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Econogics Response to the 2009 Canadian Federal Budget (January 27)

Last updated 2011.03.27 (originally posted 2009.01.30)


Canada's Economic Action Plan - Budget 2009 (subtitle: The Emperor's New Economic Stimulus Package)

March 27, 2011

It Must be Spring, the Election Signs are Blooming

In the course of running errands today, I see the election campaign signs are popping up all over, including those of my incumbent MP. Pierre sits in a safe CPC seat, which he recognizes by his behaviour, which was nicely exemplified in one incident in the past year.


March 26, 2011

Prime Minister Starts Campaign by Showing Contempt for Canadians

On his way out of Rideau Hall, having made it official that Canadians will get their chance to vote on his government's record on May 2nd, he uncharacteristically stopped to take questions from the media (which he would not do the previous day). In his responses, he said that Canadians do not care about how Parliament actually works. Just because Mr. Harper clearly does not care about democratic and lawful process works in this country, does not mean that I do not care about democratic processes. Once again, Mr. Harper has proven he does not speak for this Canadian. It is not for Mr. Harper and the Conservative party to decide the issues for this campaign - that is for Canadians to decide, and the fallen government would do well to listen for a change. If they want to set a campaign agenda, it should be to run on their record over the past 5 years as the governing party. Clearly, they are not prepared to do that, and instead are casting aspersions on their opponents and trying to talk about their proposed budget (not the basis for their defeat, that was about contempt for Parliament and Canadians) which was clearly designed as a campaign too.


March 25, 2011

Federal Government Falls on Contempt Motion!

The fallen government rants again and again, as if repetition could make it true, that Canadians don't want this election. Let me speak clearly - I want this election! The defeated government is full value for the contempt motion and falling on it. I welcome an end to their doublespeak on all fronts. Denouncing the Liberals for possibly participating in a coalition government, when Harper proposed exactly leading a coalition to defeat the Liberals in 2004. The government chants that they have been responsible economic managers, while creating the largest operating deficit in Canadian history. They ran on transparency and accountability, while refusing to provide Parliament with information to which it was constitutionally entitled, and have been found guilty of election fraud and are now being investigated by the RCMP for influence-peddling. This list goes on and on. In North Africa, people are fighting for the freedoms and democratic rights we had, but this government has systematically been undermining. This government will try to campaign on their budget. It is another sign of their arrogance that they won't acknowledge they were not defeated on their budget, but on their contempt for Parliament and all Canadians.

I ask all Canadians of voting age to consider the platforms of all candidates in their ridings, and vote for the individual that best represents their views and values.

If you don't vote, you are renouncing your hard-won democratic rights as being worthless. If you don't vote, don't complain about the result in the next Parliament.


March 22, 2011

Budget Day - Hold onto Your Wallets!

The photo-op says it all. Finance Minister Flaherty chooses to spend $50 repairing his shoes instead of buying a new pair. Meanwhile, regular folks are taking out pay day loans to buy shoes that cost less than $50 new. Actually, pay day loans can be a valid financial tool under certain circumstances, which is unlikely to be the case with today's budget. The budget is almost certain to be more about the potential upcoming election than about prudent financial management for the country - what a budget is supposed to be about. Just another measure of how out of touch this government is with those it is supposed to represent, and why finding it in contempt seems so appropriate.


January 18, 2011

Feds Tighten Mortgage Financing Rules - Again!

Back in the olden days (early 2010), "Conservative" meant reducing the role of government in our lives, and reducing government spending. Well, the "Economic Action Plan", and the backdoor bailout of the Canadian banks via CHMC blew the latter out the window. Clearly, keeping government hands off our personal investments, such as mortgages, is also now prime turf for the now neo-liberal "Conservatives" to run over roughshod. What the heck is going on? How is it that our Prime Minister can crow about Canada being the most free enterprise nation in the G20 the same day his Finance Minister trots out this interventionist nonsense? What's 'free-market' about the feds making it harder and harder for Canadians to secure mortgages, or home-equity backed financing?

A couple of ideas come to mind. It could be that the feds are anticipating a fundamental collapse of Canadian real estate values - at least a 25% devaluing in the short term - and they are trying to cushion Canadians against losing their homes. However, this government has shown no interest in the well-being of most Canadians in their 5 years in power so far. Besides, if that was the objective, it could be covered by a program via CMHC aimed at protecting Canadian mortgage holders for far less money than the CMHC bank bailout in 2010. So, most likely that's not it.

