Sunday, November 29, 2009

a home for Bill 44 refugees?

Chris LaBossiere has resigned from Dave Hancock's constituency association board of directors, as well as from the board executive. Like most of us in Edmonton's southwest, Chris sees Dave Hancock as a good guy personally and the problem is not with our MLA so much as with the governing party in general. This resignation seemed to be some time in development, and since we are both in Edmonton Whitemud, I gave him a call earlier this month to get an idea of where he was at politically and what sort of stance he intended to assume towards the Wildrose Alliance. My thinking is that he should come out to a Wildrose Edmonton Whitemud event to see if he would feel at home with Edmonton-based Wildrosers and see if local Wildrosers would in turn feel at home with him. This is not to suggest that Chris ought to be considered some sort of celebrity but rather to exhibit a spirit of open invitation that ought to be extended to every voter in the riding. Although Chris has expressed no interest to date in serving on the Wildrose Alliance constituency board, there are a number of former PC board members who have expressed an interest in serving on the Wildrose board and these situations have to be lightly managed against the possibility that some politically active people are looking to become bigger fish by virtue of jumping to a smaller pond.

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

federal Tories stand behind HST

From the Globe and Mail:
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. ...
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.

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:
- 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....
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.

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.

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

"pouring gas on the fire"

Can a tweet be used as a Rorschach test?

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

the top story of Alberta this decade: the "Fiscal Responsibility Act"

Daveberta is asking what "exciting" event from this first decade of the 21st century might be talked about in Alberta history books 30 years from now. In my view the top story, or more accurately the low point, of the province these past 10 years has been the sorry saga of the mis-named Fiscal Responsibility Act. I'll grant that this particular tale does not come with any exciting moments. If it did, perhaps government fiscal policy, or more precisely the lack thereof, might have captured the interest of the public such that, if the story had occured at all, it would have had a happier ending.

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

why not propose a cut on investment taxes in isolation?

There are two main reasons why I raised the issue of tax reform in my last post as opposed to just tax cuts. The first is general and strategic while the second is relatively technical and economic.

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

Alberta: land of the saver or the spender?

There was a time when the business tax environment in Alberta was one of the most competitive. Sadly, that is increasingly no longer the case, as other jurisdictions continue to modernize their tax regimes.

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

blogging internally

These past few days I've deprived Albertans and the public in general of my wit and wisdom as I've been directing my screeds at various Wildrose Alliance personalities who, in my infallible judgment, could do with some instruction and improvement faciliated by none other than the redoubtable Brian Dell, Expert of Everything and Authority on All. Satisfied that I've made appropriate efforts to edify, enlighten, and inform my political colleagues I hope to return to throwing my pearls of wisdom before the general reading swine later today or tomorrow.

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


Earlier today I attended the Remembrance Day ceremonies at the Edmonton Kingsway Legion (photos above). Laying a wreath on behalf of the province were MLAs Peter Sandhu and Laurie Blakeman. Laurie's husband Ben Henderson represented the city, while the son of federal MP Laurie Hawn laid a wreath on behalf of Ottawa. I approached Peter Sandhu mentioning that I grew up in his riding, and he is probably a good constituency guy, clearly adept at handing out lots of business cards. I also chatted briefly with Henderson, who makes a good first impression, as he left with his wife.

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.

I nonetheless continued to enjoy hanging out with the guys, and in fact have recently been living off and on in a multi-room home used by current and former 41 Combat Engineer Regiment members (last year Edmonton-based 8 FER was disbanded and Edmonton-based sappers amalgamated with Calgary's 33 Fd Engr Sqn to create 41 CER). The unit's mascot, Sapper Bentley F Beaver, is pictured below right manning the C6 while on deployment in Kandahar province.

