Wednesday, March 26, 2008

Blame Ontario! It seems that everything's gone wrong, since Dalton came along!

If there was any doubt about Harper's motives in this spat with Ontario, they've certainly been answered over the last two days. There's nothing wrong with the federal Finance Minister giving advice to his provincial counterparts since you can't deny the Ontario and Canadian economies are interconnected. There's probably even a time and place for making this advice public.

But the day before the budget is released is not the time to do it. And this childish stunt on the Conservative website further shows that this is nothing more than Stephen Harper picking yet another fight.

As for the validity of Flaherty's argument?

But on Monday, Flaherty dismissed suggestions the province could not afford to cut spending arguing since he was finance minister of Ontario in a previous Conservative government, spending has increased 50 per cent.

"When the premier says he can't control spending, or he can't reduce spending I have a little trouble with that quite frankly given the skyrocketing spending over the past six years," Flaherty said.


Well, Paul Wells does a pretty good job breaking it down and showing that things have gotten a lot better in Ontario since Flaherty stopped making the decisions there. I'd also wager that there isn't a lot of nostalgia in Ontario for the good old Harris-Flaherty days, despite Jim's belief that there will be protests in the street in support of corporate tax cuts.

It's also somewhat baffling to me that the biggest spending finance minister in the history of Canada is the one urging Dwight Duncan to cut spending in favour of tax cuts.

In fairness, Flaherty may have a point that it's important to call out a finance minister who was irresponsible enough to let spending increase by 12% over two years and has budgeted for it to keep rising despite an impending economic slowdown. But, as the numbers show, Flaherty won't need to go very far to call that finance minister out. Here are the provincial and federal spending numbers (in Billions), using the last year before Flaherty came to Ottawa as the baseline:

.................ONT/CAN
2005-06: 85.3 / 209.0
2006-07: 88.8 / 222.2
2007-08: 96.0 / 234.3
2008-09: 96.2 / 239.6
2009-10: 99.6 / 250.7

So, two years into the Flaherty era, federal spending has increased by 12.1%, a far cry from the "skyrocketing" 12.5% spending increase in Ontario over that time. Adding this year's budget numbers gives Ontario a 12.8% increase compared to a frugal 14.6% increase in Ottawa. Projecting ahead to '09/'10 and Ontario's budget will have grown by 16.8% over the last four years, compared to 20.0% federally.

And, of course, we're taking Flaherty's numbers at face value which, given the creative accounting that went on during the Harris-Eaves years, may be a risky assumption.

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40 Comments:

  • What you are convienently forgetting is that during all this time, Federal revenue has been increasing and the biggest complaint of the Liberals and NDP is that the Feds are putting too much on the debt and not spending enough. Also, the massive increases in spending during the first two years had a lot to do with the allocation of funds for massive spending commitments implemented by the Liberals during the Martin year. In contrast, the Ontario government raised taxes and raised spending on their own accord. While clouds gathered and revenue is threatened, they continue to spend big and promise more. We went down this road with Rae years ago and we know it will not work. The Liberals will cause severe damage to the economy and the residents of Ontario will have to suffer with higher taxes and a lower standard of living because of this folly, but I guess as long as the troughs are full, Liberals couldn't care less.

    By Anonymous Ron, at 9:44 AM  

  • Thank you. Finally we are moving away from these wasteful attacks on Stephane Dion to focus on where the real problems in Canada lie.
    Let's continue to remind ourselves of Jason Cherniak's message of solidarity.

    By Anonymous Anonymous, at 9:45 AM  

  • This is a great post! I love it when you haul out the data.

    By Blogger Idealistic Pragmatist, at 10:19 AM  

  • Wells' rant is a must read. And Conservatives have to start realizing on what shaky grounds they are treading here, especially when it is led by Flaherty: Flaherty was a disaster of Bob Rae proportions for Ontario, he is the biggest spending finance minister in the history of this country, Harper has on several occasions before now show a great dislike for his home province (his anti-Ontario rant when Stockwell Day lost to Chretien, his legislation giving the west more seats but not only continuing to ensure Ontario is not proportionally represented in Parliament but insulting Ontario and calling McGuinty the "small man of confederation" for speaking up for democratic representation, for ignoring Ontario (a single one-on-one official meeting I think in 2 years vs. Quebec 3 million and counting), for calling Tory the next Premier of Ontario within minutes of a brief meeting with McGuinty, etc. etc. etc.

    And this just gives Ontarians more reason not to trust him.

