Wednesday, January 28, 2009

The amendment might be a mistake

So the amendment just demands progress reports. That seems like an offer the Conservatives can't refuse, and the budget will pass. How could the Conservatives justify NOT giving these reports?

If the implementation falls short (I'm just speculating ;-) the opposition will beat down the Conservatives with each report. If a report is bad enough, a confidence vote will trigger an election. Sounds great for Iggy and the opposition, right?

Unless the reports are good.

If the stimulus works, then this is great campaigning for the Conservatives that could deliver that majority and rescue Mr. Harper. What am I worrying for, anyway - if the stimulus worked we should all be happy.

Although... what if the reports are good, and the economy isn't? What's the chance that Mr. Flaherty would deliver misleading numbers? I mean again, having been caught already?

This ploy to force Mr. Harper to expose any gaps in implementation of the budget may work. I hope it does. As each report comes out it must be scrutinized and verified. The Harper Conservatives have been less than truthful in the recent past, and it doesn't seem to hurt them at the polls as much as I'd expected. So, I wouldn't expect the Conservatives to lose much support if they exaggerate success in forthcoming reports.

The only good side to this amendment is a possible 'out' for Iggy to avoid responsibility for the budget, e.g. "I wouldn't have taken these chances, or screwed up the implementation," etc. But the NDP and BQ will (rightly?) point out the Libs had the chance to vote it down and didn't. It may work, it may not - it'll all depend on the mood of the swing voters when the time comes.

Speculation about a budget amendment

Suppose Iggy proposes an amendment to the budget. He can do this before deciding whether to vote for or against the budget. Offering a proposal makes the Liberals appear more collaborative, co-operative, constructive, etc.

There are three outcomes:

A) The amendment fails to pass. This means it was not supported by either the government, the NDP or the BQ. OK, I guess either the BQ or NDP could support it, but not both. Result: Iggy can safely pass the budget and avoid accepting responsibility for it. Since the coalition didn't support him he can justify not defeating the budget based on that lack of support from partners. Further, Iggy can run an election campaign filled with "I told you so, but you didn't listen".

B) The amendment passes with coalition support. I don't expect this, because then it would force the coalition to vote for the budget. After all, why pass an amendment then defeat the budget? It makes you look foolish. However, it could happen - how could the NDP argue against the ideas of a Liberal partner? I'll leave that as an exercise for Mr. Layton.

C) The amendment passes with Conservative support. Depending on what's in the budget this could anger the Conservative supporters further, a dangerous choice for Mr. Harper. It makes him appear even weaker. I don't expect this outcome is very likely, but it is possible. Voting for the amendment would guarantee passage of the budget and continued government. In this case, expect Harper to return and exact his revenge in the future sometime. To quote Mr. Burns - "I'll let the sword of Damacles dangle about his head, while I bide my time. Yes, excellent." Result: Iggy demonstrates he's the most powerful man in the house, and gets what he asked for - so be careful. On the downside, he must share the responsibility which is probably suicide.

I expect Iggy's best outcome would be A), so I expect a very aggressive amendment designed to fail, yet provide help for the next campaign. EI restructuring, limits to tax cuts and easing restrictions so municipalities can access the money easier, faster are my guesses.

We'll see, in just 3.5 hours.

Overall I thought the budget was the best I expected from Harper, and I must give him full credit for trying. If you've seen my comments around other blogs, I never expected Harper to deliver a budget with so little conservatism - and my evidence is over at the Blogging Tories. He certainly appears to be on the ropes... for now. But he must not be underestimated.

Friday, January 16, 2009

Spending cuts are the key? To what?

Martin Masse at the FP writes here: Spending cuts are the key - FP Comment.

He argues government spending during boom times diverts resources away from business, which artificially inflates particular sectors relative to others.
When governments launch massive spending programs, they simply grab more of the factors of production that businesses need, which keeps the economy down.
I have a few problems here.

What past massive spending does he mean? I was under the impression that we hadn't spent enough public monies on infrastructure, that it desperately needed renewal. I thought we'd cut spending to balance the budget. If there was an increase in spending in, say, the last couple of years, that still couldn't explain his point - that spending would be too recent I think.

Which sectors were inflated by government competition? Automobiles? Credit? Real estate? High tech and IT? Really, I don't know what he's talking about here. I don't see the evidence that past inflation or bubbles were created by too much government spending.

