The Fragile Economy: reversing the entrepreneurial drive

In a province that is so heavily dependent on public sector spending, it’s hard to imagine anyone would think that having the government play such a huge role in  the provincial government in the economy would be a great idea.

Step forward the head of the St. John’s Board of Trade:

Chairman of the Board of Trade, Derek Sullivan said government contracts give a competitive advantage for local businesses and “can be a very powerful and reliable revenue stream.”

Talk about throwing the engine of economic development into complete reverse. 

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Food bank use up in Newfoundland and Labrador

Our poverty reduction strategy has been nationally acclaimed.

-  Premier Danny Williams, National Post, August 2010*

Food bank use in Newfoundland and Labrador is higher in 2010 than it was a decade ago, according to a new report released on Tuesday by Food Banks Canada, the national organisation of community food support organizations.

Food banks across the province serve six percent of the population, the highest ratio of any province in Canada.

Food bank use in Newfoundland and Labrador is up 3% from 2009.  According to the annual Hungercount, 71% of food bank users in the province receive provincial government income support,  14% receive employment insurance and 10% reported employment income. The Newfoundland and Labrador portion of the report was prepared by Eg Walters, head of the province’s Community Food Sharing Network.

For the third year in a row, we have seen an increase in the demand for
food bank services throughout Newfoundland & Labrador. While it may be argued that it is only a modest 3% increase, this, combined with previous years’ figures, shows a continued upward trend on the demand for food aid.

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* This is the same article in which Williams tied his own political philosophy to that of the Reform Party: 

“On his own brand of Red Tory-ism We have a Reform-based Conservative Party which is probably ideologically more right-wing. I’m very fiscally conservative. What I wanted to do in Newfoundland and Labrador was get our fiscal situation under control. We were headed to bankruptcy six years ago. Now we’re a have-province. That’s the fiscally conservative side.

On the other side, I’m very socially conscious. Our poverty reduction strategy has been nationally acclaimed. We’ve doubled our health-care budget. We’ve put a lot of money into education. I felt our transportation and communication infrastructure was very important. I’m trying to give us all the basics to succeed after a non-renewable oil [resource] moves on.”

Hydro: different province, same political problem, same political solution

The province is different  - Ontario, this time – but the raw politics underneath a pledge to cut electricity rates for all homeowners is pretty plain to see.

The government has already rolled out tax measures for residents of Northern Ontario as well as seniors to give them a break on their hydro bills. But amid worries that hydro rates will become an election issue, the government is under pressure to introduce measures covering a broader group of Ontarians.

Speculation was rampant throughout the energy industry that the government plans to tackle hydro rates. But energy sources said an across-the-board rate freeze is unlikely. Such a move would leave the Liberals in the unenviable position of following former Progressive Conservative premier Ernie Eves, who froze household and small-business electricity rates in 2002. A McGuinty government rate freeze would repudiate its assertions made in 2004 that consumers would have to pay the real cost of electricity, said energy consultant Tom Adams.

Freezing or cutting energy rates is pretty much the stock vote-buying method found in several provinces, including Newfoundland and Labrador. 

And the arguments tossed out by the local New Democrats and the province’s Reform-based Conservatives are still energy policy bollocks.

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The Dismal Science: Debunking the “federal presence” fairy tale

Far from being hard done-by when it comes to federal jobs in the province, Newfoundland and Labrador is pretty much on par, according to a recent study conducted by the Frontier Centre for Public Policy, and reported by the National Post.

You can find a news release summarising the report here, while the full report is available in pdf format.

Some provinces  - Prince Edward Island, New Brunswick, Nova Scotia and Manitoba – have significantly more than the national average number of federal jobs per 100,000 population.  Quebec, Saskatchewan, British Columbia and Alberta have less.

Newfoundland and Labrador and Ontario are only slightly higher than the national average.

The study effectively refutes claims that this province is receiving something less than its “entitlement’ to federal pork spending.  The comparative figures also demolish two reports released by Memorial University’s Harris Centre in 2005 and 2006.  The provincial government has used those studies repeatedly to bolster its claims for increased federal transfers to the province to offset what turn out to be imaginary grievances.