    Or to vote for him.

    Will Harper stand up for Ontario? We have our answer clear as day.

    By Anonymous Ted, at 11:06 AM  

  • You are right!

    Flaherty, CUT SPENDING!

    By Blogger James McKenzie, at 11:29 AM  

  • Uhh Ontario has had anemic growth (and is now a have not province), while Canada has had solid growth. Spending the same when growing far slower is a problem.

    As for Flaherty/Eves' tenure in office as finance minister you had a balanced budget, 25% reduction in income taxes, solid economic growth and a near-doubling in health spending - that's a solid record.

    By Blogger hosertohoosier, at 11:40 AM  

  • Look, it's Jim Flaherty. And he has some sort of axe. It seems like he's grinding it.

    By Blogger Glen, at 11:43 AM  

  • Another wild theory - what if Harper wants an election soon because 1. he wants to face Dion and anticipates a Liberal coup in the works.
    2. He has some time-sensitive dirt that will counteract any initial losses in Ontario.
    3. He wants an election before the tanking of the economy is clear.

    By Blogger hosertohoosier, at 11:44 AM  

  • ron - if federal revenues are increasing dramatically faster than provincial ones, wouldn't that be a sign that Flaherty has not cured the "fiscal imbalance"? Shouldn't these increased federal revenues be put into tax cuts, instead of the massive spending increases Flaherty has given Canada?

    By Blogger calgarygrit, at 11:56 AM  

  • Wells' post is great, but I have a hard time buying into the idea that the Tories have started this, just to have another enemy to fundraise against. Surely there must be a safer target out there than McGuinty to go after?

    By Blogger calgarygrit, at 11:58 AM  

  • It wouldn't surprise me if the Conservatives take that picture of Dion and make it part of their logo.

    By Blogger MERBOY, at 11:58 AM  

  • "Uhh Ontario has had anemic growth (and is now a have not province), while Canada has had solid growth. Spending the same when growing far slower is a problem."

    Wouldn't a cut in spending accelerate a decline in Ontario caused by exogenous factors? What are you suggesting?

    "Another wild theory..."
    Yeah!

    By Blogger JimTan, at 12:16 PM  

  • Keep in mind that McGuinty isn't completely innocent either. When he was being elected, he promised to freeze tuitions in Ontario (a promise that Ontario could not afford), and when he got in, he flipped on it. Students revolted, and pretty much forced him to move forward on it...

    When you can't afford to do something, but go ahead and do it because you promised, well, theoretically you're going to be in debt...

    By Anonymous Anonymous, at 12:20 PM  

  • I'm assuming these attacks are an attempt for them to damage the Liberal brand. Most polls show that people vote for the Liberal name, not because of Dion, so they are trying to find a new way to damage the Liberal brand. Might as well start where the Liberal name is the strongest, in Ontario.

    By Blogger Bailey, at 1:33 PM  

  • Does anyone think that maybe the Tories see Dalton McGuinty as a possible heir to leadership of the Federal Liberal party if Dion gets dumped? Perhaps they are targeting him now in order to brand him in advance or deter him from seeking the job?

    By Blogger Forward Looking Canadian, at 1:55 PM  

  • There was an almost 5 billion dollar surplus in Ontario this year. As the Liberals had decided to dedicate part of any surplus to debt repayment, they used some of that "creative accounting" to erase the billions so they wouldn't have to pay debt or cut taxes. The federal Conservatives have paid debt and cut taxes, the Ontario Liberals want to avoid doing the same. Which way is the right way to grow the economy will long be debated.

    By Blogger nuna d. above, at 2:08 PM  

  • Hey Hoosier, when did Flaherty balance the budget?

    By Anonymous Anonymous, at 2:18 PM  

  • "Wouldn't a cut in spending accelerate a decline in Ontario caused by exogenous factors? What are you suggesting?"

    1. Flaherty is proposing slower spending growth, not outright cuts.
    2. Spending money only increases GDP in the short-run. Its long-run effects are negative (unless you are talking about programs that say, provide valuable public goods essential to economic growth).
    3. So that is why the economy did so badly when Martin cut every line item in the budget except aboriginal affairs. It is all about expectations - if long-run expectations improve due to good fiscal policy, economic growth will increase, not decrease.

    Also, Ontario is trying to bury the hatchet. Perhaps they are afraid of something here - everybody LOVES having the federal boogie-man to campaign against. That they are not whacking what should be a vote pinata is strange. I suspect something big in the works.