I thought stimulus spending seeks to employ idle resources. If the resources are idle, then how is there competition and thus inflation? If the resources are NOT idle, why is the economy shrinking? There is a decent point underneath this, though: the government shouldn't outbid private industry for already employed resources, if at all possible.

When I see opinion without any facts or data to back it up, I usually see red flags waving.

Wednesday, January 14, 2009

Crass politics in NS

David Jackson at the Chronicle Herald reports the public accounts committee would like to question the [PC] government about the state of the provinces' finances - before the budget in June. That's 6 months after the update of December 19.

So now a two month prorogation doesn't sound so bad, eh?

PC MLA Jamie Muir said "I think you're playing crass politics, and I'm not sure that's the place of this committee," in an accusation directed at NDP opposition MLA Graham Steele.

It isn't crass politics for the opposition to demand updated information during a 6-month government absence from the assembly, especially with the current economic climate.

NS is expecting an election this year, and I expect the PCs are planning their election campaign around the release of fiscal and economic news. Especially, they're probably waiting to see what the federal budget looks like (assuming it passes) and to see how that affects NS. But that's life - the government gets to set the agenda to its own favour.

But both the federal Conservatives and the NS PCs are withholding fiscal and economic information from the opposition. How can the opposition do its job without that information? It can't, and that's the point. Again, this is the privilege of the government to withhold that information and this isn't new either.

But don't accuse the opposition of crass politics because its doing its job. That's crass politics.

Tuesday, January 13, 2009

Oil bubble inside the credit bubble?

60 Minutes asks the question "Did Speculation Fuel Oil Prices Swings?" in the video below.

Near the end of the article, Steve Kroft writes:
The oil bubble began to deflate early last fall when Congress threatened new regulations and federal agencies announced they were beginning major investigations. It finally popped with the bankruptcy of Lehman Brothers and the near collapse of AIG, who were both heavily invested in the oil markets. With hedge funds and investment houses facing margin calls, the speculators headed for the exits.
So was there a vicious circle? Did a decline in the credit market cause LB, AIG and others to sell their oil futures, causing a decline in oil prices, so that their remaining oil holdings value declined, causing further ratio problems, making credit problems appear more severe?

That is, was there an oil bubble inside the credit bubble? How were the two problems linked?

Watch CBS Videos Online

Perhaps cutting interest rates simply isn't enough to offset losses on oil futures.

Sunday, January 11, 2009

8 Reasons Why Big Business Prefers a Carbon Tax

I think BigCityLib asked an interesting question in this post: Exxon Supports A Carbon Tax Because...
But, given our last federal election result, is one still a viable policy option in Canada, or are we stuck with some version of C&T merely because it has the advantage being, in effect, a hidden tax, and thereby palatable to our bovine electorate?
I would have to answer yes to this question, but for the bovine electorate. I don't find that part particularly offensive, I expect its just the passion this topic brings out in people. I left a long comment over there, the comments are interesting reading. So I'm expanding that comment into a post.

So here's my list of why big business prefers a carbon tax over cap & trade (C&T):

1. Raise public discussion to confuse and delay action. As long as the battle is still active, you haven't yet lost.

2. It strengthens the position in the voters minds and gives talking points to right-wing pundits.

3. Carbon taxation is friendlier to business and the economy than C&T, especially if that tax is very small or negligible. "See: we're doing something! Look at the millions of tax dollars! How can you say it isn't enough." A carbon tax with real teeth would bring in a lot of revenue, not a few million dollars.

4. They can argue for a carbon tax to be revenue neutral there must be corresponding decrease in corporate taxes to offset the carbon tax. And by corresponding I mean much, much greater than resulting in a net drop in corporate tax revenue.

5. There are no limits to the price of carbon in C&T - it is determined by the market. You could easily imagine "bubbles" and speculation driving carbon prices to insane levels. Carbon competition is another competitive threat to a corporation. This is why I favour a carbon tax - it is much easier to predict and control the economic effects, where C&T controls the pollution and lets the price float as per the market. Big business wants a system that won't burn them like fluctuating energy prices have.

6. As BigCityLib points out, a carbon tax is more visible to consumers (voters). C&T costs get bundled into prices, and consumers would blame the companies for higher prices. But they'd blame a carbon tax on the government (and hey, what is the government wasting this new tax grab on, anyway?).

7. There are no limits on pollution with a carbon tax. Business is under less pressure to "green up". Hey, that tax isn't their problem, it's the governments'.

