Brian Dell

the Wikipedia agenda: civil liberties at the expense of the facts

2012-01-18T19:48:00.060-07:00

Having returned to North America from several months in China I can only shake my head at the intensity with which the Wikimedia Foundation (WMF) finds an enemy of freedom in... the United States Congress.

The US government has been an enormous friend of Wikimedia Commons. Last year the National Archives and Records Administration contributed over 100,000 historical photographs to the Commons. So why go after a legislative body that has historically passed legislation that has been such a great boon to the public domain?

The short answer is the WMF took its eye off the public domain ball. If the WMF could convince other governments around the world to adopt the US practice of deeming the work of government employees done in the course of their official duties public domain, it would have a huge impact on the amount of free content available on the Internet. For evidence that the WMF is just not interested, look no further than the fact that, instead of setting an example by having the work of WMF staff deemed public domain, it's deemed "all rights reserved".

Over at Wikimedia Commons I've argued on multiple occasions that although the standard uploading tools direct uploaders towards licenses that range from totally free (public domain) to mostly free, the philosophy of the Commons is undermined by evaders who create their own "custom" licenses in order to add additional restrictions or, at a minimum, add language that appears to discourage free re-use. With the WMF itself being one of the offenders here, my arguments have gotten little traction in discussions that are overwhelmingly dominated by content creators who have an incentive to protect author rights at the expense of users.

Is there any chance that the WMF might support a "Keep the Commons Free" effort in the future? At the moment they are not just distracted by their so-called "Keep the Internet Free" campaign but obsessed with it to the point that the rhetorical excess they have engaged in has created a climate of fear and hysteria about supposedly infringed civil liberties.

On January 18, the Commons ran a banner protesting the anti-piracy legislation. Is this going to encourage anyone in Hollywood to ever donate something to the Commons in the future? Wouldn't a boost to the Commons just create a bigger platform for future advertising against the content industry's interests?

Also on January 18, all editors were locked out of editing the English Wikipedia. Well, almost all. WMF staff reserved the right to keep editing, and did, in particular WMF Executive Director Sue Gardner. What did they edit? A page the WMF took exclusive ownership of, with no opportunity for community collaboration in its development, and, more importantly, no presentation of dissenting views. How did they edit? In violation of community developed policies that included:

WP:Identifying_reliable_sources

- claim after claim, such as "as around the world, we're seeing the development of legislation that prioritizes overly-broad copyright enforcement laws, laws promoted by power players, over the preservation of individual civil liberties" is made with out a single footnote in the whole screed

WP:Wikipedia is not a soapbox or means of promotion
WP:Wikipedia is not here to tell the world about your noble cause

WP:Wikipedia is not a newspaper

- In the policy it says "Wikipedia should not offer first-hand news reports on breaking stories." Sue Gardner took it upon herself to advise her captive readers that "As of [update time here] PT, January 18, Google [News] has more than 4,600 articles about the blackout. Here are a few: ...."

WP:Wikipedia is not censored

- I couldn't help but notice the outrage some commentators on other websites directed at those who suggested ways of getting around the WMF-enforced January 18 censorship. No irony here if one is able to fully appreciate the "we had to destroy the village in order to save it" mentality, I suppose.

WP:Do not disrupt Wikipedia to illustrate a point

Wikipedia:Neutral point of view

- "NPOV is a fundamental principle of Wikipedia and of other Wikimedia projects. This policy is non-negotiable and all editors and articles must follow it," says the policy. We now know that there's an exception for "Wikimedia projects" that politick for "individual civil liberties" and editors with Wikimedia Foundation logins (which are only granted by the WMF). On the blackout page that the WMF monopolized Sue Gardner directed traffic towards the website of the civil liberties advocacy group the Electronic Frontier Foundation (EFF). Who sits on the WMF's Advisory Board? A former founder and chair of the EFF. Former WMF general counsel Mike Godwin used to be an EFF lawyer.

WP:Polling is not a substitute for discussion

- We're told that "Wikipedians have chosen to black out..." On what basis? A poll, and a poll of a small fraction of Wikipedians. The WMF tells us that "We are doing this for you" but "you", the non-Wikipedian reader, was never asked what you wanted. According to policy, "Elections and votes are only endorsed for things that take place outside Wikipedia proper" yet this "thing" most decidedly occurred ON Wikipedia. The WMF initiated a raw vote (in contrast with the more sophisticated preference rank sorting that personnel elections use) where ultimately the votes of apparent single purpose accounts counted for the same as that of veteran editors. When some editors attempted to steer the proceedings into more of a discussion, a WMF staffer shoved these efforts off into the obscurity of the poll's "Talk" page. That this Talk page was not considered relevant to the "community decision" as far as the WMF was concerned was further evidenced by the fact that the WMF blocked it on January 18 but did not block the poll page.

If Wikipedians have "chosen to black out" a global service and go to war with "Big media" it may be said Americans chose to invade Iraq in 2003. An ABC News/Washington Post poll taken shortly after the beginning of the Iraq war showed 62% support, higher support than for the global blackout of English Wikipedia (which was actually in the minority primarily because so many called for a US-only blackout). The fact of the matter is that the invasion of Iraq was not the culmination of a bottom-up grassroots movement. Likewise, the Wikipedia blackout was the brainchild of Jimmy Wales and the WMF. The editing community went along with it, in large part because they placed their trust in what they were being told.

The truth about SOPA/PIPA

What were they being told? That there was an existential threat to Wikipedia. Wikimedia general counsel Geoffrey Brigham did not mislead the Wikipedia community by painting a demonstrably false picture so much as by painting with strokes that went one way when it served the WMF's desire to politically mobilize the community and with strokes that went the other way when it didn't, such the picture that resulted was misleading and incomplete. He (and many other Silicon Valley-based activists) stretched the language of SOPA/PIPA to the breaking point in terms of breadth of interpretation, while simultaneously interpreting the language of the IRS' prohibitions against non-profit lobbying down to its narrowest. Had an advocate of equal standing been invited to present an alternative view to the Wikipedia community, there would, of course, have been far less reason for concern. Readers could have been pointed to Creative America's "Fact vs Fiction" with respect to the some of the provisions, to take but one example, and invited to draw their own conclusions. Instead, we get Brigham issuing a "call to action" that included directing readers to the virulently anti-Republican website Daily Kos (with DKos in turn directing its readers towards Jimmy Wales' poll). Brigham is also directing Foundation funds towards Washington lobbyists who are registered to lobby not only on "Copyright/Patent/Trademark" which is arguably related to public domain issues (I say arguably because, as I noted at the beginning of this post, there is a lot more that could be done to encourage content owners to voluntarily license their work for re-use as opposed to lobbying for the denial of legal remedies with the result that content owners are forced to allow re-use), but extends to "Civil Rights/Civil Liberties," which has no necessary connection to the definition of the public domain.

Partway throught the blackout Sue Gardner noted on the "Learn More" page (that the blackout page linked to) that the blackout page had received 90 million views and that there were more than a quarter million tweets an hour about #sopa. And just what was being tweeted? "If SOPA passes, there will be no more YouTube, Twitter, Google, Wikipedia, Facebook and many more sites you love to use!" or something similar. What happens when a lie is literally repeated more than a million times? Wikipedia, the information storehouse, played critical enabler to this massive misinformation campaign. According to Gardner, "in its current form, SOPA would require Wikipedia to actively monitor every site we link to, to ensure it doesn't host infringing content." Gardner's claim doesn't rise to the level of hysterical falsehood that the tweets rose to, but it's still highly dubious. If passed, these bills would require the search engines to put in some of the effort that Wikipedia currently puts in into avoiding links to sites dedicated to copyright infringement. Wikipedia is not a search engine and even if it was, the effort that is put in on Wikipedia to help protect copyright is more than enough to preclude Wikipedia ever running afoul of this proposed legislation. The only way Brigham was able to manufacture a threat to Wikipedia was by denying that these efforts exist, claiming that linking to the Pirate Bay is a "totally legitimate link" on Wikipedia.

This is not the case. WP:ELNEVER says that "editors are restricted from linking to the following, without exception: Material that violates the copyrights of others..." adding that "Knowingly directing others to material that violates copyright may be considered contributory copyright infringement.... Linking to a page that illegally distributes someone else's work casts a bad light on Wikipedia and its editors." Wikipedia's external links policy goes on identify "content that is illegal to access in the state of Florida (since Wikipedia's servers are located there)." If your internal constraint is to follow the external constraints imposed by the United States government, by definition the government would not be imposing any incremental coercion. The immediate response to this last point, of course, is that Wikipedians have absolute standards. To this I'd make two observations: 1) This is a moral argument, not a legal one, such that Brigham's legal opinion should be downweighted to that of the rest of us 2) Where were these absolute standards before? "Fair use" images are not hosted on the Commons, but they are on English Wikipedia. Why? Because most non-US jurisdictions are more restrictive about "fair use." Where is the protest to shut down various Wikipedias until foreign governments liberalize fair use? This has a direct and indisputable impact on the content of these non-English Wikipedias, yet they have apparently just passively accepted their legal environments.

The Left Coast Agenda

The obvious explanation for this anomaly is that the WMF has a US-centric view. Jimmy Wales insists that the anti-piracy laws would set a "precedent" for censorship yet the Attorney General can already order U.S. Internet service providers to block access to child pornography. As the Boston Herald notes, "thank goodness, Google and Wikipedia have thus far raised no objection [to that]. This week Jimbo told CNN that "this law... at least the Senate version, would include the creation of a DNS (domain name system) blocking regime that's technically identical to the one that's used by China. " First of all, besides the fact that the House dropped DNS blocking from its bill and the Senate bill will eventually have to be rendered compatible the House's bill, the Senate bill's sponsor indicated prior to Jimbo making his charge that he's prepared to drop it, saying "I regret that law enforcement will not have this remedy available to it..." When somebody is waving the white flag in my view the proper course of action is to hold fire and discuss surrender terms. Secondly, see this editorial from December 29 on the DNS issue, which I need not repeat here. Thirdly, while the rest of Wales' claim here is technically true, it doesn't have what I'd call truth value, truth value being that it would support the point trying to be made if all the facts were out there. I walk on two legs. So do the Chinese! Does anything sinister follow from that? For Wales to have an argument it would have to be the case that DNS blocking is somehow exclusive to authoritarian regimes. In fact, the Netherlands, Austria, Belgium, Denmark, Finland and South Korea all engage in DNS blocking. Where was Jimbo and the rest of the WMF earlier this month when two Dutch ISPs were ordered to block access to the Pirate Bay? Out organizing Dutch Wikipedians in order to protect their right to link? Correct me I'm wrong, but the WMF didn't so much as even put out a token press release. Did you know the dastardly Danes censor or ban over 3,500 sites? I do, but no thanks to any WMF awareness raising effort. Where was the WMF when the Sydney Morning Herald reported in late 2010 that Australia's list of blacklisted sites could increase from 1,370 to around 10,000 sites? Or when the "Australian communications regulator [] issued a stark warning that websites who link out to 'banned' hyperlinks are liable to fines of up to Aus $11,000 a day." Why hasn't the WMF complained about Wikipedia's blacklists in the name of free information, e.g. from a unanimous ArbCom decision dated 20 October 2006: "A website that engages in the practice of publishing private information concerning the identities of Wikipedia participants will be regarded as an attack site whose pages should not be linked to from Wikipedia pages under any circumstances"? Is this not censorship?

Answer: in San Francisco. As the Financial Post has reported, after former CBC documentary producer Sue Gardner became Executive Director of the WMF, Wikimedia moved to the west coast "where it would be in close proximity to the bright minds -- and big wallets -- of Silicon Valley." Today, of course, the WMF is furiously denying that these "big wallets" have anything to do with anything. Today CBS News reported that "behind the protests and public posturing, both Hollywood and Silicon Valley spend generously to lobby causes in Washington. According to the Center for Responsive Politics, the movie, television and music industries spent a combined $91.7 million on lobbying efforts in 2011, compared with the computer and Internet industry's $93 million." One of the Q and As the WMF put up on the "Learn More" page that got millions of views today was "I keep hearing that this is a fight between Hollywood and Silicon Valley. Is that true?" "No," we are told. Don't trust these mainstream media reports. We're Wikipedia and we're on the side of the angels! Never mind that there's no citation for this claim. Trust us! It's the little guy vs the Corporate Agenda; that we happen to be pushing Google's interests is irrelevant, as is the fact Google's founder bankrolls the WMF. What's particularly dodgy about this monied interests line is the fact that it would have cost an enormous amount had this colossal PR exercise been paid for by anti-SOPA advocates at market rates. That market value was created by the cumulative, collective effort of an enormous number of editors over several years, a small fraction of whom then decided to follow the WMF and take Wikipedia away from editors like me to use as they saw fit.

The Financial Post story goes on to note that "to many outsiders" Gardner's mixing of fundraising efforts with selected editors and writers of Wikipedia could create dubious optics with regard to how independent Wikipedia's content is. Not a problem, in Gardner's view. Zack Exley, the longtime leftist activist and internet rabble rouser, has the file firmly in his non-partisan hands. Gardner recently cited Exley's activist history as a likely asset in the lead up to today's blackout. For her own part Gardner joined Occupy Wall Street in November and afterwards called on Wikimedia to "copy OWS tactics." In a blogpost she recommended that readers consult Feministing and The Nation, a self-described "flagship of the left."

Given this background, was there any way to stop the WMF initiated propaganda campaign that went down this week? The one opportunity I saw for something of a correction was ensuring some balance in Wikipedia's SOPA and PIPA articles. It was announced on Monday that these would remain unblocked. Concentrating on the PIPA article, I added some of the observations of people who were in a position to have an informed understanding of the bills. I noted that US Chamber of Commerce executive David Hirschmann, who is also President of the Global Intellectual Property Center, said the talk of freedoms and censorship "has nothing to do with the substance of the bills." I added the fact that a 2009 paper by the Information Technology and Innovation Foundation (ITIF) titled "Steal These Policies" formed the basis of the current anti-piracy bills. What I didn't make entirely explicit but independent readers should know is the fact that ITIF is largely funded by Silicon Valley, not Hollywood. I added ITIF fellow Robert Bennett's observation that "[t]he critics either don't understand what the bills do or are misrepresenting what the bills do. There's sort of a hysterical climate of criticism where people are objecting to something the bills don't do and are promoting noble causes like free speech and democracy but there is not much connection between what they are complaining about and what's in the legislation."

There was, of course, still a lot of material from expert sources that were out there that I didn't have time to add before the blackout. For example, Hillel I. Parness, an intellectual property lawyer who also teaches at Columbia's School of Law, looked at SOPA/PIPA back in November and concluded that the US government could not take down a website unless it demonstrated, to a judge, that the intention of the allegedly rogue site was to "willfully" violate one or more specific instances of copyright. Parness has also debunked the notion that the government could "go after YouTube" (even though Google's internal documentation once identified Youtube as "completely sustained by pirated content" and a "rogue enabler of content theft"). On top of this, of course, is the fact that since Parness' review the DNS blocking provisions have become all but defunct.

Parness points out that the legislation proposed here does not break new ground,"Therefore, if there was a risk of abuse, that risk has always been there. And I have confidence in the structure of our court system, that the prosecutors and the courts are held to certain standards that should not allow a statute such as this to be manipulated..."

A question I ask of Wikipedians who want to use Wikipedia for political lobbying is why they have so little confidence in America's prosecutors and judges and so much confidence in the WMF. The WMF's spending has soared since 2007 and less than half of the current spending goes towards the Technology Group. According to Gardner, this blackout "open[s] the door for more advocacy."

If there is to be any pushback against the censorship hysteria that has been manufactured, it would likely come from mainstream media scrutiny, ie some of the same "power players" the WMF denounced today. Why? Because besides the fact the major papers are serious about fact checking, network TV in particular often invites two guests whereby viewers can get both sides of the story.

As one music industry spokesman said, "It’s a dangerous and troubling development when the platforms that serve as gateways to information intentionally skew the facts to incite their users and arm them with misinformation." Just because I entirely agree does not mean I'm in Hollywood's pocket.

UPDATE (January 19):

I asked Sue Gardner, Zack Exley, and Geoff Brigham if they had any corrections to this account. Mr Brigham objected to some quotes, insisting he was "joking." I accordingly removed the quotes as I had not presented them as jokes.

I've asked Mr Brigham if he sees any possibility that the IRS, in reviewing the WMF's tax status, could consider the blackout to be an "in kind" contribution to the anti-SOPA lobby (ie assess the promotion at its fair value in the online advertising market).

Yesterday RIAA CEO Cary Sherman observed that "it's very difficult to counter the misinformation while the disseminators own the platform."

I tried, Mr Sherman. I really did. Even a fat cat executive like you doesn't deserve to be effectively censored. I followed Sue Gardner's editing of the message during the blackout, noting the changes by updating the history page. But I was locked out of editing as was everyone else who wasn't a WMF person.

She owned the platform and I didn't.

UPDATE (January 21):
See Nick Poole's remarks in this comment thread of a Wikipedia blogger.

Alberta politics in downward spiral

2011-10-04T12:58:00.004-06:00

Although I could continue to blog from China if I bought a monthly subscription to a VPN service, use of Twitter, Blogger, Youtube, Facebook etc is not so essential for me that I can't just wait until I return to Alberta (probably after Christmas) or am visiting somewhere else. Given that I'm in South Korea this particular week, I will seize my chance to note how the Alberta political news that has emerged over the summer has been increasingly depressing.

To begin with the Wildrose, I've noted before that when the party leadership has rolled out what it says is the party platform, it has deviated from both conservative principles and what the party membership has historically supported, an example being the leadership's announcement that provincial achievement tests (PATs), something that the teachers' union has long opposed, should be killed off. As I noted at the time, the move put the party to the left of Red Tory Dave Hancock. As an aside, one has to feel a bit for the current Education Minister, because not only have Hancock's defences of testing now been rendered for naught by Premier-designate Alison Redford's promise to axe the tests (amongst other accommodations of the Alberta Teachers' Association agenda), but he took political fire for deficit easing cuts to his ministry while his new boss Redford scooped the easy political payoff that came with promising to promptly reverse those cuts. When I called attention to the fact that the Wildrose leadership's assertion that the PATs are "outdated" or "inadequate" clearly was not coming from either the grassroots or conservative pundits, I pointed the finger at floor-crossing MLAs Rob Anderson and Heather Forsyth, who showed their hand when they lobbied for union-friendly changes to party policy at the 2010 Wildrose AGM. Given that "caucus" had also elected to attack the party's free speech plank which called for the repeal of Bill 44's section 3 at that time, I am hardly surprised to learn that the recently rolled out party leadership position on human rights essentially caves on this issue as well.

Couple this with reports that party HQ is trying to suck up dollars from the constituency associations to support high spending (and salaries for staff who are hired and fired based on the leader's own counsel as opposed to constituency association recommendations) and I'm also not surprised to learn that several of the most gung-ho party organizers in Edmonton that I knew have finally thrown up their hands in frustration this summer.

Wildrose Finance critic Rob Anderson doesn't seem to be willing to go after health spending, education spending, or spending on unionized civil servants at a meaningful level of specificity. Hence Anderson has directed most of his fire at infrastructure spending, which happens to be the one form of government spending that actually creates economic growth. According to StatsCan, "Between 1962 and 2006, roughly one-half of the total growth in multifactor productivity in the private sector was the result of growth in public infrastructure." If this is how it is going to be, I'd sooner support a Liberal like Kevin Taft. Unfortunately, the Alberta Liberals have taken themselves quite completely out of the running as the thinking man's choice given that new Liberal leader Raj Sherman's idea of opposition seems to be leveling implausible allegations of conspiracy and coverup. Meanwhile Liberal MLA Hugh MacDonald, who earlier this year I identified as "easily the most effective MLA on the Heritage Fund committee," has left the party.

As for the governing party, the leadership vote has proven a grave disappointment. Instead of bringing some vitality to the Liberals or the Alberta Party, many people affiliated with the centre-left apparently decided to instead try to advance their agenda within the PC party, thereby making that particular tent even more suffocatingly huge. Former Liberal MLA Maurice Tougas has described the elevation of Alison Redford to the Premier's office as "a potential neutron bomb" that could destroy the Alberta Liberals.

Supposedly Alison Redford has influenced South Africa's legal system via her work with Nelson Mandela as a human rights lawyer. Although South Africa's 1996 constitution is "widely regarded as one of the most progressive in the world," the level of racial hatred and violence in South Africa is disturbingly high, notwithstanding the fact many liberals are relatively unconcerned because, unlike in the apartheid area, the violence has been privatized. While acknowledging that Redford has been generally effective on the crime file as Justice Minister, one of the classical differences between liberals and conservatives is that liberals are considerably more agitated about state coercion than private coercion and Redford's resume gives little confidence that she would be immune to the classic liberal syndrome of overestimating the extent to which government legislation can improve reality on the ground for private citizens. In 1997 Mandela, Redford's supposed mentor, bestowed one of South Africa’s highest honours on no less a humanitarian than Col. Qaddafi, saying “those who feel irritated by our friendship… can go jump in the pool.”

Redford promised that she will "ensure that caucus understands that their role in the future of government decision-making is critical," yet immediately upon becoming premier-designate she waved off any role, even superficial, for the elected opposition by declaring that the Legislature will not sit this autumn.

Most disturbing, however, is how exceedingly facile Redford's policy positions are. Given that any focus group or poll will tell you that health and education, especially health, are the public's top priorities, it is entirely unoriginal for a politician to say that these are her top priorities. Does she at least have some imaginative ideas for new revenue sources? Apparently not, since we're told she's been eyeing the Sustainability Fund to support her spending promises. This in contrast to leadership contender Doug Griffiths, who has took it upon himself to try to actually lead by challenging the public to think about fiscal sustainability challenges and in particular a retooling and modernization of the tax code. We know what Griffiths would have done with the briefing memos that reached his desk; he'd have been open to their arguments and, if convinced, would've tried to build popular support for moving in an unpopular but necessary direction. Yet the imaginative and intellectually curious Griffiths only managed to get first round support in the single digits. Redford is said to be a quick study, but it ultimately doesn't matter how smart a committed populist is since the policies will still be assessed on their popularity, not the strength of their supporting research or sophistication. How is Redford going to pay for her proposed $1500 Family Recreation Tax Credit, which is essentially another spending program despite its "tax credit" name and further narrows the tax base, a trend that is being widely lamented by contemporary tax economists, including those in Canada.

To those who dispute my line of argument here, I would call attention to Redford's lack of significant support from other elected representatives of her party. Representative democracy is marginally more likely to be fiscally disciplined that direct democracy, simply because representatives as a group are responsible for a coherent budget while general referendum voters can consider spending proposals in isolation. The art of serving as an elected representative is to a large degree the art of getting credit for spending and/or tax cuts while avoiding blame for spending cuts and/or tax increases. Pulling this off as a political party requires a disciplined team strategy, lest individual representatives break ranks to demand more spending or more tax cuts from their party while leaving responsibility for funding these demands on the party instead of themselves. It is this idea that left me distinctly unimpressed with the antics of Guy Boutilier, Raj Sherman, and now Alison Redford. As Sherman and Redford became popular with the public, they were in turn unpopular with their long-time party colleagues.

If it weren't for energy royalties that essentially knock 30% off the price of public services, there would be no way that Alberta could afford Premier Alison Redford.

Romney sells out again

2011-05-27T18:24:00.003-06:00

I have been in China for a few weeks and expect to be there for a few months yet. I had worked out a tunnel that allowed access to Youtube, Facebook, Twitter, and Blogger but it has since been filled in (this may be an argument for blogging via Wordpress).

I have made a weekend trip to Vladivostok, Russia, however, and will use this opportunity to quickly state that I have lost what enthusiasm I may have had for the candidacy of former Massachusetts governor Mitt Romney for the Republican 2012 nomination.

Apparently Romney has declared without ambiguity that "I support the subsidy of ethanol." Yet another case of a supposedly conservative politician opposed government spending except when they are for it. Now there are a variety of things which rightly call for some government support, but subsidizing the production of something which encourages the conversion of natural wilderness to farmland (not directly in the North America, but indirectly through the global food chain) is not one of them.

MPT gives thumbs up to Garth Turner

2011-04-18T23:40:00.021-06:00

As I noted in my last post, Stephen Gordon has got it right on corporate taxation. Unfortunately he has it wrong, however, when he calls for former MP and financial advice blogger Garth Turner to be corrected with "the math."

I won't say that Garth's latest morsel of financial advice is "right" in all its details, never mind that he's right about the "goal of life" (the grand title of Garth's latest post) being related to achieving some level of financial wealth. But I can say that Dr Gordon is the mistaken party when he says that "variances and covariances and CAPM and stuff" will expose the errors of the former Parliamentarian.

In the comments to Gordon's post, Andy Harless takes a stab at "the math" by offering an example of how adding an asset that is less than fully correlated reduces the variance of a portfolio. In the world of "modern portfolio theory" or MPT, variance and risk are one and the same; a dubious assumption in my view but one I'll just run with for the purposes of this post. So far so so good. But then Dr Harless says, "Now free up a and b so that you can use leverage, i.e., take away the constraint that a+b=1." Sorry, but one cannot take away the constraint that the coefficients add up to 1 without taking away the equation. A weighted average means the coefficients must sum to 1 by definition.

When Garth suggests that people who have a $400K portfolio consisting solely of a house take out a home equity line of credit secured against the house for $200K and use the money for investing in a variety of other assets like financial instruments, he is indeed recommending diversification. The former portfolio contained a sole asset, the house (we'll call this asset X), and its weight coefficient was 100%, ie a = 1. In the new portfolio, a is still 1 ($400K) while the coefficient (say, "b") of the new assets (which we'll call asset Y) is 0.5 ($200K) and the coefficient (say, "c") of the HELOC (asset Z) is -0.5. The coefficient for the loan is negative because one is short the security. Thus a + b + c = 1 + 0.5 - 0.5 = 1.

Since variance is the square of standard deviation ("σ"), the variance of the portfolio is given by

where the CORR functions are the correlations between the subscripted terms (e.g. the first CORR term is the correlation between asset X and asset Y). Now suppose the standard deviation for asset X is 5% and 10% for asset Y, while the expected returns are 4% and 8% respectively. This would mean the house is expected to appreciate at just half the average annual rate of the new assets excluding the loan, but with just half of the volatility as well. Let's also assume the correlation between X and Y is 0.5. The standard deviation of asset Z would be zero if it's deemed a risk-free asset, which is an important concept in MPT. A risk-free asset returns the risk-free rate, which we will assume to be 3% for this example. The loan here may be reasonably defined as risk-free because it is secured by the home: the lender is accordingly guaranteed to be paid. As noted earlier, MPT defines risk as being variance, so the standard deviation of Z is zero.

Plugging these numbers in means the deviation for the new portfolio is 8.66%:

So Stephen Gordon is correct that total risk has been increased. A standard deviation of 8.66% is higher than 5%, which was the house alone. But can it be said conclusively that Garth Turner has "not got it right"? No, because the expected rate of return is also higher, and not just higher, but would be higher after adjusting for the increased risk. MPT uses what's called the Sharpe ratio to measure excess return per unit of risk. It subtracts the risk-free rate from the portfolio's expected return and then divides that by the portfolio's standard deviation. The portfolio's expected return is simply the weighted average of the expected return on its components, ie:

Another way to calculate this would be to take the dollar value of the expected return on the house (4% of $400K or $16K), add the additional $16K one would expect on the $200K investment (that returns 8% per annum), subtract the $6K one would have to pay on the $200K HELOC, and divide the resulting $26K by one's $400K net equity interest in the new portfolio. The Sharpe ratio for the new portfolio is 6.5% - 3% divided by 8.66% or 0.404. For the old portfolio of the house alone the Sharpe ratio was 4% - 3% divided by 5% or 0.2. In sum, while Garth's recommendation does increase risk, it more than compensates in higher expected return.

Now someone may object that the particular numbers I chose produced this result. Before one quibbles too much about that, I could make some observations about some of them such as noting as Garth does that the interest paid on the HELOC is tax deductible because it is considered money borrowed to invest and the investment is not in a tax-shelter. But the full answer is that the proposal is well-founded as a matter of theory and what I've provided is just an example.

MPT is primarily concerned with building mean-variance efficient portfolios. This means finding a portfolio mix on the "efficient frontier." Graphically, the efficient frontier (for a portfolio not including a risk-free asset) can be represented by the left boundary of a hyperbola sometimes called the "Markowitz bullet." One can think of the individual points along the frontier as portfolios of different risky assets in different proportions. The addition of a risk-free asset to the portfolio creates a new efficient frontier called the Capital Asset Line - or Capital Market Line (CML), which is the best possible Capital Asset Line - tangent to the hyperbola at the point where the Sharpe ratio is highest. Shorting the risk-free asset, or using leverage, is represented by the line above this point, which I have indicated in red:

Call the red part of the line the "Garth zone," if you like. All points on the CML have the maximum Sharpe ratio. It shows that just adding cash to a portfolio (represented by the part of the CML that is not red) or deleveraging can improve expected return for a given level of variance just as leverage can.

There are, of course, problems with this model like the fact it assumes that the variance of the assets has a neatly defined probability distribution. But almost all financial models have this problem, which can be loosely described as the "fat tails" problem. Garth Turner is in any case right in a more general sense in my view, since he appreciates the fact that the people who become truly wealthy in their own right through investments almost always use leverage to get there. Garth sums up, "The holy grail isn’t living in a place your friends covet. Then they’re not friends. The object is to posses enough wealth with liquidity to give you options. Freedom, choices." I think this is sound observation; a big house just ties one down, such that what the former Liberal (and former Conservative) politician proposes provides not just diversification benefits but liquidity benefits.

off-balance sheet government

2011-04-13T19:48:00.006-06:00

Were the current federal election campaign to come and go without my blogging about it, this blog would surely be given up for dead completely. Hence a few "observations."

My objection to the Harper Conservatives that they aren't really conservative remains, but it is interesting that more of the policy community is cottoning on to how narrow "tax cuts" are actually social programs dressed up at please the smaller government crowd. The centrist Brookings Institute recently hosted a panel discussion on the topic that follows up what Greg Mankiw and other economists having been saying. This afternoon President Obama called for cutting a trillion dollars worth of "tax expenditures", a cut the Republicans will of course describe as a tax hike.

The Tories' March budget continued to fragment the tax code, and the one big dollar proposal the Tories have made to date as a campaign promise, which is to allow more income splitting between couples (after the deficit has been eliminated), continues in that vein.

Income splitting is a broader tax break than most of the other extremely narrowly targeted tax breaks the government has offered, but it is still selective. What matters here is that this revenue loss comes at the opportunity cost of providing tax relief to everyone. What is the economic rationale for not providing relief to individuals as well? What social or equality objective rationale is served by a policy that does nothing for families headed by single mothers? The short answer of course is that it serves a political objective: getting credit for proposing a "tax credit" but then restricting its cost by narrowing its application.

