Tag Archives: Joe Oliver

Hoisted by their own petard


There was never anything essentially wise – beyond the obviously political considerations – about the Government of Canada’s white-knuckled determination to balance its budget come hell or Armageddon.

In their quietest moments even the fiscal hawks among us must admit that into all lives, some red ink must fall. Individuals, banks, commercial enterprises and, yes, even governments do, from time to time, deficit-finance their way to durable prosperity. That’s simply because the coincidence of opportunity and solvency is not always – in fact, never – perfect.

Knowing this, then, we ought not become the saps that campaigners on the hustings seem to think we are when they point to their debt-defying antics as proof of their unimpeachable sagacity.

Of course, the Harper government isn’t the first in this country to claim that it, and only it, has the best interests of the average tax payer at heart when it refuses to consider any alternative to a bottom line that reads: zero.

The problem is this ambition just doesn’t appear sensible, or even achievable, at the moment.

“Rotten Luck”, thy name is Torytown.

Oil prices are slumping more deeply than anyone expected. The economic revival in the United States is losing steam. The tragi-comedy that is the Grecian formula for European recession unfolds even as a downturn in our Greater Canuckistan’s resource-fired economy conjures the dreaded “R-word” here.

Now, the Parliamentary Budget Officer, Jean-Denis Frechette, says all of this is becoming a lethal cocktail for Conservatives.

According to a CBC report last week, “The government had projected a slim, $1.4-billion surplus for 2015 in its budget, which was presented last April.

The PBO estimates a budget outlook updated with the lower GDP numbers alone would show a $1.5-billion deficit at the end of this year and a $0.1 billion, or $100 million, deficit in 2016-17. Canada would be back at a $1.5 billion surplus in 2017-18, according to the PBO projection.

Added the public broadcaster: “But that’s not the whole picture. Weak GDP growth, the budget office says, would be partially offset by higher inflation and lower interest rates. Once those are taken into account, the projected deficit is $1 billion this year, with a small surplus of $0.6 billion, or $600 million, in 2016-17, and $2.2 billion in 2017-18.”

In fact, writing in the Globe and Mail earlier this year, Jim Stanford, an economist with Unifor, had this to say:

“From the outset, the battle to slay the deficit was all about political optics, not economics. Canada’s deficits after the 2008-09 meltdown were among the smallest in the world. Our debt burden (the more important concern) is small compared to those of other countries and other periods in history. Indeed, as a share of GDP, the debt has been shrinking since 2012. So whether Ottawa has a small surplus or deficit any year is irrelevant.

“For this government, though, it’s a political imperative. Nothing will prevent the Conservatives from forecasting balance next year.”

Nothing, so far, has. Ignoring the writing on the wall has become a singular pastime in Ottawa. And no one plays the game more stubbornly than Finance Minister Joe Oliver who continued to insist – despite the rather compelling, new evidence to the contrary – that the government will better than balance the budget.

“We have looked at our numbers and we are very comfortable that we will have a surplus this year,” he said last week.

Such insistence, once merely economically unwise, is now becoming politically perilous to the self-described standard-bearers of wise money management.

Are certain petards about to hoist certain MPs, after all?

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Tory relevance is not retiring


For strategic brilliance and tactical cunning, look no further than the Conservative Government of Canada. In an election year, these are the days that try the souls of federal Liberals and New Democrats, alike.

Against their own advice of only a year ago, the Harper Tories have executed a stunning reversal of policy in announcing that they will, after all, allow individuals to top-up their Canada Pension Plans (just in time, naturally, for the fall general election).

Said Finance Minister Joe Oliver last week: “To build on our current world-class system, we intend to consult with experts and stakeholders during the summer on options for allowing voluntary contributions to the Canadian Pension Plan.”

“However,” he added, “our government will not force Canadians into a mandatory, job-killing, economy-destabilizing, pension-tax hike on employees and employers. We believe that Canadians are best placed to decide how to save for their retirement with voluntary options, rather than have tax hikes imposed on them.”