The Frontier Centre study refers to these federal jobs as a form of “stealth” Equalization.  That is, they contend that the federal jobs serve as a type of federal transfer to the local economy in each of the provinces. More importantly, though, the Frontier Centre contends that the transfer comes in addition to the formal Equalization program and is particularly heavy in the provinces it refers to as “major” have-provinces.

The study also notes that the have-not provinces with the highest ratio of federal government jobs also tend to have higher than average reliance on provincial public sector jobs generally. They compare provinces based on the number of public sector employers as a share of the total population.  Newfoundland and Labrador is third highest on that scale, with Prince Edward Island and Manitoba coming, respectively, first and second.

Looking at the same information but as a share of the provincial labour force, Newfoundland and Labrador is by far the province with the largest dependence on the public sector.  Almost 30% of the provincial labour force is employed by the federal, provincial or municipal government.

The Frontier Centre study puts the findings into a particular context, namely transfer payment reform:

The stealth equalization of unbalanced federal employment described in this paper is part of a much bigger problem —an approach to public policy in Canada that transfers money out of high-productivity regions into low-productivity regions.

Not only is this policy approach harmful to our productivity growth, it is also, quite simply, unsustainable. Historically, the taxpayers in three provinces—British Columbia, Alberta and Ontario, have paid most of the bill for high levels of public sector employment in the have-not provinces.

At the same time, the study does point to issues that are especially relevant to Newfoundland and Labrador, even if the report’s authors simply missed the poster child for their argument of unsustainable public spending and the dangers of reliance on what the author’s call “the state driven approach to economic development”.

Most residents of the recipient provinces are unaware of the extent to which their economies are state-driven and reliant on transfers. Beyond the official equalization money, massive amounts of revenue from elsewhere flow into these provinces from a number of different sources. Stealth equalization through federal employment is one important example—but there are others. Higher dependence on federal
government transfers to individuals and discrimination in ordinary  operating programs in favour of the have-nots are two more examples of ways Canadian public policy transfers wealth into the have-nots.

Most residents of Newfoundland and Labrador are unaware of the extent to which the provincial economy is state-driven and reliant on federal transfers in addition to overall public sector spending.

They aren’t alone, of course.  The current provincial administration operates as if going off Equalization was a tragedy of biblical proportions.

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Related: 

• Fragile Economy:  staying the course
• Fragile Economy:  reductio ad argentum
• Fragile Economy:  The public sector
• Fragile Economy: …and two steps back
• Fragile Economy: …now three steps back and loving it

Un-publishing

No, it isn’t like uncommunication.

The Canadian Association of Journalists has a new draft set of guidelines on correcting online information and dealing with requests to remove online material. CAJ handed the job of drafting the guidelines to an “unpublishing panel” of the CAJ ethics committee.

You can find an excellent summary of the issues involved at j-source.ca.

Here are the basic principles CAJ is proposing for how to handle requests to unpublish a particular post.  Again, there is a more detailed discussion at j-source.ca along with an explanation of each point.

1. We [the online publisher] are in the publishing business and generally should not unpublish.
2. Ongoing accuracy is our responsibility.
3. Put a clear policy in place.
4. Unpublish for the right reasons.
5. It’s fair to be human.
6. Source remorse is not a right reason to unpublish.
7. Unpublish by consensus.
8. Explain your unpublishing policy.
9. Help sources understand the implications of digital publishing.
10. Consider the impact of publishing before publication.

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Let’s slap some study on that

This is a government that talks more and more about less and less.

The latest example:

• a feasibility study of a single province-wide emergency telephone number.

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The politics of energy subsidies

From the Atlantic Institute for Market Studies comes a timely rejoinder to the policy in Prince Edward Island of subsidising energy prices out of tax dollars. The arguments in this post refer to the New Democratic Party policy of taxing tax off home heating prices but the concept is the same. The piece is also a timely one for Newfoundland and Labrador where Lorraine Michael recently embraced the policy.  

