The Road To Austerity

Before Stephen Harper and Dalton McGunity introduce their austerity budgets next month, they would do well to read Paul Krugman's column in this morning's New York Times. The advocates of austerity are everywhere these days. Unfortunately, Krugman writes, they have "substituted moralizing for analysis, fantasizing for the lessons of history."

This is particularly true in Europe, where Greece has become the tar baby no one wants to go near. But the consequences of European economic policy are now clear: "Greece and Ireland have had double-digit declines in output, Spain has 23 percent unemployment, Britain’s slump has now gone on longer than its slump in the 1930s."

Specifically, in early 2010, austerity economics — the insistence that governments should slash spending even in the face of high unemployment — became all the rage in European capitals. The doctrine asserted that the direct negative effects of spending cuts on employment would be offset by changes in “confidence,” that savage spending cuts would lead to a surge in consumer and business spending, while nations failing to make such cuts would see capital flight and soaring interest rates. If this sounds to you like something Herbert Hoover might have said, you’re right: It does and he did.

Now the results are in — and they’re exactly what three generations’ worth of economic analysis and all the lessons of history should have told you would happen. The confidence fairy has failed to show up: none of the countries slashing spending have seen the predicted private-sector surge. Instead, the depressing effects of fiscal austerity have been reinforced by falling private spending. 

Krugman has never argued that debt is no problem. It must be paid down. But timing is everything. And the time to pay it down is not when unemployment is high. Austerity merely creates more unemployment, and deficits rise. Worse still, policy makers become even more divorced from the people in the streets -- who, in turn, become increasingly restless and angry.

That's not a theory. Ask Herbert Hoover.

Ford And Facts

Word on the street is that Gary Webster is about to lose his job. His mistake was to cross mayor Rob Ford. Ford is smarting, after city council scuttled his plan to expand Toronto's subway. Royson James writes in the Toronto Star:

Denzil Minnan-Wong. Cesar Palacio. Norm Kelly. Frank Di Giorgio. Vincent Crisanti. Remember their names for induction in the transit hall of shame.

The querulous quintet — censorious and calculating city councillors — have called a special meeting of the Toronto Transit Commission on Tuesday to knife the chief general manager, Gary Webster.

For more than a year, Mayor Rob Ford has schemed to get Webster out of the way. Webster’s sin? He spoke truth to power. He told Ford he could not support the mayor’s subway plan because it did not make sense any more.

Ford wanted to expand the subway east, along Shepard Avenue to Scarborough. He asked Webster to prepare a study on the costs and benefits of the project. Webster did just that, and reported that the Sheppard extension did not make economic sense:

Ridership along Sheppard is less than a third of projections. Job growth at the North York and Scarborough terminuses are abysmal. Projections had called for 93,400 jobs in North York centre and 65,000 in Scarborough Centre by 2006. In fact, the combined total for both centres is fewer than 44,000.

Ford ordered that the report be mothballed. But Karen Stintz, the chair of the TTC, made the report public; and council ditched Ford's subway plan in favour of an LRT line, which would run above ground and cost less to construct. Ford was furious. He can't fire Stintz; but his allies have enough votes to fire Webster.

This weekend, at a meeting of the American Academy for the Advancement of Science, Canadian journalists took the Harper government to task for muzzling government scientists. Ford has been a vocal ally of Prime Minister Harper. Like the prime minister, he is allergic to facts. And, like the prime minister, he's a very vindictive fellow.

A Tale Of Two Economies

Both Jeffrey Simpson and Chantal Hebert wrote this week about what is happening in Alberta and Ontario. Simpson captured the Dickensian contrast quite accurately:

Alberta’s government will get bigger in spending and personnel; Mr. Drummond said Ontario’s must shrink. Alberta is heading for big surpluses, Ontario for large deficits – $30-billion in 2017-2018, Mr. Drummond reckons, if nothing is done. Alberta has no provincial debt; Ontario’s debt has reached a ratio of 35 per cent of the provincial economy and is going higher. Alberta has the highest bond rating; Moody’s Investor Service just knocked down Ontario’s from stable to negative.

But it's Tom Walkom who actually got down to cases. If Dalton McGuinty makes the cuts Drummond is recommending, people will be thrown out of work:

Rough calculations, based on his figures and finance department estimates, suggest that the Drummond plan will end up throwing roughly 250,000 additional Ontarians out of work by 2018. Even without another global crisis, that translates into an unemployment rate of about 11 per cent.

That's the problem with implementing austerity in tough economic times. When people are unemployed, government tax receipts go down -- and deficits go up.