That said, messing with the CPP – an arrangement between the feds and the provinces – would be a remarkable example of progressive politics for a party that has despised all such connotations in everything it has done to date.

And if this is not simply another vote-getting ploy – but an actual commitment should the Tories win another majority in October – it could amount to one of the biggest advances in social policy since Tommy Douglas tread the fair earth of western Canada so many decades ago.

Now, to be clear, a “voluntary” codicil to the current fed-prov agreement is a far cry from a “mandatory” requirement that employees and employers dig deeper into their pockets to fund old-age retirement benefits. It is not, for example, even close to the system that the UK currently enjoys – a system that tops up the state-benefit program with an ancillary fund that effectively raises the post-retirement incomes of low-wage earners to 40 per cent of the median, national average.

Still, it’s a start, and not a moment too soon.

Canada is facing a demographic crisis that all evidence suggests is leading the largest population cohort (those between the ages of 53 and 55) into structural poverty within 15 years.

Late-blooming equity accounts, overspending, debt restructuring, falling wage levels, winnowing economic opportunities for adult children, the various predations on retirement savings of capital markets – all have conspired to make a minefield of a future that once looked like the Elysian Fields.

Still, not everyone is convinced of the federal government’s good intentions. According to a Globe and Mail story, the NDP’s finance critic called the move a “deathbed conversion.” Indeed, he said, “you can tell when the government’s serious about something: They ram it through an omnibus bill. When they’re not serious about it, they launch a series of consultations.”

That’s fair enough. But what if – just this time – the Tories are serious about this thing of theirs; this entirely uncharacteristic overture to protect the future of the nation’s citizenry from the neglect and impotence that present-day capital markets promise routinely?

Even the remote hope that average wage-earners might obtain a measure of control over their retirement savings by plugging into a virtually fool-proof, government-guaranteed vehicle – as opposed to a predatory, capricious financial sector where certain public administrations actually pay criminally liable investment banks to stay afloat – is a genuine comfort to those who don’t occupy the one-per cent of the income population.

That’s why, of course, Mr. Oliver’s modest proposal is also masterful politics, timed like a bank vault on Canadian election time.

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How hawks and doves circle


The move was as much symbolic as practical. How better to prove to Canadians that the federal, Tory regime is on the right, fiscally hawkish course than by selling its last, remaining stock in the giant auto company it bailed out when it was on a far more fiscally dovish flight path?

With that, Finance Minister Joe Oliver proclaimed the end of an era this week, authorizing his government’s divestiture of 73 million common shares in General Motors to Goldman, Sachs & Co. “We have eliminated a market exposure for Canadian taxpayers and returned GM to private-sector ownership, having supported its continued contribution to the Canadian economy,” he declared in a statement.

What a difference eight years makes to the leadership sensibilities of the governing classes. We may recall the bad, old days of global, financial collapse in 2008 and the Great Recession that followed, when the still tender-footed Harper majority was, like the normally counterpoised Obama administration, committed to economic stimulus not austerity, spending rather than restraint.

At that time, allowing the big automakers, GM and Chrysler, to fail was unthinkable on either side of the 49th parallel. Indeed, less than a year after Parliament Hill and Queen’s Park banded together to drop a combined $14 billion on the crippled manufacturers, then-federal Industry Minister Tony Clement declared, “This was not a decision we took lightly. But, at the end of the day, we knew that if we did not participate, what was at risk was not just the (direct) jobs but all the other parts manufacturers and other industries that go into having an auto sector in this country, and that has been estimated to be over 400,000 jobs that were at risk.”

He was probably, if frustratingly, correct. Now, it appears, the nation’s economy has recovered well enough to justify liquidating the government’s auto assets (reportedly worth about $3.5 billion) just in time to balance the budget later this month, roughly half-a-year before the next general election.

All of which may only prove that hawks and doves really can occupy the same airspace, depending on which way the political wind blows.