    By Blogger hosertohoosier, at 2:20 PM  

  • One can't help but notice the lack of any carbon pricing mechanism in the Liberal heartland. Even Alberta has moved on this file and will be pricing carbon in the tarsands. The take home message from this budget is that we should continue to expect absolutely zero leadership or cooperation on the climate change file from Ontario Liberals. For shame!

    By Anonymous It's a brownish red, at 4:43 PM  

  • Let's continue to remind ourselves of Jason Cherniak's message of solidarity.

    Exactly - the glue that holds this mighty team of Liberals across Canada, by whom I mean executive, elected, hired-on, and blogging, is none other than Jason Cherniak. Who needs Stephane Dion when Jason's in the house?

    By Anonymous Anonymous, at 4:55 PM  

  • "if long-run expectations improve due to good fiscal policy, economic growth will increase, not decrease"

    I see!

    So the Americans are being foolish. They're handing out $200b because they're afraid of a death spiral.

    Hmmm! I wonder if something like this occured in the Great Depression. Birth of Keynesian Economics?

    By Blogger JimTan, at 10:32 PM  

  • I can't help but wonder if this part of the Conservatives overall strategy which is to do some permanent damage to the Liberal Brand. It seems to fit quite well and there has been some evidence suggesting it.

    It really reminds me of how the Tories in Britain had done with Labour in the early part of the Thatcher Years. If you do enough damage to the brand name, it has a funny way of being permanent. The British Labour Party only ever overcame there trouble by rebranding themselves as "New" Labour.

    The Ontario Liberal Party clearly was the biggest source of problem for the Tories. As long as they were doing well politically there opportunity to have a lengthy governing period is being harmed, the provincial Liberals are popular and it reduces the chances that there can be any real permanent damage to the brand name. But now if they can attack the Ontario Liberals, they might be able to weaken them as well thus there plan of hurting the Liberal Brand might actually be successful.

    By Blogger Wild Rose Grit, at 11:26 PM  

  • The only trouble is that so far Ontarians and from other polls, the rest of Canada isn't buying it. However, the repetitive nature of this highlights the need for a lengthy (well, half a year at least) duration of nagging and blasting. In the meantime, if the fed Liberals find their balls we'll have an election where it will be the CON brand that's up for a microscopic enema, demonstrated to be unwavering in their partisan hackery. The question other provinces should consider -- will you be getting the stick next? Would you rather fight like Danny and Dalton or be patsies like Wall and McDonald?
    Maybe Flaherty has really solved the provincial bickering -- this Harper regime is doing a fine job of uniting provincial leaders for a cause...

    By Blogger burlivespipe, at 2:32 AM  

  • Grit:

    Lets not forget that the majority of new and big spending has gone to the provinces (i.e. Quebec and Ontario) for the fiscal imbalance, climate change, infrastructure, etc.

    The rest of the "spending" has been tax cuts. Stats don't lie, but sometimes liars use stats.

    By Blogger Brian Grenya, at 5:09 AM  

  • As for Paul Well's post, I sent him the following (to which the East German Post Office hasn't bothered replying):

    Hey Paul,

    Just wondering if you can back up any one of your claims:

    "You don't get to run the Senate. You don't get to push bureaucrats around for kicks. You don't get to muzzle public servants, tell reporters how to cover you, pick the next US president or write Ontario budgets. There's a Canadian constitution that says so, and just because you boycotted the 25th-anniversary celebrations of the Charter of Rights doesn't mean the separation of powers, which isn't even in the Charter, goes away by fiat."

    Lets look at these one by one....

    1. "Run the senate" Harper has personally been calling for an elected, equal and effective senate since 1987. The Liberal Senate only tends to hold up legislation when the Conservatives are in power which is at best a huge coincidence and at worst the embodiment of autocracy. In Canada. What would you expect a democratically elected Prime Minister in the 21st century to do when his legislation is passed by the will of the people but held up by a handful of appointed hacks?

    2. "Push bureaucrats around for kicks....muzzle public servants" You mean like firing Allan Cutler for blowing the whistle on the biggest racket in the history of our country? Perhaps you mean firing Francois Beaudoin, taking away his pension and the PMO directing the RCMP to search his house because he wouldn't approve a loan to a friend of the PM? Surely, you jest.

