Thursday, December 31, 2009
One of my two current house mates made a little memorial (photo below) to a guy he knew for 12 years on the main floor here at the militia house.
I didn't know the departed as well but if I could talk to him I'd say it was my pleasure to hang out with you those few times years ago and your sacrifice will not be forgotten.
The red circles were not in the original photos. I added them with Windows 7 Paint after to identify Sgt George Miok. Below is a photo of George (centre) on a 35 km march in Bosnia in October 2002 with fellow Canadians.
Sunday, December 27, 2009
Thursday, December 24, 2009
I think Harper’s Conservatives have woken up to what’s happening in Alberta and will move even closer to the demands of the Wildrose party.
- Gilles Duceppe
Duceppe also says that Wildrose's rise in Alberta polling could prompt Harper’s government to strengthen its “tough on crime” position and its opposition to the gun registry.
Swann said he's like to see an arrangement so incumbent Liberals or New Democrats run in their ridings without competition from the other party.
Monday, December 21, 2009
Sunday, December 20, 2009
I have attempted to provide more balance to this article but my edits have been reverted wholesale and I fail to see the point of extended revert war. So I would just caution you that a critical criticism of Mann's graph is that it implies no Medieval Warming Period or Little Ice Age and these phenomena are well documented in other sources. ...
Wikipedia is leftist. Even TIME's Obamaphile pundit Joe Klein grants that much. In Wikipedia one can find laughable assertions like "the question of [Alger] Hiss's guilt [as a Soviet spy] or innocence remains controversial." But it is interesting to see some recognition of this in the MSM.
Saturday, December 19, 2009
advocate for the following policies:
1) cut the provincial corporate tax rate from 10% to 3% and income tax rate from 10% to 5%, making up the difference in revenue loss with a VAT that excludes all capital inputs. ...
2) adopt an innovation agenda that draws on endogenous growth theory
3) adopt a hedging program for natural resource related revenues
Think of an activity like moving goods around in a distribution center. Goods come in from manufacturers, and then the distribution center gets them on different trucks and sends them out to stores. You could run a distribution center with 100 workers and just one forklift, and the first forklift would be really valuable for moving the heavy things.
Then you could add a second forklift and that would still add real value. You'd get a lot more done in that distribution center. But by the time you've added the 30th or the 40th or the 50th forklift, each additional forklift is really not helping you very much. So with fixed recipes for how you arrange things while you're adding more and more physical capital, you do run into diminishing returns.
Economies which try to grow by just adding more and more forklifts eventually do run into serious trouble. The Soviet Union tried to grow like that for a while with essentially no innovation but very heavy investment in physical capital. And they grew for a bit because they started out short on capital, but they rapidly ran into diminishing returns from accumulating capital.
So you have to keep discovering ideas.
the federal and provincial governments preoccupation with tax credits targeted at research and development, and relative inattention to the competitiveness of the overall tax regime, is misguided. In effect, the Canadian approach has been to give with one hand, by providing generous tax credits targeted at R&D, and to take with the other, by imposing high taxes on the fruits of innovative activity and entrepreneurship.
Tuesday, December 15, 2009
...Had the Stelmach government understood the situation, they would have gotten ahead of this by signing on to a national carbon tax (something I've long advocated, as readers of this blog would know). A carbon tax would be bourne by Canadians in proportion to consumption, and therefore far more regionally equitable than by production. As an aside to those who believe climate change is a hoax, support for a carbon tax does not necessarily mean support for the idea that climate change requires fiscal action. We have to get taxes from somewhere, right? Why not get it by taxing consumption like on sales of SUVs instead of taxing everyone's personal income? We should be taxing consumption instead of income and investment anyway. Whenever I say I support a carbon tax I mean a revenue-neutral tax.From Jeffrey Simpson's G&M column of this week:
... Stelmach has tried to impress environmentalists by throwing billions of Alberta taxpayer dollars at the boondoggle of carbon capture. Needless to say, no one has been much impressed...
The best way to spread the burden would have been a carbon tax, applied on both producers and consumers. The tax could have been collected regionally and recycled into the regions where it was collected, thereby easing Alberta's and Saskatchewan's pain.
But those governments had their heads in the sands, hoping the whole issue would subside. So they did nothing in the one area that really counts: putting a price on carbon. ...
Both are big supporters of carbon sequestration, an unproven, expensive method of lowering emissions. In Alberta's case, the taxpayers will spend $2-billion to reduce emissions by perhaps five million tonnes, which is about 2 per cent of the province's total emissions. The world sees this policy for what it is – expensive and inadequate...
no government anywhere, from authoritarian China to semi-authoritarian Russia through all the democracies of the world, believes the climate-change deniers.
Here's a quote lifted from testimony to Congress by Ted Gayer (a former Deputy Assistant Secretary at the Treasury, equivalent to an Assistant Deputy Minister at Finance Canada):
The most frequent criticism of a carbon tax is that it would be politically unpopular. But to quote Milton Friedman, I think my role is to “prescribe what should be done in light of what can be done, politics aside, and not to predict what is ‘politically feasible’ and then to recommend it.”
