MB Budget 2013: Five Lies

Lies ... So many lies ... It makes me sad.

I am not happy about the PST hike -- few people are -- but for me the worst aspect of this week's budget announcement wasn't the tax increase itself but all of the lies that accompanied it. I appreciate honesty. I may not like what you're doing, but if you're honest about why you're doing it and have a good reason for doing so, I will not resent your actions.

But that is not the case here. There is a tremendous arrogance in how the government delivered this budget that I'm finding hard to articulate, so let's just get on with the show ... here some of the more grievous lies from this week's budget announcement:

LIE: The tax hike is required for flood infrastructure. Direct quote: "this revenue will help protect Manitobans against flooding." There are 13 consecutive paragraphs in the budget speech about flooding, leading up to the tax increase announcement.
FACT: Spending on water-related infrastructure is actually decreasing $11 million from last year -- from $59m to $48m. This amount also represents a very small fraction of the revenue that will be generated from the tax increase.

LIE. Holding a referendum on the tax increase would make us miss construction season. Direct quote: "We have to get on with it now. The construction season is in front of us."
FACT: This has got to be one of the worst excuses I have ever heard from a politician. I don't even know where to start. How exactly is this supposed to make sense?  You see .. much like pizza at New York's famed Grimaldi's Pizzaria, you can only pay for flood infrastructure in cash, and we ... um ... don't seem to have any cash on us. Do you have any cash Greg? No? Ya, neither do I. Gosh, where are we going to find all that money so we can protect Manitoba families from flooding? This really is quite the conundrum. I think the only solution is to instantaneously raise $48 million on July 1 with a PST hike so that we can get those construction crews working!
As already mentioned, flood infrastructure spending is going down from last year, and in any case these projects can be financed. A referendum has absolutely no bearing on whether a dike gets built this summer.

LIE: Our sales tax rate is still 3rd lowest in Canada. Direct quote: "Our PST will remain third lowest in the country."
FACT: We aren't even the 3rd lowest in Western Canada.
Alberta: 0%
Saskatchewan: 5%
BC: 7%
Manitoba: 8%  ← 4th lowest
Or .. you could look at it this way: we are 4th highest in Canada, lower than only Quebec, PEI and Nova Scotia.
FUN FACT: Two other provinces are decreasing their sales tax, including Nova Scotia. By July 2015 we will be tied for the 3rd highest sales tax rate in Canada.

LIE: The global economy is to blame. Direct quote: "But the economic outlook remains uncertain. The source of that uncertainty lies outside our borders."
FACT: As I've progressed through life I have learned that there are certain phrases that you never want to hear. Phrases like:
"We regret to inform you.."
"I just got my results back.."
and 
"While we have weathered the recession better than most provinces, the global economy remains uncertain.."
If you have the opportunity to pour yourself a scotch before hearing the remainder of any of those sentences I highly recommend it. Anyhow, on with the facts .... revenues for the year that just passed came in at only $200k less than what was budgeted for 2012/13, and those revenues were 3% more than the year before. In other words, the government's revenues are pretty much exactly as anticipated when the Premier said "Ridiculous idea that we're going to raise the sales tax. That's total nonsense, everybody knows that."


LIE. We are on track to balance the budget by 2016. Direct quote: "It will allow us to deliver a balanced budget by 2016."
FACT: The budget does indeed show Manitoba achieving a balanced budget in 2016/17. How? Through spending restraint unlike any we have seen from this government in the past. Spending growth projections are:
2014/15: 1.3%
2015/16: 2.1%
2016/17: 2.1%
For reference, the smallest increase the NDP has budgeted since it came into power in 1999 is 2.5%, and they have averaged spending increases of 4.6%. While it is technically possible for the government to keep this promise, they know very well that they will not.

Free Press & unions

There are many things to say about the layoffs at the Winnipeg Free Press yesterday. I recommend you read Melissa Martin's personal thoughts on the matter (stay tuned for more from her) as well as Adam Wazny's. Also read John Dobbin. I have a few things to say of my own.

I understand the realities of the business, at least from a high level. It's no secret that the newspaper industry is struggling both to retain it's traditional readership, as well as in finding ways to capture revenue from the growing on-line readership. This challenge is illustrated in a now-ironic tweet last week from John White:

John White of course being one of those let go yesterday.

If the future of the industry is on-line, then the Free Press shot itself in the foot yesterday when it got rid of John as well as Lindsey Wiebe, their social media guru, and a web developer. They also let go of some of their younger and more promising journalists and writers including the aforementioned Melissa, a talented writer whose expressive writing sometimes seemed more appropriate for a glossy magazine than a black and white paper.


Why would the Free Press choose these people of all people? Well, they didn't. That's the short answer. They chose to lay off people from certain job classifications, but at that point the victims were defined by the union agreement that stipulates that the least senior must go first. I would say that seniority is an out-dated concept, but that implies that there was a time when it made sense. I'm not sure there was.

I give Aldo Santin, local president of the jouranlists' union (Communications, Energy and Paperworkers Union of Canada), cudos for spending half an hour on Winnipeg Internet Pundits today to talk about the layoffs. He was questioned on the aspect of seniority, and he was adamant in his support of it. It's so ingrained in the union psyche that it's simply not up for debate. It should be.

Seniority provides a simple and unequivocal method of choosing winners and losers in a union environment. Some may perceive this as fairness because it's black and white. There is no personal judgement involved. It values longevity above all else.

This is terribly misguided, especially for a business that is in transition, but really for any business. Seniority is a poor proxy for quality of work. Years of service do not necessarily correspond to talent. Fair is not laying off those who are newest, but retaining those who add most to the organization, and have the greatest potential to lead the organization into the future.

From the business' point of view, the Free Press in this case, their potential for future success has been harmed as a result of this policy. This could have been an opportunity for renewal, in a way. They could have shed some high-paid old-timers, and retained the lower paid (presumably .. I don't know their salaries) staff with the fresh approaches to journalism. This cycle is good for a business. Instead the Freep got older and more stale, and has a higher average labour cost than before.

I'm not clear on why journalists and associated media workers need to be unionized to begin with. Santin spoke about how the union protects the workers, but tell that to the workers who got laid off yesterday. Unions don't prevent people from losing their jobs; they just ensure that job loses are not based on merit. They also add a burden to companies that need to be flexible in order to survive in an environment of dropping revenues.

I don't want to speak for the employees of the Free Press -- perhaps some or most of them appreciate being in the CEP -- but I feel it's damaging to the business; and I personally, as a reader of the Free Press, am not pleased with what transpired yesterday.

Perusing the Headlines

The NDP is anti-union ... who knew?

I submitted my second ever Winnipeg Cat meme with that. I wonder if It'll make the cut? (Actually, I think I might have messed up somewhere and I'm not sure it worked.) Anyhow, just had to chuckle when I read the this:

This intervention into the collective bargaining process at Brandon University is as dangerous as it is outrageous," he said in a statement. "It confirms for us the pro-employer bias shown by this allegedly 'labour-friendly' government."

Oh my. Yeah, if you think the NDP is outrageously anti-labour, then I think your perspective on the matter needs just a little tweeking. With a sledge hammer.