Want to give a handout to an influential interest group but avoid "conservative" ire at your spending? Ask your staff to investigate the nature of that group's tax liability and then structure the handout so as to reduce that liability as opposed to an overt subsidy. Gives the group the same benefit while nominally keeping the "size of government" limited. One can call it moving government off-balance sheet, because although the the size of government is nominally limited, it has still interfered in the allocation of resources across the economy. What does it mean to be an economic "conservative", if not to prefer private markets over central planning?

Aside from this, there's the more obviously non-conservative policies espoused by the Harper regime, like attacking the Liberals for not standing as strongly behind trade barriers (e.g. noting that the “Liberal Party’s platform makes no mention of supply management.”) This is the same supply management, of course, that Harper denounced as "government-sponsored price-fixing cartels" when he was a private citizen instead of a politician.

The Harper government is simply too hostile to complex policy for those who appreciate the need for such complexity for someone like myself to not conclude that working for or supporting them would not be prohibitively frustrating.

In 2008, instead of sending a new Tory backbencher with a legal cloud over his head to Ottawa to represent Edmonton-Sherwood Park, a voter like myself could check off the Liberal candidate and send a PhD in Economics to Ottawa to represent the riding and support a Liberal platform that called for a targeted tax with a sound economic rationale. Although the "Green Shift" was somewhat corrupted as a policy plank, it still aimed to discourage production that created a negative (or possibly negative, which is the minimum that can be said about carbon emissions) externality.

2011 is somewhat different. The Tory attitude in general has hardly changed - consider the statement of Harper's former Chief of Staff that "Politically it helped us tremendously to be attacked by this coalition of university types." But the Conservatives are actually on the right side of the issue with respect to corporate tax cuts, and it appears that this idea was actually allowed to escape from the non-partisan Department of Finance as opposed to being hatched, like most Tory policies, in the brain of a Conservative "strategist"/poller.

I won't repeat all the arguments for a cut in the general corporate rate. Stephen Gordon (photo at right from Laval University), has been making valuable contributions on the Globe and Mail's website that have served as a corrective to some of the claims of labour economists as the topic has developed as a political issue. I say labour economists instead of "progressive" economists because for those who are not on a union payroll, I believe a full analysis would lead them to agree with Laura D'Andrea Tyson, who notes on the NY Times website that "a high corporate tax rate... is also increasingly ineffective as a tool to achieve more progressive outcomes..." Most astute observers understand what the preponderance of evidence and argument supports.

Toronto Star columnist James Travers (photo below) passed away on March 3 and, in keeping with the Star's political lean, was a fierce critic of the Harper regime. Travers nonetheless understood that several "conservative" principles like free trade are well justified. Travers' February 8 column neatly summed the politics of the corporate tax cut issue:

Caught on the slippery slope of a popular proposition, Harper and Finance Minister Jim Flaherty are appealing to voter’s cerebral side. Aided and abetted by conservative economists, they’re constructing the analytical case that corporate tax cuts will pay dividends in jobs as well as productivity and won’t cost the federal treasury the $6 billion annually that critics claim.
...
Watching Conservatives slip and slide trying to push a policy rock uphill is a delicious treat for political rivals, deputy ministers and egghead academics.
For five years now they have been struggling against the ruling party’s populist gravity. ...

In my view, Michael Ignatieff's run to the left wasn't just bad policy but bad politics. Jack Layton is not about to be snookered at his own game of appealing to the anti-"corporate agenda" crowd. The Tories created all sorts of space for an opposition campaign that indicated that it would stay the course economically (or got even more aggressive on deficit reduction) but attacked the government for its contempt for Parliament and its contempt for "university types" in general, which manifests itself in things like manipulating the census, something that disturbed many swing voters. Instead the Liberals have tried to appeal to NDP voters, which is only going to be as effective as Jack Layton allows it to be. Judging from last night's TV debates, I don't think Layton lost any people to Ignatieff, meaning Ignatieff will likely end up ruing the decision to focus on the Liberal/NDP swing vote instead of the Liberal/Conservative swing vote.

leave it to de Bever?

2011-03-29T11:13:00.016-06:00

I'm back in Alberta for the next month and should have some blogging opportunities that I haven't had since leaving at Christmas. It has been a month since the Alberta budget was announced and at the time the Wildrose Alliance proposed "saving" $2.41 billion by cutting capital spending in the current year. A point in need of emphasis is that this "spending" is not, in fact, spending in the economic sense because although it would reduce the bleeding down of a line item on the asset side of the balance sheet, the money is going back into another line item on the same (asset) side. The REAL issue is the conversion of investment into consumption, not the conversion of investment into other forms of investment. On that front, Wildrose has had little to say, leaving it to others to take the government to task with regards to REAL spending. On March 19 the Calgary Sun published an op-ed by Marcel Latouche, head of the Institute for Public Sector Accountability, where Latouche observed that "close to 60% of some governments’ operating costs are made up of wages and benefits" and that "the taxpayer can no longer suffer the burden of increasing labour costs while financing the huge pensions required in the coming years as a large number of baby boomer civil servants retire." The Alberta Federation of Labour discovered a provincial politician associated with IPSA, and he wasn't Wildrose but Progressive Conservative. Indeed, the AFL wrote to the premier demanding that PC MLA (and Housing and Urban Affairs Minister) Jonathan Denis "publicly disassociate himself from the IPSA."

But maybe Wildrose still has a point, namely that it is better that public money remain in the form of a financial asset (i.e. a fund managed by Alberta Investment Management) than a physical asset? Perhaps, if Wildrose actually advanced that thesis with some supporting argument. In fact, there is ongoing concern that AIMCo has interpreted its hard won mandate to operate at arm's length from the client (government) to mean its transparency obligations to the client are limited. With respect to due diligence, the record is less than perfect, an example being AIMCo failing to discover until too late the ownership interest that a party to a Mississauga property transaction had despite the fact that the person's sharing of a last name with Mississauga's mayor, who was also pushing the deal, should have raised suspicions that the person was not a "simple real estate agent" but the mayor's son with a conflict of interest.

AIMCo CEO Leo de Bever came to Edmonton in 2008 after two years as Chief Investment Officer for AIMCo's equivalent in Victoria territory, Australia: the Victorian Funds Management Corporation. De Bever was halfway through his contract at the time he left for Alberta. In 2007, VFMC put a billion Australian dollars into a fund that, under a previous name, had been sanctioned by Australian securities regulators in 2002 and 2003 and moreover had several shady directors. A PwC valuation later concluded that the investment had lost more than 40% of its value, and a law firm's review of VFMC's due diligence claimed that "Investigations lacked rigour and consideration of key matters seemed to be superficial or non-existent." Yet an Australian newspaper observed this month that VFMC "made headlines in 2008 when some of the biggest ever public sector bonuses were paid to executives who presided over the losses."

Now in the interests of full disclosure, I've repeatedly applied for positions within AIMCo (not least because they are the dominant employer of financial analysts in Edmonton) and their apparent unwillingness to hire me may lead some to conclude I'm just jealous of those whom AIMCo has hired for big bucks. But given that an opposition member in the Victoria assembly (who is now Treasurer for the territory) once said "we have grave concerns about the way the VFMC is being managed", one has to wonder how an Alberta opposition party can be so unconcerned with the way AIMCo is being managed that it recommends money remain under its managment over being converted into a physical asset and then markets the recommendation as deficit reduction. Is a new bridge certain to still be there for the Alberta's next generation whereas a financial asset would not be? Not necessarily. The point is rather that it this is a question worth considering.

Image credit: Ron Tandberg

UPDATE:

Liberal MLA Hugh MacDonald, who has easily been the most effective MLA on the Heritage Fund committee, questioned the government about the size of bonuses and costs ultimately paid by the taxpayer last December and again this month,

nuclear nervousness

2011-03-14T22:54:00.011-06:00

13 months ago I traveled through what I would call the northern part of Japan's main island but which the Japanese call the east, including through Sendai, the coastal capital of Miyagi Prefecture. Westerners are rarely found around here, at least at this time of year. Sendai has known destruction before, as the "Sendai City War Reconstruction Memorial Hall" explains in its review of the American bombing of the city in July 1945. I then took a break from the February snow in Japan's north to fly down to tropical Okinawa, where I stayed at a capsule hotel for about $30 a night until I found a different place which was more like $20. I was woken up early in the morning by the sensation that a gigantic dog had taken my capsule in its teeth and was shaking it. Since the hotel's WiFi was still working and I had my smartphone with me, after some minutes I learned from the US Geological Survey website that the epicentre of this earthquake was just 80 km away.

What astounded me was that the Japanese literally won't get out of bed for anything less than a 7.0 earthquake. Tremors are a regular fact of life for the Japanese, and it accordingly did not surprise me to see Japanese supermarket workers being more concerned about bottles breaking than about building integrity on YouTube. It was only after the intensity of the tremors rose and lasted for an unusual long duration that locals would have become especially concerned.

I've been to Japan twice now and I've come to really love the country. It has endured a disaster but of the many individual catastrophes that occurred in the wake of the earthquake and tsunami, a particular disaster is receiving far more attention than a proportionate and rational perspective would provide.

I'm talking nuclear, of course. Noo-klee-ur! The very word that sends a chill down some spines.

Now I'll grant that the situation at the Fukushima I power plant has deteriorated substantially, as the amount of radiation released on March 15 was non-trivial and it has been acknowledged that containment integrity at Unit 2 has been partly damaged. I could make some observations here about the situation at Fukushima, such as calling attention to the fact the station apparently kept humming despite a massive earthquake (it was the tsunami that has caused its problems), the fact that newer plants are not as dependent upon external power sources to maintain their cooling systems, whether from the grid or portable backup, the fact most experts contend that - especially after several days have passed - a full meltdown remains highly unlikely, or the fact that the problems are essentially problems of the sort an oil refinery could face in a no power situation (explosions from flammable but otherwise non-toxic gases, short-lived fire at a unit with waste material that released some environmentally harmful toxins). At issue is not the facts on the ground in Fukushima, but the reasonableness of the popular reaction to them. As one authority (among many) has observed, people "don't have a particularly good grasp of the science of radiation and tend to over-exaggerate the risks."

Consider the history of nuclear accidents.

The number of people who ultimately became sick because of the Three Mile Island accident? Zero.

In 1987 in Goiânia, Brazil, a radiation scare resulting from an old nuclear medicine source being scavenged from an abandoned hospital caused more than 130 000 people to overwhelm hospital emergency rooms. Ultimately just 250 were found to be contaminated through the use of Geiger counters and just 20 showed signs of radiation sickness and needed treatment.

In 2005 a team of 100 scientists produced a 600 page report for a consortium of UN agencies on the legacy of Chernobyl. Although an accident on Chernobyl's scale is not conceivable in a developed democracy (where all reactors have containment vessels) the team found that even in Chernobyl's case,

By and large... we have not found profound negative health impacts to the rest of the population in surrounding areas, nor have we found widespread contamination that would continue to pose a substantial threat to human health, within a few exceptional, restricted areas.

More importantly, however, is the finding that "the largest public health problem created by the accident” is the psychological impact. This is partially attributed to a lack of accurate information. 20 years after the accident, the greatest problems are identified as negative self-assessments of health, belief in a shortened life expectancy, lack of initiative, and dependency on assistance from the state.

The hysteria over nuclear power, in other words, didn't just aggravate the health problem, it practically constituted the whole health problem in and of itself!

UPDATE:

The Washington Post cites a radiation expert who notes that of more than 80 000 survivors of the Hiroshima and Nagasaki blasts, about 9000 subsequently died of some form of cancer. But only about 500 of those cases could be attributed to the radiation exposure the people experienced.

The average amount of radiation that victims in Hiroshima and Nagasaki were exposed to would increase the risk of dying from lung cancer by about 40 percent, [the expert] said. Smoking a pack of cigarettes a day increases the risk of dying of lung cancer by about 400 percent.

Meanwhile, this Slate column makes the same argument I do but with a better turn of phrase and some more facts. Charlie Martin at PJM has more in this general vein.

EPA guidelines for workers in emergency situations are radiation doses of 10 rem (100 mSv) when protecting "valuable property" and 25 rem (250 mSv) when protecting populations. What does a 25 rem dose mean? According to the EPA, it means one's lifetime risk of cancer would increase by 1% on average (from 20% to 21%). Compare this 1% increased risk for workers at the Fukushima site to the reality of worker fatalities on the Deepwater Horizon rig last year, and keep in mind that no Fukushima worker in Japan has yet reportedly received a dose even this high, never mind the general public. Although there was a reading of 400 mSv/hr at one location in the plant at one particular point in time, at the same point in time the level was more than 10 times lower just 50 meters away.

the power of personality

2011-02-14T14:15:00.006-07:00

I have wound down my blogging, in the short term because I have been on the road and don't expect to be back in Alberta for at least a month yet, and in the longer term because, at least with respect to Alberta politics, I had largely said what I wanted to say on the subject and didn't want to muddy the message (that Albertans need to turn more of their current incomes into assets, real or financial, that will grow into the future).

The new year's news from Canada's most fortunate province creates some interesting prospects for further shake-ups on the political and policy fronts, however.

The premier not running for re-election is the biggest news, although there is a limit to what the pundits can add to this headline. Albertans already know that Ed Stelmach (photo at right) was a charisma-challenged but nice guy. Whether it was his fault or not, it was on Ed's watch that a rival party emerged that, for the first time since at least 1993, seriously threatens the Progressive Conservative dynasty. It is nonetheless worth reflecting on the fact that Mr Stelmach's resignation announcement came less than 3 years after his winning an electoral landslide. What changed to compromise Steady Eddie's political security when he'd already proven that he can kick the Wildrose Alliance to the curb? Danielle Smith?

Which brings me to the main thesis of this post, which is that personality - and personalities - matter more, and ideology less, in politics than many observers appreciate. While it is generally recognized to matter with respect to the individual party leaders, consider the fact that the next tier of people below the leader are also, well, people, with personalities, and so on down.

Daveberta's blogpost on the resignation of Alberta Liberal David Swann (left) has attracted no less than 60 comments, and a comment by Calgary Grit, the most read (or perhaps just most readable) blogger on federal politics who (formerly) hails from Alberta is a representative example of the sort of punditry that gets a lot of thumbs up from those who have not been heavily involved in internal party politics and/or the machinery of government. CG contends that the Alberta Liberal Party and the fledgling Alberta Party occupy the same "centrist" ideological ground, while "[Wildrose leader Danielle] Smith and [PC leadership candidate Ted] Morton [are] splitting the right wing vote..." To a lot of people it makes perfect sense to look through an ideological prism like this and assume one is getting a reasonably complete view. While I have never really been a true political party "insider", based on what experience I do have, and especially upon my experience working within the machinery of government in a central agency, I would characterize this perspective as one that perhaps ought to be satisfactorily explanatory, but not one that is.

Consider how the cogs of government policy actually turn. Suppose you were to come into a position of real political power in a parliamentary democracy. This would generally involve being elected and then being assigned a cabinet position responsible for a ministry. The first thing one would be expected to look at after being sworn in would be the briefing books prepared by the civil servants in one's Department. A great many problems will be identified in these materials and solutions suggested, problems and solutions that never made it into the political campaign debates because 1) the issues are too dull to interest the electorate or 2) the solutions are generally unpopular with the electorate. When I first loaded up my 1982 Mazda RX-7 with my limited personal effects to drive from Edmonton to Ottawa nine years ago and begin work for what was then Paul Martin's Department of Finance, I was curious as to how the competing ideologies would play out in the policy discussions that occurred. Of course, at the end of day the elected Minister makes the final policy call, but what of the details? I was ultimately struck by how un-ideological the Department actually was and I came to appreciate how frequently "ideological differences" are just political campaign artifacts as opposed to seriously competing policy alternatives.

Having said that, I have to concede that the dominant culture is only non-ideological if one sees organizations like the IMF, OECD, World Bank, European Commission, etc as non-ideological. Some strong leftists would contend that there is an "anti-people" or "corporate" agenda dominating these entities and if that's true then this agenda dominates the culture in provincial finance ministries as well. But I don't believe it is, in fact, a left or right matter nearly so much as a matter of how populist one is in one's sensitivities. It's not the job of, say, an OECD economist to recommend what the "people" want. What the people want in the short term may be in full contradiction with what they want in the long term. Now, there are several "think tanks" that are clearly "ideological" in almost everyone's eyes and an organization like a Department of Finance or a Privy Council Office is somewhat analogous to a think tank, but neutralize the funding of these think tanks (e.g. take self-styled "progressive economist" Jim Stanford off the union payroll, or diversify the Frontier Centre's funding from former Alberta Report readers) and a remarkable consensus would emerge on most issues. As it is, I think the consensus is already there, one simply has people like Stanford trying to obscure the "expert" consensus on, say, the efficiency of corporate taxes at the one end while at the other end the Frontier Centre obscures it on, say, the efficiency of carbon taxes.

As a newly minted minister, one's first lesson would thus concern how one's ideas about what one is going to do in office have to be heavily modified based on the advice of one's ministry re what is feasible and just what the most pressing problems are. An example here would be how neither Jim Flaherty nor the federal Tories in general felt that income trust taxation was a problem in need of a solution before taking office. It was after being bombarded with memos from the civil service saying there was a problem that Flaherty eventually overruled his political staff to make a move on the file (as an aside, when I learned that Wildrose constituency operations manager Dave Shillington was part of Flaherty's political office at the time, although I suspected we would end up disagreeing on something significant in Wildrose it wasn't until Dave indicated to me that he was inclined to take a laissez-faire attitude towards how nominations were conducted that I saw a red flag for a disputed nomination at some point down the road and, more ominously, a party culture that sees loud self-promoters advance at the expense of quieter voices).

The decisions of real consequence cannot, or at least should not, be taken unilaterally by a minister, however, even if the decision is well-informed by consultations with one's Department, external experts, and industry. One still has to convince one's cabinet colleagues. Suppose I was elected as the sole Wildrose MLA from within Edmonton city limits. I might have to be made finance minister simply because, given the political realities, an Edmontonian would have to get a post that at least appears to be among the most important. Now of course I would be encouraging my cabinet colleagues running line departments to support cuts to or at least caps on their budgets, and especially cuts to line items are only indirectly related (as in the case of wages and benefits for current provincial workers) or not related at all (as in the case of benefits for retired provincial workers) to the quality and quantity of services delivered to the general public. But how much power I would actually have in this situation, at the top level of internal party politics and of the government machinery, is only very approximately suggested by what an external pundit like Calgary Grit reckons the ideological positioning of my party to be. The personalities of those around the cabinet table matter far more, and it matters more the higher one gets.

When I blogged here last year saying I should no longer be described as a current Wildrose supporter, I noticed a couple people wanting to explain my defection in terms of ideology. As someone who joined the Wildrose Party even before it merged with the Alberta Alliance, I'm easily perceived as a fiscal conservative ideologue who cannot tolerate the ideological compromises that a mature brokerage party must inevitably make. But in fact I believe I would have more influence and work more effectively as part of an Alberta Party cabinet than a Wildrose one, despite the fact the Alberta Party is universally seen as significantly to the left of Wildrose. If I wasn't a member of a the cabinet but a backbencher or even just a local constituency figure, the situation would be same but at a lower intensity. Now it's true that in a parliamentary system, it is the first minister who drives cabinet dynamics. If the party leader wants to shoot down a spending proposal originating from a line department, for example, he or she will typically ask the finance minister for his or her thoughts at the cabinet table. In the case of Wildrose, although Danielle Smith would make a good premier, if I demanded that we go to war with the public service unions, or cut back on all the programs that amount to subsidies to farmers and accordingly distort the provincial economy, I doubt that she would be keen to back me in a dispute with, say, Rob Anderson who would warn darkly of the political consequences of picking a fight with the unions, or Link Byfield who would be sensitive to the political consequences of alienating rural Alberta. This isn't to say that I'm concerned the leader would tell me to sit down and shut up. I can't even imagine Danielle telling someone to sit down and shut up. It's rather that she wouldn't tell anyone to sit down and shut up and as a consequence the voice of the professional policy community would be left to fend for itself against the self-promoters, opportunists, demagogues, and assorted lobbyists. It's the power of personalities. If people think my problem is that I'm upset about having ended up on the losing side of an ideological showdown, I can only say, "if only!" There was about as much of an ideological showdown as the one in the federal Tory party that led it to going on a spending spree when in government (which is to say, effectively none).

Which brings me to Doug Griffiths. Not only does Doug (at left with wife Sue, photo from Facebook) make time to hear out the professional policy community, he understands how these sorts of people get drowned out and pushed aside in the jungle of politics. He's a fiscal conservative, which of course I find salutary, but more important to his appeal to pundits across the spectrum is that he does not try to push a particular agenda per se so much as call for a framework that ensures that sober, serious, evidence-based agendas win out. If Doug were first minister, I believe he would be less interested in getting his way, like so many politicians who have a pre-conceived and rigid idea about what's wrong with world and how they are going to fix it, than in ensuring that those who are following the advice they are getting from their Departments and non-partisan experts get a full hearing despite the political risks, and, more importantly for democracy, ensuring that that hearing occurs in front of Albertans as opposed to behind closed doors. I don't just endorse Doug Griffiths for leader of the Progressive Conservative Association of Alberta. Whether Alberta Party, PC Party, or Wildrose, if Griffiths were contending for the leadership I would be taking out a membership to support him. I admit that this seems to contradict my call for more ideology, or more precisely more ideas and consistency in those ideas, in what distinguishes and defines political parties, but that's because I think it generally needs to be made clear to campaign volunteers and donors that they are working for something larger, that they are a part of, than just a person who is not a part of their personal lives. I am not asking readers here to help advance someone's political career because he deserves it. I don't know Doug personally and I don't know what he deserves in terms of his personal fate. I support Doug Griffiths because what he stands for deserves support.

Liberal party? Whenever I think about joining the Alberta Liberals, which is never for more than an occasional nano-second, I ask myself how I would explain the move to friends and family. The politically active could potentially understand, but everyone else would think I've lost my compass completely. I could call attention to a selection of Kevin Taft speeches but Taft is no longer leader. Federally, besides the Liberals there is no other option to the Harper Conservatives that isn't fundamentally at odds with either the federation or the prosperity-creating business community. That's not the case in Alberta.

In any case, I'm not the only person who ran for election under the Wildrose Alliance banner in 2008 to now be mulling support (if not more) for the relatively legacy-free (dare I say, baggage-free) Alberta Party.

in the news

2010-12-08T01:00:00.006-07:00

It's been a week and a half since my last post here and it is likely that blogging will drop off to once every two or three weeks for the next couple months since I will be on the road again after Christmas. I've been meaning to switch to musings of a more philosophical nature, such as a post on equality as a public policy objective, but a few remarks on recent headlines is much quicker:

The Globe and Mail reported that according to a Nik Nanos poll, the federal Tories could potentially get a majority government despite weakness in Quebec. Nanos' belief that the Conservatives have mastered the art of "narrowcast[ing] messages to clusters of ridings on a diversity of issues such as crime, the long-gun registry and social issues" (while having nothing to substantive to say on fiscal matters) reminds me of my last post on "client politics."

The New York Times recently published a story that notes that "the finances of some state and local governments are so distressed that some analysts say they are reminded of the run-up to the subprime mortgage meltdown or of the debt crisis hitting nations in Europe." A financier is quoted as saying "[i]t seems to me that crying wolf is probably a good thing to do at this point."
Today the Wall Street Journal notes that California, which has often served as the poster child for budget dysfunction, is running a $6.1 billion budget gap, which represents 6.6% of its budget. Alberta's $5 billion deficit, in contrast, is more than double this fraction of its budget.

Yesterday, Environics revealed a poll that found that support for Alberta's governing party was 34%... for the fourth Environics poll in a roll. The Wildrose Alliance gained, however, with the test sample of 252 Edmonton voters indicating that a full quarter of them would support the upstart party, a stunning 9 point gain over the 16% showing in the spring. Since the PCs held steady, this gain had to come from someone else, and indeed the Alberta Liberals were down 7 points in Edmonton (and Calgary as well). Danielle Smith's party polling ahead of David Swann's in the capital city is certainly remarkable, but of particular interest to me is that just 3% felt that "fiscal/budget issues" represented the most important issue facing the province. Meanwhile 47% said health care was #1. This after a spike in health care spending in the last provincial budget that was well into the double digits in terms of year over year percentage increase. The immediate conclusion is that deficits could be run for many years before concern about them would approach concern about healthcare. One would think that taxes could raised, given that just 1% identified taxes as the most important issue, but one has to wonder about the political feasibility of such a move when even the Liberals are saying that revenue is already sufficient.

client politics

2010-11-27T20:14:00.006-07:00

This weekend Globe and Mail Business columnist Derek DeCloet advised us that "it's not all doom and gloom" with respect to management of the US debt burden.

Looking just at the numbers, I have to agree. The numbers indicate that the federal government probably won't be "hitting the wall" until around 2030, when the older boomers will be in their 80s and even the youngest ones retired. Joshua Rauh's paper on state pension liabilities predicts that the day of reckoning on the state level may occur sooner ("many state systems will run out of money in 10-20 years") but it's true that the United States had the superior system 60 years ago and there hasn't been a revolution that has overturned a system that has stood the test of time.

The challenge for America today is that it the competitiveness that ensured an efficient economic allocation in the past has eroded and this erosion is being exposed by inevitable globalization. While US business culture continues to support innovation and competitiveness, it must work within the context of public policy and the US public sector is in need of significant reform.

A large obstacle to reform is the influence of public sector unions; a writer for the Prospect argues that, in fact, federal workers do not receive too much because the average annual compensation of $120 000 is not the wage number: "It's salary, plus the value of health insurance, plus the value of other benefits like pensions." That's purely a marketing argument, of course, because the liability of the taxpayer doesn't change just because that $120K includes a pension element. At the heart of the public sector problem is the fact that, as a public union boss has admitted, "We have the ability, in a sense, to elect our own boss."

The fundamental obstacle to public policy change is nonetheless public opinion in the USA. A commentator to an Economist story titled "America's Deficit: Confronting the Monster" observed:

It is impossible to make [the public] understand that the optimum amount of tax to raise and the optimum way to raise that amount are separate questions. Hence the politician's adage that "the only good tax is an old tax."

The US tax system is so colossally fragmented, it was possible for the deficit commission co-chairs to cut tax brackets significantly and still generate a trillion dollars in revenue just by eliminating tax expenditures. Tax expenditures, as Greg Mankiw explains in this op-ed, are essentially the same thing as subsidies but can be marketed as tax cuts. It's a handout to a politically powerful interest group. Although Republicans are not shy about supporting direct subsidies when it suits them, they generally prefer that handouts be dressed up as (targeted) tax cuts. However one wants to describe it, the phenomenon that created the mess otherwise known as the US tax code is client politics.

The Conservative Party of Canada has imported several US political ideas into Canada, with a notable recent example being the idea that the national census constitutes a violation of privacy. Although the Republicans made an issue out of this just this summer, the real founder of the idea is Michelle Bachmann (R-Minn.), who went after the US census in the first half of 2009. Glenn Beck was left shaking his head but the Harper government seems to have thought the idea was brilliant. There has, however, been times when the federal Conservatives practiced conviction politics, albeit on very rare occasions. An example would be the taxation of income trusts. The move to tax trusts was accompanied with a move to lower taxes on corporations (hence the revenue neutrality of the decision). The tax cut for corporations, however, was much smaller on a per company basis because corporations constituted a far larger proportion of the economy. The stock market impact in a world of rational actors would have been net unchanged, because listed corporations would have risen as much in aggregate as income trusts fell. But the market is not entirely rational and the average voter even less so. The Tories were reminded of the value of client politics and the wisdom of fragmenting the Canadian income tax code (deductions for bus passes, deductions for fees associated with your kids' sports, etc etc).

One could look at the HST uproar in BC through the lens of client politics in two senses. One is that if BC reversed implementation of the tax, Ottawa would presumably get its $1.6 billion incentive back. Yet how many Canadians outside of BC are at all interested in having that $1.6 billion available for spending in their own jurisdictions? There is no meaningful constituency for reversing targeted spending. The other HST reality is that giving a break to corporations is generally giving a break that, by the sheer scale of the number of parties it benefits, is too shallow a benefit to any one of them in particular for any significant number of beneficiaries to lobby for it. It doesn't ultimately just benefit business, of course, since it is a general benefit for the economy, but that benefit is too diffuse to be politically valuable.

In Alberta, besides some "inflation proofing" now and then there has not been any new additions to the Heritage Fund since 1986. The opposition parties have occasionally called for new additions, by having a proportion of energy revenues directed into the Fund. This is an easy demand, because it doesn't address the trade-off of spending foregone. One would think that the more obvious first step would be to just call for a stop to the raiding of the Heritage Fund, with investment returns being retained in the Fund so it could grow (this year alone Finance Minister Morton plans to move close to a half billion from the Heritage Fund to general revenues). But far from demanding that Heritage Fund returns not continue to be directed into general provincial spending, the Wildrose Alliance, which markets itself as "fiscally conservative," has been missing in action. At the annual public meeting last month, MLA Heather Forsyth, who sits on the Heritage Fund committee, had nothing to say. It was left to Liberal MLA Hugh MacDonald to challenge the government on its unwillingness to save. The previous year, Forsyth didn't even show up. The spending that MLA Rob Anderson has challenged concerns not the province's wage bill but the form of spending that is most analogous to savings, namely, infrastructure investment. And why not; - client politics holds that because infrastructure can generally be used a little bit by everyone, the political lobby in favour of it is too diffused to be anything worth worrying about if it's cut.

To return to the political situation in the US, it's apparent that the country is going to have a very hard time improving the competitiveness of its public policy. Amongst the countries with the most efficient tax systems one finds many of the former Warsaw Pact states. This reflects the fact that overthrowing an old system wholesale allowed for the introduction of a new system based on the latest research.

In a perfectly competitive market, there is no "economic profit," there is only "normal profit," because any economic profits are promptly squeezed by out by competitors who instantly appear. In reality, of course, there is a time delay, and the businesses that are truly successful have as their cornerstone an understanding of the temporary nature of economic profits. There is no more reason why the United States should be the dominant global player in 2050 that it was in 2000 or 1950 anymore than the 30 firms that make up the Dow Jones Industrial Average should be the same as 50 or 100 years ago. While the "line workers" of America, Inc. may be as innovative as ever, its management is increasingly unable to adjust.

the business of America is business?

2010-11-23T00:11:00.010-07:00

One of the things that struck me about the US deficit reduction plans offered by the co-chairs of the President's National Commission on Fiscal Responsibility, the Domenici-Rivlin Bipartisan Commission, and Jan Schakowsky (a "progressive" Congresswoman) is that all three plans propose taxing capital gains and dividends as ordinary income. Although the Rivlin plan would allow a trifling $1000 capital gains exemption, it not only reverses George W. Bush's tax cut with respect to capital gains (which cut the rate from 20% to 15%), it, along with the other two plans, would increase the tax rate on capital gains to beyond what it was under Clinton by moving it well above 20%. All three plans would also tax dividends as ordinary income. These plans are supposedly from across the spectrum, with Paul Krugman, for example, dismissing the plan proposed by Obama's commission co-chairs, Erskine Bowles and Alan Simpson, as an "unserious" proposal that only the "centre right and the hard right [could] agree on."