Economists like fiscal measures like the GST, and most other consumption taxes which would include a carbon tax, in no small part because they are simple and transparent. Yet these are the very qualities that make politicians hate them. Politicians prefer complicated and opaque taxes as those can be hiked in the future with minimal political penalty.
... economists across the political spectrum say a consumption tax may be inevitable once the economy fully recovers. ...
Like universal health care, every other industrialized country in the world already has a value-added tax (as do about 100 emerging countries). And also like universal health care, this once-taboo policy option has recently been invoked, at times begrudgingly, by many prominent Washingtonians, including ... two former Federal Reserve chairmen, Alan Greenspan and Paul A. Volcker....
“[Today] there are many more deductions and credits, which can often encourage inefficient behavior such as tax shelters,” said Leonard E. Burman, a public affairs professor at Syracuse University, about the changes to the tax system since the 1986 reform. “The ideal tax system has a broad base — few deductions or exemptions — and low rates.”
Most of the rest of the industrialized world — including, most recently, Australia — has already taken this lesson to heart by imposing value-added taxes. Unlike income taxes, which are often front-loaded on the rich, then subsequently diluted, a value-added tax is paid by almost everybody. That broad base is one of its major advantages, and why the International Monetary Fund frequently recommends it...
The value-added tax is also the darling of many economists for its bounce-a-quarter-off-its-abs efficiency. Its administrative costs to the government are generally low. It is also considered less of a drag on the economy over the long run than raising income taxes, which discourage people from saving money and thereby making capital available to businesses.
The article goes on to explain how a VAT would work.
For a more fulsome treatment, see this paper by the Tax Policy Center.
Unfortunately, the background to these US discussions is raising more revenue for the government, which is not what the object should be in Alberta. Revenue neutrality could and should be maintained in Alberta, and indeed the "left-leaning" Canadian Centre for Policy Alternatives says Ontario's HST is "virtually revenue neutral."
"Assertions that this is a tax grab have no foundation in reality," Lightman said.
"My hope would be that (this report) forces the debate away from the knee-jerk, uninformed charges we've been having towards a discussion of what is really at stake, which is a shift from income tax to consumption tax and from business to consumers."
Saturday, December 12, 2009
Wildrosers need to be able to adopt the stance of a government as opposed to a factional opposition. What do governments do? I think the HST is a good example of what governments propose and protest parties oppose. The only party in the House of Commons to oppose the federal HST enabling legislation is the NDP, a party that Canadians in general do not see as a government in waiting. John Manley, a former deputy prime minister of Canada, president-designate of the Canadian Council of Chief Executives, and my favorite of the 4 ministers I wrote memos to during the years I worked at Finance Canada, penned an op-ed in the Globe and Mail saying Liberal leader Michael "Ignatieff made the right call on the HST." What if Wildrosers called for a 7 point cut in Alberta's corporate tax rate and a 3 point cut in the income tax rate, funded by the introduction of a provincial 8 point harmonized VAT (i.e. a 13% HST)? The cries would sound about what elitist chamber-of-commerce types the Wildrosers are. But to make that charge is to imply that the Wildrose Alliance is not amateur, and right now the PC Party's biggest problem is the perception that they are amateurs. The contrast alone would be enough to preclude this line of criticism.
For an alternative, consider a call for a national securities regulator. The John Manleys of the country would waste no time indicating their support for a measure that both the executives of corporate issuers and professional asset managers have been calling for for years. It would be putting sound policy ahead of the vacuous spectacle of playing the anti-Ottawa card.
If Wildrosers are serious about going down the populist road, then why not just call for the elimination of all the civil service positions that provide policy support to the government? I mean, who needs them when we can make policy just fine without professional input? In reality the analysts in various government departments can explain how a lot of simple, easy to understand policy ideas may not produce simple, straightforward results because of a whole legion of factors that are difficult if not impossible to appreciate absent a large staff of researchers and analysts like those available to the ministers of various departments.
The Wildrose Alliance cannot just sit and wait indefinitely as a populist protest party for government proposals to appear that can be denounced. I would also note that Wildrosers need to give the media something to digest. Telling the media that the party will do something simple and popular that requires no explanation or expert defence is not giving the media something to chew on, which they see as their job. Telling them that Wildrose will do something that requires an expert verdict, on the other hand, does give the media something to do and will give the pundits something to defend. If these pundits are not defending you, they will be attacking you.
Before Wildrosers adopt the stance that global warming is a hoax or that base MLA salaries are the province's biggest problem, the question should be asked are these the sort of things a protest party would come up with or an actual government? Governments do things on the basis of industry or consultant advice that ordinary people have a hard time appreciating all the time. But that's what ordinary people elected them to do: make unspecified-in-advance detail decisions within a specified-in-advance philosophical framework. Wildrosers and Liberals could both propose identical tax reforms in detail but the electorate would receive them entirely differently because of primary interest to voters is the philosophical stance of the party, the context in which the detailed proposals are arising.
Having established a philosophical framework around fiscal conservatism, the Wildrose Alliance needs to a plank or two that is superficially unpopular but sound upon explanation, argument, and evidence. This is the ticket to being taken seriously.
