Tuesday Afternoon Links

This and that for your Tuesday reading.

- Paul Boothe responds to the C.D. Howe Institute's unwarranted bias against public-sector investment:

Is the public sector holding back provincial growth rates by crowding out private sector investment?  That’s the contention of a recent C.D. Howe paper by Philip Cross.  The paper provides a great case study of the danger of confusing correlation with causality.

Let’s begin with the simple arithmetic.  Gross domestic product (GDP) is the sum of spending on consumption, investment, government services and net exports.  Whether the investment spending is initiated by the private sector or the public sector makes no difference to the GDP accountants at Statistics Canada. Both contribute in the same way to measured GDP and a boom in either private or public sector investment will boost economic growth. The simple arithmetic gives us no reason to prefer one kind of investment over the other.
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(T)he four provinces with relatively high private sector investment ratios that Mr. Cross highlights are all energy producers, while the ones with relatively low private sector investment ratios are not.  A simpler alternate hypothesis, dismissed out of hand by Mr. Cross, is that the differences in private sector investment ratios are mainly due to the energy boom.  In fact, when one compares the rates of public sector investment per capita in Alberta and Ontario in 2012, it turns out that they are roughly comparable. Alberta actually has greater public sector investment per capita when one accounts for investment by utilities in the same way across provinces.

Scottish poet Andrew Lang warned about the misuse of statistics, remarking that they are sometime used like a drunk uses a lamppost, more for support than illumination.  The recent CD Howe paper by Philip Cross may tell us more about the author’s political ideology than the determinants of private sector investment.

- And speaking of ideological preferences for corporate wealth over the public interest, PressProgress contrasts the CRA's Con-ordered crackdown on progressive charities against its minimal action to deal with high-wealth tax evaders. And John Oliver neatly illustrates how the U.S.' economic system is rigged to favour those who already have the most:


- Meanwhile, David MacDonald examines the effect of EI, and finds that Canada's main employment income support has such restrictive entry requirements that it actually directs money away from the poor:

In fact, the group the most likely to be EI recipients is the middle 20% of the income spectrum (prior to layoff). They are the most likely to have surmounted the almost six months of constant work required to qualify for EI.

The other disturbing implication of the above results is that any group that represents less than 20% of the beneficiaries is in essence subsidizing the system. The lowest income group only receives around 16% of the benefits depending on the year. The poor pay into EI while working, but they are less likely to collect benefits if they’re laid off.

While we may consider EI a strong social support system, its current construction makes it particularly regressive for Canada’s lowest income families.

The easiest way to redress this inequality is to reduce the number of hours required to qualify for EI thereby letting in those with precarious employment resulting in more frequent bouts of EI. 

- Derek Thompson offers a reminder of the high cost of being poor. And Adam Carter reports on the effect of poverty on health for urban aboriginals in particular.

- Finally, Alison once again has all the background information you need to know on an astroturf group looking to brand any questioning of oil barons as unpatriotic.