Inkless Wells

Paul Wells on all the latest out of Ottawa—along with the occasional post about jazz. Follow Paul on Twitter: @InklessPW
He also offers his thoughtful perspective of Stephen Harper’s last 10 years in his recent eBook, The Harper Decade.

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Post-debate post: He's a man, he's got a plan, notwithstanding that eerie sense of déjà vu

by Paul Wells on Wednesday, October 1, 2008 11:31pm - 56 Comments

I have little to add about the French-language leaders’ debate after our rather exhaustive group liveblog, which was a blast and which was extremely well-received by readers who were following along with us while the debate was happening.

I do, however, want to address the Liberal leader’s surprise policy announcement in the opening minutes of the debate. Apparently Prime Minister Martin wants to amend the constitution to bar the federal government from invoking the “notwithstanding” clause. Stéphane Dion has a five-point plan for fixing the economy in 30 days if he’s elected.

What to think of all this?

Well, first, as you can tell, I’m a bit weirded out by the structural resemblance to the failed 2006 ‘notwithstanding’ stunt. In that election, some of Martin’s staffers thought it’d be neat to release a policy plank live on TV while millions of Canadians were watching. Nothing required that the plank be a truly weird straw-man plan to skate Stephen Harper offside on abortion once again, but apparently that was some kind of bonus.

But just because tonight’s announcement borrows the manner of one of the really bad ideas in the history of Canadian politics doesn’t mean it is necessarily another of the really bad ideas in the history of Canadian politics. Let’s look at what Dion is actually proposing.

He’d ask a bunch of financial eggheads — OSFI, CIDC, CMHC, Bank of Canada — if they have any good ideas.
He’d have a meeting with economists. Don Drummond, check your Twitter.
He’d slam together an Economic and Fiscal Update within three weeks after forming a government.
He’d have a meeting of First Ministers.
He’d accelerate infrastructure spending within already-planned spending programs.

This list comes close to satisfying the Hippocratic Oath — “first, do no harm” — while being perhaps a bit too reminiscent of the Favourite Paul Martin Idea — “first, hold a lot of meetings.” Items 1, 2, and 3 on this list seem, to me, to fall into the category of “Couldn’t hurt, and for all you know, they might even help.” Item 4 is riskier — premiers tend to be smarter one by one than in bulk. As for 5, depends on your tastes. Two earlier rookie leaders did things like this when they took office during earlier economic hard times: Bill Clinton held a big meeting with economists, and Jean Chrétien launched infrastructure spending.

Since it was Stephen Harper who asked for the debate’s chapter on the economy to be expanded from 12 minutes, it was striking that he didn’t have much new to say with the extra times. Mind you, Harper’s core economic message — “stay the course” — doesn’t take long to say. Dion showed up at an expanded debate with expanded economic policy, or at least with expanded economic busy-ness. It helped him fill his allotted speaking time, at least.

Dion will be able to take this list of ideas into the English debate without having to hang his head in shame. Is anyone actually against asking the Bank and the provinces for ideas?

I’m keenly, and sheepishly, aware that this post amounts to an entirely mixed review. I don’t think Dion’s announcement deserves better — or worse.

Tags: Election Watch, Paul Martin, Stéphane Dion

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Mike G

I think that was an absolutely great debate, and a damn fun liveblog too (though I read it after the fact.) I am very much looking forward to tomorrow.
http://mikewatkins.ca/tags/politics/ Michael Watkins

I think many are missing the point.

Dion simply acknowledged the seriousness of the issue through his 30 day action plan. Those that equate this to the notwithstanding clause stupidity of Martin are simply being partisan, not objective. Clearly there is a great deal of room for debate on what to *do* about the situation – just look at the political storm over “bailout” in the U.S.; “do no harm” actually makes a lot of sense.

Harper has by and large been claiming “steady as she goes” will do the job, as Paul noted in his post.

Yet the economy is not travelling downward in a straight line, the unravelling in the U.S. is accelerating and we’ll feel this very soon.