Friday, December 11, 2009
It is also worth noting that Angus Reid confirms Environics' finding that NDP support in the capital city is down from the March 2008 election. Where have the 6 or 7 points the NDP appear to have lost from their 18% election share gone? Presumably to David Swann's Liberals, yet Edmonton Liberal support is also down 6 or 7 points relative to 2008 which means there may be a lot of Edmontonians who voted for Kevin Taft's team who are nonplussed with David Swann's group. That's something that makes a lot of sense to me, since while Kevin Taft and his talk about excessive PC spending led me to view him rather positively, I don't identify with David Swann at all.
The crosstabs are often the most interesting part of a poll. The province-wide breakdown for those in the $100K+ household income bracket is Wildrose 46%, PC 30%, and Liberal 16%. Given that the average household income in Edmonton Whitemud is $132K (and that is back in 2005), this may explain why our organizing in Whitemud has been so successful. I mean, look at this, Angus Reid has the Liberals in 2nd place after Wildrose in all demographics in Edmonton and for the six figure crowd (albeit province-wide for this tab) it is a 30 point gap, 46 to 16. The Edmonton Whitemud nomination for Wildrose is going to be hotly contested!
Besides Wildrose doing especially well in the rural south while the Alberta Liberals are quite weak in the rural north, the other crosstab of note is that Wildrose support skews noticeably older, with the Liberals skewing the other way (the PCs are inbetween on this tab, as on many). This is consistent with my experience on the ground and I have to admit I have been wearing out my welcome with a few older Wildrosers as I try to shove young, university educated people (uni grads being another demographic where Wildrose is weak and the Libs strong, with the Liberals running 8 points ahead across the province in this group according to this poll) to the front of the line. The mentality of the people on constituency association boards, on the provincial executive, and surrounding the leader is going to set the tone for the party as a whole, and accordingly I think the party needs to actively work to avoid adopting stances that preach to the choir. Environmentalism is a lot more popular with people of Danielle Smith's age and younger than those older, and I hope that older Wildrosers understand that there may be more to gain by expanding our foothold with 20 and 30-somethings than by messaging to older Albertans whom Wildrose has already won over by an absolute majority according to Angus Reid.
While I appreciate the idea of running up the score on favourable ground, my experience of politics has been that returns on investment decline after a certain point such that, for example, trying to shake the third round of votes off a tree is tough going because we are talking about fruit here that doesn't give up on the old branch easily. Find another tree and give it a first time shake. An effective shake means understanding what the tree is about and what makes it grow. I believe older Wildrosers are more than willing to cooperate so long as younger ones explain themselves (and the strategic value of bringing in their colleagues to positions whereby they could influence the party's stance) instead of just getting pushy and demanding with the old guard. In any case, whether new to the party or old, I would think most Wildrose Alliance members understand that the party is in the position it presently is because of one reason above all others.
Wednesday, December 9, 2009
The facts are that the benefits of spending billions on carbon emission mitigation are unproven. Responsible fiscal policy means conducting a cost/benefit analysis with respect to programs and why spending on carbon capture and sequestration (CCS) gets a free pass here is beyond me. By how many fractions of a degree will the average temperature in Alberta be lower in 2050 for every billion of taxpayer dollars spent on CCS and how is that better for Albertans? If this is about helping Maldivians why are there no studies comparing the cost effectiveness of spending billions on CCS with spending billions on foreign aid to the Maldivians to help them adjust to climate change? Of course, there is a good chance we have not seen a cost/benefit analysis because climate cannot be reliably predicted.
As the BBC observes, "for the last 11 years we have not observed any increase in global temperatures." Climate scientists are acknowledging that their models have failed to predict the stability in temperatures that the planet has seen over the last decade. One wonders if this outcome should really be so very surprising when, as a writer in the UK Telegraph points out, "world-ranking physicists such as Professor Richard Lindzen of MIT and Professor Will Happer of Princeton have been arguing... that the models are fatally flawed because they do not take proper account of all sorts of other factors which play a key part in shaping the world’s climate..." Britain's Met Office estimates the odds of a 10 year global temperature stall happening by chance variation amidst a genuine warming trend to be 1 out of 8. Especially telling is this conclusion by the Met authors: "The simulations rule out (at the 95% level) zero trends for intervals of 15 yr or more." In layman speak, this means that unless temperatures move up by 2013, the hypothesis of global warming should be REJECTED by those whose approach to the subject is evidence and science-based as opposed to faith-based.
The head of the IPCC, Rajendra Pachauri, says that the Alberta oil sands should be shut down. Alberta politicians cannot have it both ways here. If they are going to take Danielle Smith to task for not accepting the IPCC's work uncritically, then they should either accept this call to close down the oil sands or explain why they are cherry picking recommendations.
From an economist's perspective, people should be focusing on stopping methane leaks from refinery equipment since methane has a much greater greenhouse effect than CO2.
The real problem here is not the consumption of carbon products but consumption in general. Hence my advocacy of general consumption taxes. There are a legion of strains on the environment, of which carbon levels in the atmosphere are just one, and one whose harm to the environment is dubious. As I've noted before, according to Nature magazine,
The Palaeocene/Eocene thermal maximum, 55 million years ago, was a brief period of widespread, extreme climatic warming that was associated with massive atmospheric greenhouse gas input. We show that sea surface temperatures near the North Pole increased from 18°C to over 23°C during this event.