That capital income should be targeted in the supposed stronghold of capitalism is both remarkable and it isn't. Having the world's highest tax rates on income from capital is superficially remarkable but further analysis reveals that the US has not been nearly as capital friendly a jurisdiction as popularly imagined for a while now.

In Canada, with the exception of Quebec, eligible dividends are actually taxed at negative rate for incomes below $41 000. In Alberta, even persons making over a million a year have been taxed at less than 15% on eligible dividends (this is increasing to almost 16% for 2010 on incomes over $127 000). One must keep in mind here that dividends are double-taxed, once in the hands of the corporation and then again in the hands of the individual receiving the dividend. But this just makes the difference with the USA more remarkable. The economists in the Finance Department in Ottawa are alive to the fact that corporate taxation is amongst the most economy-unfriendly forms of taxation and that dynamic scoring indicates that cutting the corporate rate is relatively inexpensive. There has been an ongoing effort dating back to when Paul Martin was Finance Minister to cut the corporate rate when possible and effective January 1, 2011 the rate will be 16.5% (with current plans calling for 15% a year later, meaning a combined rate of just 25% in British Columbia). Like most policies that are well founded in terms of evidence, this reduction is consistent with the international trend identified by the OECD. The US corporate tax rate is 35%, for a combined state/federal rate over 39%, the highest rate in the world after (economically stagnant) Japan.

To tax corporate income at this level and then whack it again when dividended out by taxing it as ordinary income under a highly "progressive" income tax regime raises the question, why wouldn't American investors take their money offshore (and themselves along with it) instead. If a company on a listed stock exchange were to announce that it would never pay a dividend, it's intrinsic value would drop to zero overnight: you can't eat a share certificate, and accordingly the only value it has is the present value of its future dividends. Investment decisions around the world utilize a NPV (net present value) analysis; the corporate tax rate reduces the numerator of that analysis, and what's left over is still stuck in the corporate form and not available to investors apart from a dividend.

In response to those doubting my claim that the US income system is highly progressive, note this quote from a paper by the Luxembourg Income Study:

For the 13 countries for which it was possible to calculate income, payroll, and property tax progressivity, the U.S. has the most progressive tax structure; Sweden and Denmark are the most regressive.

Ah, yes, those Scandinavian scoundrels. That best case scenario for Canada that I noted above whereby the corporate tax rate in BC would be 25% in 2012? Denmark is already there, today. And Norway's dividend tax rate is... zero:

dividends from Norwegian companies were in practice tax free on the hands of the shareholder
- Norwegian Ministry of Finance

Meanwhile, Norway has been rated #1 by the United Nations' Human Development Index for years now (remember how the top spot used to be a pride of point for Canada? We're now down to 8th).

I've lived in Scandinavia for more than a year and have noted that while the "welfare state" there remains strong (the tuition for my academic degree there was zero), one does not encounter the anti-corporate hysteria that is so common in North America. When the OECD points out, for example, that

Corporate income taxes appear to have a particularly negative impact on GDP per capita. This is consistent with the previously reviewed evidence and empirical findings that lowering corporate taxes raises TFP (total factor productivity) growth and investment. Reducing the corporate tax rate also appears to be particularly beneficial for TFP growth of the most dynamic and innovative firms.

Scandinavians, and Europeans in general, are prepared to pay attention. In Canada, most people would rather listen to Bill Vander Zalm, and it isn't much different in the States. Consider who has advocated the following:

We must be firmly committed to free trade... opposing all forms of protectionism and removing existing trade protectionist measures... We should substantially reduce trade and investment barriers... and establish an open and free global trading system.

Recognize the words of the leader of "communist" China there? Meanwhile, the "leader of the free world" has assiduously avoided ever calling for free trade. Obama's recent trip to Asia was instead billed as a "jobs mission." Needless to say, the President came back empty-ended from his mission to get something for nothing. At the same time, the war of words between Germany and the US over the US government's spending spree continues. Germany's chancellor recently made the supposedly illiberal claim that "we have too little Christianity. We have too few discussions about the Christian view of mankind." With respect to immigration, Europe is significantly further to the right than North America.

For years the policy mess in the US was masked by the country's ample natural resources and its openness. "The business of America is business," said one President. But that was before FDR. America is now turning inward. As the WSJ reported last month, less than 10% of Americans say free trade agreements have helped the United States, and Tea Party supporters are even more likely to say the US has been hurt by free trade than the general public. The incoming Chair of the House Committee on Agriculture, Republican Frank Lucas, wrote Obama last year to demand that farm subsidies not be cut. Besides direct payments, the US tax code is additionally chock full of subsidies that economists would call tax expenditures, but in Republican rhetoric they are tax cuts.

a sign-off of sorts for Alberta readers

2010-11-15T23:54:00.015-07:00

I'll probably be blogging less about Alberta affairs going forward, not least because the ground is fairly well covered by others. Capital Notebook is back, although the most trenchant Leg watching commentary is likely to be found at former Liberal MLA Maurice Tougas' blog. One of the things I found remarkable about Maurice's 2004 run in Edmonton-Meadowlark is that his winning campaign spent less than $5400. I remember a Wildrose conference in 2007 when an experienced PC Alberta organizer advised us that running an urban campaign would require $8000 and a rural campaign $12 000. With Wildrose Alliance operations now dominated by big spending federal Tories, constituencies are probably being told they need to spend $25 000.

The fact of the matter is that the debate of interest to me is the government of Alberta's fiscal situation, and it is a debate that the average Albertan is not particularly interested in. A chasm in perspective between the "wonks" and the general electorate is not unusual of course. I agree with the Fraser Institute that Gordon Campbell is the best fiscal manager of the 10 provincial premiers, but Campbell's approval ratings are in the single digits, a level so low that the BC premier could not continue to govern (he announced his resignation earlier this month). But there isn't much wonk interest in Alberta's finances either. Why? Because the province has simply not been compelled to face the issues that most other North American jurisdictions have begun to wrestle with. A review of the cash on hand held by US states indicates that a large chunk is held by just two: Alaska and Texas. These two states having something in common with Alberta, of course: significant oil and gas royalties.

With a full third of its budget historically being funded by natural resource-related revenues, Alberta can afford to maintain inefficient policy and carry on with an air of self-satisfaction, taking in the spectacle of others grappling with their emerging financial problems with an air of bemusement. The typical Albertan has accepted the convenient explanation that his province's prosperity is due to hard work, a pioneering spirit, and "conservative" values in general.

This "character" myth, is of course, exactly that, a myth, but it would get rather tiring for me to point this out again and again. Over the past couple of years I've essentially said what I have to say: save and invest more, spend less, and consider how budgeting decisions are made as opposed to just the decisions, which is to say wake up to the influence of unions, especially public sector unions, on the public policy process. One can only write so many jeremiads before one has pigeon-holed oneself as, well, a Jeremiah. The more interesting observation I wish to make here is that avoiding a calamitous future would involve a shift in public perception and attitudes that would extend far beyond Alberta.

Consider, for example, trends in healthcare spending. Below is a graph of the annual growth rates in health expenditures in constant 1997 dollars:

Alberta readers might look at the 1993 to 1996 anomaly and reckon that they see the handiwork of the early Klein. But in fact this is a national graph produced by the Canadian Institute on Health Information. The following three graphs from the same source illustrate health expenditure per person in constant 1997 dollars, with the upper line in each representing public expenditure and the lower line representing private expenditure:

One can make a couple of observations about these graphs. One is that the target of limiting healthcare cost growth to GDP growth+1%, as targeted by a draft proposal released by the co-chairs of President Obama's deficit commission, is not unreasonable. Even GDP+0% would not be a flat line in the above charts, because a flat line would result from holding spending growth to inflation and population growth and GDP growth will exceed that (if it didn't, real GDP per capita would not rise over time). The other observation, more germane to this blogpost, is that while the 90s dip is more pronounced in Alberta's case, for all three provinces we see an acceleration in constant dollar expenditure per person from about 1996, creating a notable inflection point given the declining or steady level trend of the previous four years. 2009 and 2010 suggest that public spending may decelerate for Saskatchewan and Ontario relative to Alberta, but these data points are forecasts (and so represented by white dots).

Here's one more chart, which displays spending in the United States by all levels of government as a proportion of GDP:

Note the decline from 1991 to 1999. While there is variation between states and provinces, the overall story is that fiscal conservatism was a North America-wide phenomenon in the 90s. One can draw two conclusions from this. One is that fiscal debates in any given state or provincial legislature do not occur in isolation from the larger "culture." The other is that if most of North America is overspending, any given sub-national jurisdiction has likely succumbed to the same trend to at least some degree.

further to the last

2010-11-07T00:35:00.013-06:00

One regrettable consequence of my last blogpost is that a P"C" party activist or two seems inclined to think my dissatisfaction with the Wildrose Alliance somehow makes the government party a more attractive option. Let's be clear here: if there is a problem with Wildrose people making getting elected an end-in-itself instead of a means to an end, it remains a bigger problem yet with most P"C" party people. As longtime Leg watcher Marc Lisac observed in 2004:

[W]hy would anyone with a solid position in the community want to run for the opposition? The prize for election is putting up with casual insults in question period, being largely ignored by the media, watching government backbenchers earn much more money by virtue of being appointed to this agency or that board, and knowing that one's future employability outside politics is likely being impaired. The most attractive choice is to fight for a nomination in the governing party.

You have to be a saint to run for the ragged, perpetually debt-ridden shells that pass for opposition parties in Alberta. A saint, or someone with the character of a stubborn, defiant buffalo facing directly into a stiff wind coming off the mountains. Most people in public life here are neither. Contrary to the stereotype of the defiant individual, the province is full of people who take the easier path and join the party (literally and figuratively).

There is accordingly a context to my issues with Wildrose. That context includes that fact that the governing party has to take a lot more responsibility for the spending spree of the last decade than the opposition. Also, even if the Wildrose caucus successfully led an effort to kill off the restriction on teachers' right to strike, for some other planks like the right to not associate with a union and the secret ballot, it was "close but no cigar" in terms of getting them eliminated from the policy book. With the P"C" party, in contrast, you have a party that, as a government, introduced legislation that had clauses like section 29 of the Labour Code: "[e]mployees to be union members."

I have regularly returned to the issue of unions because I think how a politician is inclined to deal with this interest group is a far more revealing indicator of fiscal conservatism than nebulous talk about cutting back on spending. Remember how the unions howled at the Klein cutbacks in the mid-90s? What has changed such that spending restraint today wouldn't involve a confrontation with the unions? Premier Stelmach called the limiting of teachers' right to strike which Wildrose used to stand for "draconian," but in New York State ALL public employees are banned from striking ALL the time by section 210 of the Public Employees Fair Employment Act, more commonly known as the Taylor Law. Yet New York unions are still in the saddle. An expert panel hosted by the New York Times titled "Can California and New York be saved?" returns repeatedly to the idea that New York's new governor "has to steel himself for the long run and be prepared for the wave of ads from unions claiming the sky is falling." In Illinois where union muggings of the taxpayer are, if anything, even more egregious than in Albany or Sacramento, the Republican candidate for governor collected more than 1.7 million votes last week, losing by a thread, yet challenged the unions directly. The point being here that "draconian" is relative. As I noted in my last post, although Alberta supposedly has much in common with Rocky Mountain states like Idaho, the province allows closed shops when even the chair of the Swedish Building Workers' Union has said "closed-shop clauses [are] old-fashioned and [are] being removed" in Sweden. (As an aside, I have lived in Sweden more than a year and am a fan of much of the Scandinavian system, which in many respects is not as "left wing" as North Americans presume, e.g. a lower corporate tax rate than the UK and the USA, and perhaps the world's most radically free market in schools, schools that, by the way, privilege Christianity in the curriculum).

As I said before, the key problem is "not how much will be going to the unionized public sector per se" but how Alberta (and North America in general) decides how much is too much. Imagine an audience with some politicians on a stage in front of them. Now randomly pluck one "ordinary person" from the audience and sit them on a stool on the stage. Now invite the politicians to talk about how much that person should be paid and then vote, as an audience, for the politician who has said the most convincing thing and, by this mechanism, determine the pay. That the politicians will engage in a bidding war to pay the most should be as obvious as the fact that studio audiences invariably root for a game show contestant to win spectacular amounts of money. As much of a circus as this hypothetical scenario would be, reality is considerably worse because it isn't nearly as transparent: collective bargaining agreements are not conducted on public television.

Now having said this, if anyone should ask why I quit the Wildrose Alliance, it is not over a policy difference. Nobody gets all the policy they want out of a political party that represents a significant proportion of society. It is rather the way the party made a move that wasn't anti-any particular policy I favoured, but anti-policy period.

For whatever reason, an elected provincial politician, Doug Griffiths, wanted to talk policy, not politics, and Wildrose Executive Director Vitor Marciano (with the possible agreement of others) decided to try and make money for his party off of the uninformed grassroots using that very fact. Talking policy instead of politics is what my whole motivation has been since I left Ottawa's policy shops. Politics is a means to an end. If the end is to try scare politicians like Griffiths out of saying what he has been saying, I'm working for the wrong team. It's as simple as that, really.

Former minister Allan Warrack's comments about bringing an HST to Alberta on Alberta Primetime last Monday hit almost all the bases in terms of a concise defence of the idea. The segment quite likely would have never occurred, and Professor Warrack thus not have been given a soapbox, had Griffiths not made the effort to push the debate into the general culture. Wildrose not only failed to play enabler with respect to bringing a conversation to Albertans that I've made it something of my personal mission to bring, Wildrose actively contributed to trying to marginalize the conversation as unacceptable.

British Columbia doesn't have anything like Alberta's royalty revenues yet, as of this coming January, the corporate tax rate is no higher (10%) than in Alberta and a person earning $45 000 would pay almost $1000 less in income tax in BC than in Alberta. BC's tax on carbon does not bother me at all since I haven't owned a car for more than 8 years and the policy makes it that much less likely that BC would be targeted by a hostile foreign public relations campaign. This while BC, population 4.5 million, spends $40.6 billion and Alberta, population 3.7 million, spends $39.3 billion. The BC deficit is furthermore far more manageable. Calgary-based George Koch, writing in Alberta Venture in October, noted that "we Albertans seem a complacent lot, addicted to our government entitlements," and lamented the lack of leadership, observing that "[f]or the wilful leader, public support is a bank to draw on rather than just a wave to ride." With the exception of people like Doug Griffiths, Alberta's politicians all seem to be out surfing.

UPDATE:

Apparently I'm not alone in terms of general frustration. Mike Moffat from Western, Stephen Gordon from Laval ,and Andrew Coyne have been referring to each other's work for a while now and they are all unimpressed with the direction of Canadian politics.

why I'm not a Wildrose member

2010-11-03T19:48:00.017-06:00

My last post wasn't the first time I've talked about unions and what I thought was an accommodation of union interests by the Wildrose caucus members who joined the party back in January. Support for unions is an understandable stance for the NDP caucus but not, in my view, for a party that I had joined some three years ago on the understanding that its philosophy would be roughly consistent with that of the Wall Street Journal editorial board, namely, "free markets and free people."

When President Truman accused the WSJ of being the "Republican's Bible," the paper’s then editorial page editor responded that "our loyalties are to the economic and governmental principles in which we believe and not to any political party." In an editorial titled, "A Newspaper's Philosophy," William H. Grimes, who won the WSJ's first Pulitzer Prize for his editorial commentary on business, the economy and labour, wrote:

On our editorial page, we make no pretense of walking down the middle of the road. Our comments and interpretations are made from a definite point of view. We believe in the individual, his wisdom and his decency. We oppose all infringements on individual rights, whether they stem from attempts at private monopoly, labor union monopoly or from an overgrowing government.

I've returned to the issue of labour union monopoly on a regular basis this year in part because in the future it will be a critical driver of another problem Mr Grimes identifies, "overgrowing government." A growth in government is not necessarily objectionable in-and-of-itself: if starting from a sufficiently low base such that additional investment would not be subject to significantly diminishing returns, government investment in roads, schools, bridges, university laboratories, and other factors that generate positive externalities and may be bequeathed to the next generation may well be a net good. But with an aging and "what's-in-it-for-me" society, most government expenditures will be used to support non-workers' private consumption and a politically powerful non-business-owning middle class. In the case of private sector retirees, the promised entitlements may be appropriate. But for the public sector, there is a growing problem of sustainability and the biggest problem in my view is not how much will be going to the unionized public sector per se but the anti-competitive, unaccountable way the allocation decisions have been and apparently will continue to be made. This is not to say that corporate lobbyists don't also work the halls of legislatures in shadowy ways but rather to make an issue out of the fact that union lobbyists, unlike corporate ones, want to extend the reach of this tax-and-spend allocation system.

Each time I return to the issue, however, there is the tendency to make the point a little louder, such that there is increasing danger that I may be "crying wolf." And on the point, there is the possibility that I have mischaracterized the views of Wildrose caucus.

Rob Anderson has advised me that when Wildrose party leader Danielle Smith said in Red Deer in June that the passing of an AGM resolution suggested a maturation and "sophistication" of the membership's views, the Tweeter who associated that comment with the passing of a particular resolution that the teachers' union wanted passed was mistaken. When I stood as a candidate myself in 2008, amongst the lessons I learned is that, while the general public may be overestimating the magnitude of media bias, the public likely underestimates the frequency with which the media can get minor facts wrong. In this case, I don't recall the twitterer's view being confirmed by another source, hence I'll take at face value Rob's view that Danielle was referring to the gun rights resolutions(s) (there were two, an uncompromising one which failed to pass and a milder affirmation of gun rights which did) and stand corrected.

That doesn't mean I'm satisfied with what the party leader has said elsewhere, of course. While Education Minister Dave Hancock has defended the Provincial Achievement Tests against union interests that want them eliminated, Danielle has agreed with union interests that the PATs should go. She does say that the PATs should be replaced with "something", but apparently that something has to be "better for teachers" than the status quo and would be developed by "[w]ork[ing] with teachers" (who, if the unions are any guide, generally oppose all standardized testing). At the last Wildrose AGM, MLA Heather Forsyth used most of her microphone time on the floor to either speak out in favour of the P"C" government's free speech limiting legislation or against Wildrose policy planks opposed by the teachers' union. I might add that

a motion that proposed eliminating the "School Choice" section from the Wildrose party platform in favour of language that made no reference to choice,
a motion calling for replacing "[a] Wildrose Government will institute methods to hold educators accountable for performance" with "[a] Wildrose Government will promote innovation..." and
a motion that wanted to delete the plank prohibiting closed shops and the plank preserving the right to a secret ballot

were all "PROPOSED BY CAUCUS" and that, as a caucus member, the MLA for Calgary Fish-Creek supported all these motions. I accordingly do not believe that I have been misleading readers in my characterization of Ms Forsyth.

With respect to the right to a secret ballot, Mr Anderson currently says,

I clearly support “right to a secret ballot.” In fact, that topic never even came up at the convention - there was never a resolution vote on it.

On May 5 Vitor Marciano issued "Executive Director's Memo #3" to the membership which included as an attachment some 85 policy resolutions that Vitor wanted whittled down to a more manageable 40. One of the resolutions concerned section II "Economy" Part G "Labour" and "Moved that II G 1 and 3 be deleted and replaced..." This motion was "PROPOSED BY CAUCUS".

What were the two planks that the "caucus" wanted "deleted"?

II G 1 read:

A Wildrose Government will allow individual workers the choice to determine their membership in labour organizations.

II G 3 read:

A Wildrose Government will extend to workers the democratic right to a secret ballot vote on labour organization certification under the Labour Code and ensure that the same rule apply for decertification as for certification.

These deleted planks were to be replaced with "[a] Wildrose Government will review labour laws to ensure fairness for all Alberta workers whether employed in union or non-union settings," a plank that is, of course, so vague as to be entirely equivalent to nothing for a MLA who does not want to be held to a policy resolution.

This motion, and all of the other union-related motions proposed by caucus, made their way into the green sheets that constituted the resolutions for debate at the AGM and I accordingly stand by my last blogpost. I was at the AGM and do not recall Mr Anderson saying that he wished to retract the part of the motion that called for deletion of II G 1 and/or II G 3. I might add that if it were necessary to do further "research and consultation" in this area, the results of the research and consultation could have been presented to the membership for the membership's review. As I recall the membership was instead advised at one point to "trust" the caucus with the party's policy platform.

As it was, the vote was very close, going to a count, and II G 1 and II G 3 survived, but I think this should be of limited comfort when the caucus has revealed its hand as not wanting to be held to the provisions. Relevant here is the history of Wildrose Executive Director Vitor Marciano. When controversial Calgary West MP and former professional heckler Rob When in doubt, pull the trigger" Anders told the Canadian Press, "I would fight shoulder to shoulder with [Marciano] in any battle," this apparently included a battle between himself as a caucus member against his own Conservative constituency membership. When the board of Calgary West EDA voted in favour of asking riding members if they wanted to hold a new nomination meeting, Marciano, who represented Alberta on the National Council, approved a top-down takeover of the local board. 19 members resigned from the disempowered board, leaving behind 7 a number of whom had not been elected at the board's previous AGM. This recent incident came after the candidacy of Walter Wakula for the Calgary West nomination was rejected in 2006 and Rob Anders acclaimed, an acclamation that was ultimately overturned via the intervention of a Court of Queen's Bench Justice, despite the objections of Andrew Constantinidis, Wildrose's recently nominated candidate for the provincial riding of Calgary West.

Wakula isn't the only Wildrose member to have a run in with the federal Tory machine. John Baloun, Wildrose Alliance candidate for Edmonton-Rutherford in 2008, found out how MP James Rajotte's board plays ball when he tried to challenge Rajotte for the Edmonton-Leduc nomination. I had my own encounter with Rajotte's people a year ago, when myself and someone who had served on David Kilgour's board were attempting to organize Wildrose members in Edmonton Whitemud. We both ended up resigning from the newly formed constituency board, realizing that Rajotte's people, who were backed by Eleanor Maroes who was in turn backed by a member of the provincial executive, didn't much want us (and I was going to be out of the country for a few months). It will be interesting to see how the nomination in the new Edmonton South West constituency will be managed given that, with popular incumbent Dave Hancock almost certain to run for re-election in the old Edmonton Whitemud, this very suburban open seat is likely the only riding within Edmonton city limits that Wildrose HQ would consider a realistic pick-up for the party.

Looking forward, there will likely be a great deal of pandering to the rural vote over the coming year that would not be to my taste and looking back I'm not interested in supporting a party that imports the Conservative Party of Canada's hardball culture into its operations or caucus members who want to delete a party plank allowing "individual workers the choice to determine their membership in labour organizations." Stop maneuvering and finessing and stand and fight for the plainly stated principle.

I don't mean military courage or civil courage, or any special kind of courage. I mean just that inborn ability to look temptation straight in the face - a readiness unintellectual enough, goodness knows, but without pose - a power of resistance, don't you see, ungracious if you like, but priceless - an unthinking and blessed stiffness before the outward and inward terrors, before the might of nature, and the seductive corruption of men - ...
- Joseph Conrad, Lord Jim

Having said all this I would consider returning to involvement with the party if changes occurred and I should make it clear that I do not know Rob Anderson, Heather Forsyth, or Vitor Marciano personally. I met Rob for perhaps a minute at the Wildrose AGM but of course I was already rather prejudiced at that point based on my dissatisfaction with the "terms," or absence thereof, surrounding the floor crossing the January and the policy that the new caucus was proposing in May, policy I couldn't imagine Paul Hinman supporting. Anderson should be congratulated for the way he puts unmanipulated videos of himself speaking as an opposition member in the Legislature online and further makes his views on various matters available on his website. Our elected officials are generally well-meaning people trying to reconcile the contradictory policy wishes of the electorate and far too many people want to blame politicians for everything they see as wrong with society when, really, the enemy is us. Democracies generally get the government they deserve. At the PC AGM this past weekend, the results of a survey of Albertans were passed around. It found that "65% say the province should base spending decisions on the public’s need for services, not on the government’s ability to pay." No business or household could make spending decisions without reference to ability to pay but popular opinion, here in supposedly "conservative" Alberta, is what it is.

I just happen to think that politicians could deal with this in the way PC MLA Doug Griffiths has tried to deal with this. As Parliamentary Secretary to the Finance Minister, he has access to some information that the man in the street does not. Griffiths has been trying to communicate with the electorate, asking people to re-examine their assumptions. As I said on Sunday, it was the fact that Marciano reckoned Griffiths' party should be attacked for Griffiths' independent effort to start an adult conversation that was the last straw for me.

The fact is that no one party has a monopoly on the sort of politicians we need more of. During the 2008 provincial campaign there wasn't an all-candidates forum in my riding and when I tried to contact the other candidates to try and arrange one there wasn't any interest. So I did the next best thing and kept a look-out for any sort of city-wide forum that came up. I then ended up speaking at a forum hosted by a local Ukrainian group. A young Liberal candidate sparred with me on several issues and afterwards we agreed we should go for coffee sometime. In the audience were a few other Edmonton area candidates. John Baloun gave me some tips on public speaking. A distinguished older gentleman came up to me and quite impressed me although it might partly have been because he flattered me suggesting that I should consider joining his party. He was the PC candidate in Edmonton Gold Bar and during the recent mayoralty race I realized that he must have been David Dorward.

PC Alberta AGM weekend: unions flex muscle (again)

2010-11-01T22:09:00.021-06:00

Section 29 of the Alberta Labour Relations Code explicitly allows unions to demand collective agreements whereby "all the employees... are required to be members of a trade union." Only employees who convince the Labour Relations Board that their "religious belief" prohibits them from being a union member are exempt from this coercion, in which case an employee could potentially get his or her union dues directed to a charity instead of the union.

When Edmonton McClung introduced its motion to bar unions from forcing Albertans to pay dues that are then used for political purposes, the constituency association noted that Alberta is one of the few jurisdictions in the world that denies individual employees the right to opt out of having to pay mandatory union dues that are then used for political messaging.

In early 2008, in the lead up to the March 3 provincial election, an outfit calling itself "Albertans for Change" but in fact run by union bosses ran a series of TV and radio attack ads paid for by forced union dues. When the Merit Contractors Association and the National Citizens' Coalition called attention to the fact that this astroturf group was using mandatory dues for activities unrelated to the core union activities of collective bargaining and grievance administration, the Alberta Federation of Labour responded saying Merit Contractors and the NCC were "simply trying to further their union busting agenda" and cited a 1991 Supreme Court of Canada case, Lavigne v. OPSEU. However, Mr Lavigne was not a member of and not required to join a union, unlike the case in Alberta where union membership is often forced. Indeed, when the Canadian Civil Liberties Association intervened in the case to support the union position, the CCLA concluded that "Lavigne's protection is in his right to join or not to join" a union. Remove that protection and the Lavigne case is distinguishable.

Alberta Union of Public Employees spokesman David Climenhaga trotted out the "but the courts say" argument on his personal blog after the Wildrose Alliance AGM earlier this year to contend that passing a particular "right to work" law would be "a pointless gesture." The McClung members who proposed the motion here anticipated this sort of retort, however, by attaching a legal opinion solicited by Merit Contractors from a Calgary law firm.

I might add that, in specific response to blogger Ken Chapman's claims that the facts cited by the motion's supporters were "unsubstantiated" and in need of "proof," the union practices at issue here are prohibited in New Zealand, Australia, the United States, and the 47 countries of the Council of Europe. While far left Canadian judges like Claire L'Heureux-Dubé have held that freedom of association implies no freedom to not associate, Article 20(2) of the Universal Declaration of Human Rights clearly affirms that negative right: "No one may be compelled to belong to an association."

The European Council of Human Rights, perhaps the most famous of the Council of Europe's bodies, ruled in 1981 by an 11 to 3 vote that a 1975 agreement between British Rail and three trade unions requiring union membership as a condition of employment violated Section 11 (freedom of association) of the European Convention on Human Rights (to which all Council members are a party). The 2006 case Sørensen & Rasmussen v. Denmark made it clear that a "closed shop" is still in violation even if it were made clear to a prospective job applicant in advance that union membership would be a condition of employment. "[T]here is little support in the Contracting States for the maintenance of closed shop agreements," the Court added. The 2007 decision Evaldsson et al v. Sweden prohibited the use of union dues from non-members for non-bargaining (ie political) purposes, with the Court disapprovingly noting that "they had to pay the fees against their will to an organization with a political agenda."

Although it is currently the case that in the United States unions can spend a member’s dues on politics, members have the right to opt out, a right that is currently denied in Alberta. Unions are currently in a panic about Republican gains in elections tomorrow because of fears that the GOP will change the obscure opt out procedure to an opt in requirement for dues union leaders want to spend on politics.

At this weekend's PC Alberta AGM, union supporters tried to shout down opponents. When the vote was taken, it appeared close enough that some called for a count, a contention supported by the Edmonton Journal which described the margin as "narrow", but the moderator dismissed a count as unnecessary and the union supporters declared victory. According to CTV, "[d]ozens of people, apparently union members, bought party memberships specifically for that vote and defeated the motion much to the dismay of many long-time party members." The number of "Ten Minute Tories" might well have been significantly higher. In 2006, the Journal reported that a coalition of unions "apparently plans to buy as many as 10,000 Tory memberships" to get their man into the premier's chair. As it is, the current chair of the government caucus, Robin Campbell, is a former union boss. South of the border in New Jersey, the AFL-CIO spends a quarter million per year running a "candidate school" to get their (Manchurian) candidates elected, and with considerable success given that this union school "has groomed more than 160 current officeholders."

I nonetheless take some comfort in the fact a few grassroots PC members came to the AGM prepared to get their battle on against this economic phenomenon known as a labour supply monopoly or, in popular parlance, a union. At the Wildrose Alliance AGM during the summer, there was essentially no floor battle to speak of since the unions had, in effect, pulled off an inside job. After cordial meetings with Alberta unions during the months leading up to the AGM, floor-crossing MLAs Rob Anderson and Heather Forsyth spent essentially all of their microphone time on the convention floor lobbying for closed shops and the killing of party planks like the one that protected "the democratic right to a secret ballot," thus precluding the need for more transparently union-affiliated speakers to make the case. Party leader Danielle Smith, who had previously had her own tête à tête with AUPE's boss (photo above at right), told media outside the convention room that the union coddling constituted a display of "sophistication."

