NDP and Bloc pre-coalition talks: as it should be!

CTV has broken the story that the NDP and the Bloc have had talks for a "considerable period of time" about a coalition. CTV is taking the angle that this means there are "political motives" to bringing down the government. That is, CTV and their favourite commentators (I'm listening to Ezra Levant right now) are implying that they were not really motivated to act by Flaherty's financial update.

I disagree. In a minority parliament, when minority governments are likely to be the norm in the foreseeable future, and when we've just had an election, I believe that opposition parties should be ready to present an alternative should the governing party try to act unilaterally to do something which the opposition thinks is harmful to Canada. The alternative can't be an election at this point in time, and so the opposition should be ready to govern, if necessary.

Even though the Conservatives have now retreated on public funding of political parties, and on taking away the right of civil servants to strike, and are moving up the date of the budget, the organization of an alternative, coalition government should continue. It is needed to keep the government honest and focused on the important issues of the day.

Prepare the coalition and keep the engine running to, at the very least, keep the party in power honest and focused on governing.

Coalition Government: one reason to go for it

A number of commentators have been using chess metaphors to describe what's going on in Ottawa this weekend. Well, I'm a chess player and here is a very relevant chess proverb:

"The threat is stronger than its execution"

I think that the exercise of readying a coalition government is a good one if only to provide a credible alternative to the Conservative government and thereby to help the opposition parties do their job.

In a minority government, an effective opposition must be willing and able to present an alternative. Otherwise they have no way to induce the comprises that voters have given them a mandate to negotiate. Usually the alternative is to return to the polls, but with an election having been held so recently, and with the prospect of minority governments being the norm in the foreseeable future, opposition parties must be ready with a credibly viable alternative government, if only simply to be able to do their jobs effectively.

What did Pierre Poilievre just say?

Did I just hear what I thought I heard? I believe MP Pierre Poilievre (Nepean-Carleton) just said on CBC's The House that a year ago Stephen Harper foresaw the economic problem that Canada finds itself in right now.

Can anybody confirm that?

Fighting the Conservatives Together

There is talk today about opposition parties perhaps being willing to form a coalition government. This is in response to the Conservatives' lack of definite policies to address the global economic crisis and use of the crisis as a screen to seek political advantage. They want to save $30 million by cutting public funding for political parties - a move that would, in the short term, greatly favour the Conservative party, but do nothing to address the economy. The government may fall on a confidence vote in the next few days and the possibility of a coalition amongst the current opposition parties would be a very strong bargaining chip.

Today I received an email from Steven MacKinnon, Michael Ignatieff's national campaign director. The email draws attention to the Conservatives' move to cut public funding and then asks for donations to Mr. Ignatieff's leadership campaign because, "Michael Ignatieff can only succeed with your support."

That rubs me the wrong way. It rubs me the wrong way because it's taking a direct and imminent threat to the Liberal Party and the Canadian political system, and using it to appeal for funds to a particular leadership candidate's campaign. Even though we have a Liberal Party leadership race under way, in the House of Commons we, the Liberal Party, should still be fighting the Conservatives together. If we do not fight them as one team, we won't win. If the NDP, Bloc Quebcois and the Liberal Party can get together to form a coalition, surely the Liberal caucus could work tous ensemble.

Fight the Conservatives as a united party. Support Stéphane Dion in the House. Fight the leadership race elsewhere.

What is the true cost of nuclear energy?

I wish I had an objective assessment of the true cost of electricity from nuclear power in Ontario (in Ontario because that's where I live). I haven't seen a careful analysis of that from either friends or foes of nuclear energy.

Here's an example of a slightly hidden subsidy and an example of why it's important to look at the numbers when you read the news.

Star reporter Tyler Hamilton wrote an article for today's edition pointing out significant investment losses in an account whose funds are set aside for the decommissioning of nuclear plants. He mentioned another account whose funds are set aside for managing nuclear fuel waste. Both funds were created five years ago in 2003 and Ontario Power Generation pays into them annually.

The fund managing waste fuel, currently valued at $4.792 billion, has grown. The province guarantees it a rate of return of 3.25 per cent annually above inflation.