If Canadians really are borrowing too much, isn't it up to the lenders in a free market to raise interest rates to reflect the increased risk? That's what they do for second and third mortgages. But, for some reason, this allegedly pro-free-market government isn't content with that free-market approach. So, in spite of their pro-free-market blather for public consumption, this government doesn't trust Canadians to manage their own investments, nor do they trust the major mortgage lenders (i.e., the banks) to act in their own best interests either. Well, if you are the central government, and you don't trust the people, and you don't trust corporations, and you make arbitrary edicts to control the behaviour of both, well, we have a name for that system of government - communism.

So, other than creating another housing pricing bubble from now until April 25th, 2011, what is this announcement intended to accomplish? Especially as this is the second round of tightening in a matter of months. Why not let the free-market operate, and raise interest rates on mortgages in the next few months if consumer debt is a serious issue? Perhaps because if Canadian interest rates go up, then foreign capital will be attracted to Canada, raising the value of the Canadian dollar. If the loonie soars appreciably higher than the U.S. greenback, that is presumably bad news for Canadian exporters, i.e., the Tar Sands - as the U.S. may choose to buy cheaper oil elsewhere. The Harper regime has pretty much wiped out all other Canadian exporters but the energy sector in their undying allegiance to the Alberta oil sector. In this context, the continued tightening of the mortgage rules makes sense. The bad news: continued protection of the Tar Sands export market means we can expect more of the same in the future. Home ownership will be reserved for ever smaller fractions of the Canadian population as a result. And a carbon tax on the Canadian energy sector becomes even less likely.


December 15, 2010

Canadian Consumer Debt - Absurdity for Christmas

The irony was delicious, as it seems the perpetrators themselves were unaware of the absurdity of their finger-pointing, delivered with straight faces. Or perhaps it was a masterful piece of misdirection, the pots calling the kettle black, as the coincidental timing seems slightly suspicious.

It seems that on Monday of this week, the biggest economic issue facing this country is consumer debt. Curious, as I thought it was the sputtering of the fictional recovery, or the fact that all that stimulus spending under the Conservative government's "Economic Action Plan" (a term that rings increasingly hollow) seems not to have created many jobs at all. Or perhaps that an allegedly fiscally conservative government has spawned a deficit that would have sickened the past master of government by deficit, P.E. Trudeau.

However, apparently it is none of these, it is the foolish consumer amassing debt that is the primary culprit of our economic woes. Never mind that this is precisely what the federal government has been doing, in the name of jump-starting the recovery.

Canadian consumer debt stands at about $45,000 each (including mortgages, car payments, etc.). ( 1.5 trillion / 33 million). On the other hand, government debt in Canada comes to about $21,000 for each of us. (approx. $700 billion / 33 million).

Prime Minister Harper (and other government leaders), practice what you preach, and perhaps you would be more credible.

Then, Bank of Canada Governor, Mark Carney, warns us that interest rates are going up in the future, and we won't be able to afford the interest payments on our consumer debt when that happens. However, it is Carney and the Bank of Canada that sets the underlying bank rate which is the base for most consumer debt that is financed at variable interest rates. Given the sputtering economic 'recovery' in Canada, and the fears of a Canadian dollar above par with the U.S. dollar, there seems little fear of the Canadian bank rate rising in the next year or two. In fact, I can foresee it dropping a quarter-point within the next year.

Not living comfortably off the public teat, I have a different perspective on the ballooning of consumer / household debt in Canada. I'm sure some of us really did take advantage of lower interest rates to finance bargains on bigger houses, more expensive cars, major appliances, expensive vacations and the like. However, for many more, as household income (lost jobs, lower wages, reduced hours, investment income and value of financial assets) took a pounding on all fronts, for many, consumer debt was how we bridged the financial storm foisted on us by irresponsible multinational companies (offshoring jobs, fictional and misrepresented financial derivitive instruments, etc.) and incompetent government regulators. Those of us that had played by 'the rules' (e.g., investing in RRSPs and 'safe' market investments) were amongst those hit the hardest in 2008 & 2009. In 2010, we're a long way from out of the woods.

If the federal government really wants us to do something about our levels of debt, here are a few ideas.

Start by reading this piece, Reality Check: Banks Before Families

When the leader of the federal NDP comes out as the voice of reason on economic matters, you know things are seriously upside-down.

Let's reduce the tax burden on Canadians before giving more tax breaks to multi-national corporations that don't reside here, and are only here to exploit the resources that are the birthright of Canadians.

Let's get rid of the GST/HST, a regressive consumption tax, and replace it with a carbon tax, which would have the benefit of encouraging reduced greenhouse gas emissions and doing something positive about climate change.