The argument against the policy of cutting home heating taxes is simple:

It gave people with more than sufficient ability to pay a subsidy they did not need. It encouraged continued consumption at unsustainable levels and it helped the poor not by treating the problem (inefficient homes and too much consumption), but by treating the symptom (high electricity bills).

In Newfoundland and Labrador one suspects that political parties eager – or desperate – for votes in the coming year will lay this sort of policy on thickly to try and buy them up. 

The ruling Conservatives, despite their supposed reform-based Conservative philosophy, are already trying to sell a future deal on the Lower Churchill as a guarantee of stable prices. They don’t talk about the huge subsidies the thing may well involve or that the whole thing will add enormously to the public debt. Incidentally, the likely reason the Premier has stopped referring to loan guarantees as loan guarantees is that he is acutely aware that any Lower Churchill project as he has proposed it will – inevitably – demolish once and for all any claims about the current Conservative administration’s performance in controlling the public debt and deficit.

It’s all bollocks of course.  Energy prices in the province will stay stable anyways without the Lower Churchill.  NALCOR’s own energy demand forecasts don’t support any such megaproject to supply juice to the island portion of the province.  And with a bit of conservation and efficiency, what increased demand there is could go down.

That’s one of the reasons why this AIMS article is interesting:  it specifically points to conservation as an economically sound policy:

the need for some electricity does not undermine the basic math that it is still cheaper and more efficient and, long term, more sustainable to reduce consumption.

At the same time, providing subsidies to allow everyone, but especially low and fixed income Newfoundlanders and Labradorians, to improve the energy efficiency of their homes would treat the problem of high heating bills rather than the symptom.  At the same time, leaving the prices to reflect the cost of production would promote conservation and efficiency.  The whole idea is progressive socially in addition to being economically and ecologically sound.  It beggars the imagination to figure out why political parties would head down a road of subsidies they know is simply  unsustainable.

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A decade that changed the world

Talking Points Memo turned 10 this weekend.

Here’s the story of how it started, via The Atlantic.

Here’s how it looks now and here’s the column format that started it all.

And if you want to know why TPM is important, read the “About” bit from the website:

Talking Points Memo is one of the most innovative political news organizations in the country. Media watchers consider TPM the site to watch as the news business transforms from the old world of print to the online digital future. In March 2009 TPM topped TIME Magazine's list of 25 Best Blogs of 2009. "Talking Points," wrote Time's editors, "has become the prototype of what a successful Web-based news organization is likely to be in the future." And in September of 2009 The Atlantic listed founder Josh Marshall among the nation's 50 most influential commentators.

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Small island syndrome

So get this.

The provincial government in Prince Edward Island is going to borrow a bunch of money and turn it over to a private sector company – a subsidiary of Fortis, no less – so that islanders can think they are getting cheaper electricity.

In reality, they’ll pay the loan back plus interest out of their tax dollars that should be going to things like health care, education and roads.

And Stan Marshall will laugh all the way to the bank.

Meanwhile in other news, the Premier of another small island continues to chase the latest version of his Get-Outta-Dodge legacy plan. 

He promises to stay at the table – where and with whom we don’t know – trying to squeeze every penny out of the deal, as Faux News tells us, supposedly for the province. no word  on subsidies, but count on having to pay them.

That’s what Bob Ghiz told taxpayers in PEI, too.

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Missile: Impossible 3

The Daily Show gives the Los Angeles Missile story the ending it deserves.

Turns out that the California missile was a passenger jet.  The first clips looked like a missile.  The heli pilot says he tracked the thing for 10 minutes, a point that Jon Stewart ridicules for the rather obvious clue it is.  Makes you wonder if the gang at KCBS in Los Angeles is quite that stupid.

The news media – gotta love Fox News – and a few others blame the whole thing on the government for not knowing.

Sounds oddly familiar.

Aircraft misidentified,  hysteria ensues fuelled by local news media speculation. Gotta love local Faux News.  Even the Mother Corp went after the Faux News title on this one.

The truth is a lot less spectacular, of course.