Still, the larger issue that concerns many economists in this country is whether a hell-bent rush to book a balance in the public accounts, come what may, is rational (or even possible) in the medium-to-longterm. The GM cash-out may not be, technically, a windfall, but something about it feels awfully like found money (“Don’t worry, Mabel, we’re saved from perdition; I just found Uncle Harry’s collection of gold nuggets buried in a coffee can down by the river).

Meanwhile, storm clouds are once again gathering in the broader economy – which is expected to grow only fractionally over the next quarter – a point that Bank of Canada Governor Stephen Poloz made clear in an interview with The Financial Times last week. “When the oil shock came, it was clear we would no longer be able to close the output gap by 2016, but by 2017,” he was reported to have said.

“Since we had some firepower, we took some insurance and cut rates. . .The first quarter of 2015 will look atrocious, because the oil shock is a big deal for us. . .

In theory lower oil prices mean (putting) more money in consumers’ pockets, but. . .if an oil company cancels (an investment) project, laying off a worker, that guy will not have the money to buy a new pickup truck.”

A balanced budget is a desirable objective for any lawmaker, but not when there are girders in the economy to support – and certainly not when all such book entries are manufactured for more symbolic than practical reasons.

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Oh, what a messy slick we spill


Oil has a nasty way of sticking to everything it touches, including the best-laid plans of men, governments and hired gunslingers in the spin-rooms of the nation.

Not so long ago, black gold was Canada’s economic salvation. It was better than  manufacturing, technological innovation in the non-resource sector, and even financial services at generating long-term jobs and huge dividends for high-flying investors.

Indeed, so went the fairy tale, oil was the last, best hope to power these industries and aspirations and return the country to its always mythological status as the world’s next, big superpower of opportunity.

Oh well. Easy come, easy go – which has become, in New Brunswick, our preferred provincial slogan, beating out such bromides as “Be in this place” and (my personal favorite) “Hell, it could be worse, though we don’t possibly see how”.

Still, Alberta’s blackened, big sky country may want to rip a page from the picture-perfect province’s sloganeering songbook as it begins to send thousands of expat Maritimers back home to their sea-bound coasts.

With oil hovering below $50 a barrel – down more than 100 per cent since mid-October – and no discernible bottom to the price plunge, the West’s formerly gilded streets are about to be lined with foreclosure notices, each prettily packaged in recyclable envelopes, courtesy of your friendly, neighbourhood big, Bay-Street bank.

Oh, how the ironies abound.

To Stephen Harper’s Conservatives, oil meant certain reelection in October. That’s because royalties from this resource enabled their utterly fantastical predictions of surplus, their wholly irresponsible promise to permit income splitting among families that could well afford to pay the tax man that which is properly due to him, and their cynically calculated (and needlessly costly) diversions regarding the Child Tax Credit.

Now, they’ll be lucky to muster enough cash to cover the cost of the laces for the finance minister’s new shoes come budget time some months away.

As it is, they can’t work fast enough to fit themselves for boots of clay.

According to a Globe and Mail report last Thursday, “The Conservative government will not release the federal budget until at least April, a delay meant to give Finance Minister Joe Oliver more time to assess the impact of plunging oil prices on the Canadian economy.”

As Mr. Oliver told a press conference in Ottawa, “Given the current market instability, I will not bring forward our budget earlier than April. We need all the information we can obtain before finalizing our decisions. . .“This new reality poses a great, though not entirely unprecedented challenge. . .It represents the third largest price decline in the last four decades, exceeded only by the 1986 OPEC collapse and the sharp decline and rapid recovery we saw during the Great Recession. . .Given the current volatility, there is no consensus about how low will prices fall and how long they stay there. Nevertheless, every knowledgeable person I have spoken to believes, and history tells us, that prices will eventually move well above (the) current level.”

In fact, though oil’s price may not have yet bottomed, there is, evidently, a point at which the Canadian economy’s ability to compensate for its clear and utter dependence on the stuff simply fails.