8. Someone has to perform the trading, which drives up administration costs compared to another tax.

While those reasons suggest C&T may be superior, I still prefer carbon tax. I'm disappointed with the last federal election and I expect a federal Canadian carbon tax is mostly dead, especially if Obama goes with C&T.

But doing either a carbon tax or C&T is better than nothing - unless the tax and caps are close to nothing. David Gow at The Guardian writes that carbon trading isn't working in the EU. It seems too many carbon credits were issued by governments and the resulting price of carbon was just 1 Euro/tonne.

In short, my position FOR carbon tax over C&T is that we've seen a lot of market volatility latey in everything: equities, bonds, currencies, interest rates, commodities. Why introduce another artificial, arbitrary market which could be just as volatile? Probably more voltile, IMHO.

I'll be watching the B.C. provincial election to see how their carbon tax fares. Mostly dead is also slightly alive.

When I get time, I'll try to make a list of why C&T is better than a carbon tax (like real limits to poloution, maybe). Unless someone beats me to it... any takers?

Saturday, January 10, 2009

New poll - how do you decide your vote?

A comment from janfromthebruce reminded me of something I've wondered for a while. Different people use different criteria to decide their vote. I like to consider policy, but I know some people who decide by their local candidates (e.g. they'd vote for any party with a good local candidate).

There was a poll released in mid-December that claimed many people (51%) thought they voted directly for the Prime Minister. I don't think that many people were wrong, I think the question might have been interpreted to mean "vote for the local candidate of the party with the leader I'd like as PM."

But in the latest Nanos poll puts Ignatieff ahead of Layton. If some voters choose their local candidate based on leader (and I would argue Dion had this effect last October), then could some voters shift from NDP to Liberal?

Or could other factors such as a percieved shift of the Liberal leader to a more right wing stance affect voters deciding based on party policy?

How many of each? And so forth.

So I put a poll in the left-hand margin. Feel free to leave comments here.

Friday, January 9, 2009

Comics and politics

Avengers, assemble!

If only I had photoshop talent, I'd do a mashup of Flaherty and The Shoveler.

Favorable Liberal poll - another nail in the coalition coffin?

Nik Nanos released a telephone poll taken January 3-7, showing the Ignatieff-led Liberals have passed the Harper-led Conservatives:
  1. Liberals 34%
  2. Conservatives 33%
  3. NDP 19%
  4. Green 7%
The BQ has 29% in Quebec, and Quebec has about 25% of Canadian population, so I infer that the national BQ support must be close to 7%, which makes the above total roughly 100%. But since the BQ only runs in Quebec that's probably irrelevant anyway.

The poll also suggests Conservative support has increased in the West, but I think it's hard for them to increase their seat count much at all (they're pretty near 100% already). That means less support in the rest of Canada, possibly fewer Ontario seats, probably fewer Quebec seats.

Stronger Liberals numbers in Quebec and Ontario could raise their seat count quite a bit. With a little luck, some soft voters who supported the NDP in the last election might switch their support. It's optimistic but not unrealistic that Liberals could form a minority government with those numbers. I hope they last.

But why would Mr. Ignatieff form a coalition now, risking the possibility of a minority later? Perhaps these poll numbers are sufficient defense against an abuse of confidence votes?

The result which interests me is the shift of support within Quebec away from the BQ to the Liberals. If the BQ would lose seats to the Liberals, wouldn't they want to avoid an election? But to avoid an election, there is a strange potential that the BQ could support the Conservatives. That just doesn't sound right.

Will EI be the critical budget item?

I expect the upcoming budget to contain tax cuts. You can't expect Conservatives to bring out a budget without them. It wouldn't be fair to expect a complete capitulation and get only 100% of what the opposition asks for, and nothing the Conservatives want.

I also expect infrastructure spending. No one denies it's time for shovel-ready projects. However, the projects presented in the budget should be examined to see whether they're a) re-announcements of already committed money vs. new money, and b) really shovel-ready for 2009 vs. spending programs over several years. Past Conservative announcements seem very prone to these two, IMHO. Anyway, I think any party in government would have some trouble finding shovel-ready spending.

But Mr. Harper in a CTV interview (check out Scott's DiaTribes and Far and Wide) said he doesn't want to make EI more generous. However, if EI measures are omitted from the budget I wouldn't see this as a dirty partisan trick; only a different set of values. Ones which I don't share. What I don't think is fair is generalization of EI as paying people not to work. EI is an insurance system against downturns just like this one (although I won't speak to how effective it is nowadays). Honestly, without it what can you do? Use your savings (sell investments? I thought there were buying opportunties), move somewhere to a new job (where is that, now?), start your own business (like what?).