    3. "Tell reporters how to cover you" Its a big stretch to say that holding press conferences on Parliament Hill (like Trudeau did) and not playing by Julie Van Dusen's rules means that Harper is actually telling reporters how to cover him. Speaking of which, I must not have read the particular clause in the constitution that bestows special powers to the Parliamentary Press Gallery over the Prime Minister of Canada. Maybe Julie Van Dusen and Susan Bonner can run for election if they want these rules to be law? In the real world, we have CBC reporters actually planting questions with Liberal MPs using parliamentary immunity to question former prime ministers.

    4. "Pick the next US president" Suddenly Harper is now personally responsible for some diplomat from Chicago leaking a memo? If he's responsible for every leak, he must also be responsible for leaking his own climate change plan to the press in an effort to discredit himself and his government.

    5. "Write Ontario budgets". I'll concede the point that Harper shouldn't be telling Ontario what they ought to be doing if you concede the point that Dalton McGuinty and every premier in this country shouldn't be telling Harper what to do. If not, why the double standard?

    6. "...just because you boycotted the 25th-anniversary celebrations of the Charter of Rights...doesn't mean the separation of powers, which isn't even in the Charter, goes away by fiat."
    Not sure where you are going with this. I'm assuming your invoking the Charter is a way for you to give a shout out to your boy Trudeau or to subtly suggest that Harper doesn't believe in rights....or something. Anyway, Harper is the only PM I can remember who campaigns on the seperation of powers (see previous budget on fiscal imbalance and throne speech that talks about division of powers)

    By Blogger Brian Grenya, at 5:15 AM  

  • I think this is a pre-emptive blame game thing going on because both governments know the US led recession is about to spillover into Canada and it's good to get some culpability on the other guy as a way of containing the political damage of shitpiles of people out of work.

    By Blogger The Grumpy Voter, at 7:19 AM  

  • Brian Grenya said...

    == What would you expect a democratically elected Prime Minister in the 21st century to do when his legislation is passed by the will of the people but held up by a handful of appointed hacks?

    When you say "passed by the will of the people" you really mean "passed by threatening the opposition like a common bully instead of actually convincing anyone that what you plan is the right thing to do" right?.

    == You mean like firing Allan Cutler for blowing the whistle on the biggest racket in the history of our country? Perhaps you mean firing Francois Beaudoin, taking away his pension and the PMO directing the RCMP to search his house because he wouldn't approve a loan to a friend of the PM? Surely, you jest.

    Awwww my favourite reason to vote Conservative... "we said we'd do politics different... but behind our backs we had our fingers crossed".

    == Tell reporters how to cover you" Its a big stretch to say that holding press conferences on Parliament Hill (like Trudeau did) and not playing by Julie Van Dusen's rules means that Harper is actually telling reporters how to cover him.

    So having your people choose who gets to ask a question giving you the option of avoiding any reporter or paper who has ever displeased you... that's a good thing then?

    == In the real world, we have CBC reporters actually planting questions with Liberal MPs using parliamentary immunity to question former prime ministers.

    You know in the real world of finding out what actually happened... personally I could give a damn where the questions come from.

    == "Write Ontario budgets". I'll concede the point that Harper shouldn't be telling Ontario what they ought to be doing if you concede the point that Dalton McGuinty and every premier in this country shouldn't be telling Harper what to do. If not, why the double standard?

    Last time I checked the international community doesn't listen to premiers all that much... and I don't remember him saying anything like Canada is a bad place to do business... let alone making such statements the day before the budget whilst pretending he was just doing his part to help... WHAT A LOAD!

    == Harper is the only PM I can remember who campaigns on the seperation of powers (see previous budget on fiscal imbalance and throne speech that talks about division of powers)

    Separation unless your name is Ontario... then it's totally cool to make vicious comments with the sole purpose of scoring political points... I mean that's what division of powers is all about right???

    By Blogger MERBOY, at 7:38 AM  

  • to merboy...

    When you say "passed by the will of the people" you really mean "passed by threatening the opposition like a common bully instead of actually convincing anyone that what you plan is the right thing to do" right?.

    No, I mean passed by the will of the people. If Dion opposes the agenda he should do so. If he feels like he is getting bullied, he should pick up his ball and go home.

    Awwww my favourite reason to vote Conservative... "we said we'd do politics different... but behind our backs we had our fingers crossed".

    So, your reason to vote liberal is because you know they are corrupt? We can expect corruption when we get liberals? Nice.

    So having your people choose who gets to ask a question giving you the option of avoiding any reporter or paper who has ever displeased you... that's a good thing then?

    Thats about right. Which is why you don't see Barack Obama or Hillary Clinton on Fox News. Its a free country...certain members of the press are free to have a bias against Harper, and he's free not to answer their questions.