This is not the first time it has been the best of times for Alberta and the worst of times for Eastern Canada. Back in the seventies, after the Arabs raised the price of oil, interest rates spiked along with oil prices. Eastern Canada was thrown into an economic funk. In an effort to share the pain, the Trudeau government introduced the National Energy Program. To this day, the phrase infuriates Stephen Harper.

The problem with the NEP was that it was imposed shared sacrifice. And its failure has made any mention of shared sacrifice suspect. But that is exactly what is required now.

We know where Stephen Harper stands on the issue. He is concentrating on selling oil to the Chinese. Yet he said nothing when Caterpillar moved its locomotive operations to Indiana at the end of January. However, if unemployment in Ontario spikes, so does the federal deficit. The prime minister from Alberta cannot afford to neglect Ontario.

Sharing Sacrifice

I wrote yesterday that Premier Dalton McGuinty now faces the difficult task of getting Ontarians to accept the notion of shared sacrifice. This morning, Susan Riley reminds her readers of how the system is tilted in exactly the opposite direction. On the subject of the Harper government's plan to "save" the Old Age Security system, she writes:

Maybe they should call their bill Restoring Senior Poverty.

Meanwhile, there is no talk of trimming other pension plans — especially the RRSP, but also the tax-free savings account — that benefit those with ample money to save. Fewer than one-third of Canadians contribute to RRSPs, and a tiny number make the maximum contribution of $22,000 a year. But, by some estimates, RRSP breaks for the richest Canadians cost the treasury $12 billion in 2010.

The issues differ for different levels of government and different parties hold power across the country. But the austerity refrain is the same: protect the rich, hit the middle class and leave the poor for later.

It should be remembered that the financial structure we operate under did not occur by accident. Our politicians have carefully chosen who they will reward. I write as someone who has been able to use that system to fund my wife's and my retirement.

But, given the circumstances we now face -- which, again, did not occur by accident -- I have to ask a simple question: "What is fair?" We shall see how the McGuinty government answers that question. We already know Stephen Harper's answer.

Meanwhile, Riley -- a writer of uncommonly good sense -- reminds us that politicians lead a sheltered life:

Political leaders, and their advisers, live in a sheltered world where seniors golf in Florida all winter, families waste money on snowmobiles instead of saving for their golden years, and people are eager to work past 67 because they have absorbing, well-paid jobs.

They forget — or don’t care — that most Canadians don’t live there.

Now For The Hard Part

Don Drummond has thrown the fat in the fire. If you lived through the Harris years, Martin Regg Cohen writes, you're going to remember what is about to happen again. But this time, he predicts, it will be different:

Rather than across-the-board cuts from the late ’90s, look for out-of-the-box thinking: No welfare cuts or reckless hospital closings, but consolidation and transformation. And communication.

It would be nice if that happens. We're seeing the Harris scenario unfold in Ottawa as several of his alumni attempt to steer the ship of state.  But, even if the McGunity government goes about making the cuts differently, it's going to be difficult to get Ontarians to buy the notion of shared sacrifice. We have lived through thirty years of unbridled individualism. A whole generation knows no other way.

Drummond says that we must:

Fix universities. Merge hospitals. Integrate the system. Cut business grants by one-third. Revisit corporate tax subsidies, rather than renewing them automatically. Cut subsidies for green energy.

All easier said than done. Government cuts could mean lots of lost jobs. And, if that happens, tax receipts will go down, not up. The cuts could cause the deficit to rise. Now the hard part begins.

Paranoid Delusions

When Vic Toews proclaimed this week that those who didn't stand with the government "stand with the child pornographers," Ann Cavoukian -- Ontario's Privacy Commissioner -- responded, "What it showed to me was the weakness of their case."

It was a telling comment. Whether it's the Harper Party's defence of trickle down economics, its push for more prisons -- despite a crime rate which has dropped for forty years -- or its argument that the Old Age Security system is "unsustainable," this government continues to defend the indefensible.

The same pattern applies to the Prime Minister's increasingly bellicose rhetoric on the subject of Iran.  Scott Taylor writes that:

No doubt Harper’s ego has been inflated over the accolades and honours bestowed upon Canada for the nominal leadership role we played in the NATO dog pack’s ravaging of a hapless Libya.

As the international community, led by the U.S. State Department, pushes ever closer to a military intervention in Syria, Harper has publicly expressed his disappointment at China’s and Russia’s refusals to sanction a UN mandate against the Assad regime.

In other words, Harper is spoiling for a fight. Going one step further in the case of Iran, Harper has embarked on a one-man fear-mongering campaign to paint the Persian Peril as an imminent threat to world safety.