I relate the disturbing ties between the Wildrose caucus and union lobbyists in order to note that apparently every elected politician is either running scared from the unions or in their pocket. In the US, the Associated Builders and Contractors (a merit shop coalition) noted a study last year that found that union slush funds had contributed more than $1 billion to contract bidding schemes that increased the cost of construction projects for taxpayers. The equivalent slush funds in Alberta, known as MERFs or "Stab funds ", were finally targeted by the Alberta government in 2008 by Bill 26, which also aimed to put a stop to the union practice of "salting" (having their people respond to hiring ads and then, after having been hired just in time to vote to unionize, walking off the job to leave the employer both short manpower and unionized). The schemes Bill 26 corrected were so outrageous the union bosses knew they could not organize popular protests against the bill, but provincial lawmakers were still so afraid of union muscle they passed the bill as the very last measure of the spring 2008 sitting and at 3:15 AM in the morning. Legislature personnel were furthermore so intimidated that security guards at the Leg were placed on high alert.

There are four major political parties in the province (five if you include the Alberta Party) and the leadership and/or caucus of none of them seems prepared to make an issue out of the fact that Alberta tolerates closed shops where Europeans do not, and that provincial legislation adds insult to injury by allowing unions to pile mandatory dues to be used for political lobbying on top of mandatory membership. The PC members who voted against the McClung proposal giving workers a right to opt out of having mandatory dues used to fund leftist causes are ultimately traitors when you consider the fact that in 2008 such money was used to fund a media assault on the PC Party, but "traitor" implies an allegiance that can be betrayed.

Albertans are entitled to a political alternative. The NDP accordingly has a good excuse for, say, not supporting the 29 Old Dutch employees whom the UFCW union and the Alberta Labour Relations Board say should be fired for refusing to pay union dues. For 38 years the UFCW and Old Dutch collective bargaining agreement provided for a voluntary dues check off. In the wake of a lengthy labour dispute, however, UFCW demanded that the dues be made mandatory. Even though mandatory dues are virtually cost free to employers, Old Dutch did not agree. The obvious solution in the union's view then became getting the government to step in and amend the Alberta Labour Code. This summer, the Stelmach government indicated that it would side against the 29 workers. Perhaps the Wildrose Alliance could have said something about this instead of going on about legal disputes in other provinces.

PC Alberta AGM weekend: last chance for tax reform?

2010-10-31T23:16:00.011-06:00

The Edmonton-Whitemud "B" resolution calling for the saving of non-renewable resources was more serious that most such resolutions because A) it called for retaining the savings in an escrow account instead of sending them to the Heritage Fund or some such fund that could be raided for operations spending and B) it got specific about the cost of more savings by calling for a value added tax to make up the difference.

The resolution nonetheless was soundly defeated.

Just a week earlier, Bruce Bartlett, who is otherwise known for calling "starve the beast" "the most pernicious fiscal doctrine in history," penned a column that noted that the reaction to VAT talk south of the border constituted "a good illustration of how Republicans enforce party discipline, create ideological rigidity, disdain rational debate, wallow in self-delusion, and consciously make government unworkable just to achieve partisan objectives." Bartlett was referring here to the reaction to Indiana Governor Mitch Daniels' (right) floating of the VAT idea a few days earlier. Grover Norquist, the Torquemada of the GOP anti-tax synod, described Daniels' musing about a value added tax as "outside the bounds of acceptable modern Republican thought... [a]bsent some explanation, such as large quantities of crystal meth, this is disqualifying. This is beyond the pale."

In August, the Economist noted that "[w]onks have long revered Mr Daniels" and described him as having "a reverence for restraint and efficacy," neither of which are much revered in America in general these days. "He is also unlikely to fire up tea-partiers," observed the British weekly, quoting him as saying “Didn’t somebody say in a different context, ‘Anger is not a strategy’?"

In fact anger may well be a strategy... for fundraising. Just a couple days before the VAT proposal was shot down at the PC AGM, the Wildrose Alliance sent out a fund raising letter that blasted MLA Doug Griffiths for, as Griffiths put it, questioning the "sacred cow." One would think Wildrose would be a bit circumspect about attacking the PCs in general for the one time the party disciplinarians let an individual MLA go off the manufactured message and for specifically going after one of the most fiscally conservative MLAs in the Leg. Given that the letter was signed by former Harperite and Rob Anders ally Vitor Marciano, however, it could just be another example of "just win" federal Tory tactics being imported into the Wildrose Alliance. Under the "Conservative" government we have in Ottawa, we've been bounced from Trans-Pacific Trade talks because of our protectionism, were told by Dubai to abandon a military base there after Ottawa refused to allow a Dubai-based airline to land in Calgary and thereby threaten politically-connected Air Canada's monopoly, and are rated 39th out of 48 in openness to foreign direct investment by the OECD. It is impossible for non-insiders to know just what Marciano believes, if anything, since his Twitter feed and his blog are restricted and his public pronouncements are few and far between. Am I bitter? Yes, I am: the party membership never got an opportunity to provide input on whether they wanted Marciano, Rob Anderson, and Heather Forsyth to take over the party. "You have to get elected to enact your agenda" presumes that one has an agenda beyond just getting elected.

Not that I even understand Marciano's strategy for getting elected. Stelmach told his assembled flock this weekend that "[w]e want founding meetings for the new constituencies to be completed by the end of the first quarter of 2011 and candidate nominations completed by the end of June," whereas the latest I've heard about Wildrose's plans for the new constituencies is that there are no plans for at least the next year.

The "Stelmach's new tax on everything" bogeyman is, of course, a misrepresentation of the premier's stated position (since the premier has no more courage on the issue than Wildrose's controlling minds). It's the dodgiest move I've seen from the Wildrose to date and the last straw for me. If run as a political ad, a network might well refuse to carry it on the grounds that it is unsubstantiated, but since it is just being used to raise cash off of the party's own supporters, the only likely complainants are ex-members like myself. It is essentially now impossible for Wildrose to implement a tax on consumption going forward since otherwise anyone who donated on the basis of this latest fundraising letter would rightfully be outraged. There is no point in my continuing to direct any arguments for tax reform that shifts the burden off of enterprise and onto consumption at Wildrosers since the bridge is now well and truly burnt. As for any other policy ideas, one has to be alive to the possibility that Marciano could throw them under the bus in the name of political expediency at any given moment.

The fundraising letter contains the usual line that "Alberta doesn't have a revenue problem - it has a spending problem." Wildrose HQ, of course, is not so dense as to not understand what Griffiths is talking about when he says "the exercise wouldn't be about raising more money" since other taxes - on work and/or investment - could be cut so that "the whole thing could be revenue neutral for government," it's just inconvenient to understand.

The unfortunate reality is that Wildrose is not to be taken very seriously with respect to cutting spending. In February Rob Anderson got up in the house to denounce the Tory budget. One would think that if Anderson were really so incensed by the spending, he would have sought the Airdrie Wildrose Alliance nomination at the beginning of 2008 and gone door-knocking through the February snow preaching fiscal conservatism. Anderson says he could cut a $7.55 billion deficit down by $2.79 billion by spreading the capital budget "over 4.5 years rather than three years." This is, of course, just an accounting gimmick analogous to moving the mortgage from a 10 year plan to 15 years and claiming that significant monthly economies have thereby been realized. Anderson also called for restricting growth in Health and Education operational spending to inflation plus population growth for $1.33 billion in savings. Yet the United Nurses signed a bargaining agreement in June that would give them an increase in 2012 in excess of this guideline (so that some nurses will be making over $50 an hour), not including additional lump sum payments, and Anderson and the rest of the caucus had, apparently, no objections. Spend taxpayer money on medical equipment and that might conceivably lower my wait time for a procedure. Spend it on a public servant's salary and I get next to nothing since the public servant would presumably be doing the same job anyway, and if it goes to a pension it could well get spent in Florida such that Alberta taxpayers don't even get a local demand benefit from the expenditure.

The idea that Wildrose would have actually cut Healthcare spending by more than 10% relative to the PCs in the last budget is really a pipe dream given that the party hasn't shown any indication that it would stand up against populist pressures to spend. The Pew Center on the States and pollsters in Canada have found that healthcare and education are the two areas that the electorate is most resistant to cutting. A target of less than 5% annual increases for healthcare spending is not realistic (healthcare spending has been rising at an average annual rate in the double-digits since at least 2001), but 5% would still represent a far more sustainable pace that the 14% increase the government brought in with this last budget. The rest of Anderson's ideas for cutting the deficit add up to less than one-thirteenth of the $7.55 billion deficit the province is allegedly running this year. Wildrose is reduced to calling for efficiencies (except for efficiencies like more efficient taxation, of course), just like left-leaning Liberal leader David Swann.

Last year, Professor Jack Mintz calculated that Alberta would have to raise taxes by more than 8% per year from 2012 to 2030 to avoid running deficits. This despite the fact royalty revenues have provided more than 30% of government revenues since 1998.

PC Alberta AGM weekend: free speech? free commerce?

2010-10-31T21:25:00.005-06:00

Of the various policy resolutions that came up for a vote in this weekend's annual general meeting of the Progressive Conservative Association of Alberta, four were of particular interest:

1) a motion to strike those elements of the Alberta Human Rights Act that grant government broad discretion to limit freedom of the press

2) a motion calling for official adoption of an industrial policy re bitumen upgrading

3) a motion calling for a fiscal policy shift towards savings from consumption

4) a motion that would bar unions from spending forced union dues on political lobbying

I'll comment on (1) and (2) in this post and address (3) and (4) in two separate follow-up posts.

With respect to (1), readers may recall that Maclean's story about corruption in Quebec that the head of the sovereigntist organization Société Saint-Jean-Baptiste de Montréal called "hateful and defamatory." The House of Commons in Ottawa passed a motion expressing "profound sadness at the prejudice displayed" by the magazine. Whatever the truth of the Maclean's allegations, the Harper Conservatives supported the motion (take that, Andrew Coyne!), which meant that it could be passed unanimously (after being reintroduced once the objecting André Arthur, an independent Quebec MP, had walked out of the House). The powers that be in Alberta are not limited to such symbolic condemnations, since it is currently the case that a person who "issues" a "statement" or "publication" in Alberta that is "likely to expose a person or a group of persons" to "contempt" is breaking the law. Although truth is a recognized defence to charges of defamation under the common law, the legislation at issue here does not recognize any such defence.

The PC caucus dutifully spoke out in favour of the restrictions on expression. Freedom of speech must be "balanced", contended MLA Fred Horne, against the sensitivities of the "vulnerable." As someone who was elected to the same PC caucus, MLA Heather Forsyth performed a similar role defending the government legislation earlier this year at the Wildrose Alliance AGM. With no apparent sense of irony, last year Jennifer Lynch, Chief Commissioner of the Canadian Human Rights Commission, lumped together opponents of the legislation as hailing from the (presumably contemptible) "far right." The Sheldon Chumir Foundation, which takes its name from an Alberta civil liberties lawyer and former Liberal MLA, would presumably object to this characterization since it also opposed the legislation, and the Foundation's President has indeed objected. In any case, the resolution was defeated and it does not appear that anyone currently sitting in the Leg will take up the dropped gauntlet in favour of free speech.

The Edmonton Whitemud constituency association proposed two resolutions which are at such polar opposites ideologically the submissions constitute good evidence that the constituency association is both large and diverse. One motion called for conservative fiscal policy and the other called on the government to step into the province's production decisions by requiring more bitumen upgrading in Alberta. The economic interference motion passed by a large margin, never mind the fact that industrial policy, which has been defined as a "declared, official, total strategic effort to influence sectoral development and, thus, [a jurisdiction's] industry portfolio" has been largely discredited. It would be one thing if the proposed dirigisme had the potential of developing a positive externality, like government support for R&D. But in this case more upgrading in province would magnify negative externalities. One analysis, for example, of the environmental impact of the bitumen upgraders that were planned for the Edmonton area concluded that they would consume about 10 times as much water as the City of Edmonton and use more electricity than is produced by the entire EPCOR Genesee operation. Never mind the additional carbon emissions. Josh Lerner, a Harvard B-School prof and entrepreneurship policy expert, has noted that industrial policy frequently ends up "boosting cronies of the nation's rulers or legislators" and "[t]he annals of industrial policy abound with examples of efforts that have been hijacked in such a manner."

Alberta Treasury Branches has been a popular vehicle for government cronyism in the Foothills province. In 1994 Tory ministers had ATB extend $353 million in guarantees and loans to West Edmonton Mall which eventually provoked a furious legal battle with WEM's developers, the Ghermezians; another battle with Peter Pocklington in the wake of Gainers' bankruptcy ended with ATB writing off more than $70 million. A March 1988 Speech from the Throne announced that "[a]n important step in Alberta's diversification plan is the construction of a new magnesium plant near High River, expected to begin this spring. This plant will provide 600 person-years or more in construction jobs and a permanent work force rising to at least 250 by 1994." By 1991 the plant had already been already closed and Alberta taxpayers left on the hook for a loan guarantee of more than $100 million. As Calgary Herald columnist Deborah Yedlin said when Edmonton Whitemud MLA Dave Hancock came out in support of bitumen upgrading last year, "the musings of the Alberta government smack more of populist politics than they do of robust, long-term economic policy."

how it's all going wrong

2010-10-23T00:17:00.013-06:00

This is a long post, but it functions as something of a capstone to what I've been building up to throughout the year.

A few weeks ago, the Troubled Asset Relief Program, popularly known as the bank bailout, quietly expired. TARP effectively extended a $700 billion line-of-credit to the financial industry, of which just a portion was activated. Bloomberg's post-mortem number crunch attempted to determine how many cents on the dollar US taxpayers recovered on the $309 billion deployed. The answer? 108 cents. In other words, a $25 billion profit.

Addressing this result, President Obama said:

We've managed TARP so well that, in fact, most of the money never even got spent and whatever is remaining will help reduce the deficit. But it doesn't solve our big problem. Solving the big problem will require us making some much more significant adjustments when it comes to big-ticket items. And that's a debate that Republicans really don't want to have....
the big-ticket items are Social Security, Medicare, defense. The entitlements in defense take up about three-quarters of the budget. So you can't cut your way through education or parks programs or the Environmental Protection Agency, because that's not where the money is.

I wouldn't have voted for Obama. In July 2008 I explained why I'm for McCain and took particular exception to Obama's support for rent controls while an Illinois legislator, a disturbing and revealing policy error that got little attention from a MSM that was more interested in what I'd call the bedazzling but policy-irrelevant "Obama narrative." But in his remarks above the President is entirely correct. This year I have directed a lot of "friendly fire" at those who would normally be my political allies, but the basic reason for this is that I'd rather have a liberal who was no talk and no action when it comes to spending than a conservative who was all talk and no action. As I noted a month ago, Republican Senate leader Mitch McConnell loudly advocated the establishment of a deficit commission until Obama called his bluff at which time McConnell bailed. I consider it something of an outrage that the conservative "elite" has just let this slide.

Perhaps I'm just incurably quixotic. At right is a scan from the Edmonton Journal from the last Alberta election campaign. "Reduce government spending" as my #1 priority? This is the sort of platform that gets a candidate 2.7% of the vote. Far more common is the sort of priorities identified by Chuck Farrer, who is looking to unseat Gene Leskiw on Wildrose's behalf in Bonnyville-Cold Lake:

When asked about his top priorities, Farrer said, “Healthcare’s a real big one, the seniors is paramount, and the property rights. ...
Farrer and Sobolewski were asked about the possibility of a provincial sales tax, something both were opposed to.

Healthcare spending soared an utterly unsustainable 16% in the provincial budget announced in February (and in a deficit environment) and this Wildrose candidate STILL isn't happy? Now I understand that Wildrosers will tell me that this isn't fair because the party's view is that when "questions exist about the system’s future financial sustainability, the answer lies in squeezing more inefficiencies from the system," but I do note that I have just quoted a line from Jeffrey Simpson's Friday Globe and Mail column that was written in sarcasm.

As I have noted with some regularity this year, Wildrose policy makers have a rather mixed record with respect to advancing policy that most economists would recognize as efficient. The most important measure would be shifting tax burdens off of businesses and on to consumers, but the party does not have a whole lot to say to business on this front. Prioritizing individual landowners' rights is anti-business, if anything, since businesses - at least the constructive kind - are interested in controlling inputs merely as a means to producing outputs, and giving those who are fortunate enough to begin the game with control over raw inputs more leverage over those inputs makes it more difficult and/or expensive for producers. The one raw input Wildrose seems prepared to make more easily and cheaply available to value-adding business is oil & gas, which happens to be the one input where the externality problem is of least concern (since the economic rent is being captured by a public owner instead of a private one). There are some potential future Wildrose MLAs who may be more sensitive to the needs of business , of course, for example the talented corporate lawyer Shayne Saskiw who will be running in Lac La Biche and Andrew Constantinidis, an internationally experienced C-level executive with a listed company who will be running in the very promising constituency of Calgary West. But the decisive proof that Wildrose hasn't been doing much for business may be the fact that the party has not raised money from the corporate sector like it did during the 2008 campaign when a cut to the corporate tax rate was part of the five point platform. In 2009, corporate donations represented less than a quarter of Wildrose donations received - an even smaller share than for the Alberta Liberals - versus 69% for the PCs.

My favorite modern Presidential candidate for a major US party is not, in fact, Ronald Reagan but Barry Goldwater. In the 1980 Presidential election, independent candidate John Anderson (right) took 7%, running on a platform that included some wonk-friendly measures like a 50 cent per gallon gas tax. During the election debate, Reagan said, "John Anderson tells us that first we've got to reduce spending before we can reduce taxes. Well, if you've got a kid that's extravagant, you can lecture him all you want to about his extravagance. Or you can cut his allowance and achieve the same end much quicker." This may be been the first high level articulation of the pernicious "starve the beast" doctrine. In 2003 Milton Friedman repeated Reagan's contention, writing, "How can we ever cut government down to size? I believe there is one and only one way: the way parents control spendthrift children, cutting their allowance." What this misses, of course, is the fact that a kid can go borrow, and if he can't currently borrow a financial industry will develop that will allow him to shift his consumption from the future to the present. A study by the libertarian Cato Institute gets right to the point: "Starve the beast just does not work."

If deficits finance a significant fraction of government spending, then citizens experience government services as discounted off the full price. The same level of government spending would be less popular were taxpayers charged full fare. By this analysis, in order to build popular support for smaller government the first step ought to be to raise taxes. Indeed, the Cato study found empirical support for the theory that higher revenues constrain spending. In Alberta, of course, the problem is exacerbated because even when not running a deficit, corporate and personal tax revenues pay for only a small fraction of government spending. Other revenues, of which windfall energy revenues are particularly significant, support the bulk of the provincial government's bulk.

Goldwater (right) was a true economic conservative and Cold Warrior, who prioritized spending cuts over tax cuts because true conservatives don't run up deficits. Yet Goldwater went on to lose to Lyndon Johnson by one of the largest landslides ever; LBJ's 1964 victory was the only instance between World War II and the present that the Democratic nominee for President has received a majority of the white vote.

Now having said all this, spending per se is not the only problem or even the central problem. In early 2008, the Alberta Liberal leader condemned the overspending and even a NDP MLA said, "with all the spending they've been doing, I don't think the budget is going to be pretty." Since then Ted Morton has taken over as Alberta's Finance Minister, and Doug Griffiths has been made Parliamentary Secretary to Morton (not worth much really but better than nothing). This may provide some restraint or at least reflection going forward. There's also the fact that not all spending is created equal. As the TARP example showed, some spending is investment that may help raise revenues over time. Upgrades to physical infrastructure and government contributions to R&D can potentially serve as a squirreling away of sorts of current revenue, depending on costs.

Spending on civil service salaries and benefits cannot be deemed investments, however. They are privately captured and by economic actors with high marginal propensities to consume to boot. Even worse is the way these expenditures are competitively negotiated, or more precisely uncompetitively negotiated. Unions and consumer advocates are ultimately the biggest enemies of investment.

When politicians sit down to "negotiate" with the civil service unions, immediately there is an agency problem, such that the politicians are not dealing with their own money. More to the point, however, is the fact that the vast majority of politicians are going to be thoroughly outclassed by a union economist like Erin Weir. Weir recently noted that since "2005, business investment in Saskatchewan increased by 55% through 2008. During the same period, investment rose by only 27% in Alberta and 32% in BC." This is used to argue against cutting corporate taxes in Saskatchewan. But would Weir point to these facts in an Alberta context? Highly unlikely, as it doesn't serve the desired narrative; some other statistics would be found.

Contrary to popular perception in Canada, Republican Congressmen from John McCain on down proposed a number of alternatives for US healthcare reform prior to Obamacare. But these proposals went after the fact that the cost of healthcare benefits were exploding as a share of the economy because said benefits were untaxed. The unions blocked/watered down/deferred any removal of the tax exclusion for employer provided healthcare benefits, and they did so because negotiating healthcare benefits like regular wages wouldn't play to their negotiating strengths. Funding for Obamacare - to the extent it was funded - then had to come from taxes on super-high earners instead of high earning union members and this fact more than anything else was the reason GOP support was non-existent.

If provincial and municipal negotiators were to try to bring more of the present value of future benefits to the actual present, the transparency of what public employees are actually getting would be that much clearer to distracted taxpayers and taxpayers wouldn't stand for it. The unions know this and accordingly want benefits deferred so that when reality, and crunch time, arrives, they can say "a contract is a contract," which is a powerful bargaining chip they don't have before something has been signed. As Steven Green has noted while talking about his book, Plunder!: How Public Employee Unions Are Raiding Treasuries, Controlling Our Lives and Bankrupting the Nation, once a deal is granted, it doesn't matter if the union presentations to government are later exposed to have underestimated the present value of the future costs, the benefit has vested and cannot be retracted.

There is a parallel here in the consumer credit bubble. A significant enabler was the sheer complexity of the system that obscured pricing fundamentals, a complexity that the MBAs had no incentive to reduce to the point that MBA-level expertise was not longer required. There is also a parallel in terms of the agency problem, such that mortgage originators lost the incentive to monitor by spinning out their liabilities to relatively disinterested and uninformed external investors (not unlike politicians retaining little incentive to monitor after spinning out liabilities for pension agreements on to relatively disinterested and uninformed taxpayers).

Consider this multi-choice question: who first busted the state of New Jersey for improper and incomplete disclosure of its civil servant pension liabilities?

1) a taxpayers watchdog

2) a conservative politician

3) buyers of the state's debt who could lose their investment in the event of default

4) another government entity

The answer is (4). The SEC ended up prosecuting New Jersey (perhaps to the chagrin of both Tea Partiers south the border who want more sovereignty passed to the states and to Alberta politicians north of the border who oppose a national financial regulator). The fact is that municipal and provincial politicians do not have the expertise to run a net present value analysis on the union benefit packages they negotiate and even if they did, it's their successors who will have to deal with the negative consequences of pushing costs into the future, and even if the costs came due today, it's not their own money. If there is one behaviour that my colleagues in "high finance" engaged in that I found especially objectionable, it was the dog and pony shows that they put on for governance boards in order to get even more money to manage. Complexity increased not because of a real economic demand but because it served as a barrier to entry. In many cases the value of financial wizardry was merely in the appearance of it. Word on the grapevine is that Alberta Investment Management (AIMCo) has pulled the wool over the eyes of its governing board by snowing it with an impressive song and dance about benchmarks that mean bigger bonuses for the investment team on a more or less permanent basis. Don't expect any politicians or taxpayers' associations to do anything about something they would understand even less than the board.

Unions may argue that their influence has been declining, pointing to declining levels of unionization in the private sector. But in fact numbers don't matter. Union membership in France has declined from 20% in 1960 to 8% today, which is even below the US at 12%. Would anyone deny that French unions have significant clout? In large part because taxpayers have been mugged by public employees in state houses and city halls, quite outrageously so in places like Bell, California, cash-strapped cities are switching off streetlights, states are furloughing children from school, and counties are ripping up pavement. It is but the early stages of a civilization in decline; an October 14 Economist article is titled, "Public-sector pensions: Three-trillion-dollar hole" with the byline "American states have promised their employees benefits they can’t afford."

This problem did not "just happen." It is a consequence of a weak governance structure and, ultimately, a weak culture.

Alberta municipal elections review

2010-10-19T10:00:00.021-06:00

CALGARY MAYOR

Calgary mayor-elect Naheed Nenshi has said he was interviewed by "the evangelical newspaper." Whatever Nenshi was referring to, his remarks - punctuated by giggles -suggest someone who sees evangelicals as an oddity to be humored. I doubt that his rendering of the questions that were put to him were word-for-word accurate; Nenshi's account is extremely plausible for a non-evangelical imagining what evangelicals are like, which is, in fact, what's somewhat concerning for an evangelical. The attitude seems to be, everyone is entitled to their place in the freak show: "they're people too;" evangelicals may be deviants, but let's not marginalize them any more than, say, the cross-dressing community because we're all God's, or Allah's, children.

A harsh hostility to secularism and "diversity" is, of course, not the only alternative to Nenshi's attitude. Instead of just promulgating Nenshi's facile "I'm everybody positive" line, one could try to acquire a knowledge level of the "Other" that approaches that of an "insider" such that one could say, for example, one was interviewed by someone with the Evangelical Fellowship of Canada, or Focus on the Family Canada, or whoever it actually was as opposed to some depersonalized one of them. Fact is, a politician whose language suggested he or she had, for example, read the Purpose Driven Life (by pastor Rick Warren) would receive a lot more evangelical interest even if he or she said, "I don't agree with Rick Warren with respect to X and Y," than a politician like Nenshi, who, being agreeable, might say he agrees with someone like Warren but would never bring up Warren by name since the whole evangelical culture is terra incognita to him.

The situation south of the border is rather different. The PBS documentary God in America is not titled "God in North America." The race for the US Senate seat up for grabs in Kentucky got some increased national attention recently when Democrat Jack Conway (left in photo at right) attacked Tea Party-endorsed Rand Paul (right at right) for his youthful anti-Christian libertarianism in a TV advertisement Jon Chait called the "ugliest political ad of the year." Liberal pundits have jumped at the chance to follow Chait in condemning Conway, since it provides an opportunity to burnish their credentials as independent of the Democratic party. I have to agree with Harvard academic Theda Skocpol that the ad is nonetheless fair game. One would think with all the ads out there that fail basic fact checks, an ad that appears to be accurate with respect to its salient point would not be topping the list for most unacceptable. The Republican establishment advised James Dobson that Paul was a libertarian but Paul's people lobbied Dobson hard to change his endorsement from the GOP establishment candidate to Paul and were successful. Had Paul not done this and even accused his primary competitor of misleading Dobson, Paul's blasphemous college pranks - which Dobson would have taken very seriously had he known - would not be an issue. Ugly might thus better describe Rand's reaction: calling for Conway to be disqualified from standing for election and pandering by substituting the substantive knowledge I suggest above with a "pop culture" quote from scripture.

All this to say that Nenshi's election is indeed contrary to the stereotype of Calgary as Harperite heartland but Calgarians do not demand social conservatism out of their politicians like voters in the US South do. Albertans are not especially fiscally conservative either. Alberta has a far larger government than its personal and corporate tax revenues could possibly support. As MLA Doug Griffiths as pointed out, those revenues wouldn't even cover the Health budget, which is but one department. The province nonetheless enjoys a windfall of natural resource revenues that has fueled government expansion. It's true that "Conservative" candidates win easily across the province (aside from central Edmonton) at the federal level. But this is in large part due to regional alienation sentiments (and a taste for "patriotic" foreign policy that doesn't apply sub-nationally) that cannot be so easily inflamed at the provincial level, and even less so at the municipal level. So it is that candidates who would be "Liberal" provincially and/or federally routinely beat "Conservative" candidates in both Edmonton and Calgary municipal elections.

Nenshi's Masters in Public Policy from Harvard helps him in a race where the electorate is voting for an individual instead of a party, as it should, since the status of high school drop-out that one particularly famous former Calgary mayor held is not especially salutory when Alberta already has one of the highest dropout rates in the country. I should also acknowledge that I would have few Nenshi conversations to take issue with were Nenshi not open enough to not object to a guy following him around with a camera and releasing footage under a minimally restrictive Creative Commons license. While there appears to be some Obama-like hype around Nenshi, it is presently too early to dismiss Nenshi's election a "mistake," as Calgary government MLA Kyle Fawcett tweeted. The way Nenshi won, from relative obscurity to victory in just a few weeks despite not having held office before, should encourage quality candidates to get involved in municipal politics.

EDMONTON CITY COUNCIL

Paula Simons of the Edmonton Journal has, unsurprisingly, interpreted the re-election of Stephen Mandel (right) and the likes of Don Iveson as meaning the capital city has overcome its "fear of innovation" amongst other things. For someone who has supposedly been liberated to innovate, Simons' analysis is distinguished by its lack of originality. A continued small-l liberal conceit is that conservative finger-wagging about "responsibility" is ultimately reducible to a fear of moving forward. One of David Dorward's (at left, photo credit Ed Kaiser, Edm J) campaign themes was getting the funding for a massive LRT expansion well sorted before jumping into deficit financing and/or years of double-digit tax increases. This point is rather conveniently avoided by the thesis that the municipal vote is reducible to a referendum on the airport or some pie-in-the-sky notion of "how we see ourselves as a city." It's as if only narrow and small-minded people talk about prosaic details like the number of calories in a veggie plate relative to a chocolate sundae. "Think big" ergo "spend big," - tomorrow will take care itself if you see the glass as half full. At bottom it's the same tax-and-spend (non-)argument we've heard for years.

Graham Thomson, meanwhile, uses his column to draw a line from the municipal election to a future provincial crackdown on "freedom of the press." His logic

- the Wildrose Alliance supported Dorward for mayor

- Danielle Smith, Wildrose leader, is running in Okotoks-High River

- William "Bible Bill" Aberhart represented this area in the 1930s

- as premier, Aberhart tried to censor the press and was a hypocrite with respect to MLA recall.

That Thomson should manage to get this absurdity printed in Edmonton's paper of record is a testimony to his skills at sophistry. Perhaps conscious of the enormous chasms his "reasoning" is leaping, he says "readers took me to task" for not drawing links like this earlier and he's just innocently "making the connection as a reminder that sometimes Alberta politics takes dramatic and unexpected turns." Right.

St Albert pundit David Climenhaga muses about the implications of the "decisive defeat" of David Dorward. In fact had Calgary's mayor-elect received Dorward's 34% of the Edmonton vote, Calgary's mayor-elect would still be mayor-elect. In other words, Dorward beat both Ric McIver and Barb Higgins yet few are saying both of those two Calgary contenders went down to "decisive" defeat. Dorward's result was actually reasonably strong given how late his campaign got going and the fact he was on the minority side of the galvanizing airport issue. Incumbents are re-elected close to 90% of the time, such that had the election been at all close it ought to be interpreted as a wake-up call to the incumbent. On that count, Kim Krushell, the well-regarded Ward 2 incumbent, had such a squeaker of a win that it can hardly be said the airport issue didn't have any traction. This ward 2 race is far more suitable for being characterized as a referendum on the airport than the mayoralty race. Also of interest is the fact that former Alberta Alliance candidate Tony Caterina swamped Brendan van Alstine in Ward 7 despite the fact #toncat was only partially an incumbent and Ward 7 is prime NDP territory. Last, but not least, is Kerry Diotte's success in Ward 11. Perennial "almost but not quite" candidate Chinwe Okelu thought his gap behind Diotte would have been tighter that it ended up being. As someone who had some Wildrose support, Diotte's win is another counterpoint to the contention that the tea leaves of the municipal election suggest the Wildrose Alliance will find no purchase in the capital city.