Also: No. No you don't get paid extra for catching up on work that you have neglected to do because you chose to go on strike.

*****

You don't say ...

Federal audit finds no evidence jobs created by $1 billion in stimulus cash.

Really? You really expect to be able to measure this somehow? Look, I told you about this already:

The recession ended so quickly, not because money was spent, but because people think money is being spent. Just like golf, or the voices that tell me to strangle dogs, it's all in the head.

I am dumbfounded that people are dumbfounded that we can't directly link jobs to stimulus spending. Look, if you're going to force the government to produce a report showing that it created jobs, they will produce a report that shows it created jobs, and the report will be a pile of steaming feces. Please don't make them to that. Let's all be adults here. We all know what the situation is.

*****

An online music magazine recently reported the demise of CDs. For fun, see if you can count the spelling and grammatical errors in that story.

Several mainstream media outlets have picked up on this story as though it has some credibility. I will acknowledge that CD popularity is decreasing, but when revenue from CD sales is still over 4x higher than from downloads, I think it may be premature to call the game.

Anecdotally , I have bought more CDs this year than in the past I-don't-know-how-many years. Mostly this is because they are so damned cheap now, no doubt due to market pressure from downloads, but still ... When CDs came out they were $15-20. Not in today's dollars, but in 19-whatever-it-was dollars. Today, CDs are still $15-20 regular price, but half the stock at HMV is on for $10 or $5. I bought an old Sound Garden CD just for the heck of it. I picked up Amy Winehouse because I like to listen to dead people. 5 bucks? Why not? Hey look, there's The Trews .. I'll get that too!

I do like having something tangible. I admit that, but I think many people do as well. So if you were thinking of putting a CD in somebody's stocking this Christmas, I just want to let you know that it's still okay to do that.

2011 Manitoba provincial election platform

If you elect me as Premier, this is what I will do:

BUDGET

- balance budget ahead of schedule

- strengthen balanced budget legislation, including requirement to balance gross budget incl. crown corps on 3 year moving average basis.

- reduce dependency on equalization payments
- end defined benefit pensions for public employees in favour of defined contribution (grandfather basis).

TAXES & FUNDING

- reinstate a 1% income tax for small business (is 1% really too much?)

- phase out the payroll tax

- enact legislation to require the indexing of all income tax brackets. (see here)

- raise basic personal exemption 20% per year for first term.

- reduce education component of property tax & eliminate operational and capital funding for cities/municipalities. (see here)

EDUCATION:

- allow school divisions to close underutilized schools and redeploy resources

- consolidate school divisions

- lift university tuition freeze

ENVIRONMENT

- remove requirement for City of Winnipeg to remove nitrogen from wastewater (save $350m)

- fast track & help fund improvements to reduce the release of raw sewage into the Red River by the City of Winnipeg.

- review management of water levels and improve drainage, especially in the Interlake region.

- assess cost and practicality of replacing Hecla causeway with a bridge.

HYDRO

- immediately stop development of west-side Bipole III route and re-start assessment process for east-side route.

- direct PUB & Hydro to reduce electricity costs for base residential levels, and charge market rates for everything above that (inverted rates).

- reduce red tape allowing small private generators to feed electricity back into the grid.

HEALTH CARE

- encourage private clinics to operate in MB

- review effectiveness of the regional health authorities and hospital bureaucracies and eliminate redundancies in administration.
- fire 1000 nurses and doctors. (just kidding. yeesh.)

AGRICULTURE

- review building and electrical codes for hog barns and other animal barns.

- re-evaluate hog farm moratorium based on best scientific evidence.

TRANSPORTATION

- restrict scope of taxi cab board to safety-related concerns only. Open up taxi industry to competition.

- open up rural bus service to competition, eliminating Grey Hound's monopoly. Allow companies to bid on routes.

- improvements to Trans Canada Hwy, Perimeter Hwy & Hwy 75 including overpasses for key intersections, increasing speed limits to 110 km/h for entire lengths.

CRIME

(to the extent possible)

- focus on rehabilitation for first & second offenses for property crimes and minor offenses, with exponentially harsher penalties for each additional offense (see here)

- crack down on parole violations

- implement training and educational opportunities for prisoners, and make them mandatory for any prison terms longer than 6 months

- parole must be earned through the completion of education or training.

- scale back penalties for DUI, but implement a new tier of criminal offense for: DUI over twice the legal limit, DUI while speeding & DUI while texting, with much harsher penalties. (see here)

- make penalty for texting and driving equivalent to DUI

- include hands-free cell phones in cell phone driving ban. (see here)

- *NEW* expedite serious offenses in the court system

OTHER

- open adoption records, on the recommendation of my policy advisor.

- scrap rent controls and accompanying regulations, and restrict condo conversions until vacancy rates improve. (see here & here)

- immediately rescind all provincial funding to the Upper Fort Garry heritage park or whatever it's called.
- ban advertising by public sector unions in the 6 months preceding an election.

- revise Liquor Control Act to allow private beer boutiques and the importing of wine and beer independently of the MLCC.

This is a living document. Let me know if something here is out to lunch, or if you have a better idea, and I may very well update this list. If you have a blog, post your own platform!

Impact of festivals on downtown

I was on Winnipeg Internet Pundits today talking about the impact of festivals like Fringe on Winnipeg's downtown. You can (and should!) listen to the show's pod cast, but I thought I would type out the gist of what I talked about.

This came about because I opened my twitter yap last week suggesting it as a topic for the regular insightful WIPs gang to discuss, so of course I end up having to talk about it instead. That's okay though. Good excuse to get back down to the 101.5 studio, meet the gang (and Paul Hesse) and torture the air waves with my broken muffler-esq voice.

From an economics perspective, you can put a dollar value on things like festivals. You can google it and find lots of examples. I have some experience valuing things, having worked as an RA in University on a government-funded project to value Manitoba's wilderness, and I also at one time surveyed studies on the value of a human life for reasons that I don't recall (varies widely depending on methodology, but median was around $6-8 million at the time. Less if you're left handed. Just kidding.)

Right, so let's get down to it: looking at Fringe , in 2010 there were 86,717 tickets sold plus additional attendance at free events for about 150,00 total. Ignoring the freeloaders (though they spend money too) let's just ball park $15 per person -- $9 for a ticket plus a couple drinks each. This may be high, but the freeloaders will make up for that. That works out to $1.3 million in direct spending downtown.

The Ontario Trillium Foundation estimates that with large-ish festivals like Fringe, about 10% of the attendees come from other provinces. Let's say 10% x 86,717 = 8,671 tickets @ one show per night = 8,671 tourist nights in Winnipeg; at $150 per night = $1.3 million in tourism spending downtown.

Plus, the budget for the Fringe festival itself was about $650,000, for a sub-total of $3.2 million.

Why just a sub-total? Because you forgot the multiplier! The multiplier says that each dollar spent reverberates around in the economy like a wave, creating additional impact until it fades away. Economists like multipliers because it lets them make numbers bigger without doing any additional work. Again, there are varying estimates but they seem to gravitate between 1.2 and 1.5. This detailed Scottish study puts the local multiplier at 1.25, which works out well for me because it gives me a nice even number: $3.2 million x 1.25 = $4.0 million economic impact.