It matters not that Harper actually believed the Bush administration’s falsified documentation regarding Saddam Hussein’s non-existent weapons of mass destruction. Had he been prime minister, Harper would have happily joined the U.S.-led coalition of the willing and invaded Iraq under false pretences.
This time, of course, is different, and although Canada has no independent intelligence-gathering capability inside Iran, Harper is convinced that the CIA has got things right this time.

"The evidence is just growing overwhelming," Harper told Canadian reporters.

When this prime minister claims that the evidence is overwhelming, that's code for the fact that supporting data doesn't exist. The truth is that he and his minions suffer from paranoid delusions. The problem is that the world is full of people who are not like the Harper Party -- and, therefore, these agents of evil are a perpetual threat. It's not enough to defeat "them" in an election. "They" must be destroyed.

 That's what happens when you hand the reins of power over to the paranoid.

Understanding Brush Fires

Chantal Hebert doubts that the NDP's hold on Quebec is permanent. She points to dwindling support for the party:

Ten months after the fact, the so-called Quebec orange wave feels more like a devastating flash flood for Quebec’s federal representation than the precursor of a lasting New Democrat tide in the province’s politics.

With 58 MPs, the biggest Quebec membership drive in the party’s history underway and two candidates with strong local roots in the race, the party did not come close to filling the 500 seats of a downtown Quebec hall.

Much depends on who the party chooses as its leader.  That leader will have to convince Quebecers that he or she knows who they are, while convincing the rest of Canada that it matters as much as Quebec does. It's not an easy task -- particularly, as Lysanne Gagnon notes, because the two solitudes are getting more solitary:

Quebecers have lost the thin interest they had about the rest of Canada, where, on the other hand, there is a growing feeling of irritation mounting against Quebec – Quebec and its fat equalization payments that serve to finance fancy programs like $7-a-day daycare. This anger is still muted and expressed in rather polite terms – this is English Canada after all – but it is bound to increase as the centre of gravity moves to the West.

In Ottawa, the powers-that-be are unconcerned.They are convinced that recognizing Quebec as " a nation within a nation" has done the trick. The province, they say, has decided to exist in its own parallel universe and will not impede the Harper juggernaut.

That notion comes straight out of the George A. Custer Handbook On Leadership. The Harper government has gone out of its way to antagonize Quebec --by appointing a unilingual spokesman for the prime minister and a unilingual Supreme Court Justice. Worst of all, it has ignored Quebec's concerns about the omnibus crime bill, while insisting that the province bear its share of the costs.

The Harper Party assumes that, because no charismatic champion is presently on the scene, sovereignty is dead. That issue is never dead. And the charismatic leader is always there, although not immediately recognized. All he or she has to do is strike the match. The Harperites have produced all kinds of combustible material.

They don't, however, understand how easy it is to start a brush fire -- and how hard it is to put it out.

Severely Misguided

Anne Richards, the late Governor of Texas, once said that the man who succeeded her -- George W. Bush -- was born "with a silver foot in his mouth." Mitt Romney suffers from the same disease. Over the weekend, he told the Conservative Political Action Conference that he was a "severely conservative governor." It was an interesting choice of words. And as awkward as the phrase might be, it surely describes today's Republican Party.

Jeffrey Simpson reminds his readers that the people who now populate Republican ranks have been around for a long time:

Anyone with a passing acquaintance with U.S. history understands the power of the appeal that less government is the best defence of liberty. They will also know that, in such a diverse country, with so many regional, religious and ethnic cleavages, social and political movements of all sorts have always sprouted.

That evangelicals are so powerful today harkens back to the Pilgrims and the Quakers, the Great Revivals, William Jennings Bryan, spiritualists, Social Gospellers, Billy Graham, the Elmer Gantry types and all the television evangelists of past and present.

That Mr. Paul’s supporters are isolationists to the core recalls Washington’s “no foreign entanglements,” Charles Lindberg, William McCormick and the many other Midwestern isolationists of yesteryear. That rank-and-file Republicans see conspiracies against their liberties from within and without reminds us of witch hunts from Salem to Joe McCarthy.

That Fox News roasts the President echoes Father Charles Coughlin’s radio programs blasting Franklin D. Roosevelt. That the two parties are so divided on almost everything is nothing new, since, in the early decades of the new country, Federalists and Republicans fought over everything. Even such an idealized persona as Thomas Jefferson paid newspaper hacks to write scurrilous articles about his principal rival, John Adams. That race underpins voting patterns and social attitudes is nothing new at all.