    Last time I checked the international community doesn't listen to premiers all that much... and I don't remember him saying anything like Canada is a bad place to do business... let alone making such statements the day before the budget whilst pretending he was just doing his part to help... WHAT A LOAD!

    True. Although I don't recall anyone saying Ontario was a "bad place to do business" - now you are putting words in his and Jim Flaherty's mouth. But just so I have you straight: it was ok for Paul Martin to run against Ralph Klein and the province of Alberta in the 2004 election? Its ok when Dalton Mcguinty demands $23 billion dollars from the feds every year to "close the gap", but not ok for the feds to point out that Ontario has the 2nd highest corporate tax rate and maybe, just maybe - thats hurting investment in Ontario?

    Separation unless your name is Ontario... then it's totally cool to make vicious comments with the sole purpose of scoring political points... I mean that's what division of powers is all about right???

    I'm not sure you are clear what the seperation of powers even means. It definitely doesn't mean: we premiers get to beg and extort money annually but are constitutionally exempt from any criticism coming back our way.

    Now, I've been nice thus far, but I get the feeling that nothing I say really matters to you. You are just another mindless kool-aid drinking partisan hack, with a propeller head and right-wing decoder ring who would be just as comfortable avoiding elections altogether if there was a convenient way for you to annually tick "Liberal" off on your tax return.

    By Blogger Brian Grenya, at 9:01 AM  

  • jimtan, congratulations on continuing to show us all that you combine the partisanship of Jason Cherniak with the brains of an oxen.

    The thing about the Great Depression is that the federal reserve didn't cut interest rates. Rather, it maintained deflationary policies to prevent devaluation of the dollar (in order to maintain fixed exchange rates, as per the norm under the gold standard system).

    Moreover there was no FDIC (or whatever the acronym is for federal deposit insurance) - the government didn't bail out banks nearly quick enough. So a lack of monetary policy, or action to save the banks caused bank failures and decimated the US economy. The gold standard spread that decimation, since ever higher American interest rates threatened to draw off foreign gold - forcing other countries to raise interest rates in tandem, amplifying a cyclical downturn in the economy.

    So YES, the US government is wasting 200 billion in taxpayers money to do something that Ben Bernanke can do just fine by himself. They are doing that for the same reason congress has earmarks and pork - getting votes.

    And Yes, the conventional story on Hoover is utter crap. FDR's New Deal was an expensive flop. If you look at economic growth and unemployment, while they did better for a few years, there was a sharp downturn in the late 1930's - countered only by a massive spike in export demands caused by the approach to WWII.

    Or if you want a Canadian story, try this (it even has a partisan slant you might like). Bennett the Conservative launched a New Deal of his own. While much of it was shot down by King after 1935, and by the Supreme Court, he raised government spending, in spite of dropping revenues. Government as a share of GDP rose from 8.8% to 12.4% in two years, dropping thereafter.

    King, by contrast, governed through a recovery that say Canadian GDP increase by over a third in his 1935-1940 term. In that period he held the line on spending (until the arrival of WWII). Even in 1939 he was spending less as a % of GDP than Bennett had.

    (my source is the Queen's historical macroeconomic dataset).

    By Blogger hosertohoosier, at 10:23 AM  

  • Brian Grenya said...

    == No, I mean passed by the will of the people. If Dion opposes the agenda he should do so. If he feels like he is getting bullied, he should pick up his ball and go home.

    Yeah sorry still not buying it... when you make practically every bill a confidence motion... you're not interested in getting support from all MPs... nice try though.

    == So, your reason to vote liberal is because you know they are corrupt? We can expect corruption when we get liberals? Nice.

    It's really not that complicated... corruption is bad... regardless of what party you belong to... but it's especially bad when you're the party currently in power... which campaigned HARD and possibly picked up enough extra seats to become the government because they said they would do things different.

    We kicked out the Liberals because of corruption and bad behaviour... many who have voted Liberal in the past voted for the Conservative party because they were told that things would change and government would be cleaned up.

    You can complain all you want about what other parties have done in the past... but that's simply not an acceptable excuse for the behaviour of a party that is currently running the country.

    == Thats about right. Which is why you don't see Barack Obama or Hillary Clinton on Fox News. Its a free country...certain members of the press are free to have a bias against Harper, and he's free not to answer their questions.