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Traffic – November 7-12

The Top 10 Bond posts for the week, based on pageview activity:

1. Lower Churchill:  US and NL taxpayers may help subsidize costly big hydro project
2. Mysterious missile off Los Angeles
3. Kremlinology 20:  Who will replace Danny?
4. How to win without news media
5. US labour board files complaint over Facebook firing
6. How do you spell winner?
7. Kremlinology 28;  How will he go?
8. My own electoral grandpa:  vote in an election that isn’t happening yet
9. Pass the word
10. Lest we forget:  forgotten edition

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Crude oil r’uh r’oh

From the Globe and Mail come some words of economic caution about the price of crude:

“The energy market has been the Johnny-come-lately to the overall commodity bubble,” said New York-based trader Stephen Schork. “What the market is doing is what it was doing in 2008: Selling the [U.S.] dollar and buying commodities with it. In 2008, it was primarily about energy but traders got their heads handed to them. Now energy is following rather reluctantly.”

He said a further deterioration in the U.S. dollar (USD/EUR-I0.73-0.001-0.19%) would re-ignite crude prices, while a recovery in the greenback would result in a more substantial pullback in commodities, including oil.

Mr. Schork said it is tough to justify $85 to $90 per barrel for crude on the strength of economic fundamentals. A $90 crude price translates into $3 per gallon for gasoline in the United States, and “that is not sustainable,” he said.

Not sustainable.

Those two words just won’t go away.

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How do you spell winner?

Alaska senator Lisa Murkowski seems likely to be re-elected in the first victory for a write-in candidate in an American federal election since 1954.

Murkowski lost the Republican nomination to Joe Miller, a challenger with backing from the Tea Party movement and former Alaska governor Sarah Palin. Murkowski decided to seek re-election but Alaskan election rules, voters would have to write her name on the ballot.

Double problem.

Although Murkowski she had been appointed to the senate by her father – governor Frank Murkowski – and although, she’d already won re-election in 2004, there was still a chance voters might not be able to spell her name correctly. In a two-way fight between a red Republican and a blue Democrat, voters could vote for colour or party and still get their choice regardless of how the candidate’s name looked on the ballot. A write-in candidacy could hinge on the accuracy with which voters rendered her name.

The Republican primary and the narrow Tea Party victory also foreshadowed a tough legal challenge to a third candidate.  Take this third party ad as a typical example of the anti-Murkowski war from the campaign:

Murkowski’s campaign used a simple television spot to push the spelling of her name and get across the reminder that she was the incumbent:

She campaign also used a 17 second video that showed how to vote for a write-in candidate. Her campaign uploaded 61 videos to her youtube account, most of them fairly simple productions with high production values.  In other words, they weren’t expensive to make and told a simple story very effectively.  Most noticeably they were positive.  Even an ad that pointed to problems in her opponents finished on a positive note and let the other guy’s words tie a potential noose around his neck.

The same couldn’t be said for Joe Miller’s stuff. The music in an anti-Murkowski spot remains dark and foreboding even when discussing Miller’s positives. There are – of course – spots on Miller’s youtube account that touch on the media persecution message popular among some conservatives and a core part of the Tea Party’s messaging.

The Alaska Daily News account of one incident includes some video of a confrontation that appears to involve conventional news media and security hired by the Miller campaign. The episode would be familiar to anyone who watched the federal Conservative campaign in the 2005-2006 Canadian general election.

The write-in ballots are the last to be counted in an election that still hasn’t been declared for either of the three candidates.  By some accounts, there are enough write-in ballots and enough of those for Murkowski to give her the election. Republican candidate Miller continues to battle hard by challenging the validity of individual ballots and accusing state officials of favouritism in the counting.

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Remembrance Day 2010

At the going down of the Sun and in the morning, we shall remember them.

Pass the word

In Kingston, a new mess at Canadian Forces Base Kingston carries the name of a man who survived internment in a Japanese prisoner of war camp.  His actions while a prisoner saved the lives of many of his fellow prisoners.  he resisted all attempts to break him.

Two retired army colonels waged a private lobbying campaign to name the mess after Major Ron Routledge, DCM.

Colonel Peter Sutton put it aptly:

"Everybody should be conscious of what's gone before, and do everything you possibly can -- as Ron (Routledge) did with me -- to pass on the word."