What is new is that all of what used to be fringe elements have taken centre stage in the 21st Century Republican Party. That is no accident of history. Paul Krugman writes that it is the result of a strategy which has gone horribly wrong:

For decades the G.O.P. has won elections by appealing to social and racial divisions, only to turn after each victory to deregulation and tax cuts for the wealthy — a process that reached its epitome when George W. Bush won re-election by posing as America’s defender against gay married terrorists, then announced that he had a mandate to privatize Social Security.

Over time, however, this strategy created a base that really believed in all the hokum — and now the party elite has lost control. 

The patients have taken over the asylum. It's no wonder that the GOP is so severely misguided.

This entry is cross posted at The Moderate Voice.

CORRECTION:  Dean Esmay, at The Moderate Voice, reminds me that the subject of Ann Richards' barb was the first president Bush. It's always wise to differentiate between Bushes.

Poverty As Moral Trupitude

As the Harper Conservatives peddle the myth that the Old Age Security program is unsustainable, we should be prepared for the next assault. It comes in the form of Charles Murray's latest book, Coming Apart.  Murray, who has been criticizing the welfare state for decades, advances the thesis that our current economic malaise is not about money. It's about morals. The root cause of our problems, Murray argues, is the decline of the traditional family.

Conservatives are very good magicians. They are well versed in the art of creating distractions. Paul Krugman writes that:

. . . the truth is that some indicators of social dysfunction have improved dramatically even as traditional families continue to lose ground. As far as I can tell, Mr. Murray never mentions either the plunge in teenage pregnancies among all racial groups since 1990 or the 60 percent decline in violent crime since the mid-90s. Could it be that traditional families aren’t as crucial to social cohesion as advertised?

Still, something is clearly happening to the traditional working-class family. The question is what. And it is, frankly, amazing how quickly and blithely conservatives dismiss the seemingly obvious answer: A drastic reduction in the work opportunities available to less-educated men. 

High school graduates who went to work for GM, Ford or Chrysler used to have it made. Micheal Moore chronicled their story in Roger and Me. Now, Krugman writes:

For lower-education working men, however, it has been all negative. Adjusted for inflation, entry-level wages of male high school graduates have fallen 23 percent since 1973. Meanwhile, employment benefits have collapsed. In 1980, 65 percent of recent high-school graduates working in the private sector had health benefits, but, by 2009, that was down to 29 percent.

So we have become a society in which less-educated men have great difficulty finding jobs with decent wages and good benefits. Yet somehow we’re supposed to be surprised that such men have become less likely to participate in the work force or get married, and conclude that there must have been some mysterious moral collapse caused by snooty liberals. And Mr. Murray also tells us that working-class marriages, when they do happen, have become less happy; strange to say, money problems will do that. 

There is a moral crisis. But it's not the fault of the poor. However, Mr. Harper is targeting precisely those people. It's remarkable how supposedly bright people can put the cart before the horse. Poverty is not caused by poor people.

Faux Conservatives

Some commentators looked at this week's census numbers and saw blue skies and sunshine for Stephen Harper's Conservatives. As Jeffrey Simpson notes in today's Globe and Mail, the term "conservative" is a misnomer. Today's conservative governments are anything but conservative. Consider Alberta:

But successive Alberta governments – not real but faux conservatives – spent rather than saved, figuring, one presumes, that resource revenues would just keep pouring into the treasury. And most politicians, even of the ostensibly most conservative variety, really, really like to spend to get re-elected. (See Ronald Reagan, George W. Bush and Stephen Harper.)

The heartland of Canadian conservatism isn't conservative at all:

Thursday’s budget projected a staggering $15.9-billion in non-renewable resource revenues, most of which will be spent. All Premier Alison Redford would say is that she plans a “conversation” with Albertans about reducing reliance on non-renewable revenue.

Such was not always the case:

Decades ago, with the oil and gas industry beginning to boom, Alberta’s wisest postwar premier, Peter Lougheed, pondered this bonanza. Being a real conservative – that is, someone who wanted to conserve and preserve – Mr. Lougheed invited his fellow citizens to put some of their riches into a fund for tomorrow.

Thus was born the Heritage Fund, an idea brilliant in conception, flawed in execution. As of September, the Heritage Fund contained $14.7-billion. More than 35 years since inception, the fund has produced $32-billion in revenue for Albertans.

Lougheed wanted to use the interest from the fund to help finance government and build an industrial base. But the leaders who followed him saw an endless stream of revenues. There was no need to save for a rainy day. Lougheed also warned about unrestrained development of the oil sands. But when he retired, his policies -- and his advice -- went down the memory hole.