    Yeah Barack Obama and Hillary Clinton aren't running their country last time I checked... and even if they were... you still didn't answer my question... when you're a sitting PM "having your people choose who gets to ask a question giving you the option of avoiding any reporter or paper who has ever displeased you... that's a good thing then?"

    == True. Although I don't recall anyone saying Ontario was a "bad place to do business" - now you are putting words in his and Jim Flaherty's mouth. But just so I have you straight: it was ok for Paul Martin to run against Ralph Klein and the province of Alberta in the 2004 election? Its ok when Dalton Mcguinty demands $23 billion dollars from the feds every year to "close the gap", but not ok for the feds to point out that Ontario has the 2nd highest corporate tax rate and maybe, just maybe - thats hurting investment in Ontario?

    Paul Martin vs. Ralph Klein... from what I remember the talk between PM and RK during the 2004 federal election had to do mainly with private vs public health care... please share how that debate could possibly damage Alberta's international reputation.

    McGuinty + $23 Billion... Please share how that debate is tarnishing Canada's international reputation.

    I think it might be appropriate if a large majority of the people living in this province were demanding corporate tax cuts... but since they're not I'm sorry but it just comes across as political posturing and damaging to Ontario's economy... 100% inappropriate.

    == I'm not sure you are clear what the seperation of powers even means. It definitely doesn't mean: we premiers get to beg and extort money annually but are constitutionally exempt from any criticism coming back our way.

    I don't think anyone is saying that members of the federal government can't have an opinion... in this scenario it has everything to do with the tone... the timing... and the specific subject of the complaint.

    == Now, I've been nice thus far, but I get the feeling that nothing I say really matters to you. You are just another mindless kool-aid drinking partisan hack, with a propeller head and right-wing decoder ring who would be just as comfortable avoiding elections altogether if there was a convenient way for you to annually tick "Liberal" off on your tax return.

    As I said before... I don't necessarily disagree with the ideas that Jim Flaherty is pushing... I do think that the manner in which he aired his criticisms was completely inappropriate and was pure partisan bullying and does more harm than good.

    As for being a partisan myself... I would assume a Liberal partisan hack would vote for the Liberal party at every opportunity... I didn't vote Liberal in our last provincial election and I didn't vote Liberal in our last two federal elections. I also complained about Paul Martin to friends of mine that work for the Liberal party all the time when he was leader... maybe that makes me a bad partisan.

    By Blogger MERBOY, at 11:32 AM  

  • I get a kick out of Liberals whining about how Flaherty saying Ontario's high corporate tax rate make it the last place to do business in Canada is hurting business investment. They obviously have been watching too much TV and bought into those stupid AimTrimark commercials where investors are complete idiots who can't figure stuff out for themselves. It's the high corporate tax rate in Ontario that is hurting investment, not Flaherty pointing it out to people.

    By Anonymous Anonymous, at 12:24 PM  

  • “It's the high corporate tax rate in Ontario that is hurting investment, not Flaherty pointing it out to people.”

    It’s the economy, dummy!

    “HEATHER SCOFFIELD,
    Tuesday, March 18, 2008
    OTTAWA — Canada's days of bucking the U.S. economic downturn have come to an end, according to a forecast to be released today.
    A projection for the Canadian economy by Toronto-Dominion Bank is expected to show that Canada's slowdown is happening at the same time and to the same extent as the downturn in the United States. It also projects that Canada will likely register a quarterly contraction before the U.S.”

    “Thursday, March 06, 2008
    OTTAWA - Canada's housing sector showed further signs of slowing as the value of building permits fell unexpectedly for the third straight month in January, Statistics Canada reported Thursday.
    The federal agency reported that municipalities issued $5.85 billion worth of permits during the month, a 2.9 per cent decline from December, marked by sharp declines in residential permits.
    Such permits fell 13.9 per cent to $3.31 billion, while non-residential permits rose 16.4 per cent to $2.54 billion.”

    “OTTAWA - Canada has recorded its first current account deficit in almost a decade, as a strong domestic currency cut into demand for exports, Statistics Canada said Friday.
    The deficit totalled $513 million in the fourth quarter, larger than most economists had expected, and in sharp contrast to a $1.3-billion surplus in the previous three-month period.
    This was the first time the current account - a measure of all international transactions involving Canadians - has been in negative territory since the second quarter of 1999.”

    By Blogger JimTan, at 1:28 PM  

  • “The thing about the Great Depression is that the federal reserve didn't cut interest rates. Rather, it maintained deflationary policies to prevent devaluation of the dollar (in order to maintain fixed exchange rates, as per the norm under the gold standard system).”