Only a week ago, Ontario Premier Kathleen Wynne all-but bragged about the coming resurgence in her province’s manufacturing sector. Low petroleum prices, she noted, meant a lower valuation of the Canadian dollar against its U.S. counterpart. Since south of the border is where more than $300-billion of this country’s good wind up each and ever year, logically the boon to exporting ought to be commensurately marvelous. Read: Who needs oil?

Well, apparently, we do; and the sticky, messy stuff is not cooperating.

Says former finance department deputy minister Scott Clark, in a separate Globe piece last week, “If the government tries too hard to show a surplus, in other words twists and turns in the wind and does everything to show a surplus, I think you lose political and professional creditability. . .The reality is a lot has changed and if I were the Conservative government, I’d be saying ‘that’s the fact.’ Things have changed and we should just realize that and deal with it.”

Of course, that makes just too much sense for this country’s leadership, almost more enamoured of its own talking points on oil than it is with the sticky stuff, itself – if that’s even possible.

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A financial tale of 14 solitudes


Predicting years of fiscal health for the Canadian economy is like forecasting a warm winter for the customarily Great White North.

In some places across this vast country, conditions will be delightfully luscious; in others, downright lugubrious.

That said, according to news reports, the federal government is set to announce a trifecta, and maybe more, of solid annual surpluses totalling about $15 billion. If it manages to pull off such a feat, Harpertown will likely go down as one of the nation’s most prudent, careful administrators of other people’s money in modern times. And, indeed, bully for it.

“Strong job growth and tight spending will allow Finance Minister Joe Oliver to confirm Ottawa is poised for years of budget surpluses,” the Globe and Mail declared this week. “That scenario – which is the result of near historic lows in both government spending and revenues as a percentage of the economy – fits with Conservative pledges of low taxes and smaller government. It also presents a clear challenge for the opposition New Democrats and Liberals, both of whom have promised to increase spending in big-ticket areas.”

Still, the slow-and-steady expenditure strategy of the Tories, coupled with tax-rate moderation, are not without their perils.

For one thing, they depend on continued economic recovery over the period of promised surpluses. With a national unemployment rate of 6.3 per cent (substantially better than the predicted 6.6 percent for the last half of 2014), the Feds are happily confident that they’ve called labour market trends correctly.

But this assumes that the participation rate (the number of people actively looking for work) will remain robust overall. In some places, like Alberta, Saskatchewan and British Columbia, it will. In others, like New Brunswick, Nova Scotia, Ontario, and Quebec, the story is dramatically different, especially among young people – a cohort that is, increasingly, discovering that gainful work is harder to find than to actually perform.

Then there’s the hoary problem, once again looming on the horizon, of global economic uncertainty and weakening commodity prices for some of Canada’s most important resources – namely oil and gas. For about a year, this country’s petroleum producers have enjoyed a rare respite from OPEC pricing, thanks to steady demand from the United States and a low currency valuation, relative to the U.S. dollar.

Again, though, that could change if the Harper government’s recent trade deals with the European Union and, particularly, China, eliminate the advantageous export implications of the loonie’s float in world currency markets.

Apart from any of this macroeconomic mumbo-jumbo, though, there is the socio-economic stratification of Canada’s domestic economy to consider. Call it our 14 solitudes, one for each province, territory and, of course, Ottawa, itself.

It’s one thing for the Centre to judge itself well and fully solvent. It’s quite another to extend that merry conclusion to the circumstances that frame the provincial and territorial partners in Confederation.

The federal government’s success has come, in large part, due to its determination to hold the line on Constitutionally mandated spending on public health care, education and Employment Insurance. The burden of this approach on rich provinces has been negligible. The same can’t be said for those whose populations of ready, skilled workers are shrinking, even as their ranks of aging retirees are swelling.

As ever, the numbers tell the tale.

While Ottawa amasses enough lucre to predict three or five years of $2-5-billion annual surpluses, New Brunswick is facing, in all likelihood, three or five years of mounting annual deficits nearing $400-500-million in each fiscal period. Each pernicious term merely expands the provincial government’s already bloated $12-billion long-term debt, effectively crippling any meaningful, government-supported economic development (investments in innovation, higher education, even early childhood education).