And so today we have a prime minister who claims that Canada is an "energy superpower" -- while the country's industrial base disappears. He's a faux conservative.

The Hypocrisy Is Stunning

Today, on his road trip through China, Stephen Harper took another swipe at those "radical" environmentalists:

Our government is committed to ensuring that Canada has the infrastructure necessary to move our energy resources to those diversified markets,” Harper said. “We will uphold our responsibility to put the interests of Canadians ahead of foreign money and influence that seek to obstruct development in Canada.

It's always interesting to compare what Harper says today to what he said yesterday -- particularly when he was running for election. David Boyd, from Simon Fraser University, writes that:

In 2006, Prime Minister Harper said, “Poor air quality isn’t just a minor irritant to be endured. It is a serious problem that poses an increasing risk to the health and well-being of Canadians.”

In 2007, Harper said, "climate change is the greatest threat to the future of humanity." During his five years in minority government, he blamed Canada's environmental failings on previous Liberal governments. But, Boyd writes:

Five years later, the Conservatives have continued the Liberal tradition of addressing climate change through grand pronouncements, ineffective policies, and counterproductive actions. The federal home energy retrofit program has been canceled, reinstated, and canceled again. Canada allocated a smaller proportion of the recession-induced federal stimulus to green infrastructure and renewable energy than any other nation. After years of surreptitiously undermining climate change negotiations, Canada brazenly joined the US as the only countries in the world to renounce their commitments under the Kyoto Protocol, using false arguments to do so.

And consider what has happened to our standing in the world during that time:

That Canada has become an international laggard in environmental policy and practice is now an incontrovertible fact. In 2009, the Conference Board of Canada ranked Canada 15th out of 17 wealthy industrialized nations on environmental performance. In 2010, researchers at Simon Fraser University ranked Canada 24th out of 25 OECD nations on environmental performance.

Yale and Columbia ranked Canada 37th in their 2012 Environmental Performance Index, far behind green leaders such as Sweden, Norway, and Costa Rica, and trailing major industrial economies including Germany, France, Japan, and Brazil. Worse yet, our performance is deteriorating, as we rank 52nd in terms of progress over the 2000-2010 period. 

The hypocrisy is stunning.

The Rules Have To Change

Tom Walkom writes that, as things stand, not much could have been done to keep the doomed Electro-Motive plant in London. He points out that Bombardier no longer manufactures locomotives in Canada. It buys them from a Catapillar plant in Mexico. The problem lies not so much with Caterpillar or Bombardier, but with the rules of the game. "The real villain," he writes, "is unrestrained globalization.

As long as goods and capital are free to move unimpeded across national borders, companies — even nice ones — will locate where wages are cheap.

All of this could be changed. But to do so would require the fundamental rethinking of belief in the unalloyed virtue of free trade, a belief that the country’s political and business classes accept on faith.

A good place to start is with the now defunct Canada-United States Automotive Product Agreement.  That agreement

removed tariffs on cars, trucks, buses, tires, and automotive parts between the two countries, greatly benefiting the large American car makers. In exchange the big three car makers (General Motors, Ford, and Chrysler) and later Volvo agreed that automobile production in Canada would not fall below 1964 levels and that they would ensure the same production-sales ratio in Canada.

American manufacturers unloaded health care costs onto the Canadian government; and they manufactured product in Canadian dollars. Those advantages went to the bottom line. In return, Canadians got thousands of manufacturing jobs and lower cost automobiles. It's true that most of the jobs went to southern Ontario and were not evenly distributed -- just as resource extraction jobs are now going to the prairies.

The point is that the Autopact was a win-win for both countries. What has occurred over the last thirty years is a race to the bottom. Without new rules, capital will always flow to the lowest cost locations. In the new economy, the winner takes all. And that new paradigm now figures in our politics. Stephen Harper only got 25% of all Canadian votes. But he's now in the catbird seat.

Generally speaking, it's not a good idea to go backwards. But, if we're looking for a road map to the future, we could begin to look to what we used to have. The Autopact is dead. But the model isn't. The rules have to change.

This entry is cross posted at The Moderate Voice.

Not Your Father's Conservative Party

Tom Walkom writes that the Harper government is not  what we used to call a Conservative government. It does not stand for what Conservatives have traditionally stood for:

The old Conservative brand, associated with prime ministers like John Diefenbaker and Joe Clark, emphasized practicality melded with compassion. The new one focuses on pride, patriotism and toughness.