If you are really worried about the effect of rising interest rates on consumers (more personal bankruptcies - bad for business, you know), then do something concrete about it. How about having the Bank of Canada create a new lending regime for Canadians, instead of for just banks, foreign and domestic? Something like inverse Canada Savings Bonds (CSB). Instead of selling long-term debt to Canadians at embarassingly low rates of return for long periods of time (e.g., less than 1% for ten years), let's create Canadian consumer financing bonds (CCFB). The CCFB would allow Canadians to transfer their existing consumer debt to a maximum of $50,000 per individual via a bond they sell to the Bank of Canada. The rate on the CCFB could be based on the CSB - say + 2% to provide the BoC with a reasonable rate of return. Based on 2010 CSBs, the CCFB would carry a rate of 2.65% annually for ten years.

Create a real economic policy for Canada that includes inshoring of jobs, particularly in manufacturing, so there will be more jobs for Canadians, which will provide us the income to actually pay off our debts. It is ridiculous that a resource rich country is simply exporting the commodities and then importing finished goods, when we could be creating those finished goods within our borders and employing Canadians as a direct benefit. We have to diversify our economy beyond energy production, or we will suffer greatly when the rest of the world curbs its appetite for our tar sands.

Oh, and delivering this news just before Canadians convince themselves to open their wallets for Christmas spending must have given those in Canada's ailing retail sector a case of the chills to match the current frigid weather covering much of the country.

(If you are looking for ways to reduce your expenses and get a grip on your household finances, please visit our frugality page. No charge.)


February 9, 2010

Will Faltering Canadian Economic Recovery Slip on Oil Slick?

Oil seems to be headed below the US$70 mark. Despite the boosterism of the North American media, it's clear the fundamentals are not improving, and most western economies have bulked up on debt. While Canada is somewhat better off in that regard than most, it is also one of the countries most dependent on trade. If our trading partners are hurting, we'll be sharing that pain.

Given our federal government has pinned our economic hopes on the tar sands and the U.S. economy, we may be looking at a one-two sucker punch combination.

A couple of stories regarding the international oil market:
Iran Tankers Idle as Oil Declines Before OPEC Meeting
Floating Oil Storage Falls 20% in January, SSY Says


January 19, 2010

Canada's nice-guy strategy a flop in fight against Buy American

First, read this article in the Globe and Mail by Barrie McKenna titled "Canada's nice-guy strategy a flop in fight against Buy American".

Now, read what I wrote a month and a half ago.

Let's hope Canadian municipalities take up their challenge again quickly, and create some Buy Canadian momentum now that we can see our federal government have been hoodwinked (again) by their U.S. counterparts. It's time we started to recognize that the U.S. is fundamentally a protectionist nation, and will continue to be, no matter how much they protest otherwise. If Canada wants to remain a viable nation, it has to have a real national economic policy that speaks to a coherent national economic vision, rather than just selling it off in pieces to opportunistic buyers. The thickening of the U.S. / Canadian border continues at the insistence of the U.S. Let's recognize that reality, and respond in a rational fashion.


December 12, 2009

Budget watchdog points to slow flow of stimulus

This Canadian Press item echoes my comments over the past several months that the "funding commitments" much ballyhooed by CPC cabinet ministers are not actually flowing in significant measure, or generating the postulated economic benefits. Let's face it, anything requiring three levels of government to agree, let alone act, is not going to happen quickly. Given that the recession is not lifting in response to rhetoric, let's hope that we really do see people getting hired starting next construction season to actually get something done. In the meantime, it's still going to be a hard winter for a lot of Canadians, as EI benefits run out, and the promised reform measures aren't happening. No wonder the government elected to get out of town early for their Christmas break this year.


December 4, 2009

Buy America - Too Little, Too Late; Time to Change Course

The rumour mill reports that a deal on letting Canadian companies get some crumbs from the American stimulus program in return for giving up the last vestiges of our economic sovereignty is close.

The deal requires that all Canadian provinces and municipalities must allow U.S. firms equal standing to bid on all contracts from these levels of government in return for letting Canadian companies bid on Buy America stimulus contracts. There is no indication that U.S. states or municipalities are bound to let Canadian companies bid on contracts that are not funded by the U.S. federal economic stimulus plan, which has pretty much come to an end.

So, in small words, we are pretty much planning on giving up all our future rights to support our own companies with our tax dollars, in return for the priviledge of letting our companies bid on projects that are all but finished.