Routledge set up a communication network between the Sham Shui Po prisoner of war Camp and British intelligence at Waichow through Chinese ration truck drivers. Without hesitation and fully aware of the dangers involved, Sergeant Routledge [his rank at the time] joined the ration party as the contact for the passage of messages to Chungking agents under the eyes of the Japanese guards.

The channel Routledge set up saved many lives through the supply of much needed medicine and  valuable information. The Japanese discovered the system.  They beat, starved and tortured Routledge mercilessly yet he refused to divulge any information that would jeopardize his comrades. A Japanese court martial sentenced Routledge to 15 years in a Hong Kong prison for espionage, a sentence that ended in 1945. Awarded the Distinguished Conduct Medal for his actions, the citation for that bravery decoration reads, in part, “The resolute courage of this [non-commissioned officer] NCO in spite of indescribable suffering and his devotion to duty provide an example of the highest tradition in the service.”

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Lest we forget: forgotten edition

So innovation minister Shawn Skinner will be attending Remembrance Day ceremonies at the “St. John’s National War Memorial” on Thursday.

There are at least two problems with this particular news release:

First, the National War Memorial is in St. John’s but it is not the St. John’s memorial, as this release suggests.  It’s the one erected in the Dominion of Newfoundland in the 1920s as its national war memorial, hence the name.

Second, Skinner isn’t just participating, he is representing the provincial government – officially – in the one ceremony that represents the entire province. Nice if the Premier could have made it, but evidently he had something else on.

Incidentally, it was good to see the Premier on Tuesday tossing around a few softballs with former journalist Peter Walsh over at Dannyvision.  All that free television across the province is especially important in polling month.

Those two huge gaffes  - what Skinner will be doing and where the event takes place - are enough to make a mockery of the sentiment expressed in the release that people ought to attend a Remembrance ceremony.

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Suzuki Foundation takes aim at Gulf drilling #oilspill

Kathy Dunderdale might not be too worried about the environmental impacts of an offshore oil spill. 

Charlene Johnson might have trouble from day to day figuring out if the offshore is in her jurisdiction or not.

But make no mistake:  David Suzuki has the Gulf of St. Lawrence firmly in his sights. The David Suzuki Foundation is encouraging its supporters to contact the federal government to get a halt to drilling and other exploration in the Gulf of St. Lawrence.

A big part of the campaign is simulations of the impact of a spill at Old Harry:

Each simulation illustrates what could happen if an spill of approximately 10,000 barrels of oil per day took place over a 10-day period in various seasons. The model demonstrates the direction of the flow of oil emanating from an instant or continuous spill. Forecasts indicate the location and concentration of surface and underground oil over time.

There’s a spring, summer, fall and winter version.

The spring spill hits Newfoundland very hard.

Summer is worse for western Newfoundland.

Fall nails the south coast as far away as the Burin Peninsula.  St. Pierre would take it heavily in this scenario.

Winter hits five provinces but affects only a small portion of south western Newfoundland.

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Related:

• NL offshore drilling bans rests with prov gov
• Drill, baby! Drill!
• Miles before they hit the shore (labradore)

Mysterious missile off Los Angeles

The video  - shot by a KCBS news helicopter - shows what seems to me a missile fired from the ocean offshore Los Angeles and heading out to sea.

But so far no one knows what it was. 

The United States Air Force insists it didn’t launch anything from nearby Vandenberg air base and the United States Navy is also denying any launches.

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US labour board files complaint over Facebook firing

In the United States, the National Labor Relations Board is accusing a company of illegally firing an employee over a comment she made on Facebook.

From the New York Times:

The labor relations board announced last week that it had filed a complaint against an ambulance service, American Medical Response of Connecticut, that fired an emergency medical technician, accusing her, among other things, of violating a policy that bars employees from depicting the company “in any way” on Facebook or other social media sites in which they post pictures of themselves.

Lafe Solomon, the board’s acting general counsel, said, “This is a fairly straightforward case under the National Labor Relations Act — whether it takes place on Facebook or at the water cooler, it was employees talking jointly about working conditions, in this case about their supervisor, and they have a right to do that.”