The good news, I suppose, is that the money for managing waste fuel has not been lost in the recent stock market meltdown. What I want to point out is that over the last five years the yield on the long term (30 y) Canadian government real return bond has ranged from 1.44% to 2.79% with an average of 1.95%. Most recently it has been around 2.5%. But the province of Ontario has guaranteed a rate of return of 3.25% above inflation.

That's a subsidy.

Now, I'm not accusing anybody of trying to hide a subsidy. In 2003 the long term real return bond yield ranged from 2.8% to 3.2% so it's possible 3.25% above inflation was a fair guarantee for the initial deposit of funds into the waste fuel account. But payments in subsequent years have benefited from an above-market rate of return and that's where the subsidy lies.

What's so bad about subsidies? Well, Ontario has a nascent renewable energy industry. If that industry has to compete with subsidies to nuclear energy and subsidies to fossil fuel energy (i.e. being able to emit greenhouse gases for free), it will have a hard time growing -- which is the case! To counter that, the government of Ontario is subsidizing renewable energy and energy conservation, but it takes extra work to figure out where all the counter-balancing subsidies have to be applied and in what amounts.

National Post flubs global warming denial attempt

National Post writer, Lorne Gunter, has written a column today following other global warming skeptics in trying to make a mountain out of a molehill about a data entry error. Some September temperature data were copied into October, making a report from the Goddard Institute for Space Studies seem to indicate that October was very warm. In fact, GISS pulled the report after less than a day, got a new report from the source that sent them the erroneous data (about 10% of their data stations were affected), and fixed their report a couple days after that. From a scientific point of view, it's good to have skeptics (good scientists are skeptics, especially of their own work, which is more than I can say for most global warming deniers). The more skeptics do their work, the more solid the scientific conclusions become. That's how science works.

Mr. Gunter seems to think this incident is evidence of bias by researchers at Goddard. He writes, "...unscientific bias at GISS and elsewhere in the global warming community -- has been exposed by this incident." He doesn't think that a quickly identified and corrected programming error or data entry error could have simply been just that.

Now Mr. Gunter, look at your own article:

Look at the fourth paragraph (and the reason I included an image is in case the Post corrects their online article:


"Moreover, sea ice expanded so rapidly it covered 30% more of the Arctic than at the end of October, 2007. (Of course, you saw few stories about that, too, since interest in the Arctic ice cover is reserved for when it's melting.)"

Wait a minute, we're talking about October 2008, not October 2007. Would that be a data entry error on your part, Mr. Gunter?

Selling on the lows, part 2

This is a continuation of my last post on Conservative finance minister Jim Flaherty's plan to sell government assets now, after a historic crash in asset prices, to balance the federal government budget during the coming global recession.

It looks like Prime Minister Stephen Harper has had to backtrack, according to this report from The Canadian Press on ctv.ca:

Prime Minister Stephen Harper insisted Friday there will be no fire sale after his finance minister, Jim Flaherty, said the government is considering an asset sale to raise cash and try and stave off a budget deficit. "The government of Canada will never engage in a fire sale of assets," Harper said prior to heading off to Washington for an emergency summit of global leaders on the economy.

But I think wasn't hard for the CP reporter to find people with credentials to agree that the Conservatives have a bad idea:

"It's hard to believe this is an ideal environment to sell any asset," said Bank of Montreal economist Douglas Porter. "And it raises the bigger issue of just how hard should the federal government press to keep its books balanced. My view is if it comes down to selling the family silver at a discount rate just to make the books balance, that doesn't make sense."

Scott Brison, the new opposition finance critic just appointed by Stephane Dion, is a pretty sensible and knowledgeable fellow:

Brison said Canadians should be especially concerned because Flaherty was finance minister in Ontario when the provincial Conservative government of former premier Mike Harris sold the electronic toll Highway 407 north of Toronto for $3.1 billion in 1999. Three years later, a private investment bank valued the property at four times the sale price. "After three years of bad tax policy, and big spending, Flaherty has put the country in deficit. Now he wants to sell the house to pay for the groceries," said Brison.

There are still groups with tunnel vision, though. The CP reporter was able to count on the Canadian Taxpayer's Federation (CTF) for this quote:

Adam Taylor of the Canadian Taxpayers Federation said the government should do whatever it needs to -- including selling assets -- to balance the budget. "The government owns things that have no strategic value to Canadians and they could be sold," he said. "Property values haven't completely bottomed out and when the government owns thousands upon thousands of acres, there's a legitimate argument for selling a lot of it."

