Kevin Page Grades Jim Flaherty's Math

53%

James participates enthusiastically in Question Period. James sometimes completes his assignments on time, but needs to take more care and check his work before handing it in. He frequently skips over difficult questions, and appears to skew his results according to what he thinks will please his classmates instead of trying to find the correct answer. Next steps: review math fundamentals; consider peer tutoring.

This is What a Social Conscience Sounds Like

I just caught the last part of Gordon Brown's speech before the U.S. Congress. The Canadian and British pundits are, of course, making much of his glowing remarks about how wonderful America is and his constant references to their 'special relationship' with Britain.

I was hearing something else, though. I think I noticed it only because, in the midst of all the global economic chaos, it's something I haven't been hearing from my own government, and haven't really been hearing from the Americans either.

It was the sound of a good old-fashioned, British-style, almost Dickensian social conscience.

In our families and workplaces and places of worship, we celebrate men and women of integrity who work hard, treat people fairly, take responsibility and look out for others. If these are the principles we live by in our families and neighbourhoods, they should also be the principles that guide and govern our economic life too.

In these days the world has learned that what makes for the good economy makes for the good society.

My father was a minister of the church and I have learned again what I was taught by him: that wealth must help more than the wealthy, good fortune must serve more than the fortunate and riches must enrich not just some of us but all.

And these enduring values are the values we need for these new times.

...For let us remember there is a common bond that unites us as human beings across different beliefs, cultures and nationalities. It is at the core of my convictions, the essence of America's spirit and the heart of all faiths And it must be at the centre of our response to the crisis of today. At their best, our values tell us that we cannot be wholly content while others go without, cannot be fully comfortable while millions go without comfort, cannot be truly happy while others grieve alone.

And this too is true. All of us know that in a recession the wealthiest, the 10 most powerful and the most privileged can find a way through for themselves. So we do not value the wealthy less when we say that our first duty is to help the not so wealthy. We do not value the powerful less when we say that our first responsibility is to help the powerless. And we do not value those who are secure less when we say that our first priority must be to help the insecure. These recent events have forced us all to think anew. And while I have learnt many things, I keep returning to something I first learned in my father's church as a child. In this most modern of crises I am drawn to the most ancient of truths; wherever there is hardship, wherever there is suffering, we cannot, we will not, pass by on the other side.

It seems like an obvious thing to say in such times - that the wealthy have an obligation to the poor, the powerful to the weak, and that helping the disadvantaged in our own countries and around the world strengthens us all. And yet, it's a sentiment that has been noticeably absent from the rhetoric of North American leaders as they fret over falling stocks, collapsing banks and the disappearance of consumer confidence.

As if the problem was merely one of economics. As if the poor were merely those suffering from a lack of spending power.

The reason why Brown's words were so striking and so unusual to hear spoken aloud in that particular place is of course that any American politician - or Canadian one, for that matter - who talked that way would instantly be accused of being (God forbid) a SOCIALIST.

Happily, that's not such a dirty word in England.

A Taste of the Third World in Wilmington, Ohio

Of all the sad and disturbing stories that have emerged so far from the economic crisis, for some reason this one in particular fills me with dread.

DHL Workers Welcome Truckloads of Food

A local town, which is bracing for thousands of job cuts, gets an important delivery today to help workers in need.

This morning, eleven tractor trailers loaded with food and supplies pulled into Wilmington. It's an effort to help the thousands who will lose their jobs when DHL closes their hub at the Wilmington Air Park. It's estimated nearly 10,000 jobs will be eliminated.

Volunteers with the group Feed the Children distributed the food and personal supplies to hundreds of people who lined up in the cold.

One third of the families in this town had someone employed at DHL.

I'm not sure which is worse - the sight of Americans lining up for food aid, or wondering how long it will be before it happens here.

My Own Personal Recession

In addition to writing, singing, and working part time at a video store (it's cooler than it sounds), I make most of my money through my online and wholesale crafts business: Tara Hill Designs.

Yes, 'runesmith' isn't just a username - it's a job description.

As peculiar as my product line might seem to the mundane rabble, my work is very highly regarded within a very select target market. It was never going to make me rich, but for a little home-based business it does pretty well, with sales growing steadily over the twenty-plus years I've been at it. Up until five years ago, that is. That was the terrible year the Ontario Renaissance Festival shut down, but it was also the year I began to sense that things in general were starting to slide.

