.

In these cases, the metrics are increased productivity (i.e. doing the same things with less input cost or getting greater output for the same inputs).

Sadly, of course, the "infrastructure" that will be built will consist of Performing Arts Centers, hockey arenas and transferring federal funds to pay for things which should be paid for out of the municipal or provincial tax bases instead. And you hardly need a crystal ball to see where lm Canada a lot of this money will be spent.

 

[Kirkhill]

Maintaining things we already have doesn't get us ahead; it just keeps us from backsliding.  Bus replacement isn't an investment; it's preservation of status quo.  Something serving new routes might be an investment, provided the ridership is large enough.

Replacing a four-lane bridge with another four-lane bridge is not an investment.  Upgrading to more than four lanes is an investment.

For anything to qualify as an investment, it has to be new or an improvement over something it is replacing (enough of an improvement to pay for any additional cost above that of a straight replacement).

Replacing a four lane bridge with another four lane bridge before it falls down may not be an investment.  Trade continues unimpeded and profits continue to flow.

Replacing a four lane bridge with another four lane bridge AFTER it falls down IS an investment.  Trade ceased,  business stopped and profits stopped.  It required new money to recreate the opportunity.

So, from the government's perspective it is far better to let bridges fail and build new ones than it is to build replacements while the original is still standing.  No?

 

[PuckChaser]

Keep your powder dry till the budget mate.

So you will concede they could have done something if it was a priority, and that you're hoping the budget isn't a let down?

Hope isn't a valid COA.

 

[a_majoor]

The Financial Post casts a huge shadow over anyone who was thinking that "revenue neutrality" or even common sense was in any way behind "carbon tax" proposals. They are (and like most of us knew) and always were a poorly disguised tax grab. The Liberals (both Federal and Provincial) and the governments of Quebec and Alberta are the biggest offenders, simply because they lack the discipline to cut spending to reflect available revenues. Billions of dollars could be saved by simply eliminating overlapping programs both within their own jurisdictions and between jurisdictions, so it is not like this is rocket science.....

http://business.financialpost.com/fp-comment/terence-corcoran-the-great-green-carbon-tax-grab

Terence Corcoran: The great green carbon tax grab

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Terence Corcoran | February 25, 2016 9:09 AM ET
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If the carbon tax were to eventually rise to $200 a barrel nationally, the annual national carbon tax burden could soar to $40 billion or more.
Postmedia NewsIf the carbon tax were to eventually rise to $200 a barrel nationally, the annual national carbon tax burden could soar to $40 billion or more.
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Touted by economists as a wondrous market mechanism that will deliver Canada from the evils of climate change, carbon pricing is emerging out of the political swamps as a regulatory nightmare. It is also shaping up as the Great Canadian Carbon Tax Grab.

In advance of a first ministers’ meeting next week with Prime Minister Trudeau in Vancouver to begin setting national carbon objectives, Ontario Premier Kathleen Wynne announced that – just as consumers are beginning to benefit from lower oil prices – her province’s cap-and-trade version of a carbon tax will add 4.3 cents to the price of a litre of gasoline. Natural gas prices will also go up $60 a year per household.

More fiscal details are to come in a budget Thursday, but a Globe and Mail report says the government will ultimately collect $1.3 billion a year in fresh revenue from its cap-and-trade taxes on gasoline and natural gas. The money will slosh around a Greenhouse Gas Reduction Account to be distributed by a greenhouse central planning authority to fund industrial and other initiatives deemed essential to give Ontario a new, green low-carbon economic nirvana.

Related
Philip Cross: The Ecofailure of the Ecofiscal Commission
On Wednesday, the province also introduced its cap-and-trade legislation, grandly titled the Climate Change Mitigation and Low Carbon Economy Act. Ontarians should get ready to pay.

The province already has a low-carbon electricity regime, imposed at a high cost of $9.2 billion in long-term indirect taxes on electricity consumers, to fund wind and solar. Electricity prices are soaring. The province also clearly intends to do the same to fossil fuel consumers, only more so.