State of the Rose: not addressing the problem

2010-10-10T23:11:00.029-06:00

Since I blogged a few weeks ago about "the marshmellow test", I've looked for bloggers who have linked the concept with macroeconomics and I've come across a column by Christopher Meyer that puts the point rather succinctly:

The US doesn't need to match Vietnam's 42% of GDP invested. Just getting to the level of a Singapore (21%) or Switzerland (22%) would be a huge improvement. But it won't be easy. This quote, of disputed origin, expresses the problem:

A democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury. After that, the majority always votes for the candidate promising the most benefits....

If you were running for office in a country of marshmallow addicts, what would you do?

A good question. In 2005 David Frum defined a "brokerage party" as "a political entity without fixed principles or policies that exploits the power of the central state to bribe or bully incompatible constituencies to join together to share the spoils of government." Perhaps a political party cannot grow large enough to form a government without becoming a brokerage party.

I believe a starting point on the way to a solution may be to first address policy matters that deal with the mix of national income components as opposed to the expenditure-side mix of consumption and investment. China's undervaluing of its currency, for example, is more than just a consumption versus investment issue: the undervaluation allows the Chinese government to extract a substantial slice of the value of China's exports without distorting the incentives that encourage its people to work so hard and make Chinese labour so productive. Does this remind anyone of the "tax what is inelastic" argument that has been advanced in support of land value taxation? It should.

Naturally-occurring goods such as water, air, soil, minerals, flora and fauna are used in the creation of products. Economists call the payments received by the owners of these primary factors of production, which can be generalized as "land", rent.

An unfortunate tendency of influential people in the Wildrose party is to prioritize protection of the interests of "land" owners under the rubric of protecting property rights. Prior to the 2009 AGM, the party platform included a plank that called for "deeded landowners to receive up to 1% of the provincial royalty income generated on their land." I spoke out against the plank, noting that the policy created a "windfall," with the key point being that any cheques written under this policy "would be totally unrelated to any work or capital contribution by the surface owner." Although the plank was deleted after a close vote, the sentiment remains, and we see it in things like Wildrose's obsession with bills 19, 36, and 50, a focus we've seen from candidates like Link Byfield in addition to the leader.

Granted the issue is not directly a taxation issue, but besides unhelpfully encouraging a NIMBY culture, there seems to be little appreciation for the fact that land owners make no contribution to the production process. They instead just prevent others from using that which would otherwise be useful.

National statistical agencies typically break down broad income and expenditure estimates in order to show how the various sectors of the economy interact in their transactions with one another to produce national output. These agencies (and economists) identify more income categories than just employee wages and business profits. As an economy generates wealth, the price of land and other natural resources increases. Because the gifts of nature cannot be produced by human effort and supply cannot be increased to meet demand, holders of land and natural resources are in a position to capture the surplus - economic rent - generated by labor and capital. This rental income is a distinguishable income category of its own, and there is little call to be especially concerned about protecting its share of national income on either a moral or economic basis given that it is a socially generated surplus that is being privately captured. Besides being bad economics to defend this externality-consuming profiteering, it creates a backlash against profit in general, making it that more politically difficult to provide policy relief to productive labour and industry.

I've gone on something of an extended tirade about the state of the Wildrose Alliance here with today's triple post but in fairness it is not clear that the party leadership is offside with the membership. One of the critical issues both in terms of economics and social justice that the province is facing concerns the far weaker pension benefits that private sector workers can expect relative to their public sector counterparts. The solution is not enriching the Canadian Pension Plan, which would mean public sector retirees with Cadillac pension plans get even more, but creation of a non-universal program that acts as a supplementary plan for private sector workers. The Alberta government, to its credit, has explored a "made in the west" solution along these lines in partnership with British Columbia. The Canadian Union of Public Employees (CUPE) has, no surprise, come out in favour of greater CPP benefits. Who supports CUPE's view? Apparently just as many Wildrosers as non-Wildrosers: "[t]wo-thirds of respondents who support Stelmach’s Conservative Party back an increase [in CPP benefits], as do a similar number of supporters of the Wildrose Alliance Party."

UPDATE Tuesday, October 12:

As if on cue, Wildrose leader Danielle Smith is meeting with the Warburg-Pembina Surface Rights Group tonight to speak about the "Wildrose vision" on "property rights issues" while the OECD has published a study that finds that "recurrent taxes on immovable property" are the "most growth friendly" taxes. Corporate income taxes, which Wildrose circa 2010 has been silent about (unlike Wildrose circa 2008), "have the most negative effect on GDP per capita."

Siding with rural landowners, many of whom simply inherited their land, may make a lot of political sense but on a policy front it is completely wrong-headed.

UPDATE Wednesday, October 13:

"Cancelled Power Plant boosts Oakville Real Estate" makes explicit the connection between the market value of privately held property and public policy. Adam Radwanski then makes explicit the connection to business investment: "In terms of energy policy, the Oakville decision raises all sorts of questions... to what extent will such a reactive decision scare off investment by an industry that sees fewer risks elsewhere?"

Earlier today someone tweeted me saying there isn't a parallel to Alberta's power lines debate, but several months ago Wildrose's leader reportedly said, "Landowners must be fully and fairly compensated for the loss of value in their property and nuisance these new lines will cause."

See MLA Doug Griffiths' remarks after 14:25 of this AlbertaVenture interview for why it's difficult to have a substantive discussion about Alberta's fiscal policy.

State of the Rose: Education

2010-10-10T14:28:00.014-06:00

What's remarkable about the June AGM shots that Anderson and Forsyth took at selected party platform planks that predated their parachuting into the party is how their chosen targets match those of their PC caucus colleague Gene Leskiw (right). Go after the party's free speech plank calling for the repeal of Bill 44's section 3? check. Complain about the "allow individual workers the choice to determine their membership in labour organizations" plank? check. Leskiw's complaint that "[t]he only MLA in the party speaks of limiting teacher’s right to strike to weekends and holidays" is revealing in that this sole MLA was Paul Hinman, yet in the pre-AGM materials the motion to have this right to strike limit struck was attributed to "the caucus." This suggests that Hinman, the only caucus member to campaign for Wildrose in the last election and, later, be elected under the Wildrose banner, has either been co-opted or marginalized as a "caucus" member by Anderson and Forsyth. What about Leskiw's rant about Wildrose promising "standardized annual testing of students and teacher quality"? "This comes straight from George Bush’s American plans for school improvement," she protests. At the June AGM Anderson and Forsyth essentially spelled each other off as they went to the microphone to speak out against planks the teachers' unions don't like. Although I didn't recognize him at the time, teacher union lobbyists present at the AGM (the Provincial Executive Council of the ATA sent seven of their members) recognized another speaker who wanted to protect the teachers' union right to strike as social conservative John Carpay, now Wildrose's candidate for Calgary Lougheed

Perhaps Anderson and Forsyth would like to issue a press release that comments on this letter signed by more than a dozen US school district superintendents and supervisors, which complains of the "glacial process for removing an incompetent teacher". As an interviewee in Waiting for Superman, which is now showing in US theatres, observes, "[t]he teacher's unions are a menace and an impediment to reform." One can quibble with the film saying it oversimplifies, just as I would quibble with Wildrose's education policies by saying there should be more specificity with respect to using objective data in teacher assessment, such as a call for exploring value-added models (VAM). But the film's main thesis, that the effectiveness of the teacher is the major determinant of student academic progress, is supported by the evidence.

Jay Greene, a fellow at the Manhattan Institute and head of the Department of Education Reform at the University of Arkansas, is but one of several education scholars who have exposed the belief "that vouchers do little to help students while undermining our democracy" as a myth. According to scholar.google.com, a paper by Stanford economist and Hoover Institute fellow Caroline Hoxby that demonstrated that competition among public schools benefit students and taxpayers has been cited 689 times. Matthew Ladner has noted that "choice faces formidable political enemies," and indeed it does, when even a Wildrose MLA has called on supporters of this supposed pro-market party to treat vouchers as a "red flag." On top of this, there is a very simple retort to Gene Leskiw's remark about George Bush's No Child Left Behind Act, and that's that Barack Obama's Race to the Top program takes a page from the same "standards" playbook. Is Obama yet another right wing ideologue?

In any case, current Wildrose education policy as recently announced by the leader mentions testing only to say that current provincial achievement tests should be killed off. While an unspecified replacement is proposed, the replacement is to be developed by "working with teachers." To anyone inclined to interpret this as anything but a union accommodation, note that the process of acquiring insight into what politicians really believe (if anything) requires a certain hermeneutics. One must start with the realization that most political decisions involve some sort of trade-off between interest groups, and that politicians will try to minimize the reality of a trade-off as much as possible in order to be all things to all people. One thus needs to suss out who will get the actual concrete result they have lobbied for, and who will get the dog and pony show. In this case, terminating the PATs is a real substantive victory for the teachers union and the key member of their braintrust on the issue Alfie Kohn. Nowhere in the platform that Wildrose members had an opportunity to vote on is it asserted that the PATs are "outdated" or "inadequate", as current Wildrose policy declares. Indeed, for all the talk about how Wildrose is under the influence of right wing think tanks, axing the PATs is directly contrary to what Michael Zwaagstra has called for at the Frontier Centre. A nod is made towards the annual testing called for by the membership-reviewed party platform, but, again, when applying the principles of politi-speak hermeneutics one must look not for who is getting the "yes" (everybody gets the "yes" from a politician), but for who is getting the "no." In this case, it is clear that the party leadership is trying to give the "yes" to the union lobby to the maximal extent possible that continues to allow deniability that the other side is getting a "no". Where's our standardized testing (full disclosure here: throughout my education career standardized tests were a big boost to my academic record and/or reputation)? "Oh, the tests will remain, in fact the fox is in the henhouse right now developing them!" The proof in the pudding here is the fact that testing opponents actually get argued with instead of quietly accommodated in the remarks of red Tory and current Education minister Dave Hancock, with Hancock fingering anti-testing ringleader Kohn as "dogmatic."

In the photo (right) that Alberta Union of Public Employees' Committee on Political Action released of COPA's meeting with the "Wildrose caucus" on February 23, conspicuously missing is principled conservative Paul Hinman. Heather Forsyth featured in an AUPE press release to help make the union's case against the PC government and at about the same time Rob Anderson appeared in a United Nurses of Alberta release. In January, Danielle Smith had her own meeting with AUPE's president (photo left), with the AUPE subsequently asserting that the Wildrose leader "was receptive to union concerns." In order to advance his thesis that a Wildrose government would take a hard line on unions, AUPE communications person and St Albert-based blogger David Climenhaga was reduced to drawing on a statement by the loser of last year's Wildrose leadership vote, Mark Dyrholm. The result? Wildrose's rise having such a negligible impact on public policy that the union lobby declared victory after the government's February budget: "The budget is something of a victory for [our] coalition"

With respect to Wildrose's post-secondary education policy, it's more financial obligation on the government, less on those who consume a government-subsidized service, and fewer resources for the in-deficit provincial Treasury. The policy calls for mandated tuition caps, a philosophy rather at odds with the idea that the market should determine price levels. A consequence of the cap is that either our universities will have their funding reduced, or the Alberta taxpayer will have to contribute more. Increased tax breaks for private donations are also talked about, but donations of securities, for example, are already tax free.

Don't get me wrong here: there are problems with just demanding more standardized testing, amongst other things. But what's missing is any sign that the union lobbies, and more generally those with claims on the public purse, are going to be challenged.

State of the Rose: Wildrose vs libertarians

2010-10-10T13:45:00.005-06:00

In mid-October 2009, the membership of Alberta's Wildrose Alliance Party elected Danielle Smith as its new leader. Since then the party, which was polling 7% in April 2009, has never polled below 25% across the province, while the official opposition Alberta Liberals have never polled above. Wildrose has so sidelined the Liberals as primary opposition to the governing PC party that a newspaper editorialist has contended that Wildrose is fighting a proxy war against the governing PC party in the upcoming municipal election in Edmonton. Ms Simons' opinion piece has to be taken with a grain of salt: her previous columns suggest that she would like nothing more than to see Wildrose humiliated in the capital city, and a possible route to that end would be to render as a verdict on the party the October 17 municipal vote, which should see the incumbent mayor Stephen Mandel win at a canter. The proxy war narrative also fits it rather too conveniently into Mandel's ranting about provincial politicians interfering in Edmonton's affairs. But whether the thesis that Wildrose has what military strategists call force projection capability to contest the most Wildrose-unfriendly territory in the province on a proxy basis is well-founded or not, there is no denying that Danielle Smith has a significantly higher profile both provincially and nationally than Official Opposition leader David Swann.

Writing about my view of the state of the party this weekend is going to be lengthy chronicle of woe, sad to say. As such, I'm dividing it into three parts: 1) the regrettable and unnecessary falling out between the party and libertarian pundits at the Western Standard and Macleans 2) Wildrose's education policies, which on at least one unsettling point are more teacher union friendly the PC government's policies, and 3) a broader view of the fundamental policy problem that North America in general faces and how the "conservative" parties are failing to address it.

Ms Smith' convincing victory in the race to become Wildrose leader was seen by many "libertarians" who supported her as the membership's endorsement of a libertarian positioning for the party. Danielle told the Edmonton Journal's Capital Notebook that she was "libertarian and pro-choice." Matthew Johnston, owner of the Western Standard, says that at his e-magazine "we aim to be fiercely and openly loyal to libertarian ideas" and in April 2009 Johnston described Danielle as close to the "perfect candidate". Johnston co-hosted a reception for Danielle with federal Libertarian Party leader Dennis Young in Calgary in June 2009, shortly after Danielle declared her candidacy for the party's leadership. The blogger "CalgaryLibertarian" volunteered to help the party win the Glenmore by-election later that summer. While organizing for Wildrose in Edmonton's south-west late last year, I tried to get a 20-year old Edmonton libertarian on to a constituency board in order to ensure that the voice of young people was heard and although this student had to decline because of school commitments, he said he was very interested in getting Danielle to speak to his local libertarian meet-up group.

I'm not a libertarian, I'm a paleo-con, but I nonetheless feel that, in general, libertarians are a valuable part of any conservative movement not least because their enthusiasm for what is largely an abstraction makes them less susceptible to partisanship on any particular issue. Earlier this summer Western Standard writer JJ McCullough noted an "important" fact that is "largely forgotten or unfashionable to recall in the present day," namely, that "[t]he 1993-2003 Liberal government of Jean Chretien embarked on a remarkable agenda of fiscal conservatism." Another Western Standard contributor, Mike Brock, uploaded to Youtube a video of Andrew Coyne blasting the Harper Conservatives.

By being frequently found outside established brokerage parties, Libertarian pundits serve as a conscience check of sorts, and so it was that I thought that Matt Johnston's view should have been given some consideration when early this year he warned against floor-crosser Heather Forsyth being "given prominence in the party that could put her in a position to shape policy." I, myself, was more concerned about Rob Anderson, writing to a Wildrose executive member on January 4 to warn that Anderson is "a communications risk for going off message on social issues." The idea of "prominence" that Johnston refers to is an important one: floor-crossings are not all created equal. If crossers are going to justify not running in a byelection with the argument that they were elected as individuals instead of as representatives of a party, if post-crossing those individuals are presented more as individuals than as party representatives, the hypocrisy is minimal. More than a year ago I had written to the same Wildrose executive member to express my concerns about floor-crossers in light of the then rumours, noting that accepting the crossers into the party is one issue and "[w]hether we want them to step into what would amount to commanding positions in the Wildrose Alliance is another issue."

So when, just a month after I blogged here that "the less we hear from caucus... the better," caucus puts out a "Wildrose statement" that provokes Matt Johnston to write, "I feel sick about this. I really thought Danielle would be different," I don't know whether to laugh or cry. It is, of course, not just Johnston that is upset. Mike Brock has waved the "I told you so," finger as well, saying "[a]s I predicted, the libertarians must compromise." My former high school classmate Colby Cosh, writing for Macleans, deemed the press release evidence of an anti-evidence-based social policy and perceived Forsyth's idiosyncratic policy concerns in the text. In my view, whether or not a politician makes "extreme" remarks is unrelated to how accountable that politician is. An elected politician who makes idiosyncratic policy announcements, however, is necessarily insensitive to accountability considerations to at least a degree because an accountable politician keeps in mind the fact that the people who volunteered their time and money to elect him or her did not do so in order to advance a particular person's ambitions and personal agenda, but to advance a general agenda. De-particularizing one's platform is correlated with removing one's particular self such that getting elected becomes a team effort. The fact that Cosh, Johnston, Brock et al have all gone off about this incident suggests that these critics are voicing a view that is generally held. What's especially headshaking here is the fact that Forsyth and Anderson have used the soapbox given to them by Wildrose and funded by the Alberta taxpayer (through the MLA office allowances) to go off about a court decision in Ontario, calling on the federal government to wade into a provincial issue.

As a non-libertarian, I am not as disturbed by the substance of the policy issue here, prostitution, as the Western Standard writers. The legalization of prostitution was one of the weekly Economist debate forum topics in September and I think the "con" speaker helpfully raises some of the fallen nature arguments that libertarians, who have have little time for depth psychology, all too often give short shrift to. I also think that that if Johnston, Brock, and Cosh were true libertarians as opposed to anti-social conservatives, they would have reserved their greatest indignation for when "the caucus" (read: Anderson and Forsyth, since I can't believe it was Hinman's idea) took their very nearly successful run at the policy planks that said Wildrose "will allow individual workers to voluntarily determine their membership in labour organizations" and "will extend to workers the democratic right to a secret ballot vote" at the party's AGM in June. I would think that the right to freely buy and sell labour in general is more fundamental that the right to freely buy and sell the human body. But the fact that more than three quarters of Economist readers should think prostitution should be legalized shouldn't surprise anyone and this sentiment was not confined to the upscale readers of the Economist either, if the comment threads on the CBC and Globe and Mail websites are any guide.

Libertarians are something of a fringe group and evidence for this is the fact that the caucus press release at issue here was uncontroversial in the eyes the mainstream media. But as a fiscal conservative I have to wonder how fiscal conservatives would fare under a Wildrose government. Mike Brock writes:

It's time, as I've been saying for a while, for libertarians across the country to withdraw our support for conservative parties across this country.

Even though we are a small minority in the movement, we played a big roll in the media, within the party establishment and on the ground shilling for conservatives over the past decade. What have we gotten for this?

Insults by the prime minister, who used to identify with classical liberalism. A complete abandonment of fiscal responsibility. More regulation. Bigger government. More military spending. Intensification of the drug war.

Oh, and some token tax cuts. At the expense of the biggest deficit in history, mind you.

No. I call on libertarians from all over to withdraw their support and do their damnedest to sabotage the conservative movement by playing to it's hypocrisies on economic issues, in particular.

I have to agree completely that self-styled conservatives need to be exposed for their "hypocrisies on economic issues", with the prime minister being offender-in-chief. Boondoggles like the Atlantic Opportunties Agency are getting as much taxpayer money as ever. It seems to me that what Brock and I have a common problem with is PARTY conservatives. Principled conservatives need to stop drinking the kool-aid, especially the kind labelled "citizen's initiatives", which the worst of the demagogues, like Bill "indicted-by-the-Conflict-of-Interest-Commisssioner" Vander Zalm, exploit for their own purposes. Consider the chain of the events that led to this latest incident. It was ultimately set into motion by a decision that was made, not by ordinary voters who elected Anderson and Forsyth to represent Wildrose, or by a grassroots membership vote to take a positioning that would alienate libertarians, but by an extremely small group of insiders at the top of the party under conditions of negligible transparency. That the financial interests of the floor crossers was reportedly taken into consideration as well (note the potentially "without an income for six months [if the crossers resigned to run in byelections]" quote in that link) just underlines how the fateful decision was made in the best traditions of back room politics.

Brock in fact has it wrong when he contends that the libertarian supporters of the party ended up with a "compromise" outcome they find unsatisfactory. Were that the case, as someone who doesn't hail from that wing I would have no objection. The real problem is that how libertarians would perceive the caucus press release on the Ontario court decision was simply never even considered.

China's friends in Alberta

2010-10-03T19:12:00.022-06:00

On September 8, a fishing boat from mainland China rammed two Japanese coast guard ships near some uninhabited islands northeast of Taiwan, known as the Senkaku islands to the Japanese and Diaoyu islands to the Chinese. The islands have been under Japanese administration since 1895 (excluding the US occupation of Okinawa from 1945 to 1972) but in the latter half of 1970, when potential petroleum resources became a consideration, the governments of China and the Taiwan began to advance claims to the islands. Japan released the trawler's crew but detained the captain, Zhan Qixiong, intending to prosecute him under domestic law.

The Chinese reaction was, in the words of the New York Times, "swift and angry," and included a block on exports of rare earth elements, which are critical to hundreds of high tech applications. Eventually Japan buckled and released captain Zhan, who returned to a hero's welcome in China (photo below credit: ChinaFotoPress / Getty Images).

According to the state-controlled Xinhua News Agency, captain Zhan's grandmother "died from shock upon learning of his detention." China Network Television, CCTV's online archive, reported that

Japan's move was a serious violation of, and a brazen challenge to, China's sovereignty over the Diaoyu Islands and their adjacent islets which have been an integral part of China since ancient times, said Chinese diplomats and experts.

As a mouthpiece of the Chinese government one of CCTV's favourite tactics is to interview sympathetic experts who say what the Politburo wants said. The channel hasn't been shy about taking on its critics. It's distributed a story by the Communist Party-controlled English language newspaper China Daily alleging that Reporters Sans Frontieres (RSF) has "sowed and fueled hatred toward China and Chinese people anytime and anywhere using whatever ignoble ways they could conceive." CCTV has also carried Xinhua stories attacking rights groups, finding a "human rights expert" to claim that an "Amnesty International report, similar with those issued by other foreign rights organizations, had 'evident logical errors'."

In early 2009, 22 Chinese academics and lawyers published an open letter to announce their determination to boycott CCTV in protest of its "brainwashing propaganda." It's not a boycott that University of Alberta political scientist Wenran Jiang has been inclined to participate in, as Professor Jiang has been a frequent interviewee for Communist Party-controlled media outlets.

In June Jiang appeared on CCTV to complain about the US military's presence in both Japan and South Korea, insisting that "the cold war is over," (13:17) - an interesting claim given that TIME has just published a story titled "Asia's New Cold War" - and stating "I hope they are not working towards a containment framework [towards China]" (20:56). Comments like these are no doubt a reason why CCTV News seems to invite Jiang on to its show every time he is in Beijing, which appears to be frequently. While Dr Jiang worries about a possible containment strategy and Taiwan's military (Jiang arguing that US arms sales to Taiwan "may in fact lead to instability and a new arms race"), think tanks in the UK and the Pentagon estimate that the PRC's military expenditure has increased 20-fold over the last 19 years. Japanese military spending has declined over the last decade.

The Economist lamented this past month's Senkaku islands incident, observing that "the ferocity of the Chinese response has harmed China ultimately, by undermining confidence in China as a responsible stakeholder in the region," But in 2008 Professor Jiang contended that China was trying to exhibit "Smile Diplomacy" towards Japan despite Tokyo being "confrontational."

In March an analyst for the U.S. Army’s Foreign Military Studies Office noted that "China controls approximately 97 percent of the world's rare earth element market" and that in 1992 Chinese leader Deng Xiaoping declared, “There is oil in the Middle East; there is rare earth in China." One of the most important uses of rare earth elements is magnetic technology and in 1986 General Motors established a new division, called Magnequench, to produce NdFeB magnets, which also have critical military applications. In the late 1990s, the Chinese made a move on Magnequench and the US government cleared the acquisition, provided Magnequench remained in the US for 5 years. The day after the deal expired in 2002, however, "the entire operation, along with all the equipment, disappeared. All employees were laid off and the company moved to China." China also bid for Australia's rare earth resources but backed off after Australia’s Foreign Investment Review Board asked the Chinese to seek only a non-controlling interest. Professor Jiang nonetheless echoed the People's Daily to tell the Australian Broadcasting Corp that the West shouldn't worry so much because the production of many raw materials is nonetheless "controlled and owned by foreign multinationals inside China." (after 5:47) A former senior strategic trade adviser at the Defense Department is not reassured. "The Pentagon has been incredibly negligent," says Peter Leitner. “There are plenty of early warning signs that China will use its leverage over these materials as a weapon.”

A notable exception to what Jiang sees as unwarranted China skepticism coming from western governments is Alberta. In 2008 Jiang appeared beside former Alberta PC MLA and current "Official Representative of the Province of Alberta to the U.S." Gary Mar on a panel in Washington DC to state that he had been in discussion with Mar about cooperating with China on various issues at the sub-national level (1:03:00) and alleged that Ottawa has not been "friendly at all towards China," further suggesting that Mar agreed with him but could not speak freely since Mar is working out of the Canadian embassy in DC (1:10:50).

This wasn't the first time Jiang has taken the federal Conservatives to task. He's written an CanWest op-ed dismissing the "self-congratulatory, moral statements regarding China's human rights record" that Canada has made and penned a Globe and Mail piece that reckoned that the offering of an honorary Canadian citizenship to the Dalai Lama, amongst other things, constituted "grandstanding"

According to Professor Jiang, "there's no excuses for China to make on the foreign policy area [because there's nothing requiring an excuse]" (37:37 of this TV Ontario panel) and he is entitled to his opinion, of course. Less clear is whether the Alberta government should have set up a Beijing apologist with $24.5 million as Founding Director of the China Institute at the U of A (in photo below from left to right: Mar, Jiang, and Minister Gene Zwozdesky; photo credit University of Alberta) instead of, say, a scholar who signed Charter 08, a manifesto initially signed by some 300 Chinese intellectuals and human rights activists to promote political reform and democratization in the PRC and since signed by more han 8000.

In his latest New York Times column Paul Krugman levelled several charges against the PRC that I can't disagree with, such as "China’s government has shown no hint of helpfulness and seems to go out of its way to flaunt its contempt for U.S. negotiators" and "U.S. policy makers have been incredibly, infuriatingly passive in the face of China’s bad behavior." Krugman's prescription, however, which appears to be risking a trade war, has a lot of economists shaking their heads. Indeed, tariffs could prove disastrous.

There is a happy medium between trade restrictions and the love-in going on between Alberta policy-makers and the Chinese, which is of concern primarily not because of trade and investment issues but because of a remarkable nonchalance that seems to prevail with respect to technology transfer to the PRC. If "Chinese companies have the bad habit of siphoning off technical expertise from their German partners," according to Germany's Chancellor, what is so special about Albertan partners that the same doesn't apply to them? The Alberta government has announced various technology collaboration agreements and funded "research... in State Key Laboratories and/or National Laboratories throughout China." In 2009 Ross Terrill's expert testimony before the U.S.-China Economic and Security Review Commission warned that "the large numbers of Chinese students entering the United States would include many students either encouraged or intimidated by the government into seeking out technological acquisitions on behalf of the PRC." Chinese students are often outstanding (the secret weapon of the top performing school in New South Wales is quite simple: lots of Chinese, Vietnamese, and Korean students) but this is an issue for the U of Alberta in particular that seems to have received little attention, in contrast to, say, down under, where the foreign editor of The Australian has written about how the "reliable pro-China gang" in his country is "centred on the Australian National University." If Albertans were more curious about the gap that exists between Edmonton and Ottawa on China policy, perhaps there would be more interest in the security of University of Alberta research and in the question of whether our trade and investment policies have been subject to foreign influence.

land value taxation and the ECCA closure debate: oligarchs in the shadows?

2010-09-27T14:27:00.007-06:00

In a comment to my last post about land value taxation, Edmonton Journal columnist David Staples asked me a few follow-up questions of the sort that one would one expect from any good journalist. A good journalist is, of course, an invaluable aide to any politician or pundit who has some useful policy ideas but is short on charisma, eloquence, or just ability to speak plainly and concisely, since the journalist can take the idea, add the missing eloquence, concision, and straightforward presentation, and then present the concept to the public for mass consumption. I'd make a few more asides about the relationship between good journalists and politicians who are long on charisma and eloquence and short on policy substance, but that's an extended topic in itself I'll leave for another day.

So without further ado (I've edited or ignored a question or two; the first lesson successful political candidates learn is to not answer the questions they are asked, but rather the questions they prefer to be asked to the extent that it is possible to do so without getting called on the evasion):

You don't tax the building, just the land, is that it? And you tax the land based on what exactly?

Yes, a given plot of land would be taxed the same by the city regardless of whether there was a skyscraper on it or a dilapidated old shack. The tax payable would be determined by the market value of the land. Just how the market value of the land would be determined could be complicated; suffice to say that this paper attempted to do so and concluded that, for example, for the average property transaction in Clareview a decade ago, 35% of the sale price reflected the value of the land.

Who will pay more and who will pay less under this system?

To continue with that 35% example, if I were a property owner and city assessors concluded that, based on a hypothetical sale of my property at market value, more than 35% of the value I would receive would represent land value, I would pay more. A typical owner who would pay more would be the owner of a single detached bungalow, especially if the building was run down. A typical owner who would pay less would be a high rise condo dweller.

How will it drive people to live in the inner city? Examples?

Offered examples are typical hypothetical since the case for land value taxation hasn't been as developed as an empirical argument as much as as a theoretical one.

By far the biggest and most contentious hypothetical example in the Edmonton context is the city centre airport lands. One of the biggest arguments for closure of the ECCA concerns the opportunity cost of not having more dense development there. Under land value taxation, the marginal tax cost of throwing up a residential high rise or commercial skyscraper on what is now a runway would be zero. These buildings will be more competitively priced to potential occupants than, say, a suburban bungalow (the market will capitalize the present value of a bungalow lot's future tax liability into its sale price).

To leave aside these questions to make some observations about the ECCA debate, note that instead of advancing a call for land value taxation, which would support closure of the airport if it were straightforwardly efficient to do so, most of the advocates for closure have instead called for closure by city council decree. For a lot of people like me who are naturally skeptical of centralized government planning, we are suspicious of the numbers arguments that have been trotted out in defence of the decree. Are costs being fully accounted for? Do the pro-airport councilors really want the buildings, or the tax revenue they hope the improvements would generate? Convert the land to high density residential and, yes, at first glance this should obviously generate a lot more tax revenue for the city than the status quo, but absent tax reform the increased revenues are coming from improvements to the land, an elastic source, and whenever elastic sources are taxed dynamic scoring is required. There is a feedback loop, in other words, that makes any definitive analysis quite complex.