In many ways, my little business is a bellwether of economic conditions. I sell exactly the sort of luxury items that are the first to get crossed off people's shopping lists when things get tight. About half of my supplies are imported, I sell 80-90% of my wares to the U.S., and on any given day I can tell you what the CAN$-US$ exchange rate is to within half a cent.

The first thing I noticed was about four years ago when my wholesale sales started dropping off. The stores I sell to are all small, independent book and speciality stores, and they have all been suffering badly from big box stores and the death of downtown retail. Right now I'm down to one wholesale customer - and they are just a distributer, not a store.

Last year, my online sales to the U.S. collapsed.



The blue is 2007. The yellow is 2008. As you can see, there was no Christmas last year.

This is what a 41% drop in sales looks like. Compared to 2006, my sales have been cut in half.

Don't get me wrong - I'm doing ok. I have a lot of irons in the fire, and my husband is doing very well in the relatively recession-resistant film industry. But it makes me sad that after 20 years, my little business might end up being washed away under the economic tide.

The People Flaherty Isn't Listening To

Jim Flaherty has been a busy boy. Running all over the country, meeting, consulting, listening, getting input from all sides as to what stimulus measures he should put in his budget.

Well, some sides. Ok, one side.

So far, he's met with the CEOs of the big banks, the Canadian Taxpayers' Federation (aka "The Canadian Federation of Really Rich People"), and of course his 'economic panel' of top corporate movers and shakers.

Funny. I'm not seeing the word "labour" anywhere here. I'm not seeing the word "poverty" mentioned, either.

Happily, the Canadian Centre for Policy Alternatives - which, as the media has helpfully informed us, is a "left-wing think tank" - has come out with its own proposals for a stimulus package that focus more on jobs and strengthening the social safety net than anything being proposed by Flaherty's advisors.

The stimulus package, whose promised impact was validated by Informetrica Ltd. -- which has a macroeconomic computer model -- would boost GDP by three per cent and create 407,000 jobs, it said.

A breakdown of the proposed key investments includes:

- $12.4 billion to strengthen the employment insurance system so more out of work Canadians receive benefits, and to provide income support for low-income seniors, children and the working poor.

- $14.7 billion to strengthen municipal infrastructure and affordable housing, invest in child care, post-secondary education, and honour the First Nations Kelowna Accord scrapped by the Conservative government.

- $5.8 billion investment in "green infrastructure, training and education, and energy retrofits."

Most significantly, CCPA's proposal omits the one element almost guaranteed to figure prominently in Flaherty's budget.

The package does not include any broad-based tax cuts.

"Simply put, government-spending initiatives outlined in this plan provide far more job-creating stimulus than across-the-board tax cuts," said David MacDonald, an economist who co-ordinated preparation of the alternative federal budget.

"People who have jobs spend; people who lose (jobs) do not."

A few things need to be understood here. One is that, fundamentally, tax cuts cost just as much as government spending. 'Tax cut' sounds better in an election, but translated into personal terms it amounts to the difference between having a $500 rent increase and a $500 cut in your paycheque.

Another is something that Ali Velshi just pointed out on CNN, talking about the possibility of Obama bringing in tax cuts: that giving everyone, say, an extra $500 in their pockets doesn't really solve anything because if you are out of work or losing your house, it's not enough to help, whereas if you are doing ok then you won't really need it.

The third point is this: a lot of the stuff we buy here in Canada is made elsewhere. So a goodly chunk of the money spent at Wal-Mart or Loblaws or Canadian Tire, is just going to go to support the economies of the U.S., China and Mexico. And that's assuming that people would actually spend that money and not just sock it away in, say, one of Flaherty's not-really-tax-free savings accounts.

All of this would be perfectly obvious to Jim Flaherty if he were listening to those who speak for the low to moderate income Canadian workers (i.e. most of us) who are going to be hardest hit by this recession. Instead, he is choosing to consult only with those seeking to protect their profits and wealth. Who, incidentally, are the very people whose opinions on economics are pretty much identical to Flaherty's.

Welcome to the echo chamber.

Robbing Peter to Pay Paul

Now that Garth Turner is no longer a Member of Parliament, he's been focusing more on economics and real estate than on politics in his blog. Happily, this has resulted in most (but not all) of the more repugnant trolls losing interest, but it hasn't always made for the most fascinating reading for the rest of us political junkies.

Today's post is a notable exception:

Toxic Cash?

Do you know what’s backing your money? You should. Because in the last 90 days this has changed drastically. There’s a big gamble been taken by politicians which was never explained, never debated, never questioned, and yet could affect us all.