Anyone else think that is a bad idea?

Let's try looking forward a little bit instead. In the foreseeable future, most of the world will emerge from the current recession. The U.S. will be the laggard, saddled with a humongous federal debt and operating deficit, addicted to imported oil and natural gas, and as climate change progresses, facing scarcities of fresh water, lumber and eventually food. The emerging consumer economies will be China and India, who will be looking for oil and food wherever they can find it as they face water crises of their own. If and when the U.S. economy does get back into gear, it will be looking to buy what Canada has to sell. Why position ourselves to give that away in the foreseeable future in return for an empty promise today?

In recent years, Canada has taken pretty much all the economic pounding the U.S. can deliver. They have effectively blockaded our softwood lumber, labour, and infrastructure-focused manufacturing sectors. About all we continue to sell to them at this point is oil, natural gas and Blackberries. It's time we stopped acting like an immature colony and like a grown-up country. It's time we established serious trading relationships with the rest of the world. Historically, when we have a national vision, we have been world leaders. At the end of WWII, Canada had one of the world's largest merchant ocean fleets. We could create an industry building state-of-the-art cargo ships, which could in turn be the base for us to become a global trading nation. We could use our bountiful fossil energy resources to power innovation now for a day when such energy sources are scarce and be leaders instead of laggards in the race to converting to cleaner energy sources as they become economically attractive. Investing in these kinds of future could create jobs in Canada today, and lasting prosperity for tomorrow. Wouldn't that be better than the continuous "committing" of funds (as opposed to actually spending and employing people) that is being passed off as action on the economic front by our governments today?


November 17, 2009

Buy America - the Canadian and B.C. governments buy in

In an ironic twist, the same week the U.S. ripped up and returned some more Canadian plumbing fixtures we learn that our governments are sticking to their no-barriers, one-way-only free-trade policy. Yep, seems some of very signs our taxes are paying for to convince us the Canadian economic stimulus plan is accomplishing something are being made in the U.S. Way to go, Canada - that's showing Congress we're serious about wanting an exemption from the Buy America provisions for Canada.

So, if a U.S. firm sells Canadian steel into a project into the U.S., that's OK, but if the Canadian firm tries to sell it directly, no deal. It might take a couple more years, but if the current federal government sticks to its guns, Canada should be manufacturing free in the near future.

November 8, 2009

Dangling the dollars - Where the federal stimulus money went

This Ottawa Citizen article attempts to provide us with some of the information the federal Conservative government promised to provide to Canadians regarding the economic stimulus program set out in the January 2009 budget. Unfortunately, it does not tell us how much of the money that has been announced has actually made it into the hands of Canadian workers - the actual objective of the stimulus package. That is also information the government should be providing, as promised, but has not done. My request for this information has not borne fruit either. This leads me to conclude that one of two things is true: either the government doesn't know the answer; or, the answer is not sufficiently attractive to share with Canadians. Given the staff and tools available to the government to track the funding, I suspect it is the latter.

September 29, 2009

EI Figures - What They Don't Tell Us

Yesterday (Sept. 28, 2009), government officials and the media played up the story that the number of Canadians receiving employment insurance (EI) benefits had declined from June to July. The implication was that more Canadians have jobs and happy times are here again, or just around the corner.

Not so fast with the happy button! You see, the figures from Statistics Canada don't distinguish between people who have stopped claiming benefits because they now have paying jobs and those who have exhausted their benefits under the EI regime - a surprisingly short time in the 'have' provinces like Ontario, Alberta and B.C. Given the duration of the recession to date, folks who want to work are falling off the eligibility period end, and likely moving to social assistance. Similarly glossed over was this pertinent bit of information:
"Despite the decline in July, the number of regular beneficiaries was still 287,400, or 57.4%, above the level in October 2008." That kind of dwarfs the several hundred jobs the Economic Action Plan may have created so far.

Even the statement that the number of people making initial claims being down is tarnished by the reality that one has to have had a job in the previous month to qualify as such a statistic. With over 1.6 million of us now officially unemployed, the pool of people to be made unemployed is shrinking significantly. The official unemployed does NOT include those deemed self-employed (often a euphemism for those not working but do not qualify for EI benefits) or those that have given up actively looking for employment. In other words, no matter how bad the numbers look, the reality is actually worse.

To understand what's really at play, we need to look at the figures for the labour market unemployment rate and the labour participation rate. Those figures from Statistics Canada put the lie to the implied good news. In fact, the unemployment rate went UP, not down, by 0.1% from July to August, and up by 2.5% from the previous year. The total number of people employed has fallen by 1.7% from August 2008 to August 2009.