Last year's Remembrance Day, which I wasn't in Canada for, was significant for the unit. 41 CER reservists who volunteered for Afghanistan had joined the regular force 1 Combat Engineer Regiment to serve as part of Roto 5 of Operation Athena. A number of personal friends of mine were deployed, including CS, MB, Johnny P, and Jimmy P. At 1030 hrs on 20 August 2008 MB became aware that somebody had been hit since the internet was blocked on a coms lock order. The communications lock-down gives the military time to notify next of kin. Since MB happened to be tasked to the operations building at the time, he was able to see the preliminary message that noted the hit vehicle's call sign and 3 KIA & 1 PRI A CAS. Since MB could tell that it was Jim's vehicle, which was on a route survey operation, he knew that Jimbo had been hit, although there was still a good chance he was alive at that moment since Jim was quite probably the only guy in the back. Typically, an IED blows under the driver, since although insurgents can set a pressure plate further down the road from the charge, that's a more involved process they don't typically bother with. The other 2 KIA were probably half in the turret which sometimes shears off depending on the nature of the explosion, as proved to have been the case here. As it turned out, Jim was indeed alone in the back and was likely saved by the fact the deployment door blew off, dissipating some of the force. But as a priority A casualty the military deemed Jim to be in serious condition. MB knew that, having seen that identification typically followed up in the past by a VSA (vital signs absent; in ordinary English: dead) within an hour. When MB learned where the injured soldier was being brought, he rushed out of the ops centre in order to see Jimmy for what might end up being the last time. Although Jim was not conscious anyway, MB's thinking was that if he were in Jim's position and about to go, doing so in the presence of a long time friend instead of a bunch of strangers might be some small comfort. MB was later reprimanded for acting on information that was supposed to be contained within his comms group, but of course some rules are made to be broken.

Although Jim has not made a 100% recovery, when we were in Vegas this past May he was walking around with us. We had to walk slowly to enable him to keep up with us, but he was getting around with a body that was still all-Jim. When Americans asked him why the part of his leg that they could see below the pant leg appeared to be injured, he'd say he had a run-in with a hive of bees. Fact is, the guys are not eager to talk about the bad things that happened over there with the public generally. I only mention it here because I am really just a hanger-on as opposed to one of them. At the end of August 2005 I met up with CS and some others in Ortona, Italy, for an unveiling of a memorial related to the Battle of Ortona, one of the most ferocious WWII battles for the Loyal Edmonton Regiment and the place where 1375 Canadians were killed over 8 days. You can see here some of the photos I took in the town. In the evening 7 of us ran up a tab at an Ortona restaurant and when we attempted to pay the bill we were advised that the bill would not be coming as it had been taken care of by another table. A couple of us exchanged a look with the Italians at the other table and no words in Italian or English were necessary as it was already clear that going over there to thank them for picking up the tab would have been inappropriate since they wanted it to be a thank you to us, as representatives of the Canadians who had been there more than 60 years earlier. I felt a bit of an imposter since I was really just a tourist who had teamed up with friends, friends who had been sent over to represent Canada.

The pleasant reality today is that Canadian military personnel are held in great prestige by their countrymen. When Johnny P's wife, who is a NDP organizer (CS and MB happen to be Wildrose Alliance organizers in the Edmonton area), was introduced to a union audience as the wife of someone currently serving in Kandahar, she received a welcome that would have embarrassed a hero, an illustration of how affection for the troops is non-partisan and heartfelt, regardless of one's view of the Afghanistan mission.

I'm happy CS, MB, Johnny and Jim made it back, and not just because after he came back Jim gave me a nightstand and dresser for free that are with me in this room as I type! He's a long time friend, and it would have been difficult to deal with losing another guy when the unit had just lost someone else, someone else I had hung around with, to suicide just a couple years back. The way the government has dealt with the Jim's situation, being caught in a limbo between being not quite being able to return to his job that required full mobility and being not quite fully disabled, is in need of considerable improvement. But he has the same redoubtable attitude he did before; he swears that if his mother-in-law stays with him and his wife more than a month he is going to put in for another tour! I'm not happy that life's journey has come to an end for the other 3 guys in Jim's vehicle on that hot August day. It's not that I carry the candle for them; - I'm not really entitled to as I was never there. More than a year after it happened, CS and the others continue to wear a yellow bracelet day after day marked with the names of the three. For our veterans, Remembrance Day occurs 365 days a year. Although none of us knew SGT Eades, SPR Stock and CPL Wasden really well, they not having grown up in the Edmonton area despite 1 CER being based here, today this current civilian would nonetheless like to acknowledge the service of these three engineers. You are remembered and you are missed.

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

Monday, November 9, 2009

Dave Hancock vs free trade

The attendees of the P"C" party of Alberta convention in Red Deer this past weekend helped clarify for the voters their view of fiscal conservatism, as "Several resolutions on spending controls were rejected, including adopting legislation limiting year-over-year spending increases to the rate of inflation, plus population growth..."

