Tag: economics

Today I agreed with Stockwell Day

So CTV News today was presenting a story about a protectionist “Buy American” bill that the US Congress has suddenly passed. And some MP (not sure the party) suggested that Canada should pass its own “Buy Canada”, to which I found myself replying, “Protectionism doesn’t really help stimulate the economy” only to find Stockwell Day, on TV, saying virtually the same thing, at the same time.

Dah!

Anyway. I can’t seem to bring myself into a lather over this budget and the projected deficit. It does seem a rather large deficit, but then again, there is an awful lot of opinion out there that stimulus is needed and deficits must be tolerated. Those opinions could be wrong, but I sure don’t have the knowledge to dispute it.

But greatly amused this morning when maverick CBC economics reporter Michael Helinka (not in favor of deficit spending, by the way) expressed pure amazement that host Matt Galloway actually believed that Conservative governments try to avoid deficits. “That is simply not true. Republicans, Conservatives—they do not balance budgets. Liberals and Democrats do. Conservative governments have that reputation, but it’s simply not borne out by the facts.”

Yes, I know, I’ve said it before, but it’s hard to let go of: Stimulus package or no, we would have been in deficit anyway, because the Conservatives frittered away the surplus with stupidly timed tax cuts and silly one-time expenditures. That’s what Conservatives do.

So I don’t know what it means that I agreed with Stockwell Day.

And, I suppose it doesn’t speak well of me that I also agree with faux Michael Ignatieff in this clip from 22 Minutes. But why don’t Canadians spend some time educating themselves about how the Parliamentary system in this country works? (Not to mention which parties are best at managing economies.) That way Conservatives could stop so easily manipulating their ignorance.

Doing my bit for democracy

For the first time in my life, I voted in the early polls. That’s it, I’m done. Now I can focus on a truly inspiring Canadian contest: Who is Canada’s favourite dancer? (Seriously, if you haven’t seen So You Think You Can Dance: Canada? You should. It’s been delightful so far.)

But the economy is tanking, the polls are tightening, and the election is beginning to look like a bit of a booby prize—whoever wins this one is going to be blamed for the bad times, even if it’s not their fault.

So with all the market turmoil, can we just forget about combating global warming now? Wouldn’t that be nice. Remember, economic crises—we’ve gotten over them before, we’ll get over them again. Ecological crises—not so much. I’m going to quote Andrew Nikiforuk quoting Thomas Friedman, because they’re both real conservative guys:

By Friedman’s evocative accounting, the globe has now entered the “Energy-Climate Era” and faces several hot emergencies: petropolitics (it gives power and money to leaders who have earned neither); dramatic climate disruption; the rise of middle classes in India and China; and a real weapon of mass destruction, the catastrophic loss of biodiversity in the world’s forests and oceans. The global economy has become “a monster truck with the gas pedal stuck and we’ve lost the key.” Unless we switch to cleaner fuels, “our lives will be reduced, redacted, and restricted.”

And we’ve got about 10 years to do it. Cheery, huh?

Also interesting—because I just haven’t heard about it anywhere else—was Doug Saunders article about a scheduled meeting between presidents of the EU and whoever is Prime Minister on October 14. Subject: A potential economic partnership with Europe. Problem: All the Canadian provinces would have to agree with this, and Canadian provinces don’t agree on much. Saunders blames Harper’s policy of “open federalism” for just making this disunity worse.

Despite Europe’s stock market also being in a “boomerang” crisis, it’s still likelier to be a healthier trading partner in the next few years than the US, the source of the collapse. And it would be nice to have a PM who wasn’t philosophically opposed to getting all the provinces into one trading agreement with that lucrative market.

RDtNVC: Increasing energy prices without compensating with tax cuts

There were two letters in the Record yesterday related to the carbon tax plan. One asked how charging for pollution could possibly reduce it — wouldn’t companies just pass the increased cost onto customers as higher prices? The other asked, wouldn’t it be better to just force big polluters to pollute less, via regulation?

Both good questions. Comes down intuitively favoring a regulatory or “cap and trade” approach over a carbon tax, as so well articulated by Jeffery Simpson in the Globe and Mail:

They [the Green Party] bring urgency to the debate that the Conservatives lack, and they’ve got one thing right: that carbon emissions have to be assigned a price, that a tax is a defensible way to do it, and that the revenues from the tax are best recycled into lower personal and corporate income taxes.

There is another way of finding a price, through a cap-and-trade system, as proposed by the Conservatives and NDP. This targets mostly large polluters. Some of the costs are then passed to consumers. Using the tax, a method favoured by many economists, gives carbon a price certainty but doesn’t guarantee a particular emissions result; using the cap-and-trade produces a particular result but at an unknown price.

Politically, the cap-and-trade is a much easier sell, since the eventual effect on the ordinary person is indirect, whereas changes to the tax system are in the faces of consumers. The easier politics of the cap-and-trade explains in large part why Conservatives, New Democrats and U.S. politicians like it.

It’s too bad we can’t have a reasoned debate between these two approaches, instead of the slanging match and attack ads about the “carbon tax” that the Prime Minister calls “insane” and says will “screw” Canadians and “wreck the economy,” something that’s not happened in any of the countries that have thus far introduced one.

Now, I’m think of writing my own letter to the editor on this subject, and I can’t just plagiarize Jeffrey Simpson if I do that. So here’s my draft, which I’ll refine later! [I’m such a technical writer, sometimes. Just can’t resist the bulleted list!]

Something that seems to be missed in all the wild claims about the effects of a carbon tax on the economy and prices is that the regulatory or cap-and-trade system offered as an alternative will also raise energy prices — and without balancing them with an income and corporate tax cuts.

A cap-and-trade system involves only the largest polluters. Total target emission levels are set and are assigned a price. Companies who pollute the most pay the companies who emit the least. But exactly as with a carbon tax, some of those extra costs are likely to be passed on as higher prices for consumers.

The reasons the most economics and environmentalists — groups that don’t typically agree on much — favor a carbon tax over a cap-and-trade system include the following:

  • By involving everyone, not just the largest polluters, the potential reduction in pollution is therefore much greater.
  • With a cap-and-trade system, there’s no benefit to companies that will never reduce their emissions below the overall target, so they won’t. With a tax, the more they reduce, the more they save–and the greater the environment benefits.
  • It rewards companies and individuals who are already doing well, environmentally. They get more back in income and corporate tax cuts than they pay in increased carbon taxes.
  • Corporate and income tax cuts are generally stimulative to the economy, freeing up more money for investment, savings, and spending.

The truth is, the environmental policies of all the political parties–including the Conservatives–are going to increase energy prices. The question is, do you want an income tax cut to help you pay for those inevitable price increases, or not? If you do, then you should vote for one of the two parties planning to implement a carbon tax: the Green Party or the Liberals.

(2023 Postscript: These are the roots of the Conservative war on carbon taxes, but interesting that they supported cap and trade at the time. Also interesting that the Liberal plan was to reduce income taxes as compensation rather than the current “revenue neutral” approach. Finally, so sad that so many years later Canada has accomplished so little on this front.)