It would be nice if a government that campaigned on being open, transparent and accountable would just put the real numbers about their Economic Action Plan results and the real data about unemployment out in the public domain in an unvarnished manner instead of cherry-picking their data and presenting it without context via the media.

2009.05.29 - Another federal fund flow fiasco

It's getting to be a tedious litany: Build Canada Fund; Economic Stimulus Fund; 2008 income tax refunds - and now the news that residential school victims are waiting months for their settlement payments after the the claims are settled. At least one claimant has died in the interim.

Perhaps we should pay government MPs, cabinet members and the staff of the PMO via these programs and see if that would help improve the delivery on these payments of OUR money to a "timely and effective" level. Seems simple enough to me - if we want government stimulus money to work, it has to get into the economy.

2009.05.27 - Deficit to be larger than forecast in January

Just 4 months after presenting the 2009 Federal Budget to Parliament, Finance Minister Jim Flaherty admitted that the federal government’s hopes of stimulating the Canadian economy is not getting any traction and as a result the 2009-10 federal deficit will be significantly larger than set out in the budget document. However, he does not have a revised figure as yet (2009.05.26). Maybe next month. Apparently that answer didn't go over well, so just a day later (today) the new answer is "more than $50 billion". I can hardly wait to see what tomorrow's answer is.

The reason the economic stimulus package isn’t getting any traction is because there isn’t any significant money flowing yet. Just rehashed and repackaged announcements after re-announcements after announcements. This approach is not creating any jobs (which was made clear by yesterday’s unemployment statistics).

As near as I can tell, these are the real cornerstones of the Canadian government’s economic stimulus plan.
x Ensure as few people as possible qualify for EI benefits, and maintaining disparities by region in the face of a global downturn. This should increase the number of personal bankruptcies, leading to more work for accountants, lawyers and bailiffs.
x Delay as much as possible with bureaucracies, inter-government squabbles, requirements for tri-partite funding, and case-by-case review of proposals any actual disbursement of funds under the Building Canada Fund or the Economic Stimulus Package, relying instead on “announcement effect” tactics and hoping the economy recovers before too much of this promised money actually gets spent. This creates additional work for several bureaucrats at the federal level and each provincial government, as well as additional work for some civic employees generating more funding proposals and responding to future queries about those proposals.
x Continue funding attack ads, creating work for those creating the ads and revenue for Canadian media outlets.
x Not take a hard line against back-door protectionist strategies in play in the U.S., encouraging Canadian companies to move operations and jobs to the U.S. to qualify for contracts under the U.S. economic stimulus package, which actually is moving money into the economy, while ensuring U.S. companies have full access to the Canadian market.
x Support large U.S. companies with bailouts (Chrysler, GM) while denying similar support to Canadian firms in the auto parts sector, forestry sector, etc.
x Force Canadian workers to take pay cuts to compensate for the decades of incompetence in the Detroit 3’s bloated ‘management’ ranks.

Even Canadians can figure out that when they are losing their jobs and personal bankruptcies are soaring, the alleged economic stimulus package is not working for Canadians.

Anyone else find it ironic that the CPC is currently running television ads castigating the Leader of the Opposition for not having an economic plan (which is not his job in the Parliamentary system), while clearly the government has no vision, strategy or plan for dealing with the current economic downturn and rising numbers of unemployed Canadians (which is their job)?

2009.05.20 - The Americans noticed

This article in the Washington Post shows that the American media actually noticed the piece I covered from May 13th. This is going to get nasty before it's over. Take note, this coverage is about a proposed Canadian response; we haven't done anything yet. Given the Canadian federal government still can't get money to the street via its Economic Stimulus plan, or even through its predecessor, the Building Canada Fund, perhaps a different approach is in order.

It's not just one article, the story is spreading, and with justification. Also note, one of the projects that ripped up Canadian product was a U.S. Navy operation - and that's U.S. federal money no matter how you look at it. Given that the U.S. economy is in recession, and the apparent need to set up operations in the U.S. to qualify for their stimulus funding, perhaps we should have the Canadian government provide debt financing at 0.25% (Bank of Canada rate) to Canadian companies that want to buy U.S. competitors. That way, if Canadian business can't get the work or the jobs, at least we can own the companies that are getting the work and the jobs. Doesn't violate NAFTA, fits the current U.S. stimulus requirements, gives Canadian companies a chance to expand, and there are still bargains to be had in U.S. businesses.