The Jazz Winnipeg Festival does not seem to like publishing ticket sales, but I phoned them and the lady I spoke to estimated that there were about 40,000 sold. That's about half the Fringe total, but average cost is much higher. Without better information, let's be lazy and say another $4 million there.

Those two downtown fests alone bring something close to $8 million in annual economic impact to the area. That's what we in the biz call a "gee whiz" number. Nice and big. Looks great in a tourism brochure.

Economic impact is great and all -- it means some pay cheques are bigger and some businesses are more profitable -- but that's only part of the story. Maybe more important is the long term impact on the vitality and image of downtown Winnipeg.

The Fringe and Jazz fests both started around 1988. Back then the exchange district was known mostly for it's hookers and Chinese food. The hookers are now gone and the area has cleaned up substantially, and I submit that the festivals were one of the keys to giving the area that nudge in the right direction.

When I was 18 I recall going to Old Market Square and watching the Jazz Fest and thinking "this is really cool." It changed my impression of the area. It is not just a place where weirdos and johns go. It's a place where you and other normal people can go and enjoy yourselves. And when you go there, you see unique businesses like Hoopers or The King's Head or Hillary Druxman, and you go back and check them out sometime and discover other places and become a fan of the area. All because you went to a Fringe play.

This happens bit by bit. It is a slow transformation but a sure one that has helped drive the growth momentum in Downtown Winnipeg and especially in the Exchange. I think that, moreso than the actual festival spending during those few weeks in the summer, is the most important impact, because it's cumulative and lasting.

Modest tax cuts? How about 10th consecutive tax increase?

My fellow Manitobans, you have seen or read stuff in the press about the modest tax cuts in the new NDP budget. You might therefore be surprised to learn that you will probably be paying more income tax next year, not less. There are various targeted credits that apply to certain specific groups of people, but there is only one broad personal tax cut in this budget: a phased increase to the basic personal exemption of $250 per year over 4 years.

Well, that's pretty good, isn't it? Yes, it's good. The basic personal exemption should increase ... every year. But how much does that actually put in to your pocket? $27 the first year. Yes, that's all. You get 10.8% of that $250. $27.

What you won't read about in the press is the personal tax increase in this budget. Aside from the basic personal amount, your personal taxes otherwise remain unchanged. This means that the tax rates remain unchanged, and the tax brackets remain unchanged. How is that a tax increase you ask? I'll demonstrate:

Suppose the Stephen Harper increased the federal income tax rate by 0.5%. Is that a tax increase? I dare you to say "no". Well, the federal government indexes it's tax brackets. That 0.5% tax increase is equivalent to a 0% tax increase with tax brackets that are not indexed, assuming a 2.3% rate of inflation.* In other words, the money out of your pocket is exactly the same.

The Manitoba government does not index it's tax brackets. It has increased the lower tax threshold only once since 2002, and that was only by a meager 1.5%. Let me show you how that looks in comparison to the Federal tax threshold, and that of our arch nemesis Saskatchewan:

Inflation data: 2002 = 100 (right axis) source

Not increasing the tax brackets is just as real a tax increase as actually increasing the tax rate, friends, and in fact for most people this "hidden" increase far outweighs the "modest tax cut" that you'll hear about in the news. If you make $50,000 and you get a modest 2% cost of living increase, you will pay $127.50 more in taxes due to the bracket creep. According to my calculations, which I am willing to share with you, anybody who makes more than $25,000 will pay more tax next year than last year, independent of the miscellaneous credits.

That is called a tax increase.

For more on bracket creep, here's Colin Craig of the Canadian Taxpayer's Federation:

*this is also dependent upon the government indexing the brackets sufficiently to actually mitigate the impact of inflation.

related: budget commentary from some people you may know

Provincial Income Tax Comparo

Hi there. With the Manitoba budget coming down this week, I thought it might be a nice idea to have a chart of how our provincial personal income taxes stack up against the other provinces. You know, just for reference purposes.

Manitoba is the bright yellow one. In case you have trouble finding it, it is the line that is higher than any other line for all incomes below $49,500, and second highest after that.

source: CRA & Taxtips.ca

The comparison excludes Quebec because they do their own thing, and PEI because they are too small to matter. No offense. I'm sure PEI is a very nice province; I just don't see them stealing any head office jobs from us anytime soon (although two of their three tax rates are lower than Manitoba's too.)

related: caring for the lower class

Rent Controls: Part II

You didn't know there was a part II, did you? Surprise!!

Sorry .. I know how you hate surprises. I have to warn you though: this is going to be boring. Dry whole-wheat toast boring. If you wish to flee to another blog I will not hold it against you, and I might suggest any of the fine choices in my right sidebar.

Okay. Last week's post on rent controls was not so much a critique of the government's commissioned study on the subject, so much as it was a contrast of what they were saying publicly versus what the numbers seemed to imply. This time, I will delve into the actual study. You know, many people might see that the study was written by a professor of economics, and therefore assume that it is full of wise insight, truthful, and incontrovertible. However, there are plenty of academics out there who publish crap from time to time so all work needs to be scrutinized. That's what the peer review process is for. Government commissioned studies are not subject to peer review, therefore I will do my best to fill a little bit of that gap, if I may be so bold. Just let me grab my pipe and put on my glasses here so I look all perfesserly. Alright, I've got my tweed jacket on .. I'm all set to go ..

An Analysis of Manitoba's Rent Regulation Program and the Impact on the Rental Housing Market, by Hugh Grant

Let me start by saying that Hugh does not come to any conclusions through a quantitative analysis of the data. The data is inadequate to do an econometric analysis, he says. Therefore, when he states that "there is no evidence that ..." he is really giving an opinion based on his observation of the data and what he believes is the theoretical effect of the rent control policies.

Some of those conclusions are suspect.

Conclusion 1: "there is no evidence that rent regulations have restricted rents below what would prevail in a perfectly competitive market under equilibrium conditions."

Okay, well first of all, there is no such thing as a perfectly competitive market. The point he's trying to make here is that through the rent control regulation itself and the mechanisms that allow a landlord to apply for increases in various circumstances, the net effect should be that rents increase at the long-run supply price. Not only that, but the author actually claims that by regulating rents, and putting in place additional regulations and controls to negate the original regulations, that this actually improves market efficiency. It's a stunning claim to make.

So this is essentially the goal: to ensure that a landlord doesn't lose money, but also doesn't make a profit. The author refers numerous times to "gouging" and "unwarranted price increases" when talking about rental prices higher that the cost of supplying a unit. I don't know too many people who would go into business to break even. If this is the objective of the program, than it's little wonder that developers stopped building new units.

But let's assume that he's right, and that prices are increasing as they would with the market. What's the point of spending $1.7M on regulating rent prices? The answer: stability. To remove those periods of profits and losses so that rents follow the long term trend without the short term fluctuations. Does it work?