That's right: more than 23 degrees above Celsius at the north pole. Yet the world kept on turning.
Friday, December 4, 2009
Shouldn't the emphasis be on creating a better environment for companies to take the risks they need to develop the resource as cost-effectively as possible? This is what would benefit Albertans in the long run.
Once again, the musings of the Alberta government smack more of populist politics than they do of robust, long-term economic policy.
Sunday, November 29, 2009
If Chris had finally just had enough of the governing party's economic and fiscal management, or more precisely the absence thereof, he would be an easy fit with the Wildrose. But if the primary reason for his defection is Bill 44, that is a more difficult, and some might say more interesting, question. The facts are that in the midst of a leadership race with someone who wore his social conservatism on his sleeve, Danielle Smith went to Nanton, arguably the heartland of Alberta social conservatism, to say
We didn't need to come through with a parental rights clause. The concern they have is free speech. They already know they had the right to pull their kids under the School Act. Now parents are concerned that if a student brings up a subject, that student or teacher could be hauled up on charges. Teachers have a lot to worry about without the Human Rights Commission. There was frustration by some parents that some basics are not being dealt with enough. We don't deal with it by giving an unelected body of bureaucrats the power to control it. We should be addressing it a different way.
If anyone needed evidence that Danielle does not pander to win votes, criticizing the opt-out clause at the time and place she did is it. Her position on Bill 44 is in line with that of the Sheldon Chumir Foundation, which takes its name from a former Liberal MLA.
Based on these facts alone, one could argue that the Wildrose Alliance is a proper refuge for Bill 44 refugees. But I think this could lead to a misunderstanding, a misunderstanding akin to the confusion that sometimes exists between left/liberalism and libertarianism. Just because the Wildrose Alliance is unlikely to be leading the charge on social conservative issues, that does not mean that the party is likely to aggressively advance a socially "progressive" agenda. The party's primary concern, at least as I envision it, is professional, accountable administration and conservative management of financial and economic affairs. If one considers the mountain of material that goes from the Assembly or the cabinet to the Queen's Printer, the Bill 44 opt-out clause is a small drop in a very big bucket.
If Chris had ever taken issue with section 3 of Bill 44, like the Sheldon Chumir Foundation has, in addition to the opt-out clause, that would be revealing. But he's avoided describing himself as "libertarian" to my knowledge and in my phone conversation I recall him expressing a concern that Danielle Smith may be "too corporate." If Chris kept his Facebook wall feed, amongst other things, private I would keep that remark confidential, but he seems to be as open as I am when it comes to political opinions. "Too corporate" suggests to me the sort of perspective that takes as its starting point a skeptical view of accomodating business interests. It implies that business is, on the most general or fundamental level, bad, but can be good in a controlled environment. This contrasts with the view, a view held by most economists, that business is, on the most general or fundamental level, good, but can be bad in an uncontrolled environment. I suspect Mr LaBossierie would insist that he is not as anti-capitalist I suggest here. But the immediate context in which his resignation has occurred is Ken Chapman's Reboot Alberta weekend, an event generally styled as a conference for Alberta "progressives." Dave Cournoyer was a big booster of Reboot Alberta and I am a big fan of Dave's. Fact is, concerned citizens like Dave make this province more dynamic, diverse, and, dare I say, democratic. But Daveberta and I do not see the world, what's wrong with it, and what the solutions are in the same way. Dave was a strong backer of Don Iveson's city council campaign and since his win over Mike Nickel, Iveson seems to have been urging the city to spend more taxpayer money at every opportunity.
The bottom line is that I see Chris LaBossiere's resignation as a bellwether of Albertans' increasing sense of alienation from all three traditional political parties. While Wildrosers position themselves as an answer to this, a successor system would still have to have at least two parties, not just the Wildrose Alliance. I see the Wildrose as a modernization of the centre-right, and it would be unhelpful to democracy for Wildrose to try to accomodate the centre-left as well. Albertans deserve a quality, left leaning political alternative with which a party like Wildrose competes respectfully and professionally. There is a difference between laudable post-partisan ideals and unrealistic post-party idealism.
I think Chris did the right thing in any case. One of the reasons I take a hostile tone whenever I communicate with Ken Chapman is that I think Ken is having it both ways when he calls for change and more idealism while remaining tied into the cynical old PC party network. Either **** or get off the pot.
If one were to take away just one thing from this latest resignation, it is that the Progressive Conservative party is neither progressive nor conservative. If the party were called what it is perhaps it would be known as the Alienating Alberta party.
Friday, November 27, 2009
The federal Conservative government will introduce legislation next week on which Ontario and British Columbia's plans to harmonize their sales taxes will stand or fall, delivering a powerfully problematic ultimatum to Liberal Leader Michael Ignatieff.
What's interesting here is that, contrary to the conventional wisdom that a tax reform that increases the visibility of a tax (e.g. from taxing business to taxing consumers) can only be realized by running away any sort of vote on the move, Harper's Conservative government appears to be standing firm.
