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BILL C-44: A silent and tragic defeat for fiscal transparency in Canada

Bill C-44, the Trudeau government's first budget implementation bill, was passed on June 22. It has rightly generated a great amount of controversy among Canada's fiscal conservative community ever since. The reason behind such controversy is none other than the proposed creation of a Canadian infrastructure bank. Such a bank would add more bureaucratic levers to our government spending process, which could drastically endanger the ability of non-governmental organization to track government cash flows, its relationship with both domestic and foreign private investors, and its investment and spending priorities. When the bill was first introduced, The Parliamentary Budget Officer (PBO), the main fiscal watchdog in Canada, raised concerns about the institutional complexity of such a bank, asking the government to separate the proposition into an individual bill of its own to allow both Houses to consider the subject with more detail. Despite the PBO’s concerns, the government not only decided to ignore these recommendations, but it also proposed within the same bill to radically reform the role and responsibilities of the PBO itself. Such reforms have gone undetected among most of the media, who focus their concerns instead on the creation of the infrastructure bank. Nonetheless, such distractions are more than unfortunate to Canadians, as the changes to the PBO represent a major defeat for fiscal transparency. Before speaking about these radical reforms, it is important to present an overview about the nature of the PBO and some of the clashes that have aroused between government and the institution. Currently, the Office of the PBO is part of the Library of Parliament. The Library is a non-partisan organization that takes care of both creating and recording the minutes of all proceedings and legislations that have place within the parliament, crown corporations or any organization that has either a legal or… Read More

Time for Grexit

In the summer of 2015, after weeks of frantic negotiations, European Union (EU) member states agreed to a last minute bailout for the Greek government and narrowly averted a sovereign default. Sadly, despite the best efforts of other EU member states, the bailout has failed to rectify Greece’s deep seated economic problems. The fiscal deficit and accumulated stock of debt remain stubbornly high, while unemployment and poverty have reached unconscionable levels. Another aid package will not fundamentally fix what ails Greece’s economy and will simply continue to defer the day of economic reckoning. To have any chance of reviving economic growth and healing deep seated social fractures, Greece must default on its debt and leave the Euro. Prior to the introduction of the European Monetary Union, Greece was treated by financial markets as a semi-stable middle income nation. Endemic corruption, poor institutions and a bloated public sector kept Greek asset prices modest and yields on public debt high. However, upon adopting the Euro in 2002, investors were overcome by a wave of irrational euphoria. Capital soon flooded into Greece from other Eurozone members and stoked a property bubble and an economic boom. Interest rates plummeted while the Greek government, convinced that the good times were more than transitory, took on unsustainable levels of public debt. Unfortunately, when the property bubble burst and the extent of its fiscal mismanagement became apparent, investors began to realize that unlike in other currency unions, there was no formal mechanism to support a distressed constituent government and that Eurozone members were unprepared to fully stand behind the liabilities of their weakest link. This sparked a rapid outflow of foreign capital and sent Greece into a deep recession from which it has yet to recover.   The depreciating Greek drachma would have rapidly restored competitiveness to… Read More

The case for NGDP targeting

In the aftermath of the high inflation experienced in Canada in the 1970s, the Bank of Canada (BOC), the nation’s central bank, adopted inflation targeting as its primary policy goal.  Under the inflation-targeting regime, the BOC was committed to implement monetary policy that would keep inflation within a boundary of 1% to 3%.  Since 1991, when inflation targeting was adopted, inflation has remained much lower and less volatile than in the past, unemployment has fallen considerably since its peak in 1993 and output growth has been more stable.  However, despite these successes, the Bank of Canada should consider replacing its inflation target with a nominal gross domestic product (NGDP) target.   NGDP represents the total level of nominal spending in an economy.  In essence it is total GDP unadjusted for inflation.  Under an NGDP target, the Bank of Canada would commit to ensuring that in a set time frame, say over 10 years, total nominal spending would grow by a certain rate.  For example, a 40% NGDP target would imply that the bank of Canada should aim for 4% annual growth in nominal income.   There are several reasons that make NGDP targeting a better policy to pursue than inflation targeting.   Inflation targeting has fallen short in two principle ways:  Firstly, it was a poor indicator of whether aggregate demand was adequate. Secondly, it is susceptible to “liquidity traps”, a period of near zero interest rates where central banks’ favorite tool – interest rate targeting – is rendered ineffective.   Since 2014, the BOC has consistently undershot its inflation target.  Instead of an inflation rate between 1 to 3%, inflation has often barely reached the 1% lower threshold.  This low rate of inflation signals that the Canadian economy suffered from inadequate aggregate demand, however, there is little conventional inflation… Read More