Here is the way the system is supposed to work, and until this autumn, did.

* Our money’s printed by the Mint and backed by the Bank of Canada. The central is expected to hold assets equal to the amount of cash in circulation, which is more than $50 billion.
* Because our nation no longer owns gold reserves, our money is backed by the safest of securities, long-term government bonds and Treasury bills. This is what gives our money true value. At least, until recently.

But in the last 90 days, without public notice, the Bank of Canada has sold off more than $11 billion of those secure T-bills, plus cashed in billions more of its bonds. As stock market researcher John Paul Koning discovered last week, the central bank now lists on its balance sheet a stunning $32.4 billion in “other” assets, which comprise a whopping 42% of everything it owns.

That means more than two-fifths of the total assets backing our money supply is – what, exactly?

Well, let’s flip back a month to the middle of November, when finance minister Jim Flaherty announced the federal government was purchasing $50 billion in residential mortgages from the Big Six banks, following an earlier deal to buy another $25 billion in mortgages. “At a time of considerable uncertainty in global financial markets, this action will provide Canada’s financial institutions with significant and stable access to longer-term funding,” he said, adding, “with no additional risk to the taxpayer.”

So, the “other” assets the Bank of Canada has swapped for secure, near-cash holdings appear to be tens of billions of dollars in high-ratio mortgages. The money to buy those assets apparently came from the central bank, through CMHC, and ended up in the vaults of the Big Six banks.

You know, I had been wondering how Flaherty managed to pull $75 billion out of his ass without toppling his little budgetary house of cards. Now I guess we know.

When Chickens Attack

Peter MacKay: "When they play chicken, they wind up looking up like chickens"

That just speaks volumes about the attitude of the Conservative Party, doesn't it?



It's really remarkable how badly Harper and Flaherty have miscalculated here. So much for the Conservatives' legendary "psychic powers". You know - the ones that enabled them to intuitively know what actions to take to simulate the economy way back when they are now insisting that nobody could possibly have known that a crisis was coming and had no reason to think they needed to do anything but purely by coincidence ended up doing exactly the right thing anyway?

Ta da!

And for his next trick, Jim Flaherty will pull a deficit out of... wait... Jim? Jim? Where'd he go?!

Auto Industry CEOs: Curing the Company by Killing the Jobs

The Big 3 CEOs have been testifying before Congress about why they deserve a big fat piece of the taxpayer-funded bailout pie. They have been voicing the very real concern that if they go under it would be an economic disaster for the entire continent and result in the loss of millions of jobs. But their principle argument seems to be that they are already doing their level best to be 'more competitive' and 'restore profitability'.

Here's Ford CEO Alan Mulally on his company's "Competitive Transformation":

Few companies in the history of our country have restructured more aggressively. I can tell you that in my experience, the union under Ron Gettelfinger is working with us as part of the solution.

In a very short period of time, working together, we have reduced excess capacity, closing 17 plants in North America – including more than one-third of our assembly plants – in the past five years. We have also reduced our workforce by 51,000 employees in the past three years, shrinking our hourly workforce from 83,000 to 44,000 and reducing salaried headcount by around 12,000 from a base of 33,000.

...Our agreement with the union also established an entry level wage that reduces future costs and will make us more competitive going forward longer-term. And, for the first time ever, it included no base wage increase during the four-year period covered by the agreement.

...We also will continue the ongoing consolidation of our dealer and supplier network. Our plans call for reducing our supplier network by more than 60 percent and thereby improving supplier capacity utilization and financial viability.

...We have announced plans to further reduce employment and cut benefits and compensation at all levels. We have eliminated merit raises and bonuses in 2009, and we continue not to pay any dividends to our shareholders.

Of course, all of this admirable belt-tightening doesn't apply to the private jets they flew in on so they could appear before Congress in a timely and efficient manner. But hey, at least they're willing to make some other personal sacrifices to help their ailing companies - like giving up their multi-million dollar salaries. Except, apparently, Mr. Mulally.

Chrysler was bailed out by the federal government once before, in 1979, with $1.2 billion in loan guarantees. The company repaid the loan, plus interest, ahead of schedule. Back then, former Chrysler CEO Lee Iacocca reduced his salary to $1.

Under questioning from Sen. Jon Tester, D-Mont., Mulally didn't join the other two executives in saying he'd do the same now.

"I sure respect the intent of it, but the most important thing is that we not degrade our ability to be competitive and deliver this plan," Mulally said.