As the economic brainiacs at an organization self-styled as Canada’s Ecofiscal Commission never fail to mention, 4.3 cents a litre at the gas pumps – equivalent to a carbon tax of maybe $20 a barrel – would be essentially useless as a carbon-reduction incentive. This is just the beginning. Much more is needed.

Paul Booth, a Western University economist and an Ecofiscal “commissioner,” said during a Google Hangout this week that Canada will need a carbon tax of “$150 to $200” if it is to have any hope of meeting the carbon reduction targets the Trudeau government agreed to at the Paris summit. Math: A $200 carbon tax would mean 43 cents per litre at the gas pumps. Total annual Ontario government revenue grab at that level: $13 billion.

That’s a lot of annual dollars when multiplied across Canada. If the carbon tax were to eventually rise to $200 a barrel nationally, the annual national carbon tax burden could soar to $40 billion or more.

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A $40 billion annual carbon price burden may seem like a politically impossible tax grab, but fiscal reality might force such drastic action. Former Bank of Canada governor David Dodge told CBC Radio last month that, as Ottawa and the provinces run into growing spending deficits, the crunch will come. “At some point the government of Canada, as has the government of Alberta, for example, will have to look at revenue increases. Then something like a carbon tax or an increase in GST would be the most economically sensible way to go about doing it.”

Using energy as a cash cow is nothing new for governments. Dressing up such taxes as a carbon reduction scheme takes tax grabbing to a whole new level of moral fakery. Said Premier Wynne: “We need to deal with climate change. The cost of doing nothing is much, much higher than the cost of going forward and reducing greenhouse-gas emissions.”

The Ontario carbon tax revenues will come from joining a cap-and-trade system that already exists in California and Quebec. Industrial firms will have to buy permits to emit carbon, others will be able to sell. With the Canadian dollar in a slump, the cost of California permits is now much higher. The Ontario system, moreover, will also give some industries carbon price holidays by allowing “for transitional allowances to large industrial emitters.” The allowances will be phased out over time, but it is clear the carbon tax will be a new competitive burden to Ontario industry.

Carbon tax theorists, and apparently the Trudeau government, believe Canada needs the equivalent of a national carbon tax floor price set by Ottawa or at least by interprovincial agreement.

If pricing carbon were all it took to chase away the carbon dragon, such a tax might be tolerable, assuming climate change is a global crisis and Ontario can help. But economists who for years have been touting a carbon tax as a slick and efficient use of market forces to bring in a low-carbon economy are now backtracking furiously. We need more that a simple carbon tax. What we need, they now say, is a big carbon tax that ratchets up dramatically over the next few years plus a truckload of regulation, government economic meddling, incentives, winner-picking, controls and limits, compliance systems, subsidies and penalties, grants and incentives. (All programs and ideas with a spectacular history of failure. Crushing Canada's economy under high taxes and regulations is the "Great Liberal Idea?" People will be getting what they said they wanted good and hard).

The original claim was that carbon tax revenue was to be revenue neutral and given back to consumers. As Philip Cross notes on an oped today, “cash-strapped governments in Alberta, Ontario and Quebec are simply raising carbon taxes with no offsetting tax cuts elsewhere.”

The new objective of the green state is to manage carbon emissions down. Growth, they say, will come if governments plow the carbon tax cash back into government-planned green development to encourage low-carbon growth. That means government controls the nature of the growth, the technology developed, the future of the energy, the future of the economy.

and

http://business.financialpost.com/fp-comment/the-liberals-fiscal-anchors-cannot-hold-against-a-drift-to-more-spending

The Liberals’ ‘fiscal anchors’ cannot hold against a drift to more spending

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Ben Eisen and Charles Lammam, Special to Financial Post | February 24, 2016 4:35 PM ET
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Prime Minister Justin Trudeau during Question Period in the House of Commons on Parliament Hill in Ottawa, on Wednesday, Feb.24, 2016.
THE CANADIAN PRESS/Adrian WyldPrime Minister Justin Trudeau during Question Period in the House of Commons on Parliament Hill in Ottawa, on Wednesday, Feb.24, 2016.
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Once goalposts are moved… it becomes much easier to move them again

During the federal election, the Liberals campaigned on a commitment to run budget deficits for their first three years, while promising to cap those deficits at $10 billion. They also pledged to return to budget balance by 2019/20. Since then, the goalposts have moved repeatedly, as deficit projections have been steadily revised upward.