Could it be any clearer? The Wildrose Alliance platform contains a plank, a plank that, in my view, would be the cornerstone of the platform if associated with anti-cyclical tax reforms that would put serious (windfall revenue denying) teeth into it: "The Wildrose Alliance believes Alberta will limit growth in program spending to the rate of inflation and population growth of Alberta." This very same Wildrose Alliance plank was considered by the P"C" Party and rejected. At least they are consistent... these P"C"s are the people who increased government spending 191% between 1996 and 2008 while the population grew 34%. Plus ça change, plus c'est la même chose.

What are the stakes here? Jack Mintz does not believe that even limiting spending to population growth plus inflation will be sufficient to both avoid both deficits and higher taxes. No economist of note who has taken full account of Alberta's future demographic challenge has disagreed. The implication is that continued government by the P"C" Association of Alberta would not mean just deficits and higher taxes, but LARGE deficits and/or MUCH higher taxes.

If that wasn't enough Red Toryism for you,
Members approved a policy from Education Minister Dave Hancock's Edmonton [Whitemud] constituency association calling for the upgrading of more oilsands bitumen in Alberta by blocking shipments to other jurisdictions. The province should take "whatever appropriate action is necessary" to achieve the goal, said the resolution, including legislating that bitumen be upgraded in Alberta.
"One of the things we want out of our oilsands is to have the value here," Hancock said, suggesting the proposal is consistent with government policy. While the province doesn't like to interfere with private business, "unless you engage in some way, bitumen is going to flow down the pipe," Hancock said.

It is absolutely true that unless government "engages in some way" ("engagement" being the Dave Hancock-approved term for coercive regulation) people will freely trade. That means exporting bitumen when the price is attractive and when the investment climate in Alberta has deteriorated to the point that the corporate finance number crunchers conclude upgrader projects within the province are lower NPV than in other jurisdictions. Now the government COULD change elements of those NPV calculations by 1) reducing the marginal effective tax rate (METR) on new investment to a more competitive level and/or 2) reducing the risk adjusted discount rate by not changing energy industry policy every time the populist winds shift and/or 3) stop crowding private investment with continued high levels of government spending that inflate the cost of business inputs, including labour. Not one of these options were acknowledged. Rather, Dave Hancock's Whitemud constituency association reckons coercive, trade restricting regulation needs a place at the table, a contention that would have been of limited interest to non-Whitemud voters were it not for the fact that the rest of the convention-attending, Stelmach-supporting P"C" membership decided it would make a great policy plank for their party. BA Energy spends more than a half billion on an upgrader near Fort Saskatchewan, goes bankrupt, and the problem wasn't the escalating cost of doing business but insufficient government "engagement"? Perhaps Hancock's idea of "engagement" also includes a massive corporate welfare scheme that would send billions of taxpayer dollars down the rat hole. After all, if they can find billions for boondoggle carbon capture projects, surely they can find billions for boondoggle upgrader projects that would create more carbon to capture! Of course, these upgraders will also suck so much juice from the grid we'll need a massive new power transmission line project... you see how it all fits together?

If the government is not going to allow the private sector to export bitumen, are they going to allow the private sector to give out-of-province investors a return on investment? If Hancock can't tolerate gooey black stuff "flowing down the pipe" how is he going to keep his paws off an actual cash flow? Longtime readers of this blog know that I'm a frequent critic of the Prime Minister and what I see as a "firewall" mentality. But if there has to be a wall, I'd take Harper and Ted Morton's mostly symbolic social "firewall" around Alberta over Dave Hancock's economic firewall any day of the week and twice on Sundays. It is the expectation of being able to eventually take out a return on investment that creates the confidence to put the initial job-creating, economy-building investment in.

At the 2010 P"C" Party AGM, perhaps the Edmonton Whitemud P"C" constituency association will propose that the government take "whatever appropriate action is necessary" to ensure Albertans consume Alberta-grown bananas. Mr Hancock could explain that Albertans want "to have the value [of banana production] here." Indeed, Albertans might have to go without any bananas that aren't home grown because foreigners decided not to trade with us after we are refused to part with our bitumen (we'll trade you some worthless stuff we Albertans don't want instead... what? not interested?) If the government does not "engage in some way," you get all these free traders influencing production and investment decisions, and that's apparently just too much to bear for Dave "give me my financially and environmentally dubious upgraders" Hancock.

Thursday, November 5, 2009

Dave Taylor vs Mel Knight

Dave Taylor challenged the provincial Energy Minister quite effectively in this Youtube clip from Question Period, IMO. Sadly, the government is in fact notorious for using taxpayer money for promoting what many observers believe are partisan ends.