As a Tuesday G&M article pointed out, "It was [federal Finance Minister Jim] Flaherty who began pushing the Premier [of Ontario] to adopt harmonization when the Conservatives came to power in 2006." I was working in Flaherty's Finance Department at the time and knew that harmonization was very popular amongst the economists there, which shouldn't surprise anyone since the HST is popular with economists and think tanks across the country.
According to Jack Mintz of the U of Calgary's School of Public Policy:
The 2009 Ontario Budget is a historic watershed in tax policy for the province. Both sales tax harmonization and a competitive corporate income tax rate will confer substantial benefits to Ontarians for generations. The marginal effective tax rate on capital investments in Ontario will be cut almost in half, leading in the long run to a 20% increase (equivalent to $47 billion) in capital investment, the creation of an estimated 591,000 net new jobs, and an increase in the annual incomes of Ontarians of as much as $29.4 billion.
If I might make an aside here, I would direct readers to a finding in this report that the 2009 METR in the USA is 26.9% versus 19.5% in Sweden. Having lived in Sweden more than a year I've long told anyone willing to listen back in North America that they have a false understanding of the Nordic countries if they think that the success that those countries enjoy as societies follows from taxing businesses. In fact I never detected the sort of anti-corporate sentiment in Sweden I routinely encounter in Canada. What Sweden, Denmark, and Norway do have is a 25% VAT.
Mintz is, of course, not alone. The Fraser Institute's economists addressed the situation in BC, saying:
Finance Minister Colin Hansen took a bold step in announcing that British Columbia will harmonize its sales tax with the federal Goods and Services tax. ...Exhibit 18 of a November 23 report released by Ontario's Competitiveness, Productivity and Economic Progress task force is titled "Most HST myths do not stand up to scrutiny." The task force, chaired by Roger Martin of the U of Toronto's Rotman School of Management, notes that:
Unfortunately, British Columbians will likely be exposed to many faulty objections and misperceptions regarding the HST over the coming weeks and months by those seeking to derail this reform.
- In Atlantic Canada, [post-harmonization] prices on all items fell by 0.3%
- Competition will prevent [gouging of consumers] - that was the experience in Atlantic Canada
- Increased revenue from the harmonized sales tax is matched by reductions in corporate and personal taxes and by tax credits. The effect is revenue loss [to the government]
A 2007 study by the CD Howe Institute found that "annual investment in machinery and equipment in the harmonizing provinces rose 12.1 percent above trend levels in the years following the 1997 sales-tax reform."
A January report by the National Bureau of Economic Research argued that globalization is making it harder for national governments to tax income and recommended that taxes be shifted more towards a consumption base.
The Cato Institute has said "Switching to a consumption based tax holds the promise of spurring greater economic growth and vastly simplifying the federal tax system."
In September California's Commission on the 21st Century Economy recommended "the elimination of the 8.84 percent corporation tax" saying a VAT-like " business net receipts tax (BNRT) would serve to replace these revenues." Back in July, I noted that "California has a higher corporate tax rate than average, and corporate tax revenues are significantly more cyclical than either income or consumption taxes." The Commission's report addresses this very point saying their proposed BNRT "will allow the state to reduce its dependence on other more volatile taxes – specifically, the personal income tax and the corporate income tax." While the BNRT is not as close to a HST as it should be (Charles McLure of the Hoover Institute says it would be more efficient if piggybacked on a federal VAT) Governor Schwarzenegger said if the Commission's recommendations were contained in a bill he would "sign it immediately."
Unconvinced? Read the summary that the Institute of Chartered Accountants (ICA) of British Colombia has written about the HST and all of the "Institute Links" and "External Links" available here. Richard Rees, CEO of the BC ICA, laments that this "more modern and investment-friendly tax" will not get a fair shake because "Good public policy does not always equal good politics."
Some conservative critics, such as the Economist, say that "... a broad consumption tax, such as a value-added tax... is economically efficient, but could too easily become a politically convenient way to vacuum up more money and expand government." A carbon tax would be preferable, says the Economist. A carbon tax may indeed be preferable, but there is considerable evidence that the Economist has the politics wrong here. Stephane Dion's proposed carbon tax went over like a lead balloon in Canada in 2008, while now in 2009 Stephen Harper's government has dared Dion's successor to kill the HST. Bruce Bartlett, a former Treasury Department economist (yes, we former national finance ministry economists have to give shout outs to our kind at every opportunity), has done some great work on this, noting that "the VAT is probably the ideal tax from a conservative point of view." Bartlett addresses the sort of argument advanced by the Economist in this New York Times piece:
Those countries that adopted the value-added tax since the end of the great inflation, however, have been very restrained in raising rates....Bringing the HST to Alberta by using it to fund a serious chop down in the statutory corporate rate (say, from 10% to 2%) would be opposed by the usual right-wing suspects who would demand that a tax cut not be accompanied by a tax increase in another area. But these people are penny wise and pound foolish because if revenues are not raised through a consumption tax they will inevitably be raised by taxes that attack investors and will be far more harmful to the economy. We've already seen this happen with stubborn resistance to a national carbon tax (which would have gone after consumers and thereby been paid by Canadians across the country) having led to a legion of calls for inefficient producer-whacking measures (which would disproportionately hit Albertans because the producers are here), not to mention colossal boondoggles like billions for carbon capture schemes.
me and other conservatives [have] conclude[d] that starving the beast simply doesn't work anymore. Deficits are no longer a barrier to greater government spending. And with the baby-boom generation aging, spending is set to explode in coming years even if no new government programs are enacted.