Let's have a look at rental price fluctuations in comparison with a city that does not have rent controls, like Edmonton:

The standard deviation of rent growth in Edmonton is indeed larger than in Winnipeg, but if you exclude a 6-quarter period from 4Q 2001 to 1Q 2003, it's actually less volatile than Winnipeg. But that's a boom and bust economy. Since we are so proud of our stable economy here in Manitoba, perhaps a better comparison is a city like Halifax:

One has rent control, and one does not. At no point does Halifax have a higher rent increase than Manitoba, percentage wise, and its standard deviation is almost identical. So what's the point of all this regulation, red tape and financial cost for administering this program?

Further, there was a period of 6 consecutive years (2001-2006) where the rent guideline was lower than previous year’s rate of inflation. The following years the guideline was increased somewhat, leading the author to say 'see: prices are adjusting just as they would in a real market!'. It is a ridiculous statement to make. The only thing you can conclude is that prices went up because the government adjusted them up. There is no basis to say they are following the market when they are being manually set.

Conclusion numero dos: "There is no evidence that Manitoba’s rent regulation program has a negative impact on the supply of rental accommodation."

Mr. Grant quotes some general numbers for the country as a whole, refutes CMHC's measurement of "rental stock", and then pulls this conclusion out of the ether. Perhaps if he had actually looked at apartment construction in Winnipeg he would have come to a slightly different conclusion:


In the 1990's a pitiful number of rental units were being built each year. This only began to change after the government implemented a 15 year exemption for new construction in 2001, and increased it to 20 years in 2005. It clearly shows that the exemption was an incentive for new construction, which means therefore that the rent cap itself was an impediment to new construction.

Even still, construction lagged far behind what it once was, and failed to close the demand gap. In fact the vacancy rate continued to hover around 1% throughout the 00's. This static vacancy rate, in spite of the exemption on new construction, suggests that either a 20 year exemption is not enough, given the long-term nature of the capital investment, or that there are other barriers to building new apartments. Construction costs are sometimes sited as a factor, but these have not prevented condos and houses from being built. Perhaps the depressed prices in the existing base spill over into new construction.

Perhaps the author should have looked into these things a little more carefully. Instead he writes it off as disequilibrium, resulting from a sudden influx of immigrants:

The supply response has been slow relative to the increase in demand because of the time lag involved in the planning-to-completion of new rental projects and uncertainty regarding the likelihood that the relatively high rates of population growth in the province will persist.

However, immigration has grown steadily since 1998. That must be one heck of a lag. Further, if immigration is supported by a successful provincial program, then how much uncertainty is there really about that trend continuing?

Conclusion:

My conclusion is that Hugh Grant's conclusions were pre-determined based on the wishes of his client. It is also possibly that the author simply has a distorted view of the world. This latter option is corroborated by an absolutely astonishing statement that he makes on page 10 of his report:

In the long-run, the high profitability of existing rental units encourages the construction of new rental units with similar features which will eventually bid down rents to the long-run supply price consistent with a perfectly-competitive market. Rent regulations, therefore, play an important role in countervailing the market power exercised by landlords in the short-run by preventing them from advancing monthly rents above the marginal cost of supplying the unit.

The first part: "profitability of existing rental units encourages the construction of new rental units which will eventually bid down rents" is basic intro economics. That's how markets are supposed to work.

However, in the view of the author this is bad and must be stopped: "Rent regulations, therefore, play an important role in countervailing the market power exercised by landlords in the short-run by preventing them from advancing monthly rents above the marginal cost of supplying the unit." What he is saying is precisely: Rent regulations play an important role in preventing landlords from making a profit and in discouraging new construction.

In two simple sentences the author manages to summarize the root of the problem with rent controls, only what is a problem to most economists is actually a solution to Professor Grant.

Rent controls and graphs. Lots of graphs ...

My spongee game tonight was cancelled due to melting ice, so I guess I'll blog. Lucky you.

I had bought into the idea that the lack of apartments in Winnipeg are an unintended consequence of rent controls. Artificial restrictions on profitability will prevent people from building units, right? Makes sense to me. If you take away the upside then all you're left with is the risk.

Now the Free Press is telling me I'm wrong. My beliefs have been shattered into a million pieces, like the mold spores on the ceiling of my last apartment. Apparently some guy did some report for the government that say that rents controls have nothing to do with it:

The 39-page study, authored by University of Winnipeg economics professor Hugh Grant, also concludes "there is no evidence" that caps on rent have slowed the pace of new apartment construction or spurred a recent spike in condo conversions. Furthermore, the provincial government-commissioned report says there is no proof rent regulations have "unduly restricted" rent rises in Manitoba.

Damn you, Hugh Grant! As if all those boring chick flicks weren't painful enough. Now this!!

What do we know about Hugh? Well, he's an economics prof for the U of W. He has written about immigration, he seems to be a well liked teacher, and much like the other Hugh Grant, he gets a chili pepper for hotness:



That's something, I guess.

But still .. should we believe him? The article says that rent controls came into place permanently in 1982. Our vacancy rate looks like this:

Our vacancy rate actually sky-rocketed after rent controls came in. The problems really seemed to begin around 2000. Conclusion: it's all Doer's fault!! There, that was easy.

Or ... we could look into it a little more ...

One of the things that Hugh concludes is that "the rental shortage is largely due to a rapid increase in demand sparked by an aggressive immigration policy". Okay, let's look at immigration:

Manitoba was still losing people to other provinces (pink line), but there was indeed an increase in immigration (deep thought of the day: why do they call it "immigration" instead of "inmigration?") around 2000. I suppose that when people move out of the province, they are generally moving out of their parents' basements, but when people immigrate in, they generally move into apartments instead of parents' basements. Unfortunately I couldn't find any CANSIM data on parents' basements vacancy rates to confirm.

So it looks like immigration may be the culprit, but maybe we should do some statistical analysis just to make sure. Okay .. let's see if I can remember how to do this. Open the crunch-o-matic number cruncher ... put the data here ... feed the thread around the post ... put the bobbin in the hole ... ah, screw it. Here's another graph:

Looks like a smiley face. See, what happened was that vacancy rates actually dropped in the 1990s as immigration dropped. Maybe there is something else at work. What we do know is that apartment construction dropped off the map in the 90s:

... possibly because they began to realize that more often than not rent increases were not keeping up with inflation:


... and eventually our lack of apartments caught up with us as immigration picked up and now we have a vacancy rate of nothing.

If rent controls weren't a factor, then why would the government implement a 20 year exemption on rent controls to encourage new development? I remain unconvinced that rent controls are not the problem. The exemption should help, but as per usual when government regulations meddle in the functioning of a market, the market gets all fucked up and can't reach equilibrium. Hugh Grant should know something about equilibrium. He's an economics prof.

Of TREEs and inverted rates

If you were a tree, what kind of tree would you be? A willow? A boabab? A one-man environmental advocacy group?

In the Free Press story earlier this week Lower electric bill for poor urged, something seemed odd: why would environmental groups lobby the Public Utilities Board for lower rates for anyone? Lower rates encourage greater power usage, which is bad for the environment. So .. I decided to take a peek: Who are these groups? How can non-profit organizations afford to hire fancy American lawyers?