This is going to have an impact, a dramatic impact, on Canada that Harper has deliberately been underplaying for months. This election was called because of where we are headed in the near term economically.

None of this is news, as Harper admitted during the debate. But its one thing to expect softness – or worse – its quite another to do something about it.

Perhaps folks should look at the Government of Canada’s latest financial statements and ask a few questions, first among which: why is short term borrowing (via t-bills) up 42 billion dollars over the last three monthly reporting periods? This is unusual, compared to past years this decade, and perhaps is an emerging and worrying trend. If so it goes counter to all the official dogma coming out of Flaherty and Harper.

The government has seen fit to cut government finances to the bone purely to satisfy its ideological urges – to restrict all future governments, Conservative or otherwise, from implementing major new programs or spending increases.

Its akin to taking your wad off to the casino to blow it all just as hard times are a-coming.

Yeah, yeah, I know, government doesn’t know best, better a dollar in our pocket than theirs.
http://deleted Sandi

I thought the Martin people were to coach Dion for the English debate…maybe I got it wrong.

A crisis has hit the US – so why not have a plan to talk to folks, cause sure as hell Harper won’t give them any info.

Otherwise, they’d be working in the dark.
Davey Boy

Dion’s proposal certainly has shades of PMPM. Back in the 04 campaign I recall that Martin pledged to convene the premiers within 45 days (I may have the number wrong, I can’t find the actual pledge using Google) in order to “fix health care for a generation”. He also promised that everything would happen out in the open, no closed door meetings.

Anyway, quite predictably, the meeting was finally convened after ten weeks or so and almost fell apart before it started. The premiers were universally unimpressed with Martin’s opening gambit (although Dalton may have been tickled pink, it was a while back) and threatened to walk out. (Klein went gambling instead of sitting around the rec room at 24 Sussex). The opening session turning into a pantsing of PMPM, with each premier (and territorial leader) complaining, in turn, that his province was getting the shaft from the feds. Wearying of his public humiliation, Martin adjourned the meeting at midday and moved things “behind closed doors”. In the end Martin turned turtle and capitulated to the premiers’ complaints. It was, as I recall, federalism at its finest.

So, despite Dion’s pledge having a real “notwithstanding” feel to it, it’s probably more dubious because of the timelines it sets. A fiscal update within three weeks of being sworn in? It would take John McCallum about that long to figure out how to lock the door to his executive washroom, so you can forget about him getting up-to-date with his briefing books. Of course, Dion could make Bob Rae his Finance Minister (unlike McCallum he actually has some experience putting budgets together – not good experience, but experience) but, after his five years running Ontario, this would likely kill off whatever life was left over at the TSX, so the folks at Finance might have more pressing concerns than running off spreadsheets about Canada’s financial position. Throw in a first ministers conference and you can pretty much write off the first four months of getting anything done.

The infrastructure pledge is pure Chretien, which doesn’t make it bad. If the economy does head south, Harper would do it himself, in an expedited fashion. But, given that its Dion’s plan, will it be a green infrastructure program, complete with carbon offsets? Or just a program of building windmills from sea to sea to sea?

The proposal really has a “back of the envelope” feel to it, with unrealistic timelines and uncertain goals. It actually has a “Green Shift” feel to it. That can’t be bad…can it?
Cool Blue

If the result of these meetings is that the economists decide now is not a good time to introduce a carbon tax; will Dion dump the Green Shift?

We already know that most premiers are against it.
Jack Mitchell

This Dion announcement is far less absurd and cynical than Martin’s, but I can’t say that I think it means much.

Talking to the Bank of Canada is never a bad idea, unless you have some misguided idea that you know better than they do about interest rates, etc.

Talking to the premiers can’t really hurt, but I don’t quite see what it would accomplish, unless we were in some Great Depression scenario where we all had to spend our way out of deflation. Probably it would just be another round of the fiscal imbalancing act.

Spending money on infrastructure strikes me as an excellent idea, especially if it means trains and public transport, but I can’t see that solving a credit crunch.