Strengthing EI was one of three priorities Mr. Ignatieff mentioned in response to a "first-100-days" question in his first town hall meeting. I hope he stands up and pushes hard for an EI boost. Unemployment is both an economic and a social problem. Flaherty says he expects big job losses soon. The CCPA plan suggests $3.4B for EI. Carol Goar has a good article on EI repairs.

But can Iggy support a budget without an EI boost? Maybe. But how will that reflect upon him? Is it something the BQ and NDP will dress him in for the next election?

Can Harper put in something for EI? Maybe. I doubt it, based on past performance. The opposition will claim whatever EI love he gives as not enough, and his own party might not support the EI measures. It could be lose-lose for Harper to put any EI help in the budget.

Charts comparing this and previous recessions

The Digerati Life has a post with charts of the current recession overlaid on the average of all previous recessions post-WWII.

It looks to me like this mess is going to last a long, long time. The best chart IMHO is unemployment which tracks very closely with the average. If we can avoid extraordinary unemployment (e.g. the equity market declines already appear extraordinary) we might be getting off easy.

Thursday, January 8, 2009

Back from Iggy's 1st town hall

As I write this I realize my notes are incomplete and reflect my personal interests, and how difficult a reporters job is. Note to self: improve note-taking skills for next time.

The venue was a small theatre at Neptune with a sold-out crowd. They (Halifax Chamber of Commerce) had to add a second meeting tomorrow afternoon.

Mr. Ignatieff said he would value the upcoming budget using a quote from Joseph Howe: "What is right? What is just? What is for the public good?" He also wants to know how much of the spending is "shovel ready", i.e. how fast can the money be disbursed.

The spending should be green, but qualified that could apply to evolutionary improvements as well as brand new technologies. He'd like to see the GM deliver the Chevy Volt.

Scott Brison followed that with an example he called the Atlantic Energy Corridor, which could deliver green electricity (wind, tidal, hydro) to markets outside Atlantic Canada. It made me wonder about how to deal with NS Power as both a generator and a distributor, yet competing with other generators (see my earlier post).

Mr. Ignatieff suggested spending on summer employment for students.

Mr. Brison said he'd like to change the tax system to encourage venture capital, referencing Ireland as an example.

Mr. McCallum said we need to get banks lending again. I didn't quite hear everything he said, and think he simplified that a lot as was necessary for the time allotted. IMHO that's a pretty detailed and complex topic to get into in this context.

A question asked Mr. Ignatieffwhat he'd do in his first 100 days if he were PM on Monday. He joked that part of the question sounded pretty good. He simplified his answer to 3 points:
  1. Tax cuts for low- and medium-income workers, and a possible one-time-only income boost
  2. Changes to EI including a reduced waiting period, faster claims processing and equality of qualification across the country
  3. Shovels in the ground, by spending 80-90 hours/week on the phone to every mayor in the country to find out what they can spend right now. Halifax mayor Peter Kelly was in the back of the room, and joked (I think) he had a $1.2B list for him.
One of the last questions asked if he still supported the coalition. He replied "my position is still coalition if necessary, not necessarily coalition." He said he would not compromise the unity of Canada or his liberal values, and re-iterated the Joe Howe quote "What is right? What is just? What is for the public good?" He said he wouldn't dismiss the coalition as an option, saying Mr. Harper had acted quite unpredictably and against the public interest by pulling $6B out of the economy instead of stimulating it.

My interpretation or opinion is he genuinely wants to keep his options open, and wants to see the budget before making any decision.

Budget, election, coalition? More fretting.

I think may be right about a federal election this year. Even if the Liberals support the budget, Mr. Harper will be aggressive in parliament proportional to the Conservative poll numbers. Eventually he will introduce a confidence measure with a poison pill, and the government will fall. The further in the future, the less likely the Governor General will look for a coalition. That leaves the only way to avoid an election in the next 18 months is the Lib/NDP coalition real soon now. But at what cost to the Liberals?

Three things could happen:

1. Liberals support the budget. I agree with Ms. Hébert, it looks like the very things the Liberals are calling for such as infrastructure, spending rather than tax cuts and some love for EI may be omitted from the budget. Instead I expect tax cuts, which I personally oppose (I prefer the CCPA plan). It would be very difficult to express confidence in a budget which proposes the opposite of your position, and also difficult to have people believe your confidence is sincere.