The first group -- Time to Respect Earth's Ecosystems (TREE) -- is very small. How small are they? They are soooo small that their head office is a nest. Haha. Oh, I kill me... Would you believe I just came up with that? Actually, this is their head office:

It turns out that TREE is actually just a guy: Peter Miller, Professor of Philosophy, University of Winnipeg. He doesn't even have a web site, but he does have a mission: "Advocacy for a sustainable forest agenda in Manitoba."

So he's a philosopher who is for sustainable forests, but he wants to help poor people. Okay. What about the other group?

Green Action Centre, formerly Resource Conservation Manitoba, is a much larger group. Or, I should say, they are a group. They have a web site with all kinds of information about their causes and activities, which include active transportation, recycling, reducing emissions, composting ... the list goes on, but oddly the list does not include anything about lower hydro rates for poor people. It's not on their blog, or their "events and actions" page, or anywhere else that I could find.

Why is this group hiring lawyers to lobby the government about a policy that's not even on their agenda? Well ... probably because the aforementioned Professor Peter Miller in on their board of directors. What appears to be happening here is that Prof Peter is leveraging the name of a well-known group to lend legitimacy to his personal quest.

On to the second question: how can they (he) afford to retain and pay these consultants and lawyers? Answer: he can't and he doesn't. Who does? You do. Indirectly.

It turns out that this thing about petitioning the Public Utilities Board isn't a one off. In fact, it's pretty much an annual event, and each time Peter Miller applies for and receives a full reimbursement of his costs:

Accordingly, the Board (Public Utilities Board) will award cost in full ... Costs shall be payable by Manitoba Hydro within 30 days of the date of this Order.

He did this in here, here, here, and here in 2008 when he was awarded an eye-popping $142,066 for lawyers and consultants from Arlington, MA, even though according to Hydro the value of their input was very questionable:

The evidence provided by Mr. Weiss to the GRA proceeding was not relevant ... Further, the evidence was duplicative, since it was virtually the same evidence provided by Mr. Weiss, through RCM/TREE, in the 2007 Centra Gas General Rate Application.”

142 Grand for redundant information. Nice. Now, in relation to something like, oh .. I don't know .. bipole III, $142k is peanuts. Nevertheless this is a very expense hobby that Peter Prof has -- it has cost over $300,000 in the last five years alone ... but it hasn't cost him a cent.

So that's who they are and how they get their money. Now ... why? Why is a guy/group whose mission is to protect forests intervening in a PUB hearing to reduce Hydro payments for low income people? This is somebody who once said that supplying power below cost was a "crazy policy", and that "if no one is feeling the pinch from energy prices, why bother?" (source)

It's a tough question to answer. It's not immediately apparent why he's doing this, though I suppose I could phone him and ask him if I really wanted to. I think he's just bored. You may have guessed from my subtly sarcastic remarks two posts ago that I think a two tiered rate structure is a dumb idea. I don't doubt that Peter Prof would agree that it's a dumb idea. He's just run out of good ideas to lobby PUB for.

I actually happen to think that a previous idea of his is a good one ... or at least not a bad one: an inverted rate structure. This is where the first X amount of power is charged at a low rate, and the excess power is charged at a high rate.

If you really want to promote conservation while not bankrupting poor people, this is the way to do it, because as economists like to say: people make decisions on the margin. That is, it's your marginal cost of the next unit that you take into consideration, not the cost of all the units you bought before. Let me illustrate: when you go your friend's social and buy tickets for the 60-pounder of booze, you really only want to buy one ticket because your friend is a cheap skate and his fiancée is a bitch. But you buy three tickets, because the marginal cost of the two extra tickets is half what the cost of the first ticket is. It just seems stupid to buy only one ticket.

Manitoba Hydro actually does have an inverted rate structure ... sort of. There is a slightly higher rate for electricity use in excess of 900 kWh per month. I just checked my past two hydro bills and I use about half that, even though I routinely waste gobs of electricity. I leave my computer on overnight and while I'm at work. I never unplug anything. I have incandescent Christmas lights still, and they're set to turn on at 11 AM. Actually, they're set to come on at dusk, but you get the idea.

A far better idea than having separate low rates for poor people, or capping their payments at 6% of their income, or whatever dude is suggesting, would be for Hydro to lower the rates for a basic minimum level of monthly electricity use -- enough to run your fridge, stove, and lights. Nothing more. Set that at maybe 3 ¢ per kWh. Everything above that should be charged at cost, whatever that is, or maybe a little more. Probably something like 9 or 10 ¢ per kWh. If I'm paying three times as much for my marginal power usage, I may be more inclined to power down my PC at night.

Low income people should save money overall because presumably they don't have 60 inch plasmas sucking up megawatts every evening, so most of their power usage should fall within the lower rate bracket. The catch is that people who heat their homes with electricity will get screwed. Maybe something else can be worked out for them. It should be easier for Hydro to keep track of who has baseboard heat than how much everybody's income is, after all, Hydro is the gas supplier too.

Five Star Regulation

This blog's hit count has been creeping up over the past couple of months. I have been informed by the Provincial Web Log Regulatory Agency that I have exceeded the number of hits that I am allowed, given current internet traffic demand conditions in Manitoba. Therefore, I am required to drive away readers by writing an excruciatingly boring post about something buried deep in the business section of the Winnipeg Free Press.

I chose City bus charter's plan to expand hits red light as my victim. On page B6

of the Saturday Free Press, we read about how our benevolent civil service is protecting us from competition and economic growth:

A little-known provincial regulator is putting the brakes on Winston Gordon's efforts to grow his bus charter business. Gordon's 10-year-old Winnipeg business, Five Star Bus Lines, operates five charter buses and has applied for seven more licences. ... "I know there is demand," Gordon said. "People are calling me all the time and they say they can't find any buses."

That's what he thinks. The provincial regulator knows better:

Iris Murrell, secretary of the Motor Transport Board, said the board has not issued any new licences or alterations of licences for at least a year. That's because it's the Motor Transport Board's understanding that, in fact, the marketplace has not grown and the larger industry dynamics probably back that up.

...

Despite the fact some may believe there is more business out there, the MTB's intelligence is to the contrary, she said.

No indication is given of who supplies their "intelligence", but we do get an indication of the level of their intelligence:

"We are here to maintain service to the general public," Murrell said. "If something is being proposed that will have a detrimental effect on that, it will not likely get a favourable consideration from the board. In the past year or so, a few existing carriers have applied to this board to add existing vehicles or expand their restricted boundaries and they have all been refused."

They are maintaining service to the public by preventing any improvement in service to the public. That sort of logic can only be fully understood by driving a railroad spike through your brain. It seems the mandate of this office is not to ensure that a minimum level of service is maintained, but to ensure that a maximum level is maintained by preventing any sort of investment that might possibly give consumers a higher quality product.

Government bureaucrats artificially capping supply not only results in poor service, but also in high prices. This is literally first year economics:

It's not just buses. The same can be said for the Taxicab Board, who's actions have not only resulted in poor service from a restricted supply of cabs supplied by an industry duopoly, but in a ridiculous market for licenses that can cost drivers upwards of $400,000 for something that ought to cost no more than a couple of hundred bucks in admin fees.