I would like to see an opposition member stand up to challenge the government on why it is bringing back a retail bond program when it was terminated in the 90s because of its cost to the taxpayer relative to wholesale issuance, but the topic is probably too arcane.

new Alberta poll? PC 34 WRA 28 Lib 20 NDP 9

and 8% interested in voting for a provincial Green Party that does not currently exist as far as Elections Alberta is concerned.

I put a question mark after "poll" because the National Post seems to have pulled the story and I don't see it on either the Calgary Herald's or on Environics' website. Maybe there is some sort of problem with it. Intuitively, though, the poll results are plausible because it would be consistent with the fact the ferocious growth in the Wildrose Alliance membership rolls tapered off only moderately after the cut-off date for leadership vote eligibility passed. Anecdotally, whereas some of my direct friends just joined the party in September, by the end of October some friends of those friends were joining.

It's close to the point whereby we could run the proverbial monkey in a riding like Calgary West and get him elected under the Wildrose banner; if the party is 4 points ahead of the PCs Calgary-wide, it is probably a comfortable gap in the western and southern 'burbs. If we have any truly safe ridings it will free up some resources for long shots.

In Edmonton, it is PC 33%, Liberal 27%, WAP 17% and NDP 13%. We probably need to get that 17% to 20% to win a seat, as that would probably also imply a drop in PC support to 30%, and from 10 points behind across the city there ought to be an idiosyncratic riding we could scoop in a three way split with the Liberals à la Glenmore; e.g. the to-be-created one that I expect to be centered on the South Commons area. Indeed, the capital city strategy I am championing is to go after the likely-to-be-split Edmonton Whitemud riding with a one-two punch, the first being to run a fiscal conservative in the open municipal Ward 9 next October (which overlaps almost exactly with the current Edmonton Whitemud provincial riding), and then run that sitting alderman (who, having won, will have proven him or herself to not be some unelectable nutbar as well as a hard worker and/or fundraiser) over some of the same territory provincially in 2012. Our Zone Director is a fan of the idea that 2012 candidates should be fished for in the pool of civic 2010 candidates who, even if they didn't win, proved that they can campaign and win some votes. I don't think I am giving away too much strategy here because, aside from the fact this is just me talking as opposed to a directing group of Wildrosers, what is the competition going to do? Run a lefty in Ward 9 in order to try and shut out fiscal conservatives from city council? They couldn't have run a better insurgency than Iveson in 2007 yet if you overlaid the 2007 polls over the new Ward 9 territory, Iveson would have lost to Nickel. I'm also talking about this in order to ask Edmonton area readers who want evidence-based policy and more professional government to keep in touch with me so that we can work together to realize a common objective.

In any case I am currently organizing in Whitemud for the Wildrose Alliance and looking to welcome all assistance. The PCs may try to put Hancock up against our best candidate in Whitemud's successor ridings and thereby try to shut us out with a cabinet name, but Hancock is probably stuck to where he lives, meaning we should be able to side-step him in favour of PC and Liberal competitors who are unknown and/or sporting a thin resume and/or unwilling to door knock for weeks and weeks. I can't see their candidate recruitment prospects as likely to be stellar in the current environment.

As implausible as it sounds to overcome the governing party in Edmonton, keep in mind that the NDP has just 13% in this poll and won just 18% within the city limits last year yet hold not one but two seats. I suspect that the party whose support is most unfavourably unconcentrated across the city is the Liberals.

Wednesday, November 4, 2009

Democrats win upstate New York seat after all

My last post looks somewhat misplaced, since contrary to PPP's usually accurate polling, the White House has reason to cruise around and celebrate the result for NY-23 (not so much for the Governor races). In hindsight, the Republican bowing out in NY-23 and throwing her endorsement to the Democrat was probably big enough that once it sunk in a lot of voters concluded that the Conservative Party insurgent, Doug Hoffman, was too ideological and not enough of a native son (more than 95% of Hoffman's financial contributions came from out of state). There is a good chance that the Democrat will be ejected in 12 months as the Republican party puts some more deliberation into its candidate selection for 2010 House elections. In the background is the fact that that Obama's net favourability is running at 80% in the northeast, as per DailyKos' polling (below), versus -40% in the south:

The real prize was not this House seat anyway but is the Florida Senate seat that opens in 2010. Marco Rubio's conservative insurgency has a number of differences from NY-23, uppermost of these being that the 38-year old Rubio has considerably more charisma and connection to his jurisdiction than Hoffman. The conservatives might well have won in upstate NY had they had a better vehicle than the novice Doug Hoffman. In conservative poster boy Marco Rubio they may have that vehicle.