2009.05.13 - Buy America trumps NAFTA

Well, who'd a thunk it? Oh right, I did (see 2009.04.02 blurb below). Seems all those platitudes from the Obama administration about respecting international trade agreements are worth about as much as Bush administration platitudes about respecting international trade agreements (e.g., softwood). Apparently Canadian companies are getting squeezed out of U.S. economic stimulus projects due to a loophole in U.S. law. Personally, I like the proposed response in the article - reciprocal measures. If it isn't protectionism when the U.S. does it, I guess it can't be protectionism if Canadian municipalities, businesses and consumers do it either.

2009.05.11 - It must be true, even the Globe & Mail has done an article

If you've been following this page, you know the theme by now, so just read the Globe & Mail article yourself.

2009.05.10 - First Economic Stimulus Money Trickles Out

Of the multiple billions of dollars announced in Budget 2009, less than $15 million managed to escape the federal coffers on Friday, according to a federal government announcement. The municipalities to receive the funds have not yet confirmed.
Canadian Press story: $8.9 million to B.C., $5.4 million to N.S.

2009.05.09 - Feds Re-Announce more funding - to flow within 2 years

Rona Ambrose announces money for Alberta labs - again
We're going to fix a couple of federal facilities desperately in need of maintenance. Per the 2009 Budget, this money will be spent within 2 years. No update on when the work will actually begin in this recycled photo op. To quote a mediocre U.S. mass-market film from years ago: Show me the money!

2009.05.05 - Why Track Results?

Finally, the Loyal Opposition are actually asking some relevant questions.
Gerard Kennedy notes announced funds are not in the 2009 budget or approved

2009.04.28 - People are beginning to notice

Well, it's about a month now since the famous federal funding flow was to commence. To be blunt, it's not happening. Other people are beginning to notice, like Marilla Stephenson. If we're not careful, people might eventually notice that the original Building Canada Fund isn't exactly pushing truckloads of cash out the door either. But who's going to hold this government accountable? (Remember accountability and transparency? That's OK, that was their campaign mantra two elections ago, so who in Canada can remember that far back? Certainly not voters. Pop quiz: what was the CPC mantra in the last election campaign? Give up? It was: we will not run a deficit. Are these guys a laugh a campaign, or what?)

2009.04.20 - Buddy, can you loan me a dime?

The latest daily instalment in this Keystone Komedy farce was revealed by Minister Diane Finley in a news release. Seems that the feds have realized they aren't actually getting any Building Canada Fund grant money out into the economy, so now they're pulling a bait and switch and offering CMHC-administered loans in their place. If you are a community that really feels lucky, you can apply for a loan to get your portion of the funding to then apply for a Building Canada Fund grant. Of course, if you lose on either side, you're really hooped.

If these folks weren't using my money, it would almost be funny.

2009.04.19 - Canadian Infrastructure Stimulus Package Revisited

In late March (2009), Prime Minister Harper and his Conservative Cabinet Ministers said the money was ready to flow on April 1st. So, anybody out there on Main Street been hired to do any of this work yet? No? Well, perhaps that's because the money is not flowing. Not on April 1st, and not as of April 17th. In reality, it's not going to flow until sometime in the summer, as the application deadline under the new arrangement is May 1st.

According to this article (April 11th), "No one can say how accessing the stimulus package will hurt future applications for water, sewer, roads and other infrastructure projects because the terms for the fund haven’t been clearly decided by Ottawa and the provinces."

Another complicating factor could be that the Web site that is supposed to have the information (bcfcc-fccvc.infrastructure.gc.ca) keeps failing on time-out errors.

Let's see, we have 11 senior government bureaucracies trying to agree on how to distribute money under a plan that has be philosophical anathema to the current federal government in power that is supposed to be the main contributor. So, each provincial government is producing it's own version of the program. In the meantime, municipal governments across the country are squabbling internally over how to grab a piece of the alleged action, and appear to be neglecting more realistic approaches to dealing with immediate issues in the scramble to re-image their wish lists as 'shovel-ready' or fitting the new one-page application form for funding. (I was going to show the Ontario version of the form, but its on-line version is unavailable.)

Atlantic mayors are sounding much the same message, calling on the Harper government to provide details regarding the application and approval process.

For Canada, it looks like "business" as usual. Remember, they're from the government, and they're here to help you.

2009.04.02 - G20 Meeting Update

Well, that was a waste of London Police overtime, leaders' time and media airtime and ink.