Allowing businesses to invest and expand and compete is what drives our economy. Governments should try to facilitate that, not prevent it. Many of these of regulatory boards in Manitoba far exceed their useful purpose, and should either be cut back, amalgamated, or eliminated entirely. The only reason for regulating an industry like bus charters or taxicabs is to ensure that minimum safety standards are met (though in the case of the Taxicab Board they can't even do that properly.) Somebody with some brains on Broadway should fire Murrell, gut the MTB and the Taxicab Board, and combine them into a single Transportation Safety Board with a limited and specific mandate that does not prevent entrepreneurs from investing in capital, hiring workers, and providing a better service to the public.

I told you it was a boring post. No pictures even. (Oh, I guess I do have a graph. I hope the PWLRA doesn't make me take it down!)

Economics: it's all about optics -- 2 part special !

part 1
Well this is just shocking: Survey suggests Economic Action Plan didn't create many jobs

The Conservatives have long boasted that the Economic Action Plan helped save hundreds of thousands of jobs during the recession. But the parliamentary budget officer has found that the recipients of the money don't see it that way.

See, the Conservatives big problem here was pretending that the Action Plan was actually going to work. If they were smart, they would have instead said "look, we don't want to do this because everyone knows that Keyensian economics is a steaming pile of crap, but the Liberals, NDP and Bloc forced us to."

In case you don't remember, their economic update almost exactly two years ago contained no fiscal stimulus. They were going to let monetary policy do it's thing, and try to limit budget deficits. But, the opposition parties had a conniption and banded together threatening to bring down the house and form government. So here we are, billions more in debt with apparently few jobs to show for it.

So like I said, the Conservatives might have been better off implementing it in a more begrudging way. However, that would have been bad for us because, as the AWAP Economic Policy Division theorized last year, if -- if -- stimulus works at all, it works by creating more optimism: people see money being spent and they get encouraged that the economy is being kick-started and they spend their own money. That would all be undermined if the government admitted that it's policy was going to fail.

Bottom line: This stimulus package was never implemented to create jobs. It was implemented so that people could see the government implementing something.

part2
Manitoba scrapped it's small business tax today. Back when they put this in the budget I questioned the benefit of doing it. I mean .. 1% .. is that really too onerous?

The old argument goes that we should help small business because they employ the most workers (besides the government, I guess), but could that be because we punish larger businesses for hiring workers with our regressive payroll tax? I encourage you to read Brian Gilchrist's new blog post that demonstrates this (and points out a blatant error with the CTV story). Small business may be the engine of our economy in Manitoba, but if I were a province I would rather be crusing around in a V12 Jaguar than putting around in a 2CV.

Besides, just how much does this really help a small business? How many jobs are going to be created by saving a business somewhere up to $4,000? I suppose if a small company was hemming and hawing over whether to hire another part time employee, this may tip them over the edge, but not all small businesses are cupcake bakeries. Many are individual consultants, accountants, etc. that set up as corporations for tax and liability purposes. They are unlikey to hire any new employees.

Also consider that all small business owners need to get paid themselves, and when they do get paid they get heavily taxed.

click to enlarge:

source

The government can pretend that they are friendly to small business owners, but that's really a bit of a myth.

The government can also pretend that they're interested in job growth, but that's also a myth. Our provincial neighbours have small business tax rates in the 2.5-2.4% range. Small businesses are not going to go flocking to other provinces if we tax them at 1 or 2%. If the government were concerned about jobs and economic growth they would instead focus on chipping away at the payroll tax. But reducing a payroll tax for big companies that earn more that $1.5m in income does not have the same panache as eliminating the small business tax for a bakery that makes soft moist oh-so-tasty cupcakes with colourful icing, and those little spinkly things on top. Mmmmmm.

How can anybody possibly disagree with reducing taxes on a cupcake bakery? It's impossible! ....Unless you're a twisted cupcake bakery hater.

Like I said, it's all about optics.


related: Dobbin

Budget analysis: ouch

The true test of a leader is how he performs when times get tough. Selinger earns a FAIL.

The new budget forecasts a loss of $555 million for 2009 and budgets for another $545 million deficit for 2010/11, plus additional deficits in the following two years. To put this in perspective, the largest surplus ever budgeted by the NDP in the past 10 years was $175 million. The total of all budgeted (not actual) surpluses over those 10 years is only $812 million. In one fell swoop, we've set our finances back by over a decade.

Also consider this: in every single budget, the forecasted expenditures has been greater than the budgeted expenditures. In other words, the government has overspent every. single. year. That means that the record $13.26 billion in spending in this budget is likely to be higher by this time next year.


The biggest culprit: health care. Health care spending has been accelerating over the past ten years, and no little recession is about to slow it down. Just like my source, err.. the guy I met on the bus, said : it increased by another $300 million over the last budget. It's double what it was in 2001, almost a billion dollars more than Saskatchewan spends, and the system still under-performs. How can that be? Because the solution to everything is to spend money. And if inconvenient balanced budget legislation gets in the way of spending money, the solution to that is simple as well: change it! Let me ask this: what good is legislation if you can simply change it when it gets in your way?

While I'm on a roll asking all these rhetorical questions, here's another one: How are we going to get out of this hole? In previous years, we could count on increasing transfer payments to help us out, but those days are over. Ten years of economic growth, ten years of increasing transfer payments, and we've squandered it all. Now, if we want to reverse this slide, and claw our way back to debt-cutting respectability, there is going to have to be real pain. You can only get so far by nickle-and-diming people with higher user fees. Our personal and corporate taxes are already too high, so expenses are going to have to be cut big time. The bigger these deficits are, the more painful it will be.

Budget Scoop?

The Paper is reporting that cuts are unlikely in the next provincial budget. Wow. Shocker there. However, I have received word that spending for most departments will be more or less frozen. Most, but not all.

A guy on the bus, who's sister-in-law works for the guy who cuts the hair of the ex-girlfriend of Minister Rosann Wowchuck's mechanic tells me that there will once again be a substantial increase in health care spending, despite the proposal to freeze union wages. Something in the neighbourhood of $300 mil. There were many options explored for cutting back and holding the line on health care, but most were rejected due to a lack of political will or fear of voter wrath.

I guess Rosann blurts stuff out while she's getting her weekly tune up. Anyhow, that's what I've heard. I don't know if it's true. I don't know if it's not true.

Stats
Healthcare Budget / Forecast / Overspend (all in $millions)
2007 ... 4050 / 4154 / 104
2008 ... 4371 / 4583 / 212
2009 ... 4723 / ? / ?

Funny quirk: when you look in the 2008 budget document, the 2008 health care budget is $4371 mil. When you look in the 2009 budget document, the 2008 health care budget is $4,469 -- almost $100 million more. Ergo, the increase in the budget appears to be $100 million less than it really is. I'm sure there is a perfectly reasonable explanation.


Must have something to do with "The 2008/09 Budget numbers originally presented in the 2008 Budget Address have been restated to be consistent with the current presentation for the Government Reporting Entity." or maybe "Numbers may not add due to rounding."