If Mr. Taylor really meant what he said (do whatever it needs to...to balance the budget), he'd advise the government to also consider the possibility of raising taxes (or rescinding promised tax cuts). But that's the last thing the CTF would ever say, so they can't be that serious about balancing the budget, especially since they've been applauding the various tax cuts that helped get us to our current fiscal position.
There are, moreover, a lot of economists who are questioning the rationale for balancing the budget right now (and I agree with them). In a severe recession, balancing the budget may come only at the price of a lot of pain for economically vulnerable Canadians, and reduce the number of options the government has to manage the economy and plan for its eventual recovery.
I see that Mr. Taylor is a market-timer who thinks he knows that, after a sale sometime in 2009 or 2010, property prices will continue to fall. If that's so obvious, I'd challenge the CTF to open a trading account, put its money where its mouth is, and sell some S&P Case-Schiller home price index futures on Jan 1, 2009. Hey guys, bet the house because maybe you'll be right!
Finally, the whole idea of balancing the budget by selling assets is based on their being valued on the government books at old, below-market prices. Any revenue you get from their sale is purely accounting revenue - not real added value for Canadian taxpayers.

Selling on the lows

I used to be a trader many years ago, so I can't resist commenting on the story today from the CBC:

The federal government is considering the sale of some of Crown assets as a way of balancing its budget and avoiding a deficit, Canada's finance minister said Thursday.

I thought Mr. Flaherty was smarter than that! World asset prices have just collapsed and now he wants to sell?!?!

I further suspect that selling assets to avoid a budget deficit is only a bookkeeping trick to take advantage of certain assets being valued on the books at very old, below-market values. Perhaps he wants to hide behind the economic crisis while he pursues his real agenda of downsizing the federal government. Or, perhaps we had better quickly set up the "sweetheart deal" detector.

Minister Flaherty, let's compromise. How about if you get some expert disinterested parties to independently value the federal government assets whose book value seems way too low. Then you mark to market, and presto, you get to avoid a deficit without having to sell for real into the worst market in decades.

Greenhouses burning coal

Tyler Hamilton of theToronto Star had an excellent piece yesterday documenting how Ontario greenhouses are turning to burning coal because of higher oil prices. This piece documents critical examples that illustrate why high oil prices are no substitute for a carbon tax when it comes to an incentive to reduce greenhouse gas emissions.

Here is an excerpt:

The Toronto Star has learned that dozens of other greenhouse operators in Ontario ... have switched or are considering a transition to coal as a way to save on fuel costs.

The impact so far appears small, but the trend is gaining momentum. As it does, it could undermine the environmental benefits of an Ontario government plan to wean the province off coal-fired power generation by 2014.

"Coal is expanding in the province, despite a policy to phase out coal," says Roger Samson, executive director of REAP-Canada, an independent group that encourages sustainable farming practices. "The Ontario government has no plan on how to mitigate this."

...

It's estimated that greenhouses in Ontario cover 2,823 acres, and that the average greenhouse requires 9,500 gigajoules of energy per acre every year. This works out to 26.8 million gigajoules annually.

Convert that energy into electricity potential and it works out to 7.44 terawatt-hours a year – more than three times the 2004 electricity output of the Lakeview coal-fired generating station in Mississauga (which has since been closed down and demolished).

To those of you participating in the local food movement: don't forget to think about the possible implications of greenhouse-grown food.

Remembrance Day and reducing consumption

Msgr. Don Clement gave the benediction at the City of Kingston's Remembrance Day service today and he provided, I'm glad to note, a wise exhortation. To paraphrase Msgr. Clement, he called on us to use the liberty won by the sacrifices of our soldiers to ensure that the resources of the world be utilized for the benefit of all people, in all nations, now and in the future.
How can the average Canadian support our troops overseas?
The more I learn about the economic drivers of conflict around the world, the more I appreciate the contribution of the consumption of material goods by people in developed countries. As an example, most recently in the news, the humanitarian crisis in eastern Congo has, as an underlying cause, a struggle to control valuable mines.
So I would venture to say, one way of supporting our troops is by making a personal sacrifice. Cut your personal consumption of "stuff". You'll be making a small but real contribution to peace around the world and making future peacekeeping efforts a tiny bit easier.