Once the sorts of studies that were done of investment and price levels in Atlantic Canada post-harmonization have been published with respect to BC and Ontario, a December 2009 decision by Michael Ignatieff's Liberals to support the government's HST enabling legislation may be remembered as the day their party dodged a bullet.
Wednesday, November 25, 2009
Just saw da premier making a speech. Dat was quite a speech. Dem media better report it right.
Is the above
A) a light-hearted and lightly deliberated jab at Alberta Premier Ed Stelmach's notorious butchery of the King's English and his claims of media bias
B) an insult directed at Ukrainian Canadians
C) an insult directed at Edmontonians courtesy of "Calgary oil execs"
D) both B and C
According to Paula Simons of the Edmonton Journal, the correct answer is D.
Now perhaps no one should be surprised at Ms Simons' perspicacity here. After all, there are plenty of people who (at least claim to) see the malign agenda of corporate interests at work in the most banal of headlines. But surely when Simons subsequently fires an accusatory tweet off to (not even the original tweeter but) Wildrose Alliance leader Danielle Smith for "pouring gas on the fire" of intra-provincial tribalism, even we Edmontonians realize that we have received one too many invitations to take umbrage at Premier Stelmach's political competition.
It was Ed's partisan people who invited the media to make an issue out of a remark by someone who had a small handful of Twitter followers and conclude that although the premier himself is the very picture of magnanimity, Ukrainians as a people would be remiss to let this "offensive Twitter post" just slide quietly into the forgettable and forgivable realm of the deleted and apologized for. In a display of their skill in media relations, the premier's office easily advanced simultaneously the contentions that there was an insult, that it mattered, and that is was directed at both the premier personally and at an ethnic group. These political pros, however, knew that they would have overplayed their hand to further suggest the Edmonton-injuring machinations of some Calgary cabal behind this tweet. Having actively campaigned as a politician myself last year, I am more than aware of how unconscious people can be of when their buttons are being pushed by the peddlers of identity politics, but Edmontonians might well be too worldly-wise to not ask themselves if Ms Simons shouldn't be directing her "pouring gas on the fire" finger wagging at the mirror.
For months now the Edmonton Journal's unsigned editorials have been beating the war drum about the impending threat to the tribe presented by "downtown Calgary" types who look down their noses at a premier who hails from the Journal's market. It would not surprise me to see these same unnamed editors in the future lament, with no sense of irony concerning what has been previously featured in their pages, that too few provincial politicians tweet or blog anything but the most guarded and spin-cycled material, never mind their staffers!
NOTE: I do not wish to suggest that the correct answer to the my opening hypothetical is simply "A". I agree with Danielle Smith that the tweet was "stupid." But there were elements of "A" here that seem to have gotten short shrift in the rush to judgmental judgment. If I had detected a belligerent streak in Stephen in my limited dealings with him to date, I would not take exception to the media picture of an uncurbed attack dog that has emerged of him. But I didn't. When someone is reasonably expected to be in the headlines routinely, an accurate picture can generally be expected to emerge as media stories written from a variety of perspectives accumulate. When someone is known for just one event or for a short period of time, however, distortions are more of danger. While I question the judgment of the party leadership re not approaching Stephen's past business associates to ask them if they thought "the accounting is just an absolute mess" before Stephen was a put on staff and, more precisely, before a Globe and Mail reporter asked, there is more to Stephen Carter than 140 characters. He has apologized, resigned, and on top of a week of negative publicity he is facing a financial crisis. Leaving aside his business dealings, which I am not in a position to come to a conclusion on, I hope that he finds honourable success in his future endeavors.
Sunday, November 22, 2009
Section 2 of the Fiscal Responsibility Act declared that there would be "no deficits" in Alberta. It also came to require that at least SOME natural resource-related revenue be saved over the course of a cycle. But the provisions of the statute were ultimately ignored every time they actually threatened to constrain government spending. In March 2004, the P"C" government of Alberta amended the Act to raise the point after which resource revenues had to be diverted to the Sustainability Fund from an already high $3.5 billion to $4 billion. It was neither the first nor the last time that the province's financial assets got the short stick. In May of 2005 the constraint was lifted from $4 billion to $4.75 billion, and in May of 2006 up to $5.3 billion.
Colin Busby, an Albertan and a policy analyst at the CD Howe Institute, noted in May of 2008 that Alberta needed "aggressive savings targets" and that “[f]ailure to meet this target will lead to a permanent decline in fiscal capacity this century,” without addressing the fact that the Alberta government had repeatedly proved an unwillngess to abide by even mild savings targets.
In 2009 the charade finally came to something of an end and the Fiscal Responsibility Act was repealed. The Act's flagship clause had specified that "actual expense for a fiscal year shall not exceed actual revenue for that year." While the continual amendments had already made a mockery of the legislation, the government realized that amending the flagship clause to add "plus any amounts allocated from" savings funds would gut the law so blatantly that any further legislation on the point had better be delivered in an entirely new package. Thus was the "Fiscal Responsibility Act, S.A. 2009" born. Dave Hancock said the 2009 moves provided "for a more flexible fiscal framework" without explaining why the old Act was introduced in the first place if "flexibility" is a goal.