Moderation is the key to doing nothing

Thank God we have a responsible Premier here in Manitoba. Faced with a looming $592m deficit, our trusty Premier is committed to taking bold action though rigourous moderation:

"We're looking for moderation from everybody given the times," Selinger said. "Moderation is going to be a watchword going forward on things like collective bargaining. "We'll be looking to negotiate moderate collective agreements that recognize the limitations that we have fiscally." -fp-

Hey, I think I know what the word of the day is!

Gone (or at least postponed) are the days when we will sign collective agreements that guarantee our civil servants are the fourth highest paid in the land, in spite of our low cost of living. Say "hello" to the new moderate Manitoba, where collective agreements will be signed that restrict our government workers to a woeful increase of only 3 times the rate of inflation. Hey, it isn't pretty, but everybody has to feel the pinch!

But why stop there! The fiscal policy team at AWAP has formulated other moderate policies that we believe Greg Selinger should consider:

1. Wait for federal transfer payments to increase. C'mon Ottawa! Every other year the NDP has over spent you've been there to bail us out with windfall increases to equalization or other transfers. Don't let us down this time! We can only run a deficit for one year!

2. Smile and look happy.

3. Do nothing and hope the problem goes away.

For those of you radical right-wingers who believe we should attempt to spend within our means, freeze civil service wages, or trim the fat in our bloated bureaucracy: Shame on you! What are you trying to do? Ruin our economy? You should know that government spending is the engine that drives the Manitoba economy, and if we take our foot off the gas pedal we'll grind to a halt. Cutting spending is the last thing we should do!

Plus, if there's anything that Selinger has learned from Gary Doer, it's to not do anything that makes you look mean. Things like laying off a worker, or cutting down a tree on the east side of Lake Winnipeg. Selinger has to be especially diligent because he is not as adept at grinning as Gary Doer was. Oh that grin ... How it could always make us feel good. How I miss that grin ...

(sorry for the crappy graphic. I had time limitations and only MS Paint at my disposal)

Devil's advocate on climate change

The Climate Research Unit scientists were right to fudge their climate change studies.

The cooked data, the exaggerated results, the black-listed dissenters, and the general bastardization of scientific process: it is all justifiable. In fact, it is essential.

The problem of global pollution and climate change is subject to something that economists call the Tragedy of the Commons. If the global climate were to go to shit, all nations would suffer. However, no one nation can solve the problem unilaterally, and attempting to do so would impart economic hardship on that nation. A collaborative effort is required involving all nations. If country Z refuses to participate, then country Y will as well, so as not to be at a competitive disadvantage. If Y does not participate than neither will X, and so on.

Thus you need all nations on board, and you're not going to get all those politicians in line with wishy-washy results, or "objective peer review", or "conflicting opinions" that self-interested leaders can latch on to as an excuse not to participate.

Furthermore, we all know how these international planning sessions go: leaders go in talking about a certain objective; after all the bickering and nattering they walk away with an agreement for 1/10th of that objective; and when it comes time to put the rubber to the road they may actually accomplish 1/10th of what they agreed to. So if you need to reduce emissions by a trillion tons to save the planet, then you have to tell everybody that they need to reduce emissions by 100 trillions tons. If oceans are going to rise by 6 inches, you tell them that they're rising by 50 feet. That's how it works. And if some pain-in-the-ass scientists say "Hey wait a minute, our results show ..." then you have to shut those fuckers up ASAP before they ruin everything.

Alas, some thieving thruthers who obviously don't have the best interests of the planet in mind have exposed the ruse, and as a result the climate negotiations in Copenhagen are doomed to fail. And because of that, we are all doomed.

Sigh...

The obligatory Goodbye Doer post

I am a blogger (among many other things) and I live in Manitoba, therefore I am required by blogging convention to do a post about Doer's resignation, whether you want to read it or not.

A few months back I wrote about Doer potentially resigning. I did not predict it one way or the other, but what I said was:

Will his remarkable timing continue? Much depends on what happens federally. If the Conservatives stay in power as the economy recovers, or if the Liberals manage to get a majority, you can bet that they will again be looking for ways to chop spending and get the federal budget back on track, right about the time of our next Provincial election. This would put Doer in the same shoes as his predecessor, faced with declining revenues and tough decisions to make, should he get re-elected. You can bet that Doer will keep a watchful eye on that possibility, and quit while he's ahead if that's where things are heading. Whatever happens, you can bet he'll retire from politics smelling like a rose.

Indeed he is, although the timing of his resignation appears to be more of a happy coincidence than the cause. His successor, and I will not speculate on who that may be, will not have as easy a go of it for two reasons: the first is referred to in the quote above, and the second is that they will not have Doer's smiley charm that allowed him to slither away from scandals and failures.

Ok then .. what grade should we give him? What will his legacy be? For sure, he will go in the books as a successful Premier. He presided over a prosperous era, recorded a series of balanced budgets (sort of), and ran a boring show in a profession where "exciting" usually corresponds with "controversial" and "short lived". He made a series of modest tax cuts and kept most voters happy. One might look at this record and give him a B or B+. Nothing astounding for sure, but steady.

In my mind, however, Doer's term in office represents a wasted opportunity. It corresponded with one of the most prosperous eras in this country's history. Instead of taking this opportunity to reduce our provincial debt, he increased it. Instead of reducing our dependency on equalization payments, he increased it dramatically. Instead of reducing corporate taxes to draw private investment, he decreased small business taxes which will have a very marginal return in terms of job growth. Instead of keeping our personal income taxes in line with our neighbouring provinces, he kept tax brackets frozen and opted for small decreases, making us less competitive.

In short, he didn't take the opportunity to use the economic boom, which is now over, to position ourselves for the future. Our province's economy, including our valuable hydro resource, is burdened by debt and overly dependent on government jobs and government spending. This isn't as much of a problem now as it will a few years down the road. It's Doer's successors who will really feel the pain of his economic mis-management, and will be forced to transfer that pain to the people.

Further, his administration has been plagued with scandals, and he has failed miserably in the environment department (although he has a green image because most of our power comes from Hydro electricity) as well as in health care. He never did keep his initial promise to end "hallway medicine". Curtis Brown says that he is sure Doer has repeatedly regretted making those promises. To the contrary, I am sure he does not. Those promises got him elected. He knew it wasn't doable without massive reforms to the health care system and/or massive tax hikes, but he didn't care because it got his ass into the Premier's chair.

Gary Doer is not a man of bold action. He is more of a "don't rock the boat" sort of guy." He is not a leader, but a caretaker. I challenge any of you to point out a difficult decision that he made during his tenure in office. A truly difficult decision ... the kind of unpopular choice that a real leader would make for the betterment of the province. They are few and far between, if they exist at all.

Doer may make an excellent ambassador to the US. His charisma and rolodex (do they still make those?) will serve him well, and I suspect that he can be quite compelling in closed door discussions. As a Premier, however, he didn't have the fortitude to do what was right. C-

Don't stop stimulating us!

Everybody knows by now that the recession is over. The Bank of Canada said so, therefore it is so.

That wasn't so bad, was it?

It's amazing how fast that fiscal stimulus works. Why, just a couple months ago the government was throwing promises of money around at anybody with a shovel, and Blammo! Recession over! We gave money to stadiums that have yet to be built, we announced funding for sewers and fire stations and public transit, and we also gave money to festivals that would have gone ahead with or without the extra cash. Yet, even though the money has barely started to flow, the economy has turned around and is heading back up hill.