Compassionate conservatism disappeared soon after George W. Bush -- who claimed that's what he stood for -- became president. Taking its cue from George W, the three hallmarks of the new conservatism are on display twenty-four hours a day:

Martial valour is an integral part of this new image. From that stems Harper’s emphasis on the military, as well as the alacrity with which he sends Canadian troops to wage war in unlikely countries like Libya.

Toughness is expressed by the government’s emphasis on jails and mandatory sentencing, as well as its take-no-prisoners approach to political foes.

But above all, the Conservatives want to brand themselves as the party of patriots. Hence the reinvention of old symbols —such as putting the word “royal” back in the Royal Canadian Air Force.

What it all adds up to, writes Dan Gardiner, is "the politics of ruthlessness." It is the product of a man who has spent all his life in politics, and who spends all his time on politics:

When politics is everything, when opponents are enemies, when there’s hatred in your belly, certain things follow. Ruthlessness, for one. Personal attacks. A refusal to accept the legitimacy of different views and to work with those who hold them.

Stephen Harper is only one man, of course, but unlike every Liberal prime minister his dominance of his party is total. He effectively built it from the ground up. It is his party. And its personality mirrors that of its creator and master.

As others have pointed out, the government is controlled by the Harper Party -- whose raison d'etre is control. It is, quite simply, opposed to democracy.

This Is Competence?

Stephen Harper likes to claim, as he did in Davos, that his government is a shining example of prudent financial management. That boast, Lawrence Martin writes is the Globe and Mail, in as believable as Sun TV's recent citizen reaffirmation ceremony.

From 2007 to 2011, Canada’s economic performance put us in the middle of the pack in GDP growth among 34 industrialized countries. Our unemployment rate is currently rising and nearing the U.S. level. It’s true that, comparatively speaking, we’re doing well on a number of other economic indices. But given the advantages the Conservatives enjoyed when they took office – the big surplus, the well-regulated financial sector, the natural-resource-laden riches – how much of an accomplishment is it? When you start a race a lap ahead of the field, how hard is it to be among the leaders?

The Harperites are very good at dumping information down the memory hole. But, Martin writes, it's good to recall a little history:

Let’s recall the two-point GST cut that tore a giant hole in the revenue base, accounting for a good deal of the deficit. Let’s recall the prerecession spending – having inherited a $13-billion surplus, the Harper/Flaherty team spent so excessively that we were close to a deficit by the time the recession began. Let’s recall the slashing of corporate tax rates and the government’s easing of mortgage rules and backing of risky loans that further bled the treasury.

Put it all together and what it shows is that, with more prudent fiscal management from the same guy who lectured other countries on debt in Davos, we could have coped with the recession without driving our treasury into a large deficit hole.

Martin ends his article by quoting an official at the finance department. When asked what the Harper government had done well, he answered, "The PR."

Indeed. Stephen Harper runs a superbly competent PR machine. He does not run a competent government.

Government By Gaffe

"A gaffe," Michael Kingsley wrote, "is when a politician tells the truth." Americans have been treated to several examples of this phenomenon as Mitt Romney seeks the presidency. Last week, Vic Toews treated Canadians to a homegrown version of the same. "I don't know if statistics demonstrate if crime is down," he told a Senate committee. "I'm focused on danger."

Stephen Harper used the same argument in Davos when he implied that the Old Age Security system is unsustainable. The truth is, writes Robert Brown in today's Globe and Mail, that  the system is quite sustainable:

The Chief Actuary of the OAS system reports regularly (and publicly) on the system’s financial health. In his last published report (the eighth, in 2008), he confirms that the cost of OAS (including the Guaranteed Income Supplement) would rise to $108-billion in 2030. He also points out that, while there were 4.7 Canadians aged 20 to 64 per individual aged 65+ in 2007, that ratio would fall to 2.4 in 2030, or almost in half.

But there are other attributes that need to be remembered. First, OAS is taxable income, so a lot of the moneys paid out go straight back to Ottawa. Second, the OAS is further clawed back depending on your income. If your income exceeds $67,668, then you lose your OAS at a 15-per-cent clawback rate. If you have income of $110,123 or more, you get no OAS at all.

For the GIS, the clawback rate is 50 per cent starting at $3,500, so if you have income in your own right of $16,230 (other than the OAS), you get no GIS. Finally, OAS/GIS costs rise with the consumer price index, whereas tax revenue rises with the growth in GDP. The latter usually rises faster than the former.

So do we need to worry about the sustainability of OAS? Not according to the Chief Actuary.

We don't need new prisons. But we will get them. A significant portion of the costs will be downloaded to the provinces. And, because those costs will not be on Ottawa's books, the Harperites will claim that they are prudent managers.