The same pattern repeats in Nova Scotia, Ontario, Quebec and even, astonishingly, in oil and gas-rich Newfoundland and Labrador, which will lose its dubiously valuable “have” status  soon if it’s not careful.

So, yes, bully for Ottawa. It has managed to balance its books to the benefit of every Canadian.

It remains to be seen, however, which Canadians will benefit most from such probity – who will enjoy the warmth, and who will be left out in the cold.

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A tale of two debt loads

Mountain of debt...maybe we grow accustomed to its face...

Mountain of debt…maybe we grow accustomed to its face…

Implementing prudent fiscal policy is, for finance ministers, like threading a needle with a tightrope. Just ask Ottawa’s Joe Oliver or Fredericton’s Blaine Higgs who are, for very different reasons, attempting to execute that particular circus trick.

In the wake of a C.D. Howe Institute report that calls for the federal government to loosen up on its avowed purpose to balance the national budget by 2015 come what may, Mr. Oliver thunders like a Calvinist preacher: “Our government will not open the taps on reckless spending. We will not go down that well-trod and irresponsible path to economic decline.”

Still, economist William Scarth is adamant. “The federal government should delay its final stage of deficit reduction by three years,” he writes in his report for C.D. Howe. “If its deficit-to-GDP ratio is held at one-half of one percentage point for three years before reducing it to zero, it is estimated that the nation’s unemployment rate would be four-tenths of one percentage point lower during this three-year period (the equivalent of 75,000 new jobs).”

He’s not alone in this thinking.

A recent Canadian Press piece quotes several noted experts – some of whom are not partisan word warriors – who point out that the Canadian economy is not, in fact, in especially good shape. Over the past 12 months, only Alberta has created any jobs –  and even there, 72,000 new positions are not enough to boost the flagging fortunes of Ontario, Quebec or, for that matter, New Brunswick.

“Balancing the budget is a political imperative not an economic one,” NDP finance critic Nathan Cullen says. “It’s like balancing the family budget and not feeding the kids.”

Meanwhile, Liberal deputy leader Ralph Goodale writes in a recent editorial, “For months on end, (the Harper government) dismiss weak employment numbers like the ones recently reported by Statistics Canada for the month of June – as just ‘monthly volatility’.  But it keeps recurring, month after month. One might ask, at what point does that so-called ‘volatility’ become an undeniable trend in the wrong direction. Or to put it another way, when will Mr. Harper pull his head out of the sand?”

Then, there’s David Dodge, a former Bank of Canada Governor whose Spring 2014 Economic Outlook for the law firm Bennett Jones observes: “It is. . .important to realize that in the current environment of low long-term interest rates, fiscal prudence does not require bringing the annual budget balance to zero almost immediately. Small increases in borrowing requirements to finance infrastructure investment would still lead to declines in the debt-to-GDP ratio. Moreover, with low interest rates, it is the right time for governments and the private sector to invest in infrastructure.”

Finally, the CP taps Bank of Montreal chief economist Doug Porter for his views. Says he: “The market is not crying out for a tighter fiscal policy at the federal level. If the government wheeled out a significant medium-term infrastructure program, I don’t think I’d have a big problem with it they can borrow very cheaply and there’s a pretty good case to be made that there’s lots of demand for infrastructure.”

Move eastward to New Brunswick and witness a whole different tale of woe. Here, Finance Minister Higgs would give his left pinky to own Mr. Oliver’s set of problems, i.e., to spend or not to spend.

According to the latest audited financial statements, the province finished fiscal 2013-14 with a deficit of $500 million (about $20 million more that anticipated) on a long-tern debt of $11.6 billion.

Meanwhile, New Brunswick’s population of 755,464 people continues to age, making a quick return to fiscal health about as likely as a late-July nor’easter.

Still, plucky Premier David Alward enthuses, “We are turning the corner and we see revenue projections on target or actually a bit ahead of target from what we are projecting.”