Leaders promised not to revert to national economic protectionism. That's not going to last. One analyst I watched said Canada will suffer the most of the G20 as a result of new protectionist measures by other countries. Bzzzt, wrong, thanks for playing. Canada's largest trading partner is the U.S., who have routinely beaten Canada up with protectionist measures in spite of NAFTA, GATT and WTO decisions in Canada's favour on a variety of trade areas. Canada is now at the point where all we have left to export (for foreign currencies) are things that those countries can't actually get within their own borders. The U.S. buys our oil, natural gas and electricity because they can't produce enough in house. China buys our wheat because they can't produce enough within their borders. Japan buys our wood and minerals because they have to protect their existing forest and can't produce that much iron and other minerals for manufacturing at home. The U.S. might try to pull the remains of their auto sector back inside their borders, but Canada buys almost as many cars and trucks as we produce, so we can manage that as a zero-sum game if we choose to do so. The reality is, if Canada is worried about trade, the easiest thing for us to do is announce a policy of response-only protectionism. If you close your borders to our products, we'll return the favour (any Korean automakers listening?). We import primarily manufactured goods, so our response could be to incent domestic manufacturers and create jobs as a response to measures by other nations.

However, if you are a Canadian manufacturer, or are thinking about becoming one, make sure you are bulletproof from the get-go, because you've a lot working against you. 1) Don't count on a currency arbitrage advantage - by summer 2011, I expect the Canadian dollar will be worth more than the American dollar. 2) Our federal government does not believe in supporting Canadian businesses; we only bail out wholly-owned American companies. 3) The Canadian banks. While being praised today for their inherent conservatism, this is the same characteristic that has historically sent Canadian businesses to the U.S. to seek venture capital. Don't expect that to change, and credit in the U.S. is still tight. 4) Canadian consumers won't pay a nickel to support a local business instead of Wal-Mart selling lead-painted, melamine-filled Chinese products.

On climate change, we got a non-statement.

More money for the IMF. Before you decide that's a significant accomplishment, do a careful review of what the IMF has accomplished for its nominal clients and on major projects it has funded.

The media giggle of the event was that PM Harper missed the photo-op. However, that's not the worst of it. At the rescheduled photo-shoot, other leaders were missing. "So what?" you say. Well, just consider this - this group just agreed to spend trillions more dollars of our money, and to impose more regulation on financial institutions - but between all those national leaders, and all their aides that were undoubtedly present, and the photographer's staff, and the conference staff, apparently none of them are capable of counting to 20. I feel reassured now, don't you?


After the 2009 Canadian federal budget delivered on January 27, it is clear there is only one actual conservative party on the federal scene. Unfortunately, the Green Party doesn’t have any seats in the House of Commons. I am not alone in my disappointment that the CPC has abandoned what was left of their ideology and principles as they continue down the road to becoming Liberals.

This was clearly a budget where politics trumped policy, and fear of an election triumphed over the economy and the interests of Canadians.

It is a budget that shot itself in the foot. Oddly, for a budget marketed with the catch-phrase “Temporary, Timely and Targeted Stimulus”, its cornerstone is a permanent tax cut aimed at the middle class – a move generally regarded as having questionable value in having an effect in the short term, or getting the best bang for the buck in terms of fiscal stimulus for the economy. That’s not temporary or timely, and the targeting is questionable. It looks like the tax cut is a case of anachronistic ideology surviving as a sop to voters in case the Conservative Party of Canada actually had to ride this beast into an election.

Some of this stimulus will be off-set by almost $400 million in cuts to government expenditures. Another $250 million is for catching up on previously deferred maintenance to federal government lab facilities, and another $323 million is for repair and restoration of federal government buildings. There are even some, more cynical than me, that suspect the whole thing is a piece of photo-op puffery. An editorial in the Sudbury Star went so far as to say "The details, of course, will determine whether this budget is chiefly a political document in which many of the dollars aren't handed out -- so the federal budget can be balanced sooner -- or whether it is the genuine stimulus that it purports to be."

While there is potential for a few good measures hidden in this cure for insomnia, it’s hard to tell, as there is a definite lack of detail or substance in this 343-page bundle of fluff and disinformation. For example, the budget states that EI benefits are being extended from 45 to 50 weeks, neglecting to mention that in most of the country, those that lose jobs don’t qualify for 45 weeks of benefits now, simply because of where they live. Then again, at 343 pages, the document itself may count as stimulus for the paper and printing industry.

