What Kind of Budget Does Canada Need?

In a little under half an hour we will see if Stephen Harper has learned any lessons from the past several weeks and whether he finally realizes he has a minority government. I know the Liberals will face a difficult choice. I do not subscribe to the view of oppose the budget no matter, but nor do I think we should approach the budget as a blank slate, as we can’t forget all the deception and gamesmanship that preceded this. We have to ask not only is this a good budget but can Harper be trusted to govern responsibly and implement it appropriately in the months ahead. Harper has to send out very strong signals that he gets it. And the budget he puts forward has to be what’s necessary for the time ahead as the coalition document outlined last fall.

I think the Liberals have some pretty good broad tests of what’s acceptable, but within the broad tests, the budget should in my view have the following:

1) Protecting the most vulnerable Canadians:
- Investments in social housing. The $2 billion proposed is actually less than at least the provinces have asked for which is unfortunate, but this could be amended in committee.
- Investments in Aboriginal communities. A re-commitment to carrying out the Kelowna Accords (I don’t care if they use the name as long as the money and goals are the same).
- Investments in poverty reduction. Tax changes along the lines of Dion’s 30/50 poverty plan are more than appropriate in these tough economic times.
- Employment insurance must be enhanced and distributed more quickly.

2) Protecting Canadians’ jobs, today and in every region of the country
- There must be dedicated aid to the manufacturing sector and other hard hit industries
- There must be significant investments in job re-training
- There should be new actions taken to address the credit crisis
- There should be significant investments in the cultural industry which always returns more in revenue than government pays out and that Conservatives have badly neglected.

3) Creating the jobs of tomorrow, and enhanced our competitiveness and productivity without leaving debt and deficit behind for future generations.
- The budget must start the business of greening our economy and invest in alternative energy and green infrastructure, such as high speed rail and public transportation projects. I’m disappointed to hear that it sounds like there will only be $1 billon over two years dedicated towards green infrastructure. Isn’t that the same amount that has been in previous budgets? Hopefully the Liberals propose an amendment in committee on that front as well.
- The budget must help individuals retrofit their homes with greater aid that has been there before.
- The budget should have increased funding dedicated to post-secondary education.
- There should be increased funding given to the provinces for child care. Increased funding for early learning and child care allows more parents to enter the work force, but also enhances our competitivess for the future and helps build a brighter generation for the future. The Scandinavian countries with national child care programs are also doing better economically than us now, it’s time for us to start catching up and get serious on this issue and not stubborn ideology get in the way.
- The budget must avoid a structural deficit. That means no middle class tax cuts that don’t have a sunset. The Budget Office said that cutting $6 billion a year from foregone revenues (e.g., through tax measures) would create a structural deficit so that can’t be allowed.
- There must be plan to get us back to surplus that does NOT include asset sales or ideological cuts to social programs.

I don’t expect all these will be in here and I’m sure I’ve forgot some things (wanted to get this posted before the budget was actually released), but since I expect many of them to be in there and I don’t think Harper is so dumb as to put in the large middle class tax cuts Ignatieff said he would vote against, I expect the budget will pass. That doesn’t mean I think it should pass, but I recognize the difficult decision being made and that our MPs have been inundated with calls against a possible coalition and urging them to pass the budget, not to mention the last polls that say the same. On the whole I think the mood among Canadians is just to get a stimulus package passed as soon as possible so we must live within that context, but not forget that Harper alone was who prevented such a budget from arriving much sooner and that this is the most important budget in over a decade and can't be decided to vote up or down easily. We shall see very shortly how this will all play out.

If there are large middle class tax cuts that don’t sunset in a couple years (which would no doubt cause a structural deficit) then I think the Liberals will have no choice but to vote against though. Otherwise, I hope at the very least they propose amendments to include all those things above that Harper didn’t put in the budget. We have the majority in committee and if Harper is really going to be about “consensus” he should let the will of the majority prevail there and if he doesn't allow any such amendments then that would seem the like the same old Harper that hasn't learned the lessons he has to.

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The Steady Hand for the Economy

For a bunch of reasons I haven’t been able to blog much this month, but I should be back in the swing of it again with Parliament returning this week. With our MPs coming back today one issue will at the top of everyone’s mind: the economy. And is there a single remaining Conservative who can say with a straight face that Stephen Harper and Jim Flaherty's party have been good economic managers?

The entire last election was about them convincing us that they would be “steady hand” to guide the economy through rough waters. Instead, they’ve steadily guided us deeper and deeper into a ditch and it’s still not clear if they’ve taken us to the bottom of it yet.

Can anyone name a single sound economic decision this government made? A single one?

How about their introduction of 40 year mortgages and other reckless lending practices that first triggered the financial crisis south of the border? Was that sound economic management?

How about cutting the GST by two points when ZERO economists recommended it and taking approximately $12 billion a year more out of general revenues? Does anyone really believe that benefited the economy?