You might think that maybe this fiscal stimulus thingy doesn't really deserve any credit for the pending recovery. Maybe recessions go through a natural cycle to recovery, and maybe the record-low interest rates set by the central bank helped to get money flowing again. Maybe this Keynesian stimulus is just a bogus pile of crap designed to make it look like the government has some control over the situation.

You might think that, but you would be wrong. You see, the Economic Policy Division of Anybody-Want-A-Peanut? knows that the recession ended so quickly, not because money was spent, but because people think money is being spent. Just like golf, or the voices that tell me to strangle dogs, it's all in the head. Money for this, money for that: it is a subliminal message to consumers that money is flowing and good times are around the corner, and it becomes a self-fulfilling prophecy.

So then you might think, now that we have the ball rolling in the right direction, why don't we just cancel any additional stimulus spending to minimize the pain of future deficit reduction? No can do. We need to follow-through, because if we don't, people will begin to realize that the act of the government spending money in and of itself doesn't cure a recession, and so the future scam, er, strategy will not be effective. Job growth returns with a lag, so it should correspond nicely with the actual spending of the money, and so people will continue to believe that it works. And as long as they believe it will work, it will work. It is essential that we don't break that belief system. In fact, I really shouldn't be writing this post, but my readership is low enough that I don't think it will cripple the economic future of the country. Just don't tell anybody about this, okay?

Timing is everything

In politics, like in comedy, timing is critical. A new party can sweep into power on the heals of a major shit storm or unpopular war, for example. The ebbs and flows of the economy can also have a major impact on who gets elected and if they stay that way. If I convinced you that I could get you your job back then you would probably vote for me. (I can't by the way. Didn't mean to get your hopes up. Sorry...)

Here in Manitoba, Premier Doer's timing has been impeccable:

In the late 90s Federal Finance Minister Paul Martin chopped transfer payments to the provinces in order to slay the Massive Federal deficits, resulting in a "health care crisis" in every province of the confederation. But because health care is provincially managed, provincial governments generally took the hit. This was Doer's first big break, allowing him to roll into power on promises of health care reform. (remember "No More Hallway Medicine"? How did that go anyhow?)

The following years saw a world-wide economic boom, big revenue growth for the Canadian government and unprecedented increases in transfer payments to the provinces, but especially Manitoba, who's share of equalization payments (a.k.a. provincial welfare) consistently increased.* This allowed Mr Doer to avoid making difficult decisions, much like those that doomed his predecessor, choosing instead to throw money at problems. For example, without making any real health care reforms, Doer more than doubled health care spending.** Health care didn't really improve, but we got a couple of jazzy new buildings filled with health care administrators in downtown Winnipeg. In fact, most new jobs and construction are a result of government spending. The result is that the government is popular and everything seems to be fine. Life is good when you have money to spend, especially if it's somebody else's money.

Oh, but dark clouds loomed on the horizon: the economy began to stumble, portending the end of the massive transfer payment increases. This would have been bad news for Doer, but for one more timely new development: Keynesian deficit spending suddenly became in vogue. This produced a brand new revenue stream for Manitoba: Fiscal Stimulus! It also gave Doer an important 'out', allowing him to continue to increase spending under loosed balanced budget rules. And if he happens to run a deficit, then oh well ... we're in a recession you know!

Will his remarkable timing continue? Much depends on what happens federally. If the Conservatives stay in power as the economy recovers, or if the Liberals manage to get a majority, you can bet that they will again be looking for ways to chop spending and get the federal budget back on track, right about the time of our next Provincial election. This would put Doer in the same shoes as his predecessor, faced with declining revenues and tough decisions to make, should he get re-elected. You can bet that Doer will keep a watchful eye on that possibility, and quit while he's ahead if that's where things are heading. Whatever happens, you can bet he'll retire from politics smelling like a rose. He may be power hungry, but he's not dumb.


*2009: equalization: 2063m / fed transfers: 3782m
1999: equalization: 970m / fed transfers: 1723m

**2009: health spend: 4723m
1999: health spend: 2119m

source: http://www.gov.mb.ca/finance/provincialbudgets.html

Bits and bites: Ikea, CBC, more CBC, Magic Accounting

Oooooh. To much to talk about and not enough time to write. Must use point form.

Quick, approve it before they change their minds!

No time is being wasted in making sure we land the master angler marlin of big box stores. I am dismayed that more scrutiny is not going into this proposal. Rather than repeating my last post, I'll give you a scorecard of the proposal:
o IKEA - A
o Location - C+
o up to seven additional big boxes - D
o numerous smaller retailers - depends how they do it
a) The current layout - F.
b) My idea for a walkable outdoor mall - best idea in the history of ideas: A+
o 100-room hotel - B
o 500-unit condo building - if you want to live in the parking lot of a Target with a railway track 100 yards away, knock yourself out. - C
o 150,000 square feet of office space - D Go fill an empty building or parking lot downtown.
o 16-screen movie theatre - C (which other theatre(s) will close because of this??)
o water park (not yet proposed, but just you wait) - B+
o new traffic lights on Kenaston - big fat F This should be a deal-breaker. Go back to the drawing board and try again.

Is this good news or bad news?

CBC president Hubert Lacroix announced Wednesday that a $171-million budget shortfall is forcing the taxpayer-funded broadcaster to slash about 800 jobs and cut both TV and radio programming.

Wow. Welcome to the real world boys. Though some cuts may affect the on-air product, those 70 middle-management positions won't be missed.

Quirks and Quarks

Say what you will about CBC's excessive political correctness, biases, and extravagant spending,
there are a few things worth tuning in for. The snaggle-toothed host of Quirks and Quarks, Bob McDonald, gave a free speach at the U of M Monday (thanks for the head's up? you're welcome) that lasted over an hour. It was an entertaining speach from a guy who makes a living communicating scientific research and ideas in terms that everyday joes can understand. Check out the show if you're not familiar with it.

Budget Thoughts

Haven't had a good look yet, but new blogger NDP Convert gives it 5 stars. Brian at JDS doesn't rate the budget, but he seems to have a strange fascination with Hugh McFadyen's face. I think I should maybe assess it for myself.

One quick initial thought: The elimination of small business tax rate is not smart. Not good bang for your buck. NDPers will tell you "60% of all jobs are from small businesses" but that is irrelevant. It does not follow that cutting this tax rate will increase jobs more than cutting other tax rates. Small businesses are less likely to relocate to another province, for example. And for goodness sake, they are only taxed at 1% as it is. Maybe the reason large businesses account for fewer jobs than small businesses is because large businesses are overtaxed?? Chipping away at the Corporate and payroll tax rates would do much more for job creation. This cut is purely ideological.

Anyhoo, perhaps I'll come back with more thoughts on the budget later. Or perhaps I'll come back with a buyers guide to prostitutes. You just never know!

I'll leave you with this -- my tribute to Gary Doer, who was able to provide us with a balanced budget including debt repayment, while simultaneously increasing the provincial debt (again):