It's when they make statements like Toews made last week that the truth comes out.

Smug Stupidity

Jeffrey Simpson wrote in yesterday's Globe and Mail that:

Under the Harper government, Canada lost its bid for a Security Council seat – the first time it had ever been defeated. Were a vote held today, chances are Canada would get even fewer votes.

Consider Canada's performance on the world stage since Stephen Harper became prime minister:

The latest egregious example of truculent morality was this week’s visit by Foreign Affairs Minister John Baird and Finance Minister Jim Flaherty to the West Bank. At a meeting with the most moderate leadership in Palestinian Authority history, the Canadians lectured the Palestinians on the terrible mistake they’d made in seeking United Nations membership, a bid that won strong support in the General Assembly.

The week before the West Bank lecture, the Prime Minister was telling Europeans how they should deal with their economic crisis during a speech in Davos. This likely impressed Canadians, but not Europeans. The last thing they need is gratuitous advice from a North American country that, frankly, doesn’t count for much in Europe, as anyone who’s lived there knows. And the advice is especially unwelcome when it’s layered with self-applause by Canadians about how well their economy has done.

In climate-change negotiations, the government’s attitude of palpable disdain for the Kyoto Protocol, coupled with its own deplorable record of inaction against greenhouse-gas emissions, shredded whatever credibility Canada might have aspired to enjoy.

And so it goes. Canada has caught what used to be an American disease -- telling the world that it should be more like us. The American authors Eugene Burdick  and William Lederer wrote a novel about this kind of  international smugness, The Ugly American.

Stephen Harper says he is hell bent on transforming Canada. Do we really want to go there? Are we to be known as the home of the smugly stupid?

We've Been Played for Chumps

It's been quite a week. It began with Mitt Romney declaring, "I'm not concerned about the very poor. We have a safety net there." It ended with Caterpillar shutting down its locomotive plant in London, Ontario and moving operations to Indiana -- two days after Governor Mitch Daniels signed legislation making Indiana a right to work state.

It's not that Caterpillar is in trouble. Last year the corporation made $4.9 billion -- an increase of 83% over last year. Caterpillar bought the plant from General Motors in 2010. In 2008, Prime Minister Stephen Harper gave the plant $5 million in federal tax breaks on the theory that such largesse created jobs. On January 1st, Cat locked out its workers and issued an ultimatum -- accept a 50% pay cut or we'll shut down operations. All that was needed was Governor Daniels cooperation.

Mr. Romney claims that America needs the same medicine. The problem is that, while taxes would be cut for the wealthy, they would rise on those who make much less money. As Paul Krugman pointed out yesterday:

According to the nonpartisan Tax Policy Center, Mr. Romney’s tax plan would actually raise taxes on many lower-income Americans, while sharply cutting taxes at the top end. More than 80 percent of the tax cuts would go to people making more than $200,000 a year, almost half to those making more than $1 million a year, with the average member of the million-plus club getting a $145,000 tax break. 

So where is that safety net? And what about Romney's claim that -- because of a huge, unwieldy bureaucracy -- “very little of the money that’s actually needed by those that really need help, those that can’t care for themselves, actually reaches them?”

Krugman takes on that argument, too. Once again, what Romney says is simply not true:

This claim, like much of what Mr. Romney says, was completely false: U.S. poverty programs have nothing like as much bureaucracy and overhead as, say, private health insurance companies. As the Center on Budget and Policy Priorities has documented, between 90 percent and 99 percent of the dollars allocated to safety-net programs do, in fact, reach the beneficiaries.

Romney says that the safety net doesn't work. Harper says that corporate tax cuts create jobs. Have we clued in yet? We've been played for chumps.

This entry is cross posted at The Moderate Voice.

The Fault Is In Ourselves

We have nurtured an old curmudgeon.  He or she has been with us for a long time. However, we have never had so many of them at the same time. Carol Goar writes in this morning's Toronto Star:

Across jurisdictions, political leaders seem to have forgotten their authority comes from the people. They don’t bother to listen, explain, persuade or look for a consensus. They simply pronounce.

She then goes on to illustrate her point with three prominent examples -- Stephen Harper, Dalton McGunity and Rob Ford:

Harper "sprang the imperative of reducing seniors’ benefits on an unwary public, with no national debate, no explanation for its sudden urgency and no chance to consider alternatives."

McGuinty tried a different tactic: "In a deft end-run around voters,"  he

appointed a panel of experts after last fall’s election to come up with a sweeping plan to cut provincial costs. The four-member commission, headed by former bank executive and federal bureaucrat Don Drummond, is to report this month.