How about Stephen Harper’s encouragement to buy into the stock market before it fell another 20%? Does this make you think he should be managing the country’s money?

How about Stephen Harper’s saying in September that “if we were going to have a recession we probably would have already had one by now” before later saying we could face a depression. Does this make you think that this “economist” really understands the economy?

How about pronouncing there would be surpluses in the four years ahead and turning around just a few weeks later to say there would $100 billion in accumulated debt (with $13 billion of that coming BEFORE any stimulus) instead? Does this make you feel confident in their forecasts for the future?

I won’t be surprised if we hear in today’s throne speech about how these guys “saw the storm coming” and are providing “sound economic management”. But that’s nothing more than a massive lie and Stephen Harper and Jim Flaherty know it. You can read here on this blog and many others quotes from news stories predicting “worse than a recession” during the election campaign while Stephen Harper was still out singing from his “don’t worry, be happy” songbook. We’ve grown to expect our Prime Ministers to play politics now and then, but we’ve never seen them be so willfully dishonest. And in my book we don’t reward people who pathologically deceive, while being abysmal at the job everyone expects them to do.

We face the toughest economic crisis in a generation. The next six months of government action will play a major role in determining when Canada will see an economic recovery. The Liberals will face a very tough choice this week and will be under overwhelming pressure to pass whatever Conservative budget is put forward, and while I’m willing to see that budget before pronouncing it should be defeated we still need to ask ourselves, if we truly put the interests of Canada and our economy first, do we have confidence in Stephen Harper to get us out of this economic crisis?

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A New Voice of Hope

Today, 8 long years of mismanagement and disappointment came to an end and a new era has begun (see inauguration/speech video and other photos below). Barack Obama faces impossible expectations and no doubt he cannot meet them all and no doubt he will make some decisions that I disagree with and that he obviously won't still have an 80% appproval rating in 2012. But as I’ve been saying for a for a long time now the United States and the world desperately need a major overhaul from the approach of the last 8 years. But in these trying times the world also doesn’t just need change, but hope and optimism. And nobody embodies change and hope better than Barack Obama. As Nelson Mandela said today in a letter to the new President: “Your election to this high office has inspired people as few other events in recent times have done. Amidst all of the human progress made over the last century the world in which we live remains one of great divisions, conflict, inequality, poverty and injustice…You, Mister President, have brought a new voice of hope that these problems can be addressed and that we can in fact change the world and make of it a better place” I share the hope of Mr. Mandela and so many others today…

The hope that the United States will stand up for human rights and not against them.

The hope that the United States will engage the world and embrace multilateralism instead of unilateralism.

The hope that the United States will tackle the crisis of climate change instead of denying it.

The hope that the United States will provide health care for all its citizens instead of being the only western nation that doesn’t.

The hope that the United States will truly become an accountable government by and FOR the people instead of a government consumed by secrecy.

The hope that the United States will look after the impoverished and help left them out of poverty instead of seeing the poor as a burden to be looked down upon.

The hope that the United States will do its part to solve the economic crises instead of being an enabler of the policies that started it.

The hope that the United States President will work to heal the divides at home and across the globe rather than exacerbate them.

The hope that the United States will play a more positive role in the world than it ever has before.

I may not be an American but I can say I’m as optimistic about America’s new direction as I was the election night I won't forget in Chicago.

The Chase for Change is now over. Change has arrived and while actions will speak louder than words, I hold out hope that 4 years (and even 8 years) from now Barack Obama will still represent change we could all believe in.

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A Faint Hope of Getting it Right on the Environment

Happy New Year everyone! I hope the year for you is getting off to a good start! On the political side of things my spirits were brightened a bit to see this story on National Newswatch (which I’ve included below). One of the leading climatologists at NASA is openly lobbying the incoming Obama administration to impose a carbon tax, arguing (as Liberals did in the last election) that it is the ONLY feasible approach in the short term to make the reductions we need in greenhouse gas emissions. Even though I still think the odds are slim Obama will impose a carbon tax, this climatologist isn’t the only leading figure to call for a carbon tax, as both Al Gore and Bill Clinton have called for it recently too. IF Obama did decide for this more sensible and needed approach I would LOVE nothing more than to see the reactions of the Conservatives and the NDP.

A carbon tax in the U.S. would mean Canada would be STRONGLY compelled to have one as well (as we should regardless). Even though the idea is probably even a tougher sell in the U.S. than here, Obama will have an unprecedented honeymoon to bring in sweeping policies in his first 100 days. It’s either now or never for him for a carbon tax though, if he doesn’t move on it immediately, it won’t sell nearly as well later. However, if Obama opts for an exclusively cap-and-trade approach, I’m afraid we will be doomed to the same here in Canada for at least the next few years (even though I still think it’s a poor precedent for Liberals to reject a sound policy after just one election in which dozens of other issues and our own organizational weaknesses were big factors in our loss as well). Cap-and-trade over a carbon tax might seem like good politics, but it certainly isn't the best policy. But for now I’ll hold out the faint hope that Obama will get it right.
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Reality Bites
Halifax news, politics and snark, by Tim Bousquet

Hansen: Dion was right
January 01, 2009 04:34 PM

James Hansen is the NASA scientist who first testified to the US Senate on the climatic challenges facing the globe in 1988, and continues to be one of the leading climatologists researching the issue.