    You know a lot about finance.

    The Fed Reserve System was founded in 1913 as a clearing bank and lender of last resort. During the Great Depression, the FDIC was founded in 1933 to protect depositors. The Federal Open Market Committee (FOMC) was founded at that time to administer the country’s monetary policy under President Roosevelt.

    There are a variety of theories about the Great Depression. See wikipedia about the monetarists and Keynesians etc. This is the view of someone that was there, and was a policy maker.

    ‘Marriner S. Eccles who served as Franklin D. Roosevelt’s Chairman of the Federal Reserve from November, 1934 to February, 1948 detailed what he believed caused the Depression in his memoirs, Beckoning Frontiers (New York, Alfred A. Knopf, 1951):
    As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth -- not of existing wealth, but of wealth as it is currently produced -- to provide men with buying power equal to the amount of goods and services offered by the nation s economic machinery.’

    What did FDR do in 1932 when he was elected? Industrial production had collapsed 50% in just three years.

    He produced the New Deal. He blamed the crisis on capitalism and the establishment. He taxed and spent. He introduced regulations to check the power of companies. He abolished the right of Americans to own gold.

    By 1937, industrial production had recovered to the 1929 peak. People had some money and spent it. Most important, people took money from under their mattress and put it in banks and Treasuries. Money works best when it circulates.

    The monetarists might be mostly correct about the cause of the Great Depression. It’s the Keynesians and interventionists who had the forward-looking solution to the problem.

    What’s the point of cutting taxes when profits and jobs are few? How will balanced budgets in Ontario help when commodities are booming in the west, and manufacturing is weak in the east?

    By Blogger JimTan, at 2:46 PM  

  • jimtan, what you have said does not refute my argument, or even really address it. As usual you seem to have an imaginary conservative bogeyman in your mind, with which you are debating.

    Firstly, the federal reserve engaged in monetary policy before the FOMC. For instance, Benjamin Strong of the Federal Reserve Bank of New York is credited by Milton Friedman for maintaining stability in the 1930's.
    http://en.wikipedia.org/wiki/Benjamin_Strong

    Secondly, I fail to see how that, or the fact that the FDIC was created by FDR counters my argument that bad monetary policy caused the Great Depression (coupled with other factors). I think the FDIC is a good idea, and that there is a need for the federal government to prevent bank failures.

    Thirdly, you cite FDR's chair of the fed as saying that people need more buying power. How is that a call for expansionary fiscal policy? An expansionary monetary policy also stimulates demand. Unlike fiscal policy, however, it works much faster, is less costly, and can be easily reversed when no longer necessary.

    "Money works best when it circulates."

    Again, this is not an argument for expansionary fiscal policy over monetary policy.

    "The monetarists might be mostly correct about the cause of the Great Depression. It’s the Keynesians and interventionists who had the forward-looking solution to the problem."

    Well here is the thing, FDR engaged in an expansionary fiscal policy AND monetary policy (after leaving the gold standard - they probably didn't go far enough either). The question, which you have not addressed at all, is which one had the more important effect, and hence, would be a better tool for fighting recessions today. Since you accept the monetarist view (I should point out that Milton Friedman's book on the subject is mostly at odds with a lot of his other views*, moreover, the argument I have put forward is closer to Barry Eichengreen's - and is not really monetarist or Keynesian). The question is not "what works", it is "which policy both works, and has the fewest downsides."

    Moreover, I find it funny that you stop your argument at 1937. In 1938, unemployment ratcheted up again, and economic growth was -4%. The increased export demand of WWII saved FDR's bacon.

    "What’s the point of cutting taxes when profits and jobs are few?"

    Increased government spending has the same short term effect, as tax cuts. It is a short term demand stimulus (although tax cuts also have long-term productivity advantages, if they don't come at the cost of key public goods). Both are bad tools with which to fight a short-term downturn, because

    *Because his argument isn't against the fed, but rather that the fed got it wrong.

    **Also, in the interest of irony, I am in a building constructed under one of FDR's make-work programs right now.

    By Blogger hosertohoosier, at 4:53 PM  

  • Both are bad tools with which to fight a short-term downturn: government spending creates jobs that are hard to get rid of, even when they aren't needed (ever tried firing a civil servant?). Tax cuts made in the short term are also hard to reverse politically when they are no longer needed. Hence, both policies improve the short term at the cost of the long term (because deficits are bad). Moreover they work slowly.