On another note, I have to give a shout-out to my alma mater(s): The Times Higher Education supplement has ranked the U of Alberta at #59, one of the biggest gainers over 2008, and Lund University, where I did a Masters in European Affairs, tied with the London School of Economics for #67 and claim to Sweden's best university. Hosting an outstanding graduate school in the province of Alberta is not something that just benefits students but is something that benefits all Albertans. I'll be writing more about Paul Romer and his views on education and innovation in the coming weeks, but first I will discuss the investment climate in Alberta and how bold policy moves could help a province that has been sitting on its heels in recent years regain its competitiveness.

Sunday, November 1, 2009

third party candidate may win seat in Congress

According to PPP, their weekend polling suggests that in Tuesday's special US Congress election, a New York district near the Canadian border that has elected only Republicans since the Civil War in most of its territory is about to break that trend.

By electing the Conservative Party of New York's candidate.

Newt Gingrich, who intially endorsed the Republican Dede Scozzafava instead of the Conservative candidate, switched his endorsement to the Conservative Doug Hoffman after Scozzafava withdrew this weekend saying, "she didn't want to be the margin of helping the liberal Democrat win... and I commend her for that commitment to help Doug Hoffman win." Praise for Scozzafava also flowed from Sarah Palin. Yet within hours of these remarks Scozzafava endorsed the Democrat, Bill Owens!

The Conservative vs Republican show down was characterized by some in the media as a primary that played out in the general election because a primary wasn't part of the GOP nomination process that selected Scozzafava. But if that's an accurate characterization, it's difficult to contend that Scozzafava is a team player since her reaction to losing this de facto primary was to endorse the Dem. Also vindicating the Conservatives in their launching of a competing campaign to the Republicans is the fact that both the unions (Scozzafava is married to a union boss) AND social liberals such as pro-choice lobbyists and gay marriage advocates were in the Republican candidate's corner instead of the Democrat's. It's one thing for a Republican to run left of his or her Democratic competitor socially (in fact, I think they should do it more often) or fiscally, but on both social and fiscal grounds? How many on-again off-again GOP volunteers are going to jump on-again for such a candidate? As much as people talk about wanting post-ideological, pragmatic politicians, there is a trade-off between this value and the risk of electing self-promoting candidates and a supporting political establishment that sees its power as an entitlement.

Hoffman is far from what I would consider an ideal candidate. He had a disastrous interview with the editorial board of the Watertown Daily Times and he's likely excessively ideological. But having an ideology has the merit of boosting voter participation. Running as a "movement" liberal or conservative brings in more donations (especially if it catches national attention) and new volunteers. According to PPP, although this New York district voted for Obama, the pool of likely voters this Tuesday went 51 - 43 for McCain last year. Polls conducted in September found Hoffman's support ranging between 16% to 19% but he was over 50% in a poll (by Public Policy Polling) by the end of October, a result that should greatly encourage all dark horse candidates without an established party endorsement.

Another third party candidate who is doing well but is not expected to win is independent Chris Daggett for New Jersey governor. The Wall St Journal has warmed up to Daggett, noting with approval that Daggett has advocated replacing some or most income and property taxes with an expanded sales tax. Daggett has lately been gaining in the polls at the expense of Republican candidate Chris Christie despite Christie's demagogic insistence that Daggett is a tax raiser. Says the WSJ, "Mr. Daggett's appeal has grown because he's offering voters precisely what Mr. Christie isn't: A specific plan for controlling runaway taxes and spending." Writers at David Frum's New Majority have made useful observations in the past like noting the superiority of a VAT over a sales tax, and have again contributed to the analysis by noting that the stumbling Christie campaign in NJ is what the GOP should expect when it doesn't run an idea based campaign.

As for Tuesday's developments back in Edmonton, well, we've got Canada's Youtube-nurtured sensation Justin Bieber at WEM from 4 pm to 7 pm. Your 13 year old daughter may not forgive you if this information is forwarded to her, despite the fact video and photo taking amongst the teenagers of today is so compulsive at least half a dozen clips should appear on Youtube within days. I'm sure the scene will be a picture of restraint, just like his appearances have been elsewhere!