The moral of this story is not, or not just, related to the observation of the Director of the U of Alberta Institute of Public Economics that "[h]ad this savings/expenditure constraint remained in place, Alberta's expenditure levels would be about $28 billion annually - not $36 billion currently." It's that Albertans tolerated symbolism over substance for years, either out of a populist predilection to take umbrage only at visceral concerns or out of a lack of enthusiasm for political engagment. Instead of behaving as a trustee or agent of Albertans, the government dealt with savings funds that could have monetized the province's natural resource wealth for the benefit of future generations as if it were the owner.
During his tenure as Liberal leader, Kevin Taft noted the refusal of the P"C" government to "rein in their massive spending" and described them as, in fact, "addicted to spending." "The Tories in Alberta are spending 23 per cent more than the average of other provinces," observed the Liberal. In January of 2008, NDP MLA Ray Martin said, "with all the spending they've been doing, I don't think the budget is going to be pretty." Less than two months later Martin was voted out of the legislature in favour of a PC candidate.
Friday, November 20, 2009
Fiscal conservatives should not be proposing tax cuts without doing so in tandem with proposals for either how the tax revenue loss can be made up OR specific program spending cuts. While spending cuts is the preferred route, the political reality is that when the government steals from Peter (the taxpayer) to pay Paul, possession is effectively nine tenths of the law meaning trying to claw an "entitlement" back from Paul after he's got it is a far more difficult negotiation (and much of politics is a negotiation) than working towards a structure that doesn't see every last request of Paul indulged in the first place.
Some US Republicans have latched on the Laffer curve to contend that tax cuts pay for themselves, and while that can be true with respect to some capital taxes (capital generally being quite willing to move to the most competitive jurisdiction), it is an overstatement with respect to income taxes ("dynamic scoring" is a more precise way of acknowledging the fact that the new incentive for economic activity post-tax cut will bring SOME of the revenue loss back to the treasury) and pretty much simply misleading when mentioned in the context of a proposed consumption tax cut.
I realize that the "starve the beast" argument exists, but this line was thrown out repeatedly while the GOP ruled the roost in Washington and last time I checked, the belly of the Beltway beast was bigger than ever. Deny the beast its tax revenue and the beast's agent may just go out there and sell debt.
Fiscal conservativism needs to be coupled with some cultural conservatism that appreciates the self-indulgent reality of human nature. Economists sometimes talk about how wages are "downward sticky." When business conditions cycle downwards, wages typically do not go down in tandem with the revenues of employing corporations. The same applies to government spending, such that creating a consensus around program cuts is like herding cats. It follows that a conservative agenda would put a stop to the "step up on the wave peaks" strategy of government expansion by demanding measures that would reduce the volatility of government revenues. Moving towards a flatter tax structure and replacing the taxation of investment returns with a broad-based value added tax would help substantially in this regard, with the clincher being a hedging program.
Advocates who are not prepared to cut programs FIRST and THEN cut taxes should not call themselves fiscal conservatives, because all they are typically doing is calling for deficits and leaving it to the next generation to show true fiscal conservatism. "Starve the beast" is akin to the notion that the best way to get people with massive credit card debt to be fiscally responsible is to cut their salary. The people who think that this would actually work have an optimism about our capacity to act rationally and responsibly that I would not characterize as conservative.
re the second reason, allow me to introduce Alan J. Auerbach. After completing his PhD in economics at Harvard, Auerbach served as a Research Associate at the National Bureau of Economic Research and was Deputy Chief of Staff to a U.S. Joint Committee on Taxation in 1992. He's also a former Chair of the Economics Department at UC Berkeley and is currently Professor of Economics and Law at Berkeley while serving as Director of the Burch Center for Tax Policy and Public Finance. Auerbach has written extensively on taxation, but of relevance here are his observations in the Wall St Journal:
... eliminating capital income taxes would do the opposite, providing a windfall to owners of existing assets. Such a windfall would not only lower progressivity... but would also substantially reduce potential growth effects.
Providing windfalls to existing capital costs lots of revenue. The revenue loss could be made up only by higher taxes on future labor income, which would reduce incentives to work.
The idea here is that if, for example, we just announce that taxes on capital gains are to be eliminated, everyone tax-resident in the jurisdiction would prepare to sell their old capital assets to buyers outside the jurisdiction and consume the proceeds in the consumption tax-free environment that continued following the introduction of the capital gains tax relief. Capital income tax relief thus has to be implemented as a package deal with a consumption tax change.Auerbach goes on to note that "A consumption tax could increase GDP substantially in the long run."
Wednesday, November 18, 2009
The latest edition of KPMG's annual International Corporate and Indirect Tax Rates Survey finds that Canada has the 5th highest corporate tax rate among the 30 OECD countries in its survey. The high corporate rate represents North America's populist disdain for the international trend towards lower business taxes and higher consumption taxes. The combined GST-PST rate in Alberta is just 5%, in contrast to an average VAT/GST rate in the OECD of 17.6% and 19.8% in Europe. It's thought that a 13% combined federal/provincial VAT in Alberta (representing a provincial take of 8%) would allow the province to not only cut its corporate rate from 10% to 5%, but cut the personal income tax rate from 10% to 5% as well. In Europe, average corporate tax rates fell every year between 1995 and 2008.