Today, New Year's Day, Hansen releases a letter to Michelle and Barack Obama:, in which he underscores the importance of taking quick action to address global warming. The letter's worth reading in its entirety, but of special interest to Canadians may be the section that deals with the need for a carbon tax. Hansen argues not just that a carbon tax is necessary, but also that a cap and trade system is not a viable alternative.

As you'll recall, Stéphane Dion campaigned on a carbon tax. Jack Layton condemned it, saying he would prefer a cap and trade system, and Stephen Harper ridiculed it as an economy killer. There were no doubt many reasons why he lost in the polls, but Canadians overwhelmingly rejected Dion and therefore the carbon tax. But here we are, three months later, and the man who arguably knows more about global warming than any other human tells us we can't avoid cataclysmic climate change without a carbon tax:
The physics of the matter, together with empirical data, also define the need for a carbon tax. Alternatives such as emission reduction targets, cap and trade, cap and dividend, do not work, as proven by honest efforts of the 'greenest' countries to comply with the Kyoto Protocol:

(1) Japan: accepted the strongest emission reduction targets, appropriately prides itself on having the most energy-efficient industry, and yet its use of coal has sharply increased, as have its total CO2 emissions. Japan offset its increases with purchases of credits through the clean development mechanism in China, intended to reduce emissions there, but Chinese emissions increased rapidly.

(2) Germany: subsidizes renewable energies heavily and accepts strong emission reduction targets, yet plans to build a large number of coal-fired power plants. They assert that they will have cap-and-trade, with a cap that reduces emissions by whatever amount is needed. But the physics tells us that if they continue to burn coal, no cap can solve the problem, because of the long carbon dioxide lifetime.

(3) Other cases are described on my Columbia University web site, e.g., Switzerland finances construction of coal plants, Sweden builds them, and Australia exports coal and sets atmospheric carbon dioxide goals so large as to guarantee destruction of much of the life on the planet.

Indeed, 'goals' and 'caps' on carbon emissions are practically worthless, if coal emissions continue, because of the exceedingly long lifetime of carbon dioxide in the air. Nobody realistically expects that the large readily available pools of oil and gas will be left in the ground. Caps will not cause that to happen – caps only slow the rate at which the oil and gas are used. The only solution is to cut off the coal source (and unconventional fossil fuels).

Coal phase-out and transition to the post-fossil fuel era requires an increasing carbon price. A carbon tax at the wellhead or port of entry reduces all uses of a fuel. In contrast, a less comprehensive cap has the perverse effect of lowering the price of the fuel for other uses, undercutting clean energy sources.vi In contrast to the impracticality of all nations agreeing to caps, and the impossibility of enforcement, a carbon tax can readily be made near-global.
It's hard to read these words and not think that Canadians have made a terrible blunder.

Adding: Hansen says more about the issue here:
"Goals" for percentage CO2 emission reductions and "cap & trade & dividend" are a threat to the planet, weak tea, not commensurate with the task of getting CO2 back to 350 ppm and less. Note:

(1) There must be a tax at the mine or port of entry, the first sale of oil, gas and coal, so every direct and indirect use of the fuel is affected. Anything less means that the reduction of demand for the fuel will make it cheaper for some uses; e.g., people will start burning coal in their stoves. Peter Barnes' idea to push the cap upstream to the extent possible is not adequate nor is a 'gas tax' suggested by NY Times and others. A comprehensive approach is needed.

(2) "Cap & trade & dividend" creates Wall Street millionaires and complex bureaucracy. The public is fed up with that – rightly so. A single carbon tax rate can be adjusted upward affecting all activities appropriately. With 100% dividend the public will allow a carbon price adequate to the job, i.e., helping us move to the post- fossil-fuel world.

(3) Supply 'caps' cannot yield a really big reduction because of the weapon: 'shortages'. All a utility has to say is 'blackout coming' and politicians and public have to cave in – we are not going to have the lights turned out. Will the public allow a high enough tax rate Yes, dividends will exceed tax for most people concerned about their bills.

(4) A tax is not sufficient. All other measures, such as building codes, are needed. But with millions of buildings, all construction codes and operations cannot be enforced. A rising carbon price provides effective enforcement.

(5) Wouldn't it be cheaper to let people burn the dirtiest fuel? No. The clean future that we aim for, including more efficient energy use, is not more expensive. For example, you may have read about passively heated homes that require little energy and increase construction costs only several percent. Such possibilities remain the oddball (with high price tag), not the standard construction, unless the government adopts policies that make things happen.

Tim Bousquet

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