According to NYT, this looks like a straightforward case of free speech, as protected by law.

However,

employees might cross the line into unprotected territory if they disparage supervisors over something unrelated to work — for instance, a supervisor’s sexual performance — or if their statements are disloyal.

Courts often view workers’ statements as disloyal when they are defamatory and are not supported by facts. Mr. Babson cited a case upholding the firing of airline workers who held signs saying their airline was unsafe. But, he said, if employees held signs accurately saying their airline or restaurant had been cited for dozens of safety violations, that would most likely be protected.

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Lower Churchill: US and NL taxpayers might help subsidize costly big hydro project

Premier Danny Williams is promising a Lower Churchill deal before the end of the year and one way he could finance the project is by offloading the cost onto American and Canadian taxpayers.

Some American politicians are trying to redefine state environmental subsidies that currently don’t include hydro megaprojects like the Lower Churchill.  In Massachusetts, Republican gubernatorial candidate Charles Baker not only advocated for big hydro as part of the state’s energy future, he also favoured giving big hydro projects the “renewable” status that would make them eligible for state subsidies. 

According to the Boston Globe, the subsidies in Massachusetts alone could be worth as much as six cents a kilowatt hour.

Incumbent Democratic governor Deval Patrick  - who won re-election last week - opposed the idea:

“It does not make sense to give renewable energy incentives to a foreign-owned enterprise for something that needs no subsidy,’’ Patrick said in a statement to the [Boston] Globe. “It would amount to a windfall of hundreds of millions of dollars for Canadian ratepayers at the expense of Massachusetts customers.’’

That doesn’t mean the idea is dead in Massachusetts, though.  Energy giant Hydro-Quebec is lobbying hard for the “renewable” status for its own projects. Earlier this year, the company won a battle in Vermont to make hydro eligible for subsidies. That’s all part of HQ’s push to take its share of the New England energy market from 8.5% to upwards of 12%.

Lowering the cost of Lower Churchill power by six cents a kilowatt hour could make Muskrat Falls financially viable, especially if NALCOR left the American marketing to a private sector partner and let that company keep the subsidies.  NALCOR already sells power at the Quebec-New York border to Emera.  Under a deal announced in 2009, the Newfoundland and Labrador company apparently gets about the same rate per kilowatt hour it got from a similar deal with Quebec that expired in 2009.  Any other financial details, like profits from seasonal price fluctuations, seem to flow to the private sector.  It’s hard to know for sure since details of the 2009 detail are confidential. 

And while Danny Williams claimed last week he’d lay any development deal for the very expensive Muskrat Falls version of the project in front of the public, he hasn’t lived up to similar promises yet on other projects.  Many of the key details of the 2007 Hebron deal remain shrouded in secrecy.  Amendments to the province’s open records laws in 2008 shield the publicly owned NALCOR from disclosure of its financial dealings even though it receives public funds to run the company and its subsidiaries.

Foreign tax credits aren’t the only way NALCOR could subsidise the cost of building Muskrat Falls.

Under the most recent version of the Lower Churchill described recently by Premier Danny Williams, 40% of the power from Muskrat Falls would come to eastern Newfoundland. NALCOR’s environmental submissions on the project make it clear, however, that the island portion of the province doesn’t need the power now or in the foreseeable future. The company also plans to keep its diesel generators at Holyrood running even after it builds any new lines to the island from Labrador.

Shipping power to a part of the province that doesn’t need it would give the public utilities board the legal basis to offset any losses from sales to Nova Scotia or into Quebec by offloading them on local ratepayers.  That’s because provincial laws require that the public utilities board to set rates that protect NALCOR’s financial position from its entire operations.  But that rate-setting power only applies to domestic rates. PUB doesn’t regulate export prices.  By using Lower Churchill power in the province – even when it isn’t needed - NALCOR could use local ratepayers to subsidise power exports. 

Taxpayers could get hit another way on the deal as well.  Any NALCOR debt for the project – likely to be at least $6.0 billion – will wind up on the balance sheet of the provincial government, one of the most indebted provincial governments in Canada on a per capita basis. 

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