In December, Finance Minister Bill Morneau backed off the $10 billion deficit cap, replacing this “limit” with a new pledge to keep deficits small enough for the federal debt-to-GDP ratio to shrink every year — repeatedly referring to this as a “fiscal anchor” that would be used to prevent rapid deterioration of Ottawa’s fiscal position.

In fact, in December, Prime Minister Trudeau said: “We will continue to decrease (the debt-to-GDP ratio) every single year because that’s important for the fiscal health of our country.”

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Bill Morneau names Dominic Barton, head of McKinsey & Co., to government’s economic advisory council
Two months later, that “fiscal anchor” has been abandoned. The government’s latest economic outlook shows the federal debt-to-GDP ratio increasing from 31.0 per cent this year to 31.8 per cent in 2016/17 (the promised return to a balanced budget by 2019/20 is now also in question). This is before the Liberals have added any of their new major spending initiatives to the mix.

Once new spending is factored in (expected to be upwards of $10 billion next year alone), the annual deficit is likely to exceed $25 billion and the federal debt-to-GDP ratio will increase further.

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The short life of this latest “fiscal anchor” illustrates the dangers of constantly evolving targets, and the need for transparent, durable, and easily understood fiscal norms.

Recent years have seen the steady destruction by governments across the country of one such useful norm: the principle that governments should balance budgets during “normal” economic times, resorting to deficit spending only during economic downturns. This principle took hold during the 1990s, when governments across Canada averted crisis by decisively reining in government debt that had accumulated for decades after ongoing, routine deficit spending.

Having lived with the consequences of runaway debt and having made hard choices to get it under control, governments then generally avoided running deficits during periods of economic growth. This approach helped create the conditions for a prolonged period when the economy boomed and public debt steadily shrank.

Unfortunately, policy-makers across Canada have lately abandoned the long-standing norm that deficit spending — particularly in the name of “stimulus” — should be reserved for steep economic downturns.

The problem with unwritten fiscal norms, such as the one that governments generally ought to balance budgets, is that they take a long time to develop and cement. Once the goalposts are moved, and a basic, longstanding fiscal principle is repudiated, it becomes much easier for governments to move them again.

This is precisely what has happened. The $10 billion deficit cap that replaced a simple balanced-budget target barely survived the election before it was replaced with the declining debt-to-GDP fiscal anchor. That new “limit” was even more short-lived.

Critically, all this is happening while the government expects positive (albeit modest) economic growth next year. The recent economic outlook projects nominal GDP to grow 2.4 per cent in 2016 — even using a conservative “forecast adjustment” that reduces expected GDP by $40 billion.

The prevailing view that governments should avoid routine deficits has served Canada well, but it has now been largely abandoned, and the hastily assembled “fiscal anchors” designed to replace this hard-won principle have proven too flimsy to hold firm against the federal government’s weakness for spending.

Ben Eisen is associate director of provincial prosperity studies and Charles Lammam is director of fiscal studies with the Fraser Institute.

 

[Kirkhill]

We just had a big carbon tax removed.  The price of oil dropped from 100 dollars a barrel to 30 dollars a barrel.  At 100 dollars a barrel the world continued to hum along.  How many governments are now looking at that vacated "tax room"?

 

[Fishbone Jones]

I was actually thinking earlier that someone might want to swing this as the perfect time to build that high speed rail link between quebec city and Windsor that is always talked about and never built.

Already back on the table.

 

[Kirkhill]

PM Trudeau and his associates are having a great deal of fun repealing Conservative initiatives.  I can't help but wonder if they have thoroughly considered the implications of the replacement legislation.

From citizenship, to marijuana, to F35s, to ISIL, to refugees, to deficits, to pipelines, to natives,  I get a strong sense of "reorganization by hand-grenade": the practice of throwing a hand-grenade into a room, slamming the door shut, waiting for the bang and then opening the door after the moaning has stopped so as to sort out the pieces.

 

[ModlrMike]

Already back on the table.

Why am I getting a visual of the Spingfield to Shelbyville monorail?