Amidst this complexity and uncertainty, questions about how the incumbent council can come to a definitive disinterested conclusion arise. In 1990, for example, many economists wrote to Mikhail Gorbachev, advising him that "[w]hile the governments of developed nations with market economies collect some of the rent of land in taxes, they do not collect nearly as much as they could..." Land value taxation was nonetheless not adopted in the wake of the collapse of the Soviet Union, because it wasn't in the interests of the would-be oligarchs:

...a least distorted way for Russia to recover was by a tax on economic rent, that is, the value of land and natural resources that exists independently of labor and capital investment. The aim is to untax industry and labor, and make Russia's natural resources monopolies finance the government. But these are precisely the assets that Yeltsin's kleptocrats were the first to grab.

election in E-town: land value taxation vs what's interesting

2010-09-26T17:55:00.022-06:00

A blogpost about an election next month in Alberta's capital city may not interest all readers, so I'll first make some observations about policy that would apply to all municipalities before making some snarky remarks about some of the more colourful candidates in Edmonton.

Whereas shifting the tax burden off of investment (most directly, off of business) on to consumption, especially consumption that creates a negative externality (e.g. environmental damage), is the perhaps the most popular policy prescription of economists at the macro level, at the municipal level the call is for land value taxation.

According to Canadian economist and Nobel Prize winner William Vickrey:

removing almost all business taxes, including property taxes on improvements, excepting only taxes reflecting the marginal social cost of public services rendered to specific activities, and replacing them with taxes on site values, would substantially improve the economic efficiency of the jurisdiction.

In other words, aside from tax revenue that can be roughly categorized as user fees, taxes on real estate improvements ("one of the worst taxes", in Vickrey's words) should be minimized in favour of taxes on site value "("one of the best taxes").

Vickrey is not alone here. Others have claimed that

Economic theory and, to a lesser degree, empirical evidence support the claim that taxing land values instead of wages, profits, or capital values would improve economic performance and could improve people’s lives. (p. 10)

Indeed, 7 other Noble Laureates besides Vickrey have endorsed the idea, although one should be careful about transferring the authority that a Nobel Prize implies in a particular field of economics to another field, case in point being Vickrey's dubious defence of large budget deficits. Vickrey may be a hard-core Keynesian, but on the merits of land value taxation, Milton Friedman agrees with Vickrey: "the least bad tax is the property tax on the unimproved value of land, the Henry George [right] argument of many, many years ago."

Note also that the benefits of a location well served by civic services and public infrastructure will be capitalized into higher land value such that the revenue returned to the government by site value taxation is proportionate to the added economic value generated by its services.

If a land value tax system were implemented, the tax payable of property owners would change according to the proportion of the property's value attributable to land. According to a study of a decade ago titled "Implementing a Land Value Tax in Urban Residential Communities," property sales in the Edmonton neighbourhood of Clareview suggested that, on average, land represented 35% of sale value.

A half-way house towards a shift to a land value tax is split rate taxation, whereby the tax rate on the value of the land is set significantly higher than that on improvements. According to a 2003 study, more than 700 cities around the world use a split-rate property tax system. In North America, however, the land value tax idea has seen little implementation.

Now how does this relate to the election in E-Town on October 18? Money issues are not everything, of course (consider the fact that statistics showed a drop in west-end crime because of the work of volunteers from the Beulah Alliance Church), but taxation does matter and moving to land value taxation would stimulate urban core development while preserving the environment and reducing urban sprawl. The candidates who have talked most loudly about the value of these objectives, however, have typically done the most to undermine them by supporting higher property tax rates, especially on businesses (which include non-owner occupied condos and hotels, which would have amongst the highest building to land value ratios) relative to single family residences (which would have amongst the lowest).

At 1:34 of the video below, you see councilor Don Iveson contending that more spending on transit would encourage more people to move into the city centre, his logic being that more municipal government spending would increase incomes. Why this increased income wouldn't be spent on housing in the 'burbs, or where this additional money for transit is supposed to come from, isn't explained.

What's particularly galling is that in the process of getting on city council, Iveson took out Mike Nickel, the one candidate in recent years to take issue with the prevailing policy that sees businesses pay higher tax rates than individuals.

I'd give Iveson due credit for running a campaign 3 years ago that up-ended an incumbent, but I think that the significance of that campaign has been rather oversold. To begin with, Iveson "lost" to incument Bryan Anderson. It just so happened that at the time a 2nd place finish still got one a seat at the council table. As Alex Abboud has noted, had the new ward system been in place in 2007, Iveson would have lost to Anderson in the new Ward 10 that Iveson is currently running in, and in the more southerly new Ward 9, which constitutes the rest of the bulk of the old ward, Iveson would have finished third (30% Anderson, 28% Nickel, 25% Iveson). The straightforward explanation for why Iveson beat Nickel is that Iveson was ideologically left, Nickel right, and everything north of the Whitemud, and especially north of 61 Ave, between Whitemud Creek Ravine and the river (on the west) and Gateway Blvd (on the east) tilts left, getting even more left as one progresses north to the U of A campus and the river, such that in the far north of the old ward that is now Ward 8, Iveson swamped Nickel 38% to less than 15% (with Anderson taking 27%).

The lesson from this is that in 2010, the only incumbent in any serious danger is Tony Caterina in Ward 7. Whether one looks at provincial voting patterns or federal, it's clear that Caterina, as a former Alberta Alliance candidate, is out of step ideologically with the Alberta Avenue area he is running in, his general reasonableness notwithstanding. Brendan van Alstine has been campaigning for a very long time now, and the Iveson case suggests that whether he fits with the area's ideological lean is quite likely more important than the campaign. Scott McKeen is also running here, and although normally someone who throws his hat in the ring so late in the game is unlikely to win, McKeen might have started fund-raising and door-knocking long ago, with him keeping it on the QT in order to remain the Edmonton Journal's salaried civic affairs reporter for as long as possible.

I'm actually going to be living in Ward 7 until the end of October - I met van Alstine and one of his campaign people when he was out with his dog on 118 Ave Thursday evening - but legally I've remained resident at my parents' place in Clareview for years, such that if I was going to vote it would have to be in Ward 4.

In Ward 4 we've got a Satanist in the candidate mix, which has attracted criticism to such a degree that you'd think he was in league with the Devil or something. The candidate's unforgivable sin is rather his profanation of the Queen's English. Now maybe Mr Robb (photo at right) is correct that "the contraversial closure of the ECCA... will result in huge property tax increases, many deaths, and destruction of a historic site" and maybe he isn't. But what is most certainly not correct is having the first letter of the alphabet represented twice in "controversial." And as for describing the airport closure as "a blantant disregard for democracy," is not the combining of the word "blatant" with "bland" a watering down of the alleged blatancy? Also running in Ward 4 for "city councel" is Ken Atkinson. "Councel" might be more tolerable here if Mr Atkinson hadn't managed to use the dictionary spelling elsewhere on his blog. I mean, you'd think that with two variant spellings, he'd have cause for pause and a bit of a think about which of the two variants he's going to run with.

UPDATE (Sept 27):

In response to a comment this post continues on the matter of land value taxation.

the marshmallow test

2010-09-18T21:46:00.014-06:00

Discipline is the price of freedom.
- D. Elton Trueblood

In the late 1960s, a Stanford psychology professor left a succession of 4-year-olds in a room with a bell and a marshmallow. If they rang the bell, he would come back and they could eat the marshmallow. If, however, they didn't ring the bell and waited for him to come back on his own, they could then have two marshmallows. Film of the kids showed some of them squirming, hiding their eyes, or turning around so that they couldn't see the marshmallow. Some of them ate the marshmallow immediately. Others rang the bell within a minute. About 30% delayed gratification for the full 15 minutes that passed before the researcher returned.

Years later the researcher, Walter Mischel, suspected from stories he had heard about the subjects later in life that there was a relationship between waiting for the second marshmallow and future academic performance. In the 1980s Mischel sent out questionnaires to all the reachable parents, teachers, and academic advisers of the 653 subjects who had participated in the marshmallow experiment, who by then were in high school. He found that the child who could wait fifteen minutes had a SAT score that was, on average, 210 points higher than that of the kid who waited only thirty seconds. Researchers continued to track the subjects into their late 30s and also found that low-delaying adults were more likely to be overweight and more likely to have had problems with drugs.

The implications of what has become known as the "marshmallow test" are significant. As cerebral conservative pundit David Brooks has observed, "[i]f you're a policymaker and you are not talking about core psychological traits such as delayed gratification skills, then you're just dancing around with proxy issues." Yet earlier this week when Brooks lamented the current state of America - "The nation is overconsuming and underinnovating" - he saw many self-described political conservatives as part of the problem: "[i]f Republicans decide that even the smallest tax increases put us on the road to serfdom... the country will careen toward bankruptcy."

Some time ago a commentator responded to my flogging of the HST issue to state that conservative opposition to the HST "has nothing to do with the merits of HST and everything to do with restraining the growth in government." If, with no small indulgence, we were to assume that the HST reform were not revenue neutral but a revenue raiser, the difference between the enacting the reform and not enacting is still not the difference between big government and small but but between big government and big government with a deficit.

The "starve the beast" doctrine has been discredited by the record of self-identified conservative governments in office. Early last year, Andrew Coyne noted that, in Canada,

[Our "conservative" government has put us] on course toward a massive and permanent increase in the size and scope of government: record spending, sky-high borrowing, and—ultimately, inevitably—higher taxes. And all this before the first of the baby boomers have had a chance to retire.

Since 2000, federal spending per Canadian in inflation-adjusted dollars has risen more than a third. The US government has also hardly been the picture of restraint these past ten years, despite Republicans controlling all of the House, Senate, and Presidency for much of the decade.

I'll repeat the point for emphasis: smaller government is realized by smaller government, not lower taxes. Cut taxes, in particular consumption taxes, and all that one has done is move total consumption, private and public, forward in time, the exact opposite of what is, or was, understood to constitute fiscal discipline.

There is, in fact, nothing particularly magical about China's meteoric growth. The country's consumption/investment ratio is massively skewed towards investment relatively to "the West." And the Chinese government understands this, which is why the currency is deliberately undervalued: consumption is more expensive (imported consumer goods cost more) while investment is cheaper (demand for the exports produced by more property, plant, and equipment is higher). A cheap yuan is a transfer from Chinese consumers to Chinese producers, the very business-friendly move that invites the hostility that drives opposition to the GST/HST in Canada and provides popular support for the USA's sky-high corporate tax rates in combination with low or no value-added taxes.

Fortunately, many Americans are alive to the fiscal reality that their government is in. A Deficit Commission has been proposed and designed to be as politically unaccountable as politically possible, since otherwise its recommendations would be watered down if not outright ignored. Republican Senate leader Mitch McConnell (left) was an outspoken proponent of the Conrad-Gregg deficit commission ("We must address the issue of entitlement spending now before it is too late. As I have said many times before, the best way to address the crisis is the Conrad-Gregg proposal...")... until it came time to actually vote on it. McConnell's excuse? "Our problems are not a result of taxing too little, but of spending too much." As Fred Hiatt noted at the time, McConnell "was happy to claim fiscal responsibility while beating up Obama for fiscal recklessness. But when Obama endorsed the idea... and when the commission actually, against all odds, had the wisp of a chance of winning the needed 60 Senate votes - McConnell bailed." The incident is but an example of how efforts to avert the public's gaze from the marshmallow by moving a policy decision a step back from the immediacy of electoral review are typically denounced most loudly and ferociously by populist self-identified conservatives.

Earlier this week the Tea Party was celebrating in Delaware, as Congressman and former Governor Mike Castle lost the Republican Senate nomination to Christine O'Donnell. Charles Krauthammer called Sarah Palin's endorsement of O'Donnell "reckless and irresponsible," while Delaware GOP chairman Tom Ross observed, "I could buy a parrot and train it to say, ‘tax cuts,’ but at the end of the day, it’s still a parrot, not a conservative." EJ Dionne at the Washington Post dubbed Ross' remark his "favorite line of this election season" and I agree: at issue here is a hijacking of the conservative label to reduce it to self-indulgent tax cuts. Back in 2002 and 2003, when a group of influential self-styled conservatives advanced the argument that invading Iraq would usher in an age of peace and harmony to the Middle East, most observers at least recognized this sort of thinking as so far from the traditional "conservative epistemology" - i.e. skepticism about grand claims that state action will bring about a better, more liberal world - that they at least assigned the prefix "neo-" to these "conservatives." Today, a person wanting to buy a Ferrari, and wanting it now, can stand up and demand a tax break on his indulgence (it's invariably a call for a personal tax break as opposed to a break for business in general) and somehow get unqualified trademark rights to "conservative." North American society as whole has flunked the marshmallow test and, in the wake of a fiscal crisis precipitated by debt-financed over-consumption, has responded by looking around for an authority figure to blame, as if the consumer debt friendly policies that exacerbated the problem were not the result of office-holders being over-responsive to the demands of the electorate.

It was not that long ago that Jane Austen's books were back in vogue, as North Americans alienated by the culture of consumption were stirred to feelings of, dare I say it, conservative nostalgia. As Mr Knightley advised, "There is one thing, Emma, which a man can always do, if he chooses, and that is, his duty; not by maneuvering and finessing, but by vigour and resolution." The concept of duty, to entities above and beyond oneself, like the next generation, was once a fundamentally conservative value. It could be again.

Men are free when they are obeying some deep, inward voice of religious belief. Obeying from within. Men are free when they belong to a living, organic, believing community, active in fulfilling some unfulfilled, perhaps unrealised purpose. Not when they are escaping to some wild west. The most unfree souls go west, and shout of freedom. Men are freest when they are most unconscious of freedom. The shout is a rattling of chains, always was.
- DH Lawrence

media management

2010-09-12T20:14:00.005-06:00

In my last post, I called attention to BC Finance Minister Colin Hansen's statement, "the most important piece of information ... was a chart that shows the marginal effective tax rate on investment province by province..."

What's interesting about corporate tax policy is that even the left wing is often supportive if they are informed and independent (the writers over at http://www.progressive-economics.ca/ are generally quite informed but most appear to be on a union payroll such that they have to frequently resort to an appeal to the "class struggle" to plug the gaps). For example, Ezra Klein allowed his blog to be used by a guest writer who observed that

The U.S. corporate income tax rate -- at 39 percent, it's the second highest in the developed world after Japan's, and Japan's may be about to drop -- is counterproductively high. It's probably the only tax in the U.S. these days that's conceivably on the wrong side of the Laffer curve; if we lowered the rate, we might take in more money.

But introducing the business-friendly HST to BC has been a public relations disaster for the BC government, which has led me to wonder what role the media played.

In Alberta during in the last few weeks complaints from the Wildrose party about how the Speaker of the provincial legislature (a member of the government caucus) was treating them appeared in the news. If the comment threads are any guide, a lot of people were (initially) of the opinion that Wildrose should just follow the rules. But a day or two later, after the media had talked to former Speakers and a political science teacher and reported their views, public opinion (amongst the segment aware of the reports) shifted to a clearly unfavourable view of the current Speaker's actions. The "trick", of course, was to be onside with informed opinion, such that when the media took up its obligation to inform by going out to collect informed opinions to relay, the desired result was achieved.

But what if the media doesn't do anything? Can a media outlet be biased through inaction?

I think the answer is clearly yes. But one of the ironies, if you will, is that the more even-handed and "responsible" the media is, the more likely it is to be ignored by the general public. “I’m not a journalist,” Glenn Beck (right) said in a June 2009 interview with GQ, “If I wanted to be a journalist, I would be Charlie Rose and bore the snot out of people and have fourteen people watching me." Beck knows what the customers of newsmedia want. His ratings almost doubled in 2009 alone. MSNBC, whose primetime lineup is the left wing answer to FOX, has also done relatively well such that last year CNN fell behind MSNBC with the 25-to-54-year old demographic in prime time. Fox News, for its part, overtook CNN in early 2002 and has long since left CNN in the ratings dust, since as of May 2010 the conservo-populist channel had three times the an average daily prime time audience of CNN. By August of this year, CNN's monthly primetime audience had slipped to a 10 year low, with 5 of its 10 lowest months for the previous ten years having come during 2010 despite just 8 months of the year having passed.

The reality is that media has learned that adding more ideological talk show hosts to prime time and shedding dissenting voices is the ticket to greater audience. "Fair and balanced" may sell as a marketing line, but not as a matter of substance.

HST in the news again

2010-09-01T22:41:00.015-06:00

According to the BC Hansard, last November 23 Finance Minister Colin Hansen (right) said that "...the most important piece of information that I saw in the middle of May was a chart that shows the marginal effective tax rate on investment province by province..."

What I find interesting about this is that that chart was generated by Finance Canada as opposed to Hansen's own department. I have included such a chart in my own blogposts before, and I took it directly from the federal department's website. Indeed, in response to a question about the chart's origin from NDP finance critic Bruce Ralston, Hansen stated that "the table .... was prepared by the federal Department of Finance." This was a federal initiative that the province happened to find convincing.

Of current interest to most British Columbians, however, are portions of the rest of the exchange that November afternoon between Hansen and NDP finance critic Bruce Ralston:

Hansen: ... we were [not] in discussion with the federal government with regard to harmonized sales tax [at the end of March 2009 when Ontario announced its 2009 budget].

Ralston: ... from ... January 2009, until after the election ... there was no discussion either by the minister or his officials of the implementation of an HST. Is that the minister's position then?

Hansen: That is correct.... The very first indication that anyone in the federal government would have had that British Columbia was reconsidering its previous opposition to the HST was ... at the end of May. It was only subsequent to that that there were discussions that commenced at the officials level.

This week, emails between BC Ministry of Finance officials and Finance Canada were revealed which some media sources are saying "show that talks between staff in Ottawa and Victoria began on March 26, 2009."

In fact that emails don't show that. On the afternoon of March 26 the acting ADM of Finance Canada's Tax Policy Branch, Louise Levonian, emailed all four provinces that had not indicated an intention to harmonize (BC, Sask, Manitoba, and PEI) saying "I am available to discuss." The BC Finance official who received the email, Glen Armstrong, had earlier advised other BC officials that Levonian had indicated that she was available for a meeting the next day "if we think we need a meeting." There is no indication that any such meeting occurred. Levonian emailed Armstrong again on May 11, the day before the BC election, and Armstrong responded with a substantive question, but even if that minimal exchange constitutes "discussion", this occurred in mid-May, contrary to the media claim that "talks ... began on March 26." Furthermore, Armstrong's response to Levonian's email is hardly evidence that "British Columbia was reconsidering its previous opposition to the HST" coming as it did from an official whose job it is to keep on top of his files as opposed to a politically responsible minister.

With respect to discussion internal to the BC government, I'd first note that internal discussion does not contradict Hansen's remarks, above. It is true that on March 27 Armstrong sent an email to another provincial official saying that the minister should be given an updated brief on harmonization issues in light of the Ontario experience. There is, however, no evidence (in these emails) that the minister solicited this. The memo, or an update to it, may be seen as part of the ministry's general responsibility to keep its minister briefed on the developing issues the ministry identifies.

This isn't to say that there isn't a real issue when a political party makes a major policy move shortly after forming government that it had not campaigned on. It is rather to say no significant evidence has yet been revealed that indicates that the BC Liberals were planning to implement the HST and just hid those plans during the campaign. Minister Hansen's contention is that after the election it was then time to think about long term policy and a consequence of that think was the HST. I see no reason to doubt that aside from the natural cynicism that one may reasonably have about politicians and politics in general. If I am not inclined to indulge that cynicism it is because I have worked on the inside of a finance ministry and seen the extent to which the general public is inclined to a conspiratorial mindset that distorts perceptions of how policy is developed.

I do think the BC Liberals hurt the cause of investment friendly (and therefore consumption "unfriendly") tax reform by not at least musing about the possibility of harmonization during a political campaign. They could have done what Ted Morton has done in Alberta and mentioned it as something that warranted further study and that should not be ruled out. But the BC Liberals are not to blame for the FUD spread by Bill Vander Zalm and his NDP allies. Hansen made it clear that his government was getting about $5 billion in revenue with the old PST and will collect about $5 billion under the new HST regime such that it is a tax reform, not a tax hike.

There was a time when it was the political left that had little time for abstraction, laying charges like "that's racist" or what have you based on an immediacy of perception such that appeals to sophisticated argument at all removed from subjective, unfalsifiable "feeling" were summarily dismissed. Today it is the ascendant political right that has no time for concepts that cannot be reduced to a slogan. Self-styled "conservatives" have hijacked and even destroyed essential conservatism by upending its traditional emphasis on responsibility in favour of a self-indulgent demand for tax cuts. Spending cuts are an afterthought, and on the rare occasion when meaningful attention is paid, the typically "conservative" conclusion seems to be that it is spending that affects others, like the young, that should be put on the chopping block. The locus of reference remains circumscribed to me, myself, and I, which I could sympathize with as someone who salts his communitarianism with respect for the individual were it not for the fact that the reference point is not only metaphysically constrained but chronologically constrained: what's good is good for me AND good for me NOW. Saving for tomorrow? That's so yesterday.

update to last blogpost

2010-08-27T15:02:00.003-06:00

I penned (ok, typed) "the more we hear from Danielle the better!" comment before I read this story.

"There are some theoretical issues that Professor Mintz and others have identified, and we’re looking at those, and we take them seriously,” [Finance Minister Ted] Morton said [with respect to tax reform].

Frankly I am surprised to hear this. If Morton had said this prior to heading up the Finance department I would have even been downright shocked, since that would have been prior to his being briefed by his department about the "theoretical issues."

Danielle Smith's reaction? "It’s shocking that he wouldn’t rule [a consumption tax] out."

Smith goes on to declare that "[t]hey don’t have a revenue problem. They have a spending problem," which I could not agree with more, but the context of Morton's "musing", if one can call it that, appears to be "looking at all the options we have for smoothing out revenue volatility," i.e. exploring tax reform within a revenue-neutral constraint.

For what it's worth, I agree with U of C economist Frank Atkins that

It's a really tough sell now because we all know that the whole reason that sales tax talk is heating up now is because of the size of the deficit. This is the wrong time for sales tax talk. This is the time for cutting expenditure talk.

As such, it can be reasonably argued that Morton is, indeed, just looking to raise money, not least because he attacked a spending control bill introduced by a Wildrose MLA earlier this year as being too constraining. Furthermore, "we take [the argument for taxing consumption] seriously" is rather at odds with what Morton's government has actually legislated, since the preamble to the "Alberta Taxpayer Protection Act" states categorically that "a general provincial sales tax is not a desirable tax."

But be that as it may, Danielle's position seems to be that it will always be "the wrong time for sales tax talk." It appears to be an a priori rejection instead of a conditional one that allows for a consideration of the evidence.

According the Edmonton Journal's editorial board, I apparently should never be too concerned about what Danielle Smith says, because she is one of those "opposition politicians who can say anything an audience wants to hear without having to worry about having to deliver." But I am concerned on the policy front and frankly I don't get the politics either. A comment by LarryAlberta on the CBC News website, "[e]liminate provincial income tax and then put in a sales tax. User pay is the fairest of all tax systems" currently has more than half again as many thumbs up as thumbs down. I dare say that the party should not refuse to consider supporting a issue with even just 40-some percent support in Edmonton when almost any constituency in the capital city can be won with 40% of the votes cast and the party would be extremely competitive in any Edmonton riding in which its support was running at 30%.

Wildrose in Edmonton - Rutherford

2010-08-26T21:35:00.027-06:00

Wildrose's Edmonton - Rutherford constituency association held a barbecue earlier this Thursday evening and the first thing that struck me was the latest promotional banners. City Council may feel compelled to pass a road safety bylaw banning the use of Danielle's latest promo image near motorways because her look here is traffic stopping. I'd almost think they overdid it, but if newly minted Masschusetts Senator Scott Brown is any guide, a politician can never be too goodlooking.

Before we sat down to eat I chatted with Jim J and Ben B who work for caucus on the 5th floor of the Leg Annex and we got on the subject of municipal politics. I advanced the thesis that most citizens get involved with political campaigns by starting with the federal level, and from there moving on to provincial and finally municipal politics. Ideally, it should be the other way around, because then people would be more issue-focused than ideology-focused and, more importantly, would not as incubated by a "party machine." As it stands now, a lot of the most influential new people in Wildrose want to do things like they are done within a particular federal party, whereas if they had municipal backgrounds they would be coming in with diverse experiences of what worked period.

After Danielle spoke, a comedian/magician took the floor and he was very well received: "Many of you are politically active. Myself, I don't support an organized political party...... I'm a Liberal." The silent auction was another good idea... the "Wildrose surprise box" went for $20 and I never did find out what was in it.

Safetech invited me to join them at their table but the contributions of various businesses were not limited to buying tables. Alberta Pork supplied the main dish and the silent auction contributions of Weiss-Johnson Sheet Metal and Next Flight Courier were substantial. I would advise other constituency associations cultivating their business relationships like this to also take some photos illustrating a good turn-out and of the event display of their product or service information so that this can be emailed back to the business owners/managers as confirmation that their contributions were not just charity but had a business building component consistent with the experience of sponsors of non-political events.

When Danielle took the floor she addressed a number of policy issues and, just as importantly, provided some background. Reading between the lines of her discussion about the background to taking a position on the downtown airport closure, I felt my suspicion confirmed that Danielle was inclined to take a nuanced position on the airport but that Guy Boutilier and Paul Hinman wanted to dive into the issue like Manual Uribe doing a cannonball. Whenever the party appears to be damning the torpedeos, in my view it's usually because some influential players are temperamentally inclined to a "hang 'em high" Tea Party philosophy and Danielle cannot just ignore and defy such people since the party is not just all about her. Of course as far as your correspondent is concerned it ought to be all about her; - although her communications focus is on what I consider to be micro and local issues, she never fails to be convincing in substance and a model of reasonableness in tone. She also projects empathy, in that one could not fail to notice from her body language that she is either very sensitive or has received an earful or two in the past from those who ardently want both the airport and, more to the point, the issue about it closed. A Ron Leipert type she is not.

So when the hostility of the government has been such that they have obstructed caucus staffers from adding Danielle's name to a press release (on the grounds that taxpayer resources paid for the electricity that powered the e-mail carrying the name of a non-MLA), that may have been just as well in this corner's view since the less we hear from caucus and the more we hear from Danielle the better! On that count, I not only applaud the redesign of the party website, which now looks like somebody with campaign winning experience has worked on it, but salute the fact that Danielle is, in effect, now "blogging" on it (my one bit of advice to the webmaster is use [at] instead of @ for Danielle's email address so bots won't have such an easy time adding that address to their spam lists). Click here for her latest remarks regarding the private healthcare clinic in Calgary. Combine that with Kevin Libin's piece on the matter (which the National Post has interestingly carried as both an opinion piece and as a news item) and I'm far less concerned that the party may have put ideology ahead of evidence-based policy than I was earlier this week. Dave Cournoyer, who has helped cement his reputation as Alberta's authoritative public policy blogger by appearing on Global News this week (along with Edmonton's Mastermaq), had me concerned when he blasted Wildrose on the Calgary clinic matter. After all, surely Dave understood that he has the readership he does because is usually heavy on being informative and light on soapboxing. Since Daveberta hasn't exhibited as much of a compulsion to take shots at Wildrose as, say, Ken Chapman, Mr Cournoyer's criticism can't be as presumptively dismissed. Now that a more complete picture of all the facts has come out, whether one agrees with Danielle or not, fair-minded observers have to agree with Libin that Danielle has provided some sober second thought with respect to the private clinic issue.

Nominations for Edmonton - Rutherford close Friday afternoon, so we will soon learn whether there will be a contested nomination there and in several other Alberta ridings. Barring any last minute surprises, Kyle McLeod (right) will be carrying the torch for Wildrose next election against PC incumbent Fred Horne and, likely, Horne's formidable Liberal predecessor Rick Miller. Finding a candidate to put a lot of time and effort into competing against these two was not going to be easy, but Kyle is evidently not deterred by long odds as he stood as an independent during the 2006 federal election in Edmonton—Mill Woods—Beaumont. Some might question this decision to compete against the Conservative nominee, Mike Lake, given that the riding was Liberal-held at the time of the election call, but since David Kilgour was retiring the riding's competitiveness was largely illusory and, indeed, Lake beat the Liberal nominee by close to a 3 to 1 margin. I don't know enough about Kyle to endorse him beyond his being my preferred party's nominee, but he's done a stunning job organizing in Rutherford and has a picture-perfect young family.

One final, unrelated observation I'll make here concerns the October municipal elections, which I discussed with a few attendees. Early this year I lamented incumbent councilor Bryan Anderson's decision to run in ward 9, since the upscale, older, and (therefore?) conservative-leaning ward would have been open had Anderson, Don Iveson, and Ben Henderson had not all decided to run in wards they don't reside in, just so that Henderson didn't have to compete against Jane Batty in the new northside ward 6. Anderson and Iveson's January announcement was timed to deter would-be competitors from starting to door-knock and fund-raise early in what they thought would be open wards. I, for one, didn't think there would be any interesting races this fall. It now appears, however, that Kerry Diotte (video below) has a very interesting chance in the southeast's ward 11, as Dave Thiele has decided - to the satisfaction of most council watchers - to not seek re-election. I've seen enough Tony Caterina signage on 118 avenue this month to believe that Caterina will be more competitive in arty ward 7 than I previously thought, and the suburban north end ward 3 will also be open. On top of this is the fact that there is a well-funded and organized movement to keep the airport open, which could have supported a pro-airport candidate in every ward. As it stands now, Envision Edmonton has a ground army and phone banking facilities that could have been fruitfully utilized right until election day were these candidates currently several weeks into their door-knocking and fundraising. All this to say that more conservative candidates should have announced a run at council during the first half of this year than actually did.

this Wildroser salutes Kevin Taft

2010-08-14T01:18:00.016-06:00

Former Alberta Liberal leader Kevin Taft (right) has announced that he will not be seeking re-election, although he will continue to serve his Edmonton Riverview constituency until the next election.

This is a lengthy post, but mostly because I quote at length from Taft's response to the 2008 Stelmach budget. The boldfacing you see is my own emphasis.

If there was a policy forum being held in the capital city, like on healthcare in Whitemud or on power at Rexall, Dr Taft could be counted on to attend. After lining up with other ordinary citizens to speak to a microphone at the Rexall rally, I noticed that the former Leader of Her Majesty’s Official and Loyal Opposition never introduced himself by name, never mind as an Edmonton MLA. Few politicians, I would think, would have been inclined to remain so anonymous.