I think it just shows that Dion is interested in the economy, which is a good thing. Also, because it doesn’t amount to much, you can’t really attack it. It will be interesting to see how Dion plays it up (or not) tomorrow.
http://carnewsandviews.com jwl

First off, I would echo others who say that Dion’s plan is weak because it’s hold a lot of meetings and build infrastructure. Don’t we do that every recession?

Secondly, the economists who he wants to talk to. Why talk to only economists who work for the State. They are going to draw up something that’s a lot like the Paulson plan, fat cats helping fat cats. Why not talk to economists who don’t rely on the State for their paycheque and see what they think.

Dion didn’t say what the problem is with the Canadian economy and what needs to be fixed. All except Harper are scare mongering and they’re going to talk us into a recession. Did you notice how the all the chicken littles kept referring to the U.S. and made it seem like we have the exact same problems here?

Clearly, we are going into economic downturn but that’s happening worldwide. If people think putting socialists in power now is a good idea, I wish they would look to UK and see how that’s working out and remember to always be careful what you wish for.

Coming up with nebulous plans to fix a problem that may, or may not, emerge does not impress me all that much.
Paul Wells

jwl, point 2 of Dion’s plan-thing calls for “independent private-sector economists.”
john g

The question I would ask Dion is what will he do when everyone in those meetings tells him that his carbon tax plan will kill the economy?
Paul Wells

Unless he holds those meetings in the Conservative caucus room, John G, there’s no danger of that. Ahem:

“Don Drummond, senior-vice president and chief economist at the TD Bank Financial Group, said he believes it is a misperception that people living in rural areas will be disproportionately affected by a carbon tax.

“The offsets are heavily oriented towards the personal side and when you look at what percentage of the carbon tax will be paid by the individuals as opposed to corporations, corporations are getting back only a fraction of that in the offset plan, most of it is going to individuals,” said Mr. Drummond.

He said the fact that the Liberals’ proposed carbon tax would not raise the price of gasoline at the pumps has been largely absent from the debate, and has caused a lot of confusion about the plan’s potential implications.

“Bear in mind the carbon tax that they’re proposing is not on gasoline, because it’s already approximated by the existing gasoline excise tax so that [rural people] don’t have access to public transport, that’s not particularly relevant because the price of gasoline is not going to be changing…Their home heating costs would not be very different because they’re in a rural area,” said Mr. Drummond.”

http://www.thehilltimes.ca/html/index.php?full_path=2008/july/21/carbon_tax/&display=story
boudica

“Mind you, Harper’s core economic message — “stay the course” — doesn’t take long to say.”

No no Paul. The core message is “Canada is not the United States. Our economic fundamentals are strong.”

Sorry, couldn’t resist.
Paul Wells

john g, here’s a fun article on the economics of carbon pricing, from a magazine called The Economist that hires people who don’t know half as much about economics as you do.

http://www.heatisonline.org/contentserver/objecthandlers/index.cfm?id=6485&method=full
http://carnewsandviews.com jwl

Paul Section 2 says gather economists “to report on the state of the economy”. What’s the point of that? We already know the state of the economy, Stats Can and Finance Ministry keep us well informed.

Dion is a bureaucrat, and know-it-all, at heart and he would listen to the eggheads from OSFI, CIDC, CMHC, Bank of Canada before he would listen to a free marketer from the University of Calgary or a marxist from Trent.

I wish someone would gather economists who had a wide range of thought and make them thrash something out. I found the book The Wisdom Of Crowds to be very persuasive and having people who know what they are talking about developing policy would be a great idea but it’s not going to happen.
Paul Wells

For a fun bonus, it’d be interesting to ask those economists about GST cuts and reductions in the diesel excise tax.
catherine

Wells, thanks for that link to the article on carbon pricing. Seems to be saying exactly the same things as the US Congressional Budget Office, which is that the carbon tax is by far the best way to price carbon if you want to achieve results as cheaply as possible.