    By Blogger hosertohoosier, at 4:58 PM  

  • Regardless of who spends more or less.. reducing corporate capital taxes does tend to lead to more jobs expansion

    No amount of hair splitting can alter that fact. Applies to British Columbia too.

    Dynasty Electric Cars are moving out of Delta BC and off to Pakistan. Reason? No tax breaks and no Eco tax incentives.

    [Tip].. Reason not to pull out of the Middle East.

    An easy but gruesome video, not for those under 18 years.

    You will never see this in our politically correct TV.

    http://www.liveleak.com/view?i=7d9_1206624103

    = TG

    By Blogger TonyGuitar, at 5:46 PM  

  • Actually, I was rebutting your argument that monetary policy by Bernecke would be sufficient. That the $200b given out in 2008 by the American government was unnecessary.

    I said: The monetarists might be mostly correct about the cause of the Great Depression. It’s the Keynesians and interventionists who had the forward-looking solution to the problem.

    “Firstly, the federal reserve engaged in monetary policy before the FOMC. For instance, Benjamin Strong of the Federal Reserve Bank of New York is credited by Milton Friedman for maintaining stability in the 1930's.”

    Actually, Benjamin Strong died in 1928. It says so in the wikipedia article. So, he couldn’t have been active in the 1930s. The assertion about price stability is not backed by a citation or figures. In Strong’s bio at the Fed, there is no mention of this role.

    “I think the FDIC is a good idea, and that there is a need for the federal government to prevent bank failures.”

    Yes, the point I was making was that we need a multi-prong approach to do the job right. Make no mistake! America is on the brink of disaster today of a scale to rival the Great Depression.

    Bernecke is working hard to gain time, while the economy slowly finds its equilibrium. That said, there is a range of possible equilibrium paths. Unemployment could top out at 6% or 9%. So, there is a role for temporary government stimulus. Is there room for hope in economic policy?

    “(after leaving the gold standard - they probably didn't go far enough either)”

    FDR didn’t drop the gold standard. As I understand it, the government had to maintain a ratio of gold reserves to paper money. So, FDR took gold out of the hands of private citizens. The government used the enlarged gold reserves to print more money.

    In 1944, the Bretton Woods agreement fixed the currency/gold ratio. By 1968, the Americans had lost fiscal discipline. Devaluation ($/gold) were insufficient. The entire system was dismantled and floating exchange rates began. That’s when the gold standard was dropped.

    “Moreover, I find it funny that you stop your argument at 1937. In 1938, unemployment ratcheted up again, and economic growth was -4%. The increased export demand of WWII saved FDR's bacon.”

    In the wikipedia article on the Great Depression, there is a chart showing industrial production. Note that industrial production peaked in 1937, fell in 1938 as war loomed, and rose higher in 1939 before the War officially began in September 1939.

    This is the interesting thing. At the peak of the Great Depression, 25% of Americans were unemployed. Prior to WW2, 15% were still unemployed. Is the 10% drop in unemployment important?

    By Blogger JimTan, at 8:19 PM  

  • Dear Mr. Tony Guitar,

    Allow me to set the record straight. Dynasty Electric Car Company was started in anticipation that California would require 30,000 electric cars each year as part of its zero emissions laws.

    Unfortunately, California cancelled this part of the law. The bottom fell out of the electric car market.

    Commercial Body Builders Corporation of North Delta, BC took over the project. On a small production run, the electric cars cost $20k to build in Canada. But, buyers were paying only $16k for each car. The governments refused to provide a subsidy to cover the difference.

    The operation was sold to a Pakistani businessman and moved to Pakistan where the costs are very much lower for small production runs.

    So, the problem is the subsidy (and Canadian costs). Not the corporate tax rate!

    I hope that this has been helpful.

    Your Friend,

    Jim

    By Blogger JimTan, at 8:50 PM  

  • Jim,

    Thank you very much for filling out the picture.

    Sometimes a half-baked theory is nicely corrected by those who take the time to set things straight.

    Looks like it may be some time before Canada learns how to encourage Electric Vehicle production.

    We have all the raw materials.

    Logs are a raw material and they ship out wholesale every day while lumber mills are being shut down.

    Elk Falls mill, Campbell River just closed down.. Not good. = TG

    By Blogger TonyGuitar, at 12:53 AM  

  • "Elk Falls mill, Campbell River just closed down.. Not good"

    I feel badly for the guys in the logging and manufacturing industries.

    By Blogger JimTan, at 2:36 AM  

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