When Wildrose MLA Rob Anderson introduced his private member's bill in February to limit provincial spending to population growth and inflation, Finance Minister Ted Morton responded "If you look at what’s happening in most of the U.S. states that have those types of rules right now, you’re seeing massive cuts to education, law enforcement, health care." In fact Finance Minister Morton was disseminating disinformation here since the bill at hand would cap the growth of spending, and as such would not force any net cuts. The states that are making deep cuts are in fact doing so because of mandated prohibitions against deficit financing (a reason why I spoke up against a proposal to prohibit debt financing at the last Wildrose AGM). If Morton were inclined to make a reference to the situation in the USA that was revealing instead of misleading, he could note that not all 50 states are running deficits. Alberta's only American neighbour has remained in surplus throughout the recession, and Alaska, which has analogous energy resources, anticipates a surplus in 2011. In addition, the Center for Budget and Policy Priorities notes that neither state has cut services. The Pew Centre's State of the States 2010 report notes that states situated similarly to Alberta are in relatively good fiscal health:

Call these the “Lucky Few”—states that have weathered the recession better than most: Alaska, Montana, Nebraska, North Dakota, Texas and Wyoming. Except for Nebraska, all of these states are rich in minerals. Nebraska, meanwhile, benefits from low unemployment, rising farm income and conservative government fiscal policies.

When Kevin Taft addressed the issue, he observed that capping at population growth and inflation "doesn't account for growth in the economy" and accordingly should perhaps just be "a short-term way to control spending." It was a thoughtful and respectful argument that prompted Anderson to say "very good question" and Anderson even felt compelled to agree with the former Liberal leader that "[y]ou don’t want to in perpetuity cap spending at inflation plus growth."

For what it is worth, I disagree with Taft and think the Wildrose MLA conceded to him too readily in that I don't see a gradual reduction in the size of government relative to the economy as a problem. The level and quality of government services would not go down, as their resourcing levels would be calculated per capita and would not be eroded by inflation. You just wouldn't see the government taking a cut out of the additional future wealth the economy would hopefully create over time. It's the most easily managed "diet" that a government could be on. I might add that the government's pension liabilities are likely to increase and the specific bill here, Bill 204, explicitly excluded changes in "liabilities respecting pensions" (and "debt servicing costs") from the "government spending" it sought to control.

Taft nonetheless helped inform the policy debate instead of disinforming it like Morton, and I note that Kevin Taft has repeatedly called for true fiscal conservatism. By this I mean caring for the province's asset position as opposed to just demanding less revenue collection, as all too many self-styled "conservatives" would have it. During the last election campaign the party he led issued a press release calling on the Tories to "rein in their massive spending", and observed that "[t]he Stelmach government spends more per capita than any province in Canada..." Without committing his party to a policy of indefinite duration, the press release quoted Taft saying, "'The Alberta Liberals will keep our commitment to real change through our platform, with no increase in real per capita program spending. It’s time to spend right, not more. It’s time for an end to Stelmach’s tax-and-waste government." He also observed that "[t]he Stelmach government spends 35% more per capita than the Ontario government" without noting that the former had a "conservative" label and the latter a "liberal" one.

Most notable of all, however, were Dr Taft's prescient observations that

[t]he Stelmach government is addicted to royalties. They act like the end of the gravy train will never come, like they can continually add spending without consequences. We have to get responsible and provide for the future before it’s too late.
At this rate, the Tories are setting us up for service cuts and rapidly increasing taxation when royalties slow down.

Within a year, the very slow down that Kevin Taft had warned of had materialized, with the one thing that he did not fully anticipate with his remarks being the fact that the Tories would evade tough choices with respect to service cuts and tax hikes by repealing their own "Fiscal Responsibility Act" in order to run massive deficits.

Within a matter of days after this press release, however, Albertans re-elected Stelmach, Morton, and the rest with a massive majority, effectively terminating Taft's mandate to indefinitely continue as Liberal leader. The government soon released its 2008 budget, and Taft gave his response to the budget on April 23:

...[o]n a per capita basis Alberta has 51,900 barrels of recoverable oil reserves, tops in the world. In other words, for our small population, per capita we have the largest oil reserves in the world. Second is Kuwait, then the United Arab Emirates, and then Qatar. Saudi Arabia, which we always assume is incredibly wealthy in petroleum, actually ranks fifth on a list of petroleum wealth per capita. Alberta ranks first. I think that’s something we should all remember when we’re weighing out how we manage this wealth. Now, that’s just oil reserves. If you add in natural gas reserves, our wealth rises even higher. Natural gas reserves are almost 57 trillion cubic feet, and there’s perhaps another 500 trillion cubic feet of coal-bed methane....

But in this budget it’s the same approach that we’ve seen for far too long from this government, which is no plan for savings, and the results of that are shocking. I think the most obvious result of that is the value of the heritage trust fund, which was set up over 30 years ago. It was set up to be a savings vehicle for the people of Alberta, and in real terms the Alberta heritage fund today is worth less than it was 20 years ago. I think that’s shameful.

We are liquidating the wealth of this province just about as fast as it can humanly be done. You can see that in the overheated economy. You see that in the labour shortages. You see that in the consuming of the environment. We’re liquidating our wealth as quickly as we can do it. We can’t do it any faster – can we? – because we can’t get the people here, can’t get the equipment here. We’re selling our wealth as quickly as is humanly possible, and what’s the long-term result of that? Where are the savings? Where is the wealth that’s going to be there for our grandchildren and beyond?

Of course, it’s said many times that Alberta has fallen behind other jurisdictions on this measure, and it’s very true. I fully acknowledge that each jurisdiction is different and has different priorities, but when you look across the globe, you see that Alaska has a strategy for saving its petroleum wealth and converting it into something permanent, Norway does, Russia does, and several Middle Eastern countries do. Then you look at Alberta and you go through this budget and you don’t see that plan. That is, in my view, the fatal shortfall of this budget.

... it’s worth perhaps looking a little bit at the past. How much nonrenewable resource wealth has flowed through this province’s treasury since this government was first elected? It’s a staggering amount. It would now be well over the $200 billion mark. If you go back, you can itemize it through the years, starting in the 1970s and moving up. There are many individual years when as much as $10 billion or more in one year of nonrenewable resource wealth flows through this government’s hands. Yet the Heritage Fund today, if you liquidated it entirely, wouldn’t finance six months of government operations.

It is very much, Mr. Speaker, like this government believes it won the great big lottery of all time, and in many ways it did, but instead of doing what every reasonable and well informed financial adviser would recommend, which is to save some of that, we’re spending it as fast as we can, and that is a mortal danger to the future of this province.

What this budget indicates is that we have become addicted to the process of liquidating our capital. This government has become addicted to it. There is actually an enormous gap, which we call a sustainability gap, between what this government brings in in reliable sources of revenue – I’m talking there about taxes, federal transfers, fees and premiums, and so on, things that every other provincial government has to rely on so heavily – a gap between all of those permanent and secure sources of revenue and how much is being spent. We haven’t had time, since this budget just came out yesterday, to work out the size of the gap in this budget, but based on previous years, I’m sure that it’s grown. It’s probably over $2,000 per person, the gap between what we’re spending and what we’re bringing in in sustainable revenue. The only way we’re able to cover that gap is by spending our petroleum wealth, our nonrenewable petroleum wealth.

This is a dangerous, dangerous pattern, and it’s a pattern that’s been building now for many years with this government: spend more than you bring in and make up the difference by selling part of the farm. Well, at some point we’re not going to be able to do that, and we’ve learned that lesson historically. The Minister of Energy is snickering at this analogy. Well, maybe that’s the difference between your government’s position and mine and this caucus’s position.

History will tell us that, in fact, there’s a real danger here. We learned that lesson 20 years ago when the world price of oil dropped below $10 and we were as a government massively dependent on those nonrenewable resource revenues. When they dried up, what did we have to do? We had to make dramatic cuts to public services, we had to increase taxes, we had to lay off thousands of people, and we went into a prolonged economic slowdown. We’re on the same course again, and this budget reinforces and, in fact, amplifies that course. That’s my single biggest concern with this budget, Mr. Speaker.

At the time that Taft made these remarks in the Legislature, there was no Wildrose Alliance representation, the party having been wiped out in the election of the previous month. But just the day before, April 22, the Liberal leader opened with following remarks:

It’s a great pleasure for me to introduce a person who many of you will know and many of you won’t have known. He’s seated in the Speaker’s gallery today, the former Member for Cardston-Taber-Warner and the current leader of the Wildrose Alliance Party, Mr. Paul Hinman. I would ask Paul to please rise, and let’s give him a warm welcome.

Clareview stop on the summer BBQ circuit

2010-08-11T22:50:00.016-06:00

Before replying to some comments to my last post, I'll share here some mental notes I made about Edmonton-Sherwood Park MP Tim Uppal (at left in photo), who hosted a barbecue in Edmonton's northeast Wednesday afternoon, and declared Uppal supporter Edmonton-Beverly-Clareview MLA Tony Vandermeer (right). Although I don't currently live in that riding, my folks do and I have kept my mailing address there. I accordingly head over there on a roughly weekly basis to collect mail and to visit with mom and dad. This particular evening I joined Dad in dropping in on a barbeque he was invited to by Mr Uppal.

Uppal makes an amiable impression. He has a normal person's level of shyness instead of a politician's level, meaning that he doesn't go out of his way to "work the room" and give everyone a firm handshake and a good look in the eye. It was actually a little too noticeable that he wasn't looking me in the eye when I was talking with him, particularly when the topic was difficult like the circumstances surrounding his 2008 nomination. While some might think it dodgy, I find some evasive body language reassuring, since it's the politicians who can lie to you or give you a half story without blinking an eye that scare me.

When I raised the subject of the 2008 federal nomination, he made a number of claims, including

- it was not a close vote; he won by 2:1

- yes, he was anointed by party authorities in Ottawa in the sense that Stockwell Day agreed to voice a demon-dial to the membership describing him as the "one conservative" in the race. But that's called politics not playing dirty

- everyone who voted had to prove they were riding residents

- the riding is not "Sherwood Park", it is "Edmonton - Sherwood Park". Given the results of the subsequent federal election, which showed Uppal losing all but a handful of polls in Fort Saskatchewan and Sherwood Park to the candidate supported by a majority of the riding board and who filed as an independent (coloured yellow, below), it was apparently to Uppal's advantage to have held the nomination inside Edmonton city limits, but Uppal rejected the charge that the location of the nomination meeting was furthermore "obscure."

As for policy, Tim discussed the issues from a retail angle and I would be surprised if he were ever moved up off the back benches. His views on the Wildrose party seemed to be consistent with the federal party line, namely, official neutrality but expressing some anxiety about "vote splitting". Afterwards, I was thinking I should have asked him about this story.

While Uppal gives off a "nice guy" vibe, Tony Vandermeer seemed to have a chip on his shoulder.

When talk of an imminent provincial election reached a fever pitch in late January 2008, I advised the head office of the newly combined Wildrose Alliance (I had been working with Link Byfield's Wildrose side in 2007) that I would be willing to stand as a candidate. I was quickly informed that I was acclaimed in Beverly-Clareview. Evidently the party just looked at my mailing address, since strategically it would have made more sense to run in Sherwood Park or Edmonton Whitemud, having as I did other connections to both of those considerably more conservative ridings and the party didn't end up running a candidate in either. But since I was house-sitting in Beverly-Clareview near 66 street at the time and could also base out of my parents' condo at the other (eastern) end of the riding when my folks were gone for a couple weeks during the election campaign, there was a certain logistical sense to my running there at that time. During the campaign, there was never an all candidates forum, so I never ended up meeting Vandermeer or the incumbent at the time, Ray Martin of the NDP. I accordingly didn't expect Vandermeer to recall that Brian Dell was a competitor of his before I reminded him. But I talked with him twice on Wednesday - once when I approached him and introduced myself and a second time when my Dad and I were talking with Uppal and Vandermeer apparently came over to give me a piece of his mind about Wildrose - and the second time he wanted to know "so did you do anything?" [besides just stand as a name on the ballot] and responded to my observations about the spending spree his party presided over by arguing "why don't you get out and run yourself if that's how you feel", a line that seemed oblivious to the fact that I spent $1300 of my own money and several hundred more raised from family to deploy 250 lawn signs, deliver 2500 brochures by hand and another 2500 through the mail (printing cost for the brochures was covered by the party), while knocking on hundreds of doors. Any candidate who has seriously campaigned has knocked on thousands of doors, but the visibility of my campaign's presence in the riding dwarfed that of the Social Credit candidate, and if I ever met Robin Porteous I would not hesitate to point out that I had seen some Social Credit material in a few mailboxes and even a sign or two while I was out and about campaigning.

While Vandermeer's apparent non-recognition of the Wildrose Alliance campaign in his riding is really just a harmless oddity, his "testiness" (as my Dad put it) was rather unsettling for a lawmaker. He clearly has no love for the Wildrose party. He deemed its support to be analogous to that of Social Credit, i.e. not to be taken seriously but enough to bring a deserving candidate such as himself down to defeat in a very close race. He raised the topic of Rob Anderson's defection suggesting that here was an unscrupulous traitor, although he never used those exact words. A certain Darren Richard was at this barbecue and Darren told me that he didn't like Vandermeer's attitude before I met Vandermeer, although it should be said that this person is a current Wildrose organizer and one of the few constituency residents who called me during the last election (he had a big beef with the Stelmach government's section 3 freedom of speech restrictions). While it's pretty obvious I have no love for team Stelmach to requite, anybody who blogs on politics is going to sound either opinionated or vapid. You can't really know a writer without a face-to-face encounter. Tim Uppal's campaign literature may savage the Liberals, but having met him I see that that's his campaign as opposed to his personality.

In any case, my sympathies for Tim Uppal, which were rather low given the stories I had heard, went up considerably after meeting him, while my sympathies for Tony Vandermeer, which were rather high given what I had heard from others, went equally as far down. Subsequent to my chats with these two, Darren got into a friendly battle with a provincial PC party supporter who argued that Wildrosers were gun nuts and ideologues who would try and cut back the compensation due unionized government service workers. Since the last point was a plus instead of a minus in my books (my biggest beef with Wildrose being that I don't think the party has the backbone to actually do it), I had little to add beyond making some comments about the guns issue and, after chatting up a few other strangers milling about, took my leave from my only visit to the "summer BBQ" circuit to date.

the Ottawa card: will an Alberta political party support the Economic Charter of Rights initiative?

2010-08-06T03:10:00.018-06:00

What about the dreaded Ottawa card?

The Macdonald Laurier Institute (hereafter, MLI) has called "on the federal government to use its constitutional authority to strike down internal barriers to free trade and mobility within Canada" through an Economic Charter of Rights and then set up a commission that would deal with non-compliance.

An Ontario poli sci professor writing in the Toronto Star has attacked the proposal as "enshrining free market dogma" and the usual suspects over at "Progressive Economists" have agreed that the left's monopoly on the use of the courts to advance their agenda should be preserved. In light of this hostility from the left one would think that "right wing" or "centrist" parties like Alberta's Wildrose and Progressive Conservative parties would consider coming out in support of such a charter. But in fact an endorsement is unlikely to emerge from either party, even (or especially) from the grassroots. One of the members of the MLI's Advisory Council is Purdy Crawford, who chaired the "Crawford Panel" calling for a single national securities regulator, a notion that Wildrose MLA Rob Anderson has slammed. Purdy Crawford has also been described as "dean emeritus of Canada's corporate bar", something that sounds precariously like "eastern establishment" to prairie ears. MLI founder Brian Lee Crowley co-wrote "The Canadian Century" with Neils Veldhuis and James Clemens and that book speaks well of the federal Liberal regime circa 1993 to 2003, surely a cardinal sin in "Conservative" Alberta. Crowley is also a Maritimer who has worked in Ottawa. Veldhuis, Crowley's co-author, is pro-HST, another taboo for the cowboy set.

Can "Conservative" Albertans truly not get past these nominal associations with the "eastern elite" and get behind the MLI's call for an Economic Charter of Rights? The blurb for Crowley's book "Fearful Symmetry: The Fall and Rise of Canada's Founding Values" is solidly conservative:

In the 1960s, Canada began a seismic shift away from the core policies and values upon which the country had been built. A nation of “makers” transformed itself into a nation of “takers.” Crowley argues that the time has come for the pendulum to swing back—back to a time when Canadians were less willing to rely on the state for support; when people went where the work was rather than waiting for the work to come to them.

Just a few weeks ago Western Standard contributor JJ McCullough had little quibble with the good things "The Canadian Century" had to say about the Chretien/Martin regime. In fact, in a must-read review McCullough provides as an "important fact" the book's contention that "[t]he 1993-2003 Liberal government of Jean Chretien embarked on a remarkable agenda of fiscal conservatism..." and quotes, apparently approvingly, the book authors' opinion that "[t]here is substantial risk that current federal [Conservative] policy will undo the fiscal reforms of the Redemptive Decade [1993 - 2003]". Most relevantly for Alberta firsters, "Canadian Century" co-authors Clemens and Veldhuis are, in addition to working for the Fraser Institute, authors of "Beyond Equalization", which critiqued Canada's system of interprovincial transfers and had a chapter on why the equalization program may be illegal.

On this Western Standard page, however, you can see Clemens speaking with the word "Liberal" featured prominently in the background. The unfortunate reality remains: an anti-establishment sentiment is at work on the prairies such that "Liberal" is equated with eastern elites and all things nefarious. The BC Liberals gets high marks from many in the "public policy establishment" for their stance on unions ("the obvious pro-union-pro-worker bias of the [Obama] government has contributed to a slower recovery, especially in labor markets" - Gary Becker, 1992 Nobel Prize for Economics recipient), trade, a carbon tax, the HST, etc. The BC Conservatives are rightly seen as cranks, and Tim Hudak in Ontario has pulled a variety of populist stunts that have failed to whet the appetite of the pundit class, including denunciations of the HST, broadsides against "elitist special interests”, etc. Thus does the Liberal brand retain as much shine in BC and Ontario as "Conservative", if not more.

The Alberta Liberals ought to have a tremendous opportunity to follow in the steps of the BC Liberals by staking out a position as the party of the sophisticated businessperson. The party's support is already skewed towards more educated voters, so why not run with that and reposition as the party for the Economist reader?

I must have my weekly issue of The Economist, or I risk de-evolving into the sort of mouth-breathing rabble by which I am surrounded daily!
- The Onion, Point/Counterpoint

There are four major political parties in Alberta (five if the Alberta Party is included), yet none of the them can be expected to support this national Economic Charter idea, the Liberals because leader David Swann is too resolutely left, the PCs and Wildrose because they are too provincial. That this vacuum in political options should exist is ultimately a failure of the conservative elite, if one can call them that.

US "conservative elites", are, of course, at least as frustrated with nominally conservative American politicians as they are in Canada (where they are not frustrated enough, IMO). Reihan Salam of the National Review was left scratching his head last month after Senate Minority Mitch McConnell asserted that tax cuts pay for themselves. The 20-something liberal bloggers Ezra Klein and Matthew Yglesias both chimed on in the "failure of conservative elites", with Klein writing that "[t]o a degree that people don't quite appreciate, conservative economic elites have attempted to... make people ashamed of... wacky views [in particular the view that tax cuts don't increase deficits]." The result is the absence of a political option for real fiscal responsibility.

the Calgary card: Edmonton's airports

2010-08-05T19:29:00.008-06:00

This week Wildrose leader Danielle Smith addressed the issue of closing the Edmonton City Centre Airport. Unlike the arena issue, I am not personally decided on the question, although I note that if there were a compelling "economic logic" for closure, there ought to be something of an international trend towards airport consolidation (like is the case for consumption taxes, defined contribution pension plans, free trade etc) and on that point not only is London England not closing its City Centre airport (when the megacity already has 4 others: Heathrow, Gatwick, Stanstead, and Luton), it aims to carry 8 million passengers annually by 2030.

Whatever the "right" answer is on closure, I think Danielle's move to raise consciousness about the petition drive to put a closure decision on the October municipal ballot serves the public interest, just as I think city councilor Tony Caterina (who is facing a what I expect will be a tough re-election fight in Ward 7) has been serving the public interest with his comments on the petition, whatever my reservations about #toncat. Even if one disagrees with Danielle and her support for demandthevote.ca, there is no denying that she has taken an interest in Edmonton affairs, and the downside risk for generating some headlines here is low given that Wildrose polling in the capital city suggests moves with "fat tail" probability outcomes should be taken.

Paula Simons of the Journal wasted no time in declaring that the anti-closure crowd is advancing a "perverse" argument in order to "save Calgarians a 20-minute commute up the highway", an opinion so predictable that even David Climenhaga spoke of the "usual suspects" and, with reference to Edmonton Mayor Stephen Mandel, "playing the dreaded Calgary card." I'd also note in regard to Ms Simons' and Mr Mandel's calls for Ms Smith to butt out of an Edmonton issue that last summer left leaning city councilor Don Iveson's said, with respect to the impact of closure on Medevac, that "[t]he issues here are financial, logistical and jurisdictional — and all are Provincial."

An inclination to resist - or at least take a skeptical view of - the spell of tribalism seems to cut across the political spectrum.

the Wikipedia agenda

2010-07-28T18:39:00.010-06:00

A point of pride for "the encyclopedia that anyone can edit" is its declared "neutral point of view".

Just what is neutral, however, seems to depend on one's point of view.

In October 2006 Wikipedia's Arbitration Committee ruled unanimously that

- A website that engages in the practice of publishing private information concerning the identities of Wikipedia participants will be regarded as an attack site whose pages should not be linked to from Wikipedia pages under any circumstances.

and that
- Links to attack sites may be removed by any user; such removals are exempt from 3RR. Deliberately linking to an attack site may be grounds for blocking.

In November 2008, Wikileaks, an organization founded and directed by Julian Assange, published "[t]he names, addresses and telephone numbers of more than 10,000 current and former members" of the British National Party, including persons who asked for "discretion." This disclosure occurred in an environment where persons perceived, rightly or wrongly, to be sympathetic to the BNP were often receiving death threats. As it was, at least one person was fired from his job as a direct result of Wikileaks' posting.

Would Wikipedia extend the same principles that its "ArbCom" said applied to its own "participants" to everyone, by calling Wikileaks an "attack site" in the wake of its leaking of the BNP membership list?

Evidently not, since not only to does the Wikipedia article "Afghan War Diary" (a title drawn from Wikileaks chosen name for what other media dubbed the Afghanistan "War Logs") link to Wikileaks' website, it provides a mirror as well. If Wikipedia didn't helpfully link to a mirror, Wikileaks' servers might be overwhelmed, and given that foundations that support innovative free press initatives have declined to fund Wikileaks, Wikileaks might otherwise be forced to spend money on more server capacity.

Meanwhile, the New York Times makes a point of stating that "[w]e have not linked to the archives of raw material. " A prudent position, it would appear, given that

In just two hours of searching the WikiLeaks archive, The Times found the names of dozens of Afghans credited with providing detailed intelligence to US forces. Their villages are given for identification and also, in many cases, their fathers’ names.

What does Wikileaks director Julian Assange have to say about the the possibility that these informants may be harmed? Assange suggests that they may have it coming to them anyway, by arguing that many informers were “acting in a criminal way” by sharing false information with NATO authorities. Assange also blames the White House by saying the White House could have and should have helped Wikilinks vet that data and declaring that "[t]he United States appears to have given every UN soldier and contractor access to the names of many of its confidential sources without proper protection."

"The most dangerous men" says Assange, "are those who are in charge of war. And they need to be stopped." According to the Wikileaks director, the files he leaked suggest "thousands" of "war crimes" have committed. "I enjoy crushing bastards. So it is enjoyable work" was his comment to Der Spiegel.

Wikipedia's editing community has no problem with linking to Assange's website when Assange deems NATO's informants collateral damage in his battle against American "bastards" or when Wikileaks exposes members of a right wing British political party to hostility, but go on to Wikipedia and link to a site that reveals the mere name of a Wikipedian and you're banned? ...as if people behave so much better on the web when they are anonymous.

A Times editorial argues that "[n]o established news organisation in the world would have published these leaks in full, nor should they." For all the talk on Wikipedia about the need for "consensus", whatever the external consensus is is secondary to the consensus of the internal collection of left-libertarian Wikipedians. Such it is that general "social or religious norms" are declared to be of no concern, despite the fact that the declaration itself creates an internal norm by marginalizing Wikipedians who want to take a more responsible stand on, say, the issue of censorship.

What Wikipedia - and Wikileaks, for that matter - don't seem to appreciate is that they are undermining their avowed missions of bringing knowledge to the world when they play the role of activist because lose that intangible and increasingly rare (on the internet) attribute called authority. Pornographic images and videos (parental advisory re those two links) are on Wikipedia, supposedly to "educate", but how is the education mission really being served when schools will have little choice but to block Wikipedia if it continues down this road?

the hazards of populism

2010-07-22T10:52:00.030-06:00

Last week I blogged about how the Harper Tories have alienated authoritative voices for conservative economics, namely the Economist and Andrew Coyne. Although the example I chose for Coyne's views dated from a year ago, I could have also directed readers to his March 29, 2010 blogpost, in which Coyne barely conceals his contempt.

With some stretching, I could extend "authoritative voices for conservative economics" to the Globe and Mail editorial board, and trot out as an example of the G&M's right lean on fiscal matters the paper's July 20 editorial, which noted that "[t]rimming growth in the public-sector pay bill is necessary to address provincial fiscal woes" and called on public sector unions to make "concessions in their next collective agreement..."

When James Travers complains that "Harper encouraged loyalists to ignore experts and go with their gut" on the matter of crime and punishment, Travers can be dismissed as a typical Toronto Star pundit, notwithstanding the fact that the Economist has also taken issue with the government's crime and punishment stance. The decision to change the conduct of the census, however, is off-side with too many "experts", from too many fields, and the Tory attempts to stoke passions about intrusive and coercive government were, this time, too nakedly an Ottawa initiative to ignite the righteous fury of the grassroots. This week, the G&M editorial board dubbed the census move "folly" and Colby Cosh, another economic conservative pundit (on the rare occasion when he writes on that topic), largely agreed. If it just stopped there, with the pundit class, the matter would have nonetheless blown over, but this time the concern stretched deep into the public policy establishment, culminating in the resignation of the country's Chief Statistician.

Industry Minister Tony Clement says "The government took this decision because we do not believe Canadians should be forced, under threat of fines, jail, or both, to divulge extensive private and personal information." One can imagine how this rationale could be perceived around the cabinet table as a powerful one-liner in the heat of an election campaign dominated by sound bites (not that this was really a cabinet decision as opposed to a Harper decision). They likely imagined that the worst case scenario was that the chattering classes would natter on about how it was Harper Tories 1 Nuance 0 for the zillionth time, a complaint that has been around for a long time now without finding much political traction. The resignation of Statistics Canada's top civil servant wasn't anticipated, however. Why? Because

1) the special nature of the Statistics group was not considered, and

2) Harper has a general contempt for the opinions of the civil service

re (1), Norman Spector perspicaciously zeroed in on this one when he called attention to a letter to the editor by a UBC economist, who wrote

Decades ago, we established that the Bank of Canada needs to operate at arm’s length from political interference. The same should be true of the national statistical agency. If statistical collection changes with the ideological whims of the government, the very basis of government decision-making, transparency and trust is shattered.

Keep in mind here that the people inside Finance Canada were unanimously opposed to the Harper/Flaherty decision to cut the GST because of its opportunity cost. But had the Deputy Minister of Finance resigned, it would have offended many Canadians' belief that elected officials are in charge at the end of the day and it is the job of civil servants, however expert they may be, to follow orders. While I think there should be more transparency surrounding the incidents where the advice of the Department of Finance is rejected so the electorate is more informed, I would certainly grant that Finance cannot be at full arm's length to the government. There is no good reason why the national statistical agency cannot be at arm's length, however.

re (2), during my time in Ottawa working at Finance I became aware of some of Harper's margin notes in the memos he was receiving from the PCO. "Bullsh*t" was his view of one claim by a civil servant. "Justice doesn't know what the **** they are talking about" was his view of another, which summarized the view of the Justice Department on a particular matter.

The Tories could feed their bloggers like Stephen Taylor information in an attempt to discredit the resigning Munir Sheikh as a political partisan, or some such thing, but how convincing, really, is the tenet that the Chief Statistician is part of a conniving cabal of elites out to deprive Canadians of their civil liberties, as opposed to someone who just takes his job seriously? How would the fact that Munir Sheikh's predecessor agrees with him be explained away? The "elites" have finally scored a blow that I expect will be more than glancing against Team Harper, partially because it involves a matter that is of interest to more than just those who follow politics closely, and mostly because there are just too many "elites" this time, and from too broad a field to be pigeon-holed as Toronto liberals. Stephan Taylor is soldiering on on behalf of what he calls "ordinary citizens", but I don't think his argument, which appears to be that obscuring the stats would be a laudable step towards dealing "a huge blow to the welfare state", is going to fly when the opposition here includes Chambers of Commerce.

At 12:05 today a commentator in the Globe and Mail's "Cover It Live" session suggested that citizens take this opportunity to "review the state of policy-making..." "is there a typical development path for new policies originating from a governing political party vs. the civil service?" asked the commentator. Indeed. In the case of Alberta's Wildrose party, the party does not appear to anticipate any role for the the civil service beyond carrying out the wishes of the "grassroots". Is there any doubt that if the following resolution were made at a Wildrose policy convention, that it would pass?

A Wildrose government would not require Albertans to provide Statistics Canada with the number of bedrooms in their home, or what time of the day they leave for work, or how long it takes them to get there. A Wildrose government would not force Albertans to divulge detailed personal information under threat of prosecution.

Note that this would be taken almost verbatim from what Clement has said about his government's census decision. If the matter is really so simple as this statement suggests it is, why is this census change even controversial?

Canada has developed an international reputation for evidence-based decision-making. The alarming thing about this story is that the Harper government seems to prefer decision-based evidence-making.
- Armine Yalnizyan

UPDATE:

The U.S. Census Bureau tested out the idea of making a mandatory national survey voluntary ... but quickly discarded the idea because it produced what was deemed unreliable data at an exorbitant price.
- Montreal Gazette

shifting the spectrum

2010-07-17T01:13:00.014-06:00

My last post noted Andrew Coyne's contention that "All [the Conservatives] have done is shift the spectrum further and further to the left."

With this in mind let's revisit the successful move to kill the Wildrose policy plank that called for "restor[ing] education as an essential service under the Labour Code ensuring no child's right to an education is denied by school strikes or lockouts."

During the 2001 British Columbia election campaign, the BC Liberals promised to restore education as an "essential service" in order to "prevent immediate and serious disruption to the provision of educational programs." On May 16 of that year Liberal candidates captured 77 out of 79 seats in the provincial legislature. The new Gordon Campbell government then acted on this promise and made other changes to the Labour Code to the applause of the province's business community.