Of course, to do that, Telegraph-Journal reporter Chris Morris notes “additional revenues of $1.129 billion, a 14 per cent increase over 2014-2015, must be achieved.”

Not even on his very best day would Mr. Oliver walk that tightrope for Mr. Higgs.

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Such a fine line: economy versus environment

Four strong winds that blow from Alberta

Four strong winds that blow from Alberta

This music industry icon, this erstwhile miner for a heart of gold, steps off the bandwagon just long enough to cluck his tongue and sample the air in beautiful, downtown Fort McMurray.

It looks like a nuclear test site and smells like one, too, says Neil Young: “The Indians up there and the native peoples are dying. The fuel (is) all over – the fumes everywhere – you can smell it when you get to town. The closest place to Fort McMurray that is doing the tar sands work is 25 or 30 miles out of town and you can taste it when you get to Fort McMurray. People are sick. People are dying of cancer because of this. All the First Nations people up there are threatened by this.”

What’s more, he told an American crowd the other day, “Fort McMurray looks like Hiroshima. . .a wasteland. . .The oil that we’re using here. . .they call ethical oil because it’s not from Saudi Arabia or some country that may be at war with us.”

Actually, there’s no need for atomic-era hyperbole. Good, old Fort Mac (population: 61,000) looks like Fargo, North Dakota, which is, in and of itself, bad enough. But I take Mr. Young’s point: The tar sands are despicable. Boo.

Among the celebrated elite, it’s a familiar refrain, gaining ever greater traction as U.S. President Barack Obama leisurely considers his next move in the Keystone XL pipeline kerfuffle. Indeed, the list of prominent “deathline” haters grows longer with each day that passes on the protest lines: There’s the Dali Lama and his pal, Al Gore; there’s Bishop Desmond Tutu and Sundance Kid Robert Redford; there’s actors Mark Ruffalo, Julia Louis-Dreyfus, Kyra Sedgwick, and David Strathaim. All are wedded to the simple, if absolute, certainty that Alberta’s oil industry is killing the planet.

They are probably right. Still, no one in a position of authority ever looks at the long game of energy policy – not when the short game is so economically lucrative and politically profitable.

Consider the oft-repeated rejoinder of tar sands apologists to the environmental lobby’s claim that Alberta bitumen is dirtiest source of oil in the world: No, it’s not. Or, as Canada’s Natural Resources Minister Joe Oliver told The New York Times’s Joe Nocera recently, “That statement that the Keystone pipeline would mean ‘game over’ for the environment is absurd.”

Mr. Nocera – a confessed proponent of the project – grabbed the baton from Mr. Oliver and, in his column, sprinted to the finish line:

“Oil mined from the sands is simply not as environmentally disastrous as opponents like to claim. Extraction technology has improved to the point where there is almost no difference, in terms of greenhouse gas emissions, between sands oil and old-fashioned oil drilling. The government has insisted that the companies extracting the oil return the land to its original state when the mining is completed. Indeed, for all the hysteria over the environmental consequences of the oil sands, there is oil in California that is actually dirtier than the oil from the sands.”

All of which misses the bigger point – the one that celebrity eco-warriors, themselves, invariably fail to make: If you’re pointing a shotgun to your head, does it really matter what calibre of shell you’re using?

The world is hooked on oil. It’s going to stay that way until it runs out (not likely) or its economies collapse (increasingly likely). If Keystone fails to win presidential assent this time around – thanks, perhaps, to the pickets of the preeminent – it, or something like it, will roll out the next time around, or the time after that. There’s no point in pretending otherwise.

Just as there’s no point in pretending that anyone is giving serious consideration to the long-term economic benefits of the Energy East pipeline proposal for New Brunswick – though we might do ourselves a favour by curbing our crowing tongues for a change and spend a few minutes actually examining the post-construction-phase ramifications of, and the durable commercial opportunities generated by, the project.

After all, out here in New Brunswick, where we don’t lace our boots without a government shoestring, we’re not looking for a heart of gold.

Just the gold.

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