A year ago, the OECD noted that
After 25 years of gradual increase during which tax revenue from consumption taxes increased by about 4% of GDP in OECD countries, the proportion of general consumption taxes as a % of total taxation is now stabilised at around 18%. The introduction of VAT/GST as part of the tax reform process is to a large extent responsible for this, VAT/GST is now in place in 29 of 30 OECD countries. Specific consumption taxes like excise duties also have an important role to play not only as a means of collecting revenue but also as an instrument to influence consumer behaviour and, increasingly, as part of wider attempts to protect the environment. ...
No other tax innovation has spread so widely or rapidly as the VAT. In half a century it has been adopted by more than 130 countries. VAT has become the most widespread general tax on consumption demonstrating its potential to raise tax revenue in a neutral and transparent manner. The United States remains the only OECD member country without VAT...
The decision to invest is highly sensitive to the rate of return generated by the asset. Taxes imposed on businesses affect the rate of return and hence the amount of investment undertaken. While the statutory corporate income tax rate is an important indicator of how the tax system is affecting investment, it is not a comprehensive indicator. The marginal effective tax rate (METR) provides a more complete picture of the impact of the corporate tax system on the decision to invest. As one can see when clicking on the Finance Canada chart below, unharmonized PSTs (that is to say, provincial sales taxes that have not been not transformed into a value added tax like the GST) can add considerably to a jurisdiction's METR:
Elizabeth Beale, president and CEO of the Atlantic Provinces Economic Council, has noted that "There's been clear gains on the investment side and the benefits flow through to consumers," from harmonization. "It's hard for consumers to see that because, of course, they're paying a higher level of tax at the front end." In populist Alberta, when taking investment tax credits into account as well, the tax environment is quite unspectacular relative to the rest of the country and the US:
A 5% reduction in the provincial corporate rate, or better yet 7%, would make a substantive difference in Alberta's attractiveness to international investors, and if this tax relief were funded by the introduction of a provincial VAT (a harmonized PST), domestic consumers would also be encouraged to invest instead of consume, thereby contributing to the capital stock that could eventually be bequeathed to the next generation.
In March 2006, Dr Jack Mintz put the Calgary Chamber of Commerce on notice that given "continued spending at these growth rates in the next decade, Alberta will be facing a deficit by 2010".
Mintz also noted that
While Alberta might think it has a competitive business tax system - that is not the case. In the world's eyes, Alberta is far from being a tax haven for non-resource investments, which undermines the provinces ability to diversify its economy. Further, with high corporate tax rates, businesses shift their income from Alberta to low-tax jurisdictions outside Canada...
This is, of course, not the first time I've referenced Dr Mintz. During the 2008 provincial campaign (supposedly the worst time to discuss "serious issues", according to some), I noted that in 2007 Jack Mintz had observed that
[c]orporate income taxes continue to be a major source of inefficiency and unfairness in the Canadian tax system... Canada could reduce corporate income tax rates, possibly increasing revenue or at worst losing little. Compared to any other business tax policy, this is a "win-win" proposition--both government and the private sector would be better off. ... As first order of business, Canadian and provincial governments should reduce corporate income taxes.
Tuesday, November 17, 2009
There are a number of conditions under which political movements start to unravel and one of these is when members stop listening to each other. Obviously people will not always agree. But if they are listened to with an attention appropriate to objective measures of how evidence- or argument-backed and non-self-serving their opinions are - as opposed to how influential they just happen to be - most people can live with that regardless of the result. When people start leaving is when they feel their views are not being fairly considered. Another condition under which the ties that bind may fray is when some people's egos get too big. I, of course, am too humble to ever create that sort of problem!
Wednesday, November 11, 2009
It's been a long time since I did my basic training, as this photo of me to the right in the old style fatigues attests. I did not originally plan to attend the U of Alberta, since after some time in the reserves I had my heart set on military college. But when I failed the eye exam for military college, I not only had to find another university, I couldn't rejoin my unit, 8 Field Engineer Regiment, as I was advised that I really shouldn't have been admitted in the first place to 8 FER and with the transfer of decision making about the matter from the unit to Canadian Forces HQ, my military career - such as it was - was over.
UPDATE late 11 Nov:
I took a couple photos after enjoying the company of CS and Jimbo this evening. It was a rare opportunity to catch them in full dress. The Americans give out a Purple Heart medal and Canada just grants a bar on the lower shirt sleeve (left)? You'd think it was a paper cut. I also took a snap of CS' wristband (right). Earlier this year CS showed me a bit of Taliban webbing. It had verses from the Qur'an written on it in Arabic. I pressed him for information about how he obtained it but he said only that the party who was relieved of the item of wouldn't be needing it any more. His wife insists that the item be kept in the garage as opposed to the house lest bad juju descend upon the household.
When you're wounded and left on Afghanistan's plains...
- Rudyard Kipling, 1895