One can design a cap and trade to mimic many features of a carbon tax (and the US CBO gives specific advice on how to do this). It makes for a complicated system, but if politics dictates that one must implement cap and trade, then that is the way to go. Still not quite as efficient as a carbon tax, but a big improvement over most cap and trade. The worst case is fixed, inflexible caps, as proposed by the NDP. That is the most costly system.
http://www.kontrol.ca kontrol

Here is what over 200 economists think about the first proposed (and failed) US bailout package.

http://faculty.chicagogsb.edu/john.cochrane/research/Papers/mortgage_protest.htm
Cool Blue

Quote: “Unless he holds those meetings in the Conservative caucus room, John G, there’s no danger of that. Ahem:”

What about the meetings with Premiers?

Provinces against the carbon tax:
- Ontario
- Manitoba
- Sask.
- Alberta
- New Brunswick
- NL (against the Green party carbon tax)

I believe the territories have also come out against it.
http://carnewsandviews.com jwl

Paul Old articles from Economist don’t prove anything. Look at current numbers and you will see that EU is in real economic trouble, the economy contracted in second quarter and they are talking about ‘stagflation’.

But who cares about real world experiences when we got Drummond to tell us that everything will be fine when we put a new tax on just about everything.
john g

john g, here’s a fun article on the economics of carbon pricing, from a magazine called The Economist that hires people who don’t know half as much about economics as you do.

Well they tried to hire me but they couldn’t afford me.
DR

Making a serious attempt to understand what the impact of the US implosion is a good idea.

Shrugging, smirking and repeating John McCain’s talking points is a bad idea.
Davey Boy

Hi Paul,

Since folks here seem particularly enamoured with dismal scientists today, the Globe had a small sidebar to a front-pager that might be a useful reminder: the tale of Long-Term Capital Management, the hedge fund that had to be rescued in ’98 for fear that its unsecured $100 billion in hedge positions would lead to a wider collapse of the financial markets. Fearing that other banks might be wiped out in the collapse, the Fed organised a bail-out.

Now, who were the brainiacs behind this affront to capitalism? A bond trader named John Merriwether and a couple of characters named Myron Scholes and Bob Merton. Myron and Bob who? Glad you asked. Bob and Myron just happened to be the winners of the 1997 Nobel Prize in Economics for developing “a new method to determine the value of derivatives.” In 1997 they were the toast of Stockholm. By 1998 their seminal work risked bringing the US financial structure crashing down on their heads.

So its worth remembering that a herd of dismal scientists charging along in one direction might be no more indicative of long-term good sense than a pod of whales swimming along beside them. Bob and Myron saw to that.

Its also worth remembering that two of the giants of economics, Keynes and von Hayek, each with their legions of devoted followers; essentially spent their careers preaching completely opposing messages. And both was proved right, at least for a time.

My concern with Dion’s proposal is that he doesn’t really understand the economics things, which makes him captive to the other “big, bulging brains” in the room. Harper does, and knows when a line of textbook babble is being sent his way. (I also think his plan of letting consumers keep their money and spend it is a better way of stimulating the economy than taxing them and letting the department of Paving and Potholes try and figure where the money will get the biggest bang for the buck. But that’s just me).
Marie

comment by john g on Thursday, October 2, 2008 at 8:22 am:

The question I would ask Dion is what will he do when everyone in those meetings tells him that his carbon tax plan will kill the economy?

First of all John, the solution for the economy should not be even part of “The what if mentality”. Secondly, our economy is already in a free fall situation & needs urgent attention even though Harper keeps saying its doing fine. Thirdly, the Carbon Tax is very straight forward & if one takes the time to read it, Revenue Neutral. As a matter of fact, it promotes green technology thereby creating more jobs, lowering income taxes by refundable credits; saving more money on income taxes, credits refunded to Canadians if not already applied against income taxes. In other words; for every dollar raised in taxes, a dollar returned to Canadians in tax cuts. To top it of, the Auditor General WILL ensure the Green Shift’s revenue neutrality.