The Wrong Side of History

I nearly choked yesterday when I heard the following delusional nonsense come out of Georgie's mouth in his speech to the Manhattan Institute in New York yesterday:

"The crisis was not a failure of the free market system," Bush said. "And the answer is not to try to reinvent that system."

"History has shown that the greater threat to economic prosperity is not too little government involvement in the market, but too much."

Blink. Really? Wow. Who knew? I guess he must be reading out of that OTHER history book - you know, the one where America single handedly won every war it's fought, humans walked with the dinosaurs, and Herbert Hoover was the greatest president of all time.

That same day, Stephen Harper was busy exhorting his base not to become mired in ideology, raising hopes that he might finally be prying himself (and us) loose from the dying, toxic carcass of the Bush administration and it's thoroughly discredited economic policies.

This morning, there's this:

Harper lines up with Bush on reform
Two leaders balk at calls by other leaders for far-reaching new financial regulations

OTTAWA — Prime Minister Stephen Harper is expected to join U.S. President George W. Bush in a defence of free-market capitalism and resistance to international calls for dramatic re-regulation of financial markets.

On the eve of a meeting in Washington of leaders from the 20 largest economies, Mr. Bush argued yesterday against drawing the wrong lessons from the global financial meltdown.

In doing so, he rejected the view of leaders like France's Nicolas Sarkozy, Australia's Kevin Rudd, Brazil's Luiz Inacio Lula da Silva and even many U.S. Democrats, who have argued the root of the crisis lay in deregulation, greed and unchecked speculation.

...German Chancellor Angela Merkel last month attacked "greed, speculation and mismanagement" as the root causes of the crisis, while Australia's Mr. Rudd slammed the "obscene" failures of financial oversight.

French President Sarkozy yesterday defended capitalism but slammed what the French typically describe as the Anglo-American approach that "everything will be solved by deregulation, free competition and the market."

But in a comment article in Britain's Financial Times yesterday, Finance Minister Jim Flaherty supported Mr. Bush's view that free markets - properly regulated - remain the best approach for encouraging global economic growth and prosperity. "The open market system did not fail in this crisis."

It's like listening to the parishioners of some discredited minister trying to cling to their faith even as their leader is hauled off in handcuffs.

I almost feel sorry for them.

Voters, Schmoters: How the Real Decisions Are Made

It's been a week and a bit now since a little more than half of us marched into our polling stations to do our duty and cast our ritual vote for our candidate or party of choice.

Yay us.

As sick as some of us might feel about the results, we all somehow manage to convince ourselves that "the people have spoken". That as much as we might disagree with the choices they made, however pathetic the turnout was, however dishonest and manipulative the political advertising campaigns were, however shoddy and superficial the media coverage, the plurality of Canadians who bothered showing up had somehow ferreted out enough information about their candidates and party leaders to make something resembling an informed decision.

Meanwhile, the real decisions about our economy had already been made by Stephen Harper's true constituents:

Politics factored into bank aid deal
Dialogue between Ottawa, Bay St. behind the scenes

… Several of the people involved in the process said that even while pillars of Wall Street were crumbling and world leaders were invoking the spectre of financial armageddon, a central consideration for the Prime Minister’s Office seemed to be Jack Layton and the New Democratic Party.

The Conservatives and key allies on Bay Street feared both the immediate and lasting consequences of giving political adversaries an opening to turn the banking industry and its ties with Ottawa into a matter of public scorn. This concern reached a peak immediately before the election with the meltdown in markets, co-ordinated global interventions and the approach of polling day.

Amid late-night phone calls to the homes of senior officials in Ottawa, a loose strategy emerged to split the federal government’s response into two stages, with a decision to delay until after the election the explicit commitment to insure interbank lending that was finally unveiled yesterday.

But bank executives insisted on a long-sought move to shift mortgages off their books and supply them with cash before the election, because they feared the uncertainty of polling day and the possibility Mr. Flaherty might not return as finance minister, according to participants in the process and observers. This first stage was held back until the last possible moment, the eve of the Thanksgiving weekend, the last day of market trading before polling day, when a $25-billion scheme to aid banks was announced by Mr. Flaherty. “The strategy [was] trying to low-key it, [unveiling it] when people were running away to the cottage to pull the dock out of the water and making their pumpkin pies,” said one person involved in the discussions.

This is what happens when a government is confident that nobody is paying attention. Get ready for more of the same.