The requirement for tri-party funding (municipal, provincial, federal) for major infrastructure projects is disquieting for two reasons. First, it seems to ignore that there is only one taxpayer – us – even though we get gouged into three different pots for the convenience of our elected officials. Second, this is coming from the much-criticized federal Building Canada Fund noted for its inability to move money from government coffers to working projects in a timely manner. The Building Canada Fund model pretty much guarantees that stimulus funding will not reach a significant number of workers for many months, and likely considerably more than a year. [2009.02.14 - In fact, according the the federal government itself, only 4% of the funding announced under the program in the past 2 years has actually left federal coffers. That's the same channel that will be used to move this supposed stimulus package into the Canadian economy.] That’s not timely, though it may appeal to this government as a form of back-door miserliness; promise the funds for PR purposes, but ensure the bulk don’t actually get spent. Confusion about the funding model is increasing since the budget was presented, not diminishing.

The budget identifies 13 lucky top priority projects for the infrastructure stimulus funding. Of those, 6 are for highways, 2 are for buildings, and there are 1 each for renewable energy, a train station, a port, a transit project, and waste-water treatment processing. Somehow, that doesn’t give a sense of vision or innovation.

The alleged ‘green’ infrastructure item is particularly short on details. While there is apparently a pile of money for this, it is not clear what the requirements are to qualify. Unlike the Building Canada regular infrastructure funding, no projects are identified as ready for funding. However, like the Building Canada Fund, costs for the green infrastructure projects do require tripartite funding.

In the best case scenario, money won't flow until after the budget is passed (likely late March), applications are received and reviewed, two sources of matching funding are proved to be in place per project, and only then will the federal bureaucracy consider approving each project, on a case by case basis. After that, the municipality with the project will likely have to go to a tender process to get competitve quotes on the work, because of the size of the projects. After that, the tenders have to be evaluated for compliance, and possibly rated against specific objectives (e.g., degree of work performed locally, quality of references, proposed project schedule, quality of proposed resources). In my estimation, it will be at least late summer before even the first of this money starts flowing. It will be well into the autumn before a significant portion of the promised funds can be in place to actually move to the companies that will actually pave roads or pour concrete, and by then we'll be approaching the end of construction season. Given that the contractors have to complete an agreed amount of work before they can invoice, and many municpalities are not noted for speedy payment of large invoices, it is likely that this money will not hit the streets (so to speak) until at least the spring of 2010, and probably later. [2009.02.06 - Support for this concern from Canadian big business.]

By that time, many economists believe an economic recovery may already be well under way (starting in the 2nd half of 2009), and government money flooding into the market at that point will produce labour shortages for many of the skilled construction labour segments. In other words, too late and when we won't need it. If the federal government could get some of the already approved and committed funds already sitting in the Building Canada Fund moving, that might yield benefits when they are needed (remember 'timely'?) and give this government some degree of credibility on this file.

The one theme implicit in this budget that is true to conservative ideals is the concept of self-reliance. If Canadians are relying on this budget to mitigate the impact of the recession on them, they will be sorely disappointed. They will be much better served to ignore the whole thing, rein in their expenses, and take advantage of any additional monies that come their way as savings and investments. (See our frugality tips on our 'Surviving the New Normal: Recession' page.) That’s because they will certainly be paying higher taxes in years to come to pay for this spending spree. I know that runs counter to the ‘spend our way out of recession’ philosophy being espoused in Obamaland, but as I read between the lines, that’s the message the Harper/Flaherty budget has delivered.

Maybe Ignatieff and the federal Liberals will vote for this. However, I think that once the Canadian and world business communties really grasp what is - and is not - in this document, they will vote otherwise with their investment and jobs.

With luck, NAFTA will allow Canadians to benefit from the Obama stimulus package in the U.S. As usual, what the U.S. does has a bigger impact on Canadians than what our own federal government foists upon us. However, the softwood lumber issue is probably more instructive as to how the current Buy America provisions will play out to Canada's detriment.

[2009.02.14 Addendum: On Friday the 13th, 2009, Infrastructure Minister John Baird announced that the government has decided to remove the requirement for federal environmental assessments as a criteria for approval of federally-funded infrastructure funding. Nice piece of misdirection; as if environmental assessments were the delaying factor in repairing rotting municipal infrastructure, and not the inertia of the Building Canada Fund. Remember last month, when the focus of the stimulus money was to be the backlog of 'shovel-ready' projects, that presumably already had any required environmental assessments completed? How does dispensing with environnmental assessments for future projects help move the existing backlog forward? Stand by for additional CPC boogeymen to be offered up as scapegoats as the recession deepens while more announced money disappears into the BCF black hole.]


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