I am sure that everyone in those meetings will be up to date on these facts I pointed out. I don’t even expect that the question you asked will even be part of those meetings. These people are educated professionals, not arm chair know it alls posting on blogs.
T. Thwim

Davey Boy, so.. how much exactly is Harper proposing to reduce the income tax? 0? Hmm.. so how exactly is he letting consumers keep more of their money?

Oh wait.. that’s right.. if they choose to do the few things that are on the “Harper Approved List” — send their kids to piano lessons, or buy their very first house, I hear. Pretty short list, actually.

Of course, for those of us already with a house, and without kids or any plan to have them, Harper’s plans seem pretty skinny to me. Of course, I’ll have to fork up more dough to open additional prisons for the 14-18 yr old contingent we’ll be shipping there. That’s always nice.

In comparison, Dion and the Greens propose to reduce the amount they take out of my pocket at the front end, and my choices as to what I choose to buy or not determine if it’s taken out in the back end. Hey.. that sounds like real consumer choice.

Then there’s the NDP… I haven’t read any proposals from them reducing my taxes on the front or back (but I’m certainly willing to be informed by any NDP supporters here) however they will be bumping up the taxes on the corporations. Thank goodness that corporations don’t pass their costs down to custome… what’s that? Oh.. well that kind of sucks.
Davey Boy

Marie/Thwim,

You are asking different questions (which is fine) but they have the same answer, so please bear with me.

If the economy is already in the passing lane to Hades, as Marie suggests, then adopting a fiscal plan like Dion’s will probably throw us into a severe recession, because his program is back-end loaded (ie. you pay your carbon taxes first and get the benefits, refunds/credits/baby bonuses, later). Revenue neutral means we’ll balance things out a year from now. If we are really careening into a credit-deprived depression, giving money to the government is the last thing you want to do, because governments generally are not that good a stimulating a lot of consumption, at least not without some prior planning. It’s the biggest lesson from the 1930′s; the New Deal kept people from starving but it wasn’t until the War (with its huge government-directed consumption) that peope really started socking the money away. Their full bank accounts jump-started the post-war economy allowing N. America to pretty much avoid a long post-war recession,the most common immediate effect of peace breaking out.

So, if we really are in trouble, the government should be thinking of ways to put dollars in peoples pockets now, and worry about hoovering them back later. THat’s not Dion’s plan, at least not as far as I can see.

What’s Harper’s solution? Well, let’s see, he’s already letting an extra $12 billion slosh around the economy by reducing the HST. That’s a good start, especially as it seems he doesn’t need the money in Ottawa. In days gone by a lot of extra money at the end o the fiscal year would mean a few more Chalenger jets for the boyos, or a scholarship program for the next generation of kids. Now there’s nothing wrong with scholarships, except that they tend to require multi-billion dollar endowment funds, that is government money sitting in a bank account somewhere waiting for little Johnny to finish Grade 12, instead of in Johnny’s dad’s pocket, to buy a cruller and a double-double so that Sandra behind the counter can make next month’s car payment. And so on, and so on, and so on.

Even if Dion winds up pushing a whole lot of money out the door (by going into deficit) in order to give people their cabon taxes up front, he just winds up clawing it back every time someone fills the car, or pays the hydro, or fills the heating oil tank. So if, as you say, we are on the precipice of disaster, then we really don’t want Stephane (who I’m really quite fond of) trying to remake the economy. You want someone who understands the “velocity of money” theory in more than abstract terms. And that guy is Stevie H, love him or hate.

Now Thwim, I know you love Jack and his friends but I’m from Toronto and I’ve seen Jack in action (I even remember when he and Olivia tried to skive the taxpayer by living in subsidized housing). There’s a lot less of him than meets the eye, which is just fne because he’ll never get into government from where he is. If you want me to take a Dipper seriously, let’s talk Doer. If not, well, que sera sera…
Ryan

Are we now to throw out the entire Liberal platform for this election? The plan for the economy will be hammered out in these meetings after the election, and who knows what that means? If the consensus is to do the opposite of any number of Liberal election commitments, then is that what we’ll do? Of course, the Liberals will tell us experts say everything in their plan is the right thing to do. In which case, why have the meetings?