During the 2007 Saskatchewan election campaign, Brad Wall's Sask Party promised to bring in "essential services" legislation. On November 7 of that year, Wall and his party won a clear majority of the seats and a majority of the popular vote. Moreover, a poll in early 2008 found that "two-thirds of Saskatchewan people support the government's proposed essential services legislation." While this legislation did not deal with teachers per se or ban strikes outright, it applied to "government, Crown Corporations, universities and SIAST, health employers and municipalities." The president of the Saskatchewan Government and General Employees’ Union (SGEU) deplored what he considered to be “definitely the worst essential services legislation in Canada."

At the same time, the Wall government amended the Trade Union Act to require a "Mandatory secret ballot certification or decertification vote." The Wildrose policy platform similarly says that

a Wildrose government will extend to workers the democratic right to a secret ballot vote on labour organization certification under the Labour Code and ensure that the same rule apply for de-certification as for certification

However, at last month's Wildrose AGM, of the 450 votes counted at that meeting, just 56% of (presumably committed, since most of them traveled to Red Deer) card carrying Wildrosers supported keeping this plank. This while 67% of polled Saskatchewan citizens of all political affiliation supported the Sask Party's labour policy. Premier Brad Wall continues to bask in popular support.

What the Wildrose caucus, which led the charge on these union coddling moves, has managed to do is render labour policy that is government policy in both of Alberta's neighbours fringe policy in Alberta. Premier Ed calls quashing teachers' right to strike "draconian" and Wildrose agrees, never mind that Wildrose was polling ahead of the premier's party at the time he leveled the charge.

Given this, how is one to argue with Ted Morton, whose party has presided over the erosion of Alberta's competitiveness relative to its neighbours, when he claims that Wildrose is in basic agreement with his party as far as policy goes ("We all believe in the same thing and want the same results")?

Harper Conservatives show their teeth on everything but fiscal policy

2010-07-13T13:46:00.014-06:00

Prime Minister Stephen Harper's appearance at the annual Calgary Stampede BBQ has prompted some commentary. Alberta Finance Minister Ted Norton used the opportunity to make the interesting declaration that, with respect to his provincial party and the Wildrose, "We all believe in the same thing and want the same results." I'll nonetheless leave that claim aside for now and instead opine on Vancouver-based Adrian MacNair's lament that

the current Conservatives have adopted the kind of woolly-headed, socialist, nanny-state ideals that would make any Liberal feel quite at home.

While all too regrettably true, what's galling is that despite these policies, small l and big L liberals still feel anything but at home in Harper's party. This primarily because the party's culture represents everything that is offensive to small L liberal sensibilities.

The authoritative Economist has not been shy about exhibiting its distaste for the Harper regime this year. St Albert pundit David Climenhaga has fingered the British weekly as a "venerable" but "pretentious newsmagazine" (perhaps alluding to one of its advertising lines "[i]t's lonely at the top, but at least there's something to read") that provides "wistful right-wing drivel" "for credulous capitalists around the globe" and describes its upscale readership as "people who wish they were rich." The Observer (a unit of the UK's left leaning Guardian) has tut-tutted that the Economist's "writers rarely see a political or economic problem that cannot be solved by the trusted three-card trick of privatisation, deregulation and liberalisation." Yet what John Ralston Saul has further described as "the Bible of the corporate executive" mocked Harper's rationale for pro-roguing Parliament in January and charged, "Never mind what his spin doctors say: Mr Harper’s move looks like naked self-interest." The prime minister has a "ruthless streak" in the Economist's view which suggests that he is the same man who threw away a chance at 24 Sussex in 2004 by claiming that then-Prime Minister Paul Martin approved of child pornography. As a columnist observed at the time, Harper "showed his teeth."

In December the Economist observed that

A third of the 63 bills introduced in the House of Commons in the past year have dealt with some aspect of criminal justice, and more are on their way. Despite complaints that a similar, purely punitive approach has not worked in the United States, and that piecemeal change will clog up the justice system and leave taxpayers with a larger bill, the government has not deviated.

Never mind that the association representing Crown prosecutors appeared before the much maligned Senate to plead for a more evidence-based approach. Fiscal conservatives have to concede, yet again, as the prisoner population increases, costing taxpayers $93 000 per year per prisoner.

The Economist is hardly a lone voice here. Andrew Coyne's observations of a year ago on the federal Conservatives, which Mike Brock posted to Youtube, should be must see viewing for Wildrose party supporters in Alberta who believe Harper, who cannot find the political support for an agenda that is not even as fiscally conservative as that of the politically dominant Liberals in the mid-1990s, has really shown the way.

On policy after policy, they have not simply watered down or moved incrementally, they have abandoned their convictions...
It is too easy to just say that politics is the art of the possible, and leave it at that, because it allows other people to define what is possible... a truer statement is that politics is the art of enlarging the possible. Politics is not just a matter of giving people what they want, it is a matter of making them want what you want them to want. It is not just a matter of moving to the middle... it is a matter of moving the middle to you. ...
All [the Conservatives] have done is shift the spectrum further and further to the left. The right wing of Canadian politics is now defined by 35 billion dollar deficits [and] by record high levels of spending...
- Andrew Coyne

If one is going to sell-out, at least sell-out for something. Not that getting into the good graces of the Economist and Andrew Coyne would constitute a stooping that self-described conservatives should ever be ashamed of anyway. Label them "liberal " and it doesn't change the dynamic: these are the sorts of liberals who need to be onside if a conservative movement is going to have the support of the majority. Pundits warning conservative movements against going down the Tea Party road late last year have been silenced this year as the electorate has shifted to the right, but the unthinking populism of the Tea Party still represents a political dead end.

In Alberta, I doubt that some of the "moderation" efforts that have been initiated by influential players in Alberta's Wildrose Alliance are going to produce nearly as many votes as hoped for, not least because it is the party's image and communications that needs to have its edges sanded off as opposed to the policy platform. Show one's teeth on the budget, and one's smile on everything else (the exact opposite of the Harper approach, in other words). Turning over communications from Shawn Howard to a shrill caucus is not going to help on this count.

constructive criticism?

2010-07-08T23:38:00.013-06:00

Rudy de Haas, Wildrose's most prominent organizer in Lethbridge, says he has quit the party. He was a constituency association president and was on the party's policy committee.

Reviewing Rudy's complaints I find it difficult to see things Rudy's way. But why is that when I have also described myself as "disillusioned" with the party?

The first reason may be that an alternative to quitting is stepping back and seeing how the future plays out. In my own case I have taken myself "out of the loop" (not that I was ever that much of an insider) in recent months but I am still a party member. After all, things can change.

More important in my view is the rationale for taking issue with the party in front of a large audience. Rudy seems to be very upset with the procedures which led to what was voted on at the AGM. But how do the procedures really matter in the end if the policy that is generated in the end is acceptable? Nobody outside the party cares much about how the party came up with the policy planks it did.

Even more critically, what ends up in the party policy book is not that important anyway. How much of what contemporary western governments do follows from what is in the policy platforms of their governing political parties? I know Wildrose aspires to be different on that count, but if the party was really serious about holding its elected MLAs accountable it would ensure that the policy planks were written in such a way that a MLA couldn't possibly weasel out of what they called for. The current reality is that the Wildrose policy platform has oodles of wet noodles that couldn't nail down an ordinary person never mind a politician who has made a profession out evasive maneuvers. The other parties are even worse when it comes to taking a clear stand on what's controversial but that fact alone doesn't excuse anything.

But if professed policy (from a source that is unlikely to ever become a minister) is irrelevant, and procedure even more so, what does matter?

People.

Which people? The caucus. The biggest change in the party between now and December is that it has 3 new caucus members and these people have had enormous influence over the party's communications. It is the party's people in the legislature who will ultimately decide the province's direction if the party forms government. I have issues with all four of the ones currently there. Lorne Gunter writes:

So where do I get off saying they’ve stalled?

Let’s start with the acquisition of Mr. Boutillier.

Gunter then proceeds to outline concerns that should be taken seriously. I am not quite so inclined to put the party in the gunsights as Gunter because I hold out hope that it is not, in fact, true that "getting him to cross over from the Independent seats will have come at the price of a post in any future Alliance cabinet." (Memo to Lorne: it is rival parties interested in tying the party to its Randy "referenda on abortion and gay marriage!" Thorsteinson days that describe it as "Alliance" alone) Given the sensitivity that was exhibited towards the floor crossers' personal interests in January, however, I don't hold out hope with much confidence.

Both Boutilier and Rob Anderson have politician written all over them. That isn't entirely a bad thing because it means they have people skills, skills I am quite jealous of. But I prefer the style of, say, Heather Forsyth who together with Danielle makes a good argument for getting more women into politics. While my differences with Rob are more or less summed up by the Canadian Press wire story that quotes me (twice, actually, since I believe I'm also the "one delegate" who objected to "wishy washy" resolutions), my problem with Heather is that she is just too far to the left fiscally. The Economist that went to press today had an article titled "an unavoidable clash" that said "[the public sector] unions may mobilise against the [British] government’s plans to curb public pay and pensions. But they are defending the indefensible." I cannot see Heather taking up the gauntlet on behalf of taxpayers despite the nobility and urgency of a showdown with the union lobby. Never mind the fact that every dollar that goes into a union member's pension is one less dollar for a school, a hospital bed, a library, etc. Heather has been a great champion for children's interests (named Reader's Digest' Canadian Hero for the year 2002) but had little of note to say about the neglect of the Alberta Heritage Savings Trust Fund (and saving in general) despite chairing the Standing Committee for that fund when revenues were rolling in. As for Paul Hinman, I still have great respect for him. He is conscientious and a genuine conservative. But I'm afraid Paul's obsession with Legislature matters may have led to the party into becoming too interested in picking up floor-crossers. Wildrose may not be treated well by the governing party on the Leg grounds but as far as most Albertans are considered these scraps are inside baseball.

The final test for whether criticism is constructive is whether the damage complained of has already been done such that the problem can't be fixed anyway. The AGM cannot be done over again. But what we could and should yet see is the caucus leaving the limelight to the leader. The caucus cannot win over voters to anything like the extent the leader can but caucus (and this includes future candidates) can very much lose votes for the party. So... No issuing news releases that have not been thoroughly vetted by the leader, by party communications, and by some sort of policy committee or expert(s). No back room deals for floor crossers, or for caucus members lobbying for special interests, or the appearance of such. No more fawning over caucus members by party spokespeople. Continue to pay little heed to the Ken Chapmans and David Climenhagas who will not be shaken from the view that Wildrose is but a front for the oil lobby and intolerant extremists but do pay heed to observers like Lorne Gunter and the Alberta Altruist (on that note, somebody should ask Rob Anderson what happened to AA since he lives in Anderson's riding).

the short version

2010-07-03T15:28:00.006-06:00

I realize that most readers are not going to read my last post because it is just too long, never mind all five of my posts in the last week.

So I direct those interested in the short version of my concern to this story by the left-leaning (for the USA) New York Times, Labor’s New Critics: Old Allies in Elected Office. The fiscal chickens are coming home to roost to such an extent across the US that even ex-labour leaders turned public office holders are finally standing up to the public sector unions.

Yet here in Alberta there doesn't seem to be a politician anywhere on the political spectrum willing to talk tough while the fiscal chickens are still in the air, so to speak. The eventual result of this is going to be the fiscal crises we are seeing elsewhere coming to Alberta and when that happens, the new teachers, nurses, and public employees of that time will likely be scapegoated in an over-reaction because there was a severe under-reaction earlier that allowed today's public union pensioners to get away with unsustainable or unjustly enriched agreements.

Wildrose AGM review Part 5 - caucus proposals

2010-07-03T01:11:00.020-06:00

The "caucus" submitted several policy proposals to the membership, and most of them sought to soften policies that were perceived as "harsh".

The first caucus proposal to come up for a vote sought to delete the plank calling for a striking of section 3. Presumably (there was little explanation here) what concerned caucus here is that prohibitions against discrimination would be weakened should the section simply be struck (there is language to the effect of "indicates discrimination or an intention to discriminate" in the section). The question for me, however, was why there was any need to finesse this policy plank when even the Sheldon Chumir Foundation, which draws its name from a former Liberal MLA, thinks a simple repeal of section 3 acceptable.

Of greater concern to me, however, were the caucus calls to compromise the party's commitment to economic freedom. The caucus called for a deletion of the clause allowing individual workers to freely choose their membership in labour organizations and deletion of the clause protecting workers' "democratic right to a secret ballot vote" (card check, here we come!). These clauses were to be replaced with

A Wildrose Government will review labour laws to ensure fairness for all workers whether employed in union or non-union settings.

Readers of this blog may recall that before the AGM I objected to the "fairness" language, but the edition of the Economist that came out during the week after the AGM expresses the objection to "fairness" much more clearly and convincingly:

the fact that everybody believes in fairness is a clue to what’s wrong with the notion. Like that other warm-blanket word, “community”, it signals limp thinking. What exactly is “fair” about restricting trade, for instance? Or “unfair” about letting successful people in business or other fields enjoy the fruits of their enterprise without punitive taxes? ...
To one lot of people, fairness means establishing the same rules for everybody, playing by them, and letting the best man win and the winner take all. To another, it means making sure that everybody gets equal shares.
Those two meanings are not just different: they are opposite. They represent a choice that has to be made between freedom and equality. Yet so slippery—and thus convenient to politicians—is the English language that a single word encompasses both, and in doing so loses any claim to meaning.
Fairness is fudge. This newspaper will have none of it. We reject the wide, woolly notion of fairness in favour of sharper, narrower words that mean what they say, like just or cruel.

The Economist "will have none of it". But the Wildrose caucus evidently can't get enough of it, because they wanted yet another clause in the Labour section deleted and replaced with "fairly" (albeit this time with only union members being identified as those who needed to be "treated fairly"!). When the membership agreed with the caucus on that second proposal the party leader said that the vote illustrated the party's "sophistication." Thus did the Wildrose Alliance give the Economist a lesson in subtle and urbane thinking!

If the caucus had just argued that Premier Stelmach was right when he claimed that denying a right to strike is "draconian", even when a strike would deny children their right to an education, that would have been one thing, but Rob Anderson called on the membership to "trust the caucus", as if only a Leg grounds insider could really understand. Both Anderson and Heather Forsyth also wanted to turn several other policy planks that teachers' unions don't like into uncontroversial platitudes, and instead of arguing that, for example, the social science evidence indicates that "'school choice' legislation" is a bad idea, Anderson insisted that "anything that suggests 'vouchers' is a red flag." Just why a showdown in the bull ring must be avoided was not explained. As it was, I agreed with caucus and voted for some measures that watered down demands for things like testing because I have come across conflicting research on the topic. I agreed with Heather Forsyth that the party should be cognizant of the fact that eliminating the policy of social promotion denies parents a right. We should only have planks on matters on which we have done extensive research. But expert opinion did not seem to be of as much interest to caucus as the opinion of powerful lobbies. Anderson called on the membership to heed various "stakeholders" and, if I recall correctly, Forsyth opposed every measure that would hold teachers accountable for performance.

The problem with this "stakeholders" talk is that it means that when it comes to the budget, should the party try to take away a chair before the music stops from those who are making claims on taxpayer resources, the civil service unions will not be the ones left standing. Given Danielle Smith's assertion that raising royalties was the "single worst decision any premier of our province has ever made", it's fair to expect that the oil patch won't be left standing when the music stops either. There isn't a political party in Canada for which healthcare spending is not a sacred cow. So who will get the short straw, or will no one get it, such that the government spending just rolls on as it did when PC finance minister Iris Evans responded to questions about ballooning spending by asking "where would you cut?" Maybe all the Wildrose words about fiscal conservatism will convert themselves into million dollar bills so that a "stakeholder"-pleasing budget surplus can be painlessly generated?

Given how little emphasis the party has placed on corporate taxation since the time when I was a candidate in 2008, I suspect that businesses not directly involved in energy extraction will get little relief from a Wildrose government. The Wildrose leader has already complained that "big corporations" are getting too much from the current PC government (albeit within a specific context where I agree). At the AGM the party membership voted to water down a clause that "a Wildrose Government will increase research and development", a move that I saw as penny wise and pound foolish since R&D and post-secondary education are broadly recognized by economists as representing the biggest positive externalities, i.e. the areas with the best argument for receiving taxpayer support. A growing economy means growing tax revenues, and economic growth is driven by innovation and investment. Who invests in property, plant, and equipment? Corporations. Unions, in contrast, consume, and not only do the incomes, benefits, and pensions they draw represent consumption but they represent a share of provincial income that was acquired by means of anti-competitive practices. Just because they are applied to the supply of labour doesn't make it any less the application of monopoly power.

Am I out of step with the mainstream in my views here? Absolutely. It is the prevailing wisdom of the mainstream, the accept norm of recent years, that is off track. Peoples' preference for living for today and securing their own benefits and/or exemptions from taxpaying responsibilities at the expense of the public purse is creating a steep bill for the next generation. Bear with me while I quote at length from the Economist again:

Rising government debt is a Ponzi scheme that requires an ever-growing population to assume the burden—unless some deus ex machina, such as a technological breakthrough, can boost growth. As Roland Nash, head of research at Renaissance Capital, an investment bank, puts it: 'Can the West, with its regulated industry, uncompetitive labour and large government, afford its borrowing-funded living standards and increasingly expensive public sectors?' ...
In the past 100 years the moral battle has moved in favour of the debtors. Bankruptcy is no longer stigmatised but simply regarded as bad luck. When consumers borrow beyond their means, the blame is laid on lax lending practices rather than irresponsible borrowing. ...
Clearly a society built on consumption will have to pay more attention to saving. ... The battle between borrowers and creditors may be the defining struggle of the next generation.

On the rare occasions when I disagree with the opinion of the Economist, it is because the magazine has gotten too close to idealistic libertarianism and too far from realistic conservativism. When the publication takes such a conservative approach as to reference the long term "moral battle," you can be assured I am 110% in agreement. The #1 candidate for austerity ought to be the public sector, yet our politicians seem to insist on the necessity of further indulging a section of society that has sailed through the recent financial crisis/recession while the private sector has suffered. Even California is starting to appreciate that something has to be done; as the NY Times reports

For the last few years, California stood more or less unchallenged as a symbol of the fiscal collapse of states during the recession. Now Illinois has shouldered to the fore, as its dysfunctional political class refuses to pay the state’s bills and refuses to take the painful steps — cuts and tax increases — to close a deficit of at least $12 billion, equal to nearly half the state’s budget. ...
The state pension system is a money sinkhole...

This is the crisis of our age. If the music has not yet stopped, it is going to, and not just one chair but several have to be taken away.

I would more inclined to give Rob Anderson the "trust" he asked for if he had not spent the last provincial campaign trying to further expand the legislative presence of a government that had been increasing spending at double digit rates. Back in January of this year I expressed some concern about the floor crossings, not because I was fundamentally opposed in principle but because there appeared to be too much accommodation of the crossers. Liza Yuzda quoted Danielle Smith as saying holding by-elections would mean the new caucus members could "be without an income for six months." Now I could sarcastically say "cry me a river" but I wanted to take, shall we say, a "sophisticated" stance on the issue at that time. When Rob Anderson took to the platform last Saturday to complain about his expected remuneration after Link Byfield had just presented the conclusions of his "MLA pay and perks" task force, my opinion on the terms of the floor crossings, or the absence thereof, became a lot less sophisticated and a lot more simple. Link had essentially put some of his political capital on the line at the beginning of this year when he indicated that he believed the floor crossings came about for reasons he had no problem supporting, yet here Anderson follows up Link's one appearance on the AGM platform to conspicuously fail to support Link's work.

The capstone to my disillusionment was set when, near the end of the AGM, someone involved in operations told a reporter that every constituency has a membership count of 140 or more. I don't have the latest numbers and am not at liberty to disclose them but I do know that this claim is certainly false. As far as I was concerned, Edmonton Journal reporter Archie McLean was being deliberately misled, and even if the Journal's editorial page hasn't been exceedingly fair with us, Archie certainly has been. The fact that Archie wasn't actually asking for that information is beside the point. Given that it is also the case that constituency organizers have quit because of conflicts with this person, were I in charge I would have deemed giving inaccurate information to the media grounds for firing. Given that the daughter of an Edmonton Decore organizer was fired from staff for no grounds or explanation at all (according to my information), it's not like the party can't do it. Recall that the party's office manager, Heather McMullen, was let go for allegedly "speaking out of turn" at the time of the floor crossings.

I was advised by a Wildroser after the AGM that it isn't the same party that I put time and money into in 2008. Of course. But going from the fringe to the mainstream need not entail getting offside with sound policy like that articulated by the Economist, or Jack Mintz, or the economic consensus which has little time for monopolies generally and unions specifically. We do not need every vote. Once the party starts thinking it does, it is hardly different from the P"C" party. When I talked to the new VP Policy last weekend before he was elected about a policy I thought fairly straightforward and a powerful political tool for maintaining fiscal conservatism (by reducing the revenue windfalls that seem to inevitably strengthen the bargaining power of interest groups wanting taxpayer money), namely hedging, I was advised that the hedging concept, or at least its implementation, was likely too abstract. My experience of the AGM suggested that even if sound policy was passed, the caucus is likely to want to water it down if powerful lobbies oppose it with the end result being that caucus' discretion is preserved. Where the party policy book is silent, such as on whether to support a national securities regulator, the caucus does not seem to have felt a need to be less than strident in taking a position in its press releases.

My multi-part review of the AGM has become more critical as it went along over this past week and has reached a climax with this post, as I have pointed the finger at caucus (Hinman excepted) for being too accommodating of insider lobbies and/or their own political and financial interests to maintain my confidence in the party's real, as opposed to rhetorical, commitment to enforcing fiscal conservatism and, indirectly but in turn, at the leadership for being too accommodating of caucus. The accommodation started back in December, if not before, but would not have reached what I consider an intolerable level had events at the AGM not reinforced my suspicions about which way the wind was blowing.

The AGM was not hijacked by the NDP - don't get me wrong - but neither was the old Reform party hijacked by the NDP; it was rather compromised to the point that it led to a government more centrally controlled (prorogue, anyone?) and fiscally loose (anyone for some Andrew Coyne opinion?) than the Liberal government it replaced (the Harper government has yet to freeze public service wages like the Liberals did). I got off the Tory train several years ago, when it became clear what the direction was. The Wildrose party seems to think that Stephen Harper has shown the way, and indeed he has, but to government, not to principled fiscal conservatism or to the post-partisanship that would ease voter alienation. Ironically, the very hardball political tactics that got the federal Conservatives to a minority government are what is preventing them from ever getting a majority government. We need to play hardball, all right, but with the root causes of the fiscal crisis that looms for developed country governments, a key one of which is the demands of the public sector unions and assorted lobbyists.

Wildrose AGM review Part 4 - Alberta Constitution, financial regulation, gun rights

2010-07-02T00:15:00.011-06:00

One of the first policy planks to come up for a vote called for an Alberta Constitution. A lawyer (or law student?) helpfully pointed out this could well end up playing a similar role to that of the Charter of Rights and Freedoms. As such, it would serve to limit the discretion of the elected legislature. The membership ended up voting for this measure, but later on voted for a philosophically opposite measure by deleting a clause that called for a referendum before invoking section 33 of the Charter (the Notwithstanding Clause), thereby handing discretion for whether to "opt out" of applying a provision of the Charter within Alberta back to the legislature. A sponsor of the measure to delete the requirement for a referendum when using s. 33 claimed that there would otherwise have to be a referendum every 5 years, but in fact that is only true under an unreasonable interpretation of the Wildrose policy clause. There is nothing in Canadian law which would preclude a provincial legislature from holding a referendum once, and the legislature interpreting that as supporting, say, a 50 year mandate instead of 5, and accordingly renewing sans referendum the use of s. 33 ten times over that 50 year period (every 5 years as is required by Canadian law).

I supported the use of section 33 without holding a referendum and voted against bringing in an Alberta Constitution primarily because I am a conservative as opposed to a libertarian. At the heart of our current problems is not too little reference to rights but too little reference to responsibilities. An Alberta Constitution, like all forms of legislation that are intended to be superior to the legislation produced by a legislature, would restrict the power of the majority (presumably) in the name of protecting the minority. The net result of this is provide a means of legal redress against the coercive power of norms. If the norm is to not engage in a certain behaviour, by enshrining a constitutional right to engage in the behaviour, deviants can sue to preserve their right to deviate. That's all well and good in theory, but in practice norms are what hold society together and minimize the development of anomie. The Charter of Rights and Freedoms only works in a liberal / libertarian direction opposed to conservatism because of its fundamental nature: it is not a "Charter of Responsibilities". While I grant that an Alberta Constitution could include rights that conservatives would normally support as part of an alliance with libertarians, like property rights, having experienced life in 80-odd countries and studied law and society for several years I am convinced that what ultimately protects a "right" is a society's norms, not what is written in its law books. Whatever a country's constitution might say, it is going to be interpreted in a way that is consistent with the prevailing culture of that country and the mentality of its people. North Korea is formally known as the Democratic People's Republic of Korea but in reality it is one of the least democratic jurisdictions in the world. An Alberta Constitution could ultimately make it more difficult to take necessary collective actions like creating budget surpluses, since it could create negative rights to not be taxed, positive rights to government services, or both. You might believe that the less collective action the better, but note that collective action is not necessarily government action. Whatever one's opinion on gay rights, for example, it is difficult to deny that the primary objective for those who used the Charter to advance gay rights was the erosion of the social norm than found same sex relations deviant. Government's role was really just incidental, since there was nothing stopping same sex couples from solemnizing their relationships before friends, family, and/or clergy. "Official" government recognition was important not for the piece of paper it involved but the message that was sent to the general public. Acceptance by society, as opposed to some formal government institution, was the most important goal.

Now it is true that an Alberta Constitution could enshrine things like "a marriage consists of one husband and one wife" but enshrining norms in legislation that is superior to elected legislatures is an abuse of power. Enshrining (true) rights at least has a rationale revolving around limiting majoritarianism. Enshrining whatever happens to be supported by the majority at a particular point in time (as reflected by the opinion of an elected legislature) as unchangeable for future majorities is to engage in unjustified exceptionalism. What is so special about today's norms that some of them should receive constitutional status? There has to be some sort of timelessness argument, and it is because I believe very very little is truly timeless than I oppose charters and lengthy, wide-ranging constitutions. Actually, I should correct that saying that I believe there are a number of timeless transcendent values but I am not inclined to force others to accept them by accepting my view of a constitution over theirs. Leave it to democracy. Choose conservative humility about what constitutes social justice over liberal arrogance. Constitutions and Charters take power away from democracies and hand that power to the framers of constitutions and charters. If an Alberta Constitution took power away from the federal government, I would interested in supporting it but, of course, an Alberta Constitution could control only the Alberta Legislature, not the Canadian Parliament.

Three policy proposals that came up later arose in a sequence and I ended up approaching the microphone to speak to all three. Two concerned labour and one concerned securities regulation. I'll address the labour matters in a subsequent post since otherwise this blogpost will be absurdly long. I spoke out against the proposal titled "Securities Act" because it just added clutter to the policy book. The policy planks should bind elected MLAs (and the party executive / leadership?) and this proposal didn't limit discretion at all. Gut securities regulation? Arguably OK because the proposed clause said the party supports greater protection for sellers of securities (against whom if not the buyers of securities, who would only have a positive action against the sellers if the law gave them one?). Increase the level of securities regulation? Just as defensible because the clause also called for greater protection of buyers of securities. A speaker in favour of adopting the policy plank made reference to the financial crisis, but I would refer readers to what the Economist wrote about the financial crisis just within the last day: "Though the financial crisis was global, it originated in America’s uniquely fragmented financial system, overseen by a patchwork of federal and state regulators." If the USA has a "patchwork of federal and state regulators" what does Canada have? Yet continuing or even increasing the "patchiness" of regulation in Canada seems to be exactly what the Wildrose leadership / caucus has in mind when it so intensely opposes a single national regulator. The Alberta Securities Act and Regulations is something like 3 inches think. It was my fattest statute book when I was in law school. Now times that by 13 for 10 provinces and 3 territories and call me when you are done reading, because only then have you mastered securities regulation throughout Canada, which represents, at most, 3% of global capital markets.

Were the party to adopt a plank like,

The Wildrose Alliance will use Alberta's influence over a national securities regulator to attempt to ensure that only financial derivatives listed on public exchanges may be traded in Canada

one might actually have something that got at what caused the crisis and helped prevent a future one. As that same Economist article notes, "[under the Dodd-Frank Wall Street Reform and Consumer Protection Act] Most derivatives that now trade dealer-to-dealer will be traded on public exchanges. That will lessen the risk that one dealer’s failure brings down others." Why is the risk reduced? For two main reasons. The first and most direct is that exchanged traded products are marked to market, usually daily, such that if one's counterparty defaults, the default is on just one day's worth of margin, whereas if the product were off-exchange, days, months, and perhaps even years' worth of a position going against the counterparty could have built up, leading to a massive credit overhang. The second is more structural, and goes to the transparency of the system. As the Globe and Mail reported on June 30 in a story titled, "Ignorance of derivatives spurred AIG fall",

As markets slid toward chaos, [AIG and Goldman Sachs] quarrelled bitterly over what obscure derivatives were worth, current and former executives testified Wednesday.
Their testimony casts light on what has long been one of the murkiest episodes in the broader meltdown.

Most Wildrosers support free markets primarily because they are free. As an economist, I primarily support free markets because it is generally the case that free markets make fundamental price values more transparent (government bureaucracy obscures the state of true demand and supply). But in the case of derivatives, which, as their name suggests, derive their prices from more fundamental prices, they make the fundamental economic signals more obscure. An off-exchange derivative is especially obscure because it is a tailored, non-standardized product requiring a unique valuation.

At the end of the day, neither of these policy planks, the Alberta Constitution nor this "Securities Act" plank, were especially consequential in and of themselves. With respect to the Constitution, what will matter is what is in it, not whether it exists or not. And the Securities Act plank didn't say anything. One could argue that the proposal to add a clause after "a Wildrose government will entrench individual property rights" stating "ownership of firearms is a form of property rights" would have been consequential (had it passed) but I don't think it would have been of great import in any case aside from optics (meaning voting just on one's view of the optics was entirely appropriate). It really just said what should be obvious: if one owns a gun one owns a gun. Governments violate individual property rights all the time by taxing individuals; it is just a question how much property the individual is left with after the tax man departs. What would matter was how the proposed policy plank was interpreted, and on that count I voted against it because the context seemed to be that of raising the right to own a gun to the level of, say, the right to due process, i.e. beyond mere property right. The debate on the subject helped turn votes against the proposal, I suspect, since the respected Link Byfield spoke out against and speakers in favour used implausible and/or extreme rhetoric, e.g. "a man without a gun is a slave (a man with a gun is a citizen)." As it was, a Firearms section which contained a lot of pro-firearms language was added to the policy book later, and the presumptive reason why that passed and this first proposal didn't was because the later proposal was in a context that was more appropriate to gun rights being on the level of presumptively respected but practically regulated property rights than on the level of inalienable and absolute personal rights.

So what did really matter, in my view? The provisions that were union-related, for reasons I will explain in my my next post.