Drummond answers to the premier, not the people. It is not clear what principles he has applied or how he weighed the needs of various groups. It is not clear whether his blueprint will be open to public debate.

And then there is Ford: 

He bullies or bulldozes anyone who gets in his way. It worked for about a year. Then a moderate group of city councillors, prodded by angry Torontonians, found their spines. They opposed most of the spending cuts in Ford’s 2012 budget and rallied enough votes to win.

Now they are challenging his legal right to scrap provincially approved transit improvements in favour of subways. The mayor says he won’t budge. Nothing will happen till this test of wills is resolved.

When Edward R. Morrow took on Senator Joseph McCarthy sixty years ago, he ended his famous broadcast with the question, "How did McCarthy succeed?"  Then he provided the answer:

The actions of the junior Senator from Wisconsin have caused alarm and dismay amongst our allies abroad, and given considerable comfort to our enemies. And whose fault is that? Not really his. He didn't create this situation of fear; he merely exploited it -- and rather successfully. Cassius was right. "The fault, dear Brutus, is not in our stars, but in ourselves."

McCarthy had his day on the stage. But courage brought him down. We are at a point in our history when political courage is in short supply. The fault is in ourselves.

Anti Intellectual

The Harper government is willing to spend money -- on prisons and F35 jets. The simple truth is that it's not willing to spend money on pensions. Therefore, its "improvement" to the pension system is to be voluntary and administered by private financial interests.

For Stephen Harper, a strong public pension system is symptomatic of "a welfare state in the worst sense." That's why he and his party have once again chosen to ignore expert opinion. The Globe and Mail reports that

research prepared at Ottawa’s request argues Canada’s pension system is in far better shape than the Europeans’, and there’s no need to raise the retirement age. Edward Whitehouse – who researches pension policy on behalf of the Organization for Economic Co-operation and Development and the World Bank – was asked by Ottawa to study and report on how Canada stacks up internationally when it comes to pensions. 

Ignoring expert opinion is nothing new for these folks. They have pushed ahead with their "tough on crime agenda," despite evidence and advice that their agenda is counterproductive. But that agenda feeds the party base; and cutting public pensions feeds the upper echelons of that base.

Thomas Klassan -- a political science professor from York University, who has studied the Canadian pension system -- says:

reducing OAS costs is an easy way to save money over the long term because it can be done unilaterally without negotiating with the provinces or public-sector unions. “It’s okay to look at Old Age Security pension payments,” he said, “but I think there’s got to be a lot more evidence that there’s a problem, and I don’t see that evidence.”

However, the Harper government has never acted on evidence. Earlier this week, I referred to an article by Richard Cohen on the sad state of the Republican Party. The party, he wrote, has adopted a policy of "belligerent anti-intellectualism, pretending that knowledge and experience do not matter."

The Republican disease has spread north of the border.

Rejecting The Frame

In the last six years, the Harper Conservatives have been very good at defining the terms of debate. That is, they have set the premises of those debates, and the opposition parties have accepted those premises.

Their first -- and  overriding -- premise was that trickle down economics works. They continue to hold to that premise, even though thirty years of evidence has proved that the benefits of rewarding the rich have not trickled down to those on the bottom rungs of the ladder. In the last election, they argued that coalition government was illegitimate because it would require cooperation with the Bloc Quebecois -- even though the Harrperites had proposed such a coalition to topple the Martin government.

Now they argue that Canada's Pension system is "unsustainable." The term is the prime minister's. But two days ago, Bob Rae rose in the house and destroyed that premise.  There is indeed a crisis. But the problem is not that pensions are unsustainable, he said. The problem is income inequality:

Yes, there is a crisis. The prime minister’s answer to that crisis is to make the rich richer and make the poor poorer. Conservatives have no problem saying that they will split incomes for middle-class families. They have no problem granting a significant advantage to people by doing that income splitting, but they have a serious problem with respect to the social justice of the people who are making less than $30,000 or $40,000 a year. That is the problem they have and that is where we have to say, yes, everyone wants prosperity, but we want prosperity to be shared. We want the prosperity to be sustainable, but we want that sustainability not to be applied and supplied on a selective basis.

The Conservatives will deny that Canada has a problem with income inequality. For them, it is a simple fact of life. But what they accept as a fact does not have to be accepted by all parties. In fact, the Conservatives are in denial. They have a record of ignoring facts. Mr. Rae has signalled that his party does not accept income inequality. One hopes that the NDP will also send a similarly strong signal on the subject.

Things will only begin to change in Canada when the opposition parties begin to define the terms of debate.