2. A coalition forms. The GG calls Iggy and asks if he can govern. If he refuses, an election is the only option left (see #3 below). If a coalition takes power, they'll face unrelenting criticsm of how their spending failed to create anything but a bigger deficit. The newly-jobless will soon wonder if maybe corporate tax cuts might have created more jobs. The Liberal spin could be "it was either this, or an election - the GG perfered the coalition, it was her call not mine".

3. An election is called, and it's blamed on the Liberals by the Conservatives (for defeating confidence - and that NO budget could've satisfied the power-hungry opposition) and the opposition (for not pushing the coalition). I can't find any polls for 2009 yet, but I wonder if Iggy as leader has changed the numbers much yet. I expect some anti-Dion votes to return, and possibly some soft Conservative votes to choose Mr. Iggy over Mr. Harper. I think the best Liberal spin on this would be "it was either a coalition or an election, confidence was not possible - it was the Conservatives who forced this election, and at the worst time".

3a. Liberal minority. Iggy seems to be doing better in Quebec, and the spending vs. tax cut battle could shift some Ontario power to the Liberals. They could probably govern with a minority better than the Conservatives. 'Nuff said.

3b. Conservative minority. Another waste of election money while the economy continues on its laissez-faire path. However, Conservatives would have to take the blame (or credit) for economic conditions - it would be hard to blame the opposition in this case (but they would anyway, for the interruption).

3c. Conservative majority. AHHHHHHHHHHHHHHHH! My minds eye is blind. Fortunately, I think this is least likely of #3.

I think #1 is least likely, but that's for Mr. Harper to decide. If he governs like he has a minority, he could introduce an acceptable budget. I won't hold my breath. What's in it for Mr. Harper? Another dysfunctional minority and less Liberal support than before (I hope). If he believes there is no solution for the economy and he'll take the blame for it anyway, he might as well try to get some things done that fit with his ideology and ignore the economy (but don't make it so obvious this time).

Of #2 and #3, it's too hard for me to say. But these are the choices for Mr. Iggy. If he thinks he can win a minority after considering the impact of triggering another election, that might be his best outcome - but the risks are #3b and #3c (ACK!). Otherwise, I expect #2.

(BTW, I just can't resist typing 'Iggy', and now I type 'Mr. Iggy'. The shorthand is literally irresistible)

Tuesday, January 6, 2009

CCPA Stimulus ideas

The Canadian Centre for Policy Alternatives has a pretty good report here (pdf). Runesmith has a good post on it.

An EI boost seems like a good idea, people aren't likely to just save that money if they're unemployed. Further, if more people keep their jobs than expected (say, due to other stimulus) there will be fewer EI applicants, right?

Similarly, help for poverty action, low income seniors and the working poor would be spent not saved. And those people would need help the most.

I really like the Pension Guarantee Fund idea. I expect anyone close to retirement might be pretty worried about their pension now, making an excuse to cut their spending. Further, if a pension fund fails it sends a BIG message about lack of confidence in the economy. It's the same situation for retirees with RRSPs, but I don't see how you could help boost RRSP value except through general recovery of equity values. Anyway, if someone does retire it potentially opens a job for a replacement.

Affordable, green housing and renovations for seniors would directly stimulate the construction industry to offset any decline due to residential mortgage difficulties. And I think there is an increase expected in the proportion of the population as seniors, so this would be a good time to invest ahead of that trend.

Even if infrastructure doesn't provide the stimulus we all hope for, it still makes sense to buy it while it's cheap. As well, there have likely been many technological advances (green and otherwise) since the last infrastructure build out that should be of advantage now, whether in cost, quantity or quality.

Tax cuts would only help those who're paying tax, which are the most likely to save any extra for a rainier day. Specifically I think past GST cuts weren't much of a stimulus; more of the same won't be any different.

Questions, suggestions for Iggy's tonw hall?

Or suggestions for me, like things to pay attention to, maybe for later blog fodder. I'll be attending his town hall on Thursday. Feel free to offer some comments below. I'm new to politics, I've never been to one of these. Mostly I want to listen to his reactions from others; I hope their ideas are better than mine. I've been spending my idle time over the holidays thinking about stimulus, and honestly I come up short. Another post, perhaps.

I don't expect to learn much that isn't already known. This wouldn't be much of an opportunity to announce anything new, I think.