Destroying the Halifax Chronicle Herald

Bell Media made news last month by announcing a large quarterly profit that went hand in hand with hundreds of layoffs. The consolidation of media in Canada is the product of a transforming industry. The proliferation of new media and a changing profitability equation has brought forth a massive consolidation. Nearly every media outlet is connected to some large corporate overlord. On the print side, virtually ever paper is connected to Postmedia, Transcontinental, TorStar, or Quebecor. Scan down the list of major dailies in Canada and you will see only one whose stamp of ownership is listed as “independent.” It is the Chronicle Herald. Based in Halifax and covering all of Nova Scotia, it has been a feature of the East Coast for 150 years. And sadly, it is being destroyed. The paper is owned by the Dennis family, and is independent in the sense of not being connected to any other major media conglomerate. Independence being a key matter in good journalism, the paper has a proud history as being Halifax’s paper of record. In the past several years, however, there has been a clear change in focus. The Dennis family is at war with the journalists in the company, at a time when the ad department is growing. It began in 2009, with more than a quarter of the east coast’s largest newsroom being laid off. The second blow came last year, as a further 17 journalists were turfed. Now, just before Christmas, another proposal is on the bargaining table to get rid of 30% of what remains from the news force. In addition to this severely gutted staff, management is also taking shots at journalistic independence. They are seeking to remove seniority requirements, which would allow them to lay off whomever they please. They’re also looking to reclassify jobs… Read More

Plea for a Balanced Budget

It’s official. We will have a new government in Ottawa. I should start by congratulating Mr. Trudeau for what I believe to be a superbly executed campaign. After all, it’s been less than two weeks since the Liberals started coming in first in most polls, while they were the third party at the beginning of the campaign.   While Generation Screwed is a non-partisan group, that does not make it apolitical. Due to the very nature of our movement, we constantly monitor what our MPs are doing in parliament and speak out against what we find troubling. As the saying goes, if we don’t take care of politics, politics will inevitably take care of us.   There is, as a matter of fact, one crucial issue right now which we feel should be front and center at this time: the three years of deficit that were announced by the Liberals. Not only will this policy be extremely harmful to future generations, but we can’t find any logical explanation for it.   Trudeau tells us that we need those three years of deficit to stimulate the Canadian economy. While it is true that we are in a technical recession, most economists agree that our economy is already stabilizing and that it should be back on track as we speak. They are only waiting for next quarter’s data to say that it is indeed finished. All that was accomplished without the need for an additional enormous stimulus package! Is Trudeau’s economic wisdom that we should run deficits when things are going well, and run enormous ones when things are bad? If so, that is the very definition of fiscal irresponsibility.   Those deficits total 25 billion dollars on three years, according to the Liberal Party of Canada’s estimates. Those 25 billion dollars,… Read More

Bad policy to blame for Ontario’s economic decline

  The Albertans who put the New Democrats in charge of their province last May will be disappointed to hear that being ruled by Big Government (and its equally ugly twin, Big Unions) is no fun. Just ask Ontarians, who live in a once-prosperous province that has been in steady decline in recent years.

   From 1992 to 2002, Ontario's economy grew by 47.9 percent, compared to 36.9 percent in the rest of the country, according to the newly published Fraser Institute study Ontario – No Longer a Place to Prosper. But from 2002 to 2013, economic growth was only 15.8 percent in Ontario, compared to 26.8 percent in the rest of Canada.   Philip Cross, the author of the study and former Chief Economic Analyst at Statistics Canada, places the blame for Ontario's decline on poor government policy.   Not coincidentally, the decline of Ontario began at the same time as a change in government. 2002 was Mike Harris's last year in office as Ontario Premier, and 2003 was Dalton McGuinty's first.   A report published by the new Vancouver-based think tank Aha!, only two days before the recent Fraser study, found that based on fiscal and economic outcomes, Mike Harris was Canada's best premier since 1981. Of the 59 premiers ranked in the Aha! report, Dalton McGuinty placed 53rd, and his successor Kathleen Wynne was ranked the worst current premier in Canada among those who have been in office for at least one year.   As shown by Philip Cross's Fraser study, Ontario's unemployment rate was below the national average every year from 1976 (the earliest year with the available data) to 2005, but has been higher than the national average since 2006.   In particular, youth unemployment has remained stubbornly high – and would be much higher had youth labour participation rates… Read More
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