On private interests

So far, the COVID-19 crisis has offered plenty of lessons about the limitations of delivering public goods through self-interested banks. Any relief has flowed only slowly, while the crisis has been turned into a profiteering opportunity both in the form of fine print imposing higher long-term costs on people who ask for it, and standard policies imposing higher immediate costs for people who don't.

Meanwhile, the major public-sector effort to distribute a new form of relief has been an unabashed success in terms of speed and efficiency (even if it's still too limited in scope). 

Which is to say that we're seeing further evidence that a blinkered focus (PDF) on putting banks in charge of deciding who gets money and how can't actually be justified in the name of speed or business efficacy. To the contrary, they're far more likely to dangerously limit any distribution of resources, while making any decisions only through ponderous approval processes which delay the receipt of help even where it is made available.

Instead, if we want to ensure that money actually makes it where it's needed (however that need is defined), the past month has demonstrated that the public sector is far better suited to the job.

Thursday Morning Links

This and that for your Thursday reading.

- Linda McQuaig criticizes the Cons' use of the tax system to try to silence charities who don't match their political message:

PEN now joins Amnesty International, the David Suzuki Foundation, Canada Without Poverty, the United Church and other groups that, having criticized an array of Harper policies, have been obliged to devote precious resources to defending themselves from a special probe of charities ordered by the Harper government.

This beefing-up of tax audits of charities is particularly striking when compared to Harper’s laid-back approach to auditing the real bad guys: corporations and citizens using offshore tax havens to cheat the government out of billions of dollars in revenue.

Indeed, the allocation of an extra $13 million to carry out audits of charities has taken place even as the government slashes the overall Canada Revenue Agency (CRA) budget by $250 million over three years and lays off hundreds of auditors.
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Internal CRA documents, obtained under access-to-information by Sen. Percy Downe, reveal that an infusion of $30 million by Ottawa in 2005 to counter “aggressive international tax planning” resulted in the collection of an extra $2.5 billion over four years.

By contrast, putting extra resources into auditing charities will almost certainly produce no additional revenue.
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(W)hile there aren’t enough auditors to go after many of the wealthy Canadian corporations and individuals hiding money offshore, the government managed to find two auditors to spend three days this week at PEN’s little Toronto office — the beginning of an audit that will go on for many months.

The Harperites may be inept at using audits to collect vast sums of revenue hidden by the rich — but they sure know how to beat up on defenceless groups trying to promote the public good.

- And Dean Beeby breaks the news that the Cons aren't satisfied going after charitable organizations, and instead want to be able to compile their own list of individual donors as well. But there is some push for disclosure where it's actually needed as a check on undue institutional influence, as MoveOn is calling for corporate spending in U.S. politics to be subject to public scrutiny.

- Bill Curry reports on the C.D. Howe Institute's recommendation that the federal government focus on economic development rather than deficit scolding - with Joe Oliver naturally responding that he has no interest in job creation if it might conflict with his political goals. And Rick Goldman comments on the futility of using austerity policies in the name of fighting deficits when they ultimately cause more harm than good even by that measure.

- Steven Chase discusses the latest application of the Baird Doctrine that bluster matters more than action in foreign policy - as a much-trumpeted aid announcement for the Ukraine four months ago has led to zero actual contribution from Canada.

- Finally, David Atkins connects the U.S.' drift to the right with participation in party primaries - as the Tea Party and other right-wing groups have driven Republican turnout (and thus policy oriented toward its base) while Democrats have been increasingly staying on the sidelines over the past 40 years:

When conservatives don't get what they want, they tend to double down at the ballot box. When progressives don't get what they want, many of us tend to storm away and fantasize about engaging the system outside of electoral politics somehow. This is part of why conservatives have been successful in moving the country to right.

I've brought these points up again and again. Politicians don't care about people who don't vote, and the Tea Party gets coddled because they actually vote in primaries and Democrats tend not to.

But, of course, Democratic politicians also bear a lot of the blame. It's awfully hard to get motivated to vote when you know that not much is going to change regardless of the outcome.

Even so, you can't lay the entire blame for the problem at the feet of centrist corporate Democrats. The trend toward lower turnout started in 1970, hardly the heyday of the DLC. Yes, Democratic politicians need to do a better job of advancing progressive priorities and building base enthusiasm. But progressive voters also need to come out and actually vote, too.

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.

Friday Morning Links

Assorted content to end your week.

- Paul Krugman offers a response to the assertion that accumulated wealth should be considered as costless capital:

(I)f there’s one thing I thought economists were trained to do, it was to be clear about opportunity cost. We should compare accumulation of dynastic wealth with some alternative use of resources – not assume, as Mankiw in effect does, that if not passed on to heirs that wealth would simply disappear. Maybe he’s assuming that the alternative would be riotous living by the current rich, but that’s not a policy alternative.

In fact, what we’re really talking about here is taxation of wealth., and the question is what would happen to that revenue versus what happens if the rich get to keep the money. If the government uses the extra revenue to reduce deficits, then all of it is saved – as opposed to only part of it if it’s passed on to heirs. If the government uses the revenue to pay for social insurance and/or public goods, that’s likely to provide a lot more benefit to workers than the trickle-down from increased capital.

The point is that you can only justify Mankiw’s claim that inherited wealth is necessarily good for workers by insisting that the government would do nothing useful with the revenue from inheritance taxes. I’d call that assuming your conclusions; in any case, it’s a claim that deserves to be made openly, not smuggled in on the pretense that you’re just doing economic analysis.

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(C)onservative economists are well aware of the danger of “regulatory capture”, in which public institutions are hijacked by vested interests, yet blithely dismiss (or refuse even to mention) the essentially equivalent problem of democratic institutions hijacked by concentrated wealth. I take regulatory capture quite seriously; but I take plutocratic capture equally seriously. And this is not an issue you can deal with by claiming that the benefits of capital accumulation trickle down to workers.

- And it's worth noting that precisely the same argument applies to tax cuts or privatization of services promoted on the basis that any good done by the public sector doesn't count, while anything measurable done by the private sector is good. Which brings us to PressProgress' debunking of an inane C.D. Howe Institute report which purports to show the importance of private-sector investment, but in fact proves nothing other than that profiteers will indeed make money off of public services if handed the opportunity to do so.

- Meanwhile, Mike Marqusee discusses what happens when vital interests are left in the hands of the corporate sector by pointing out prime examples of Big Pharma holding patients' lives hostage in the pursuit of disproportionate profits. And Roger Annis looks in detail at how a combination of corporate greed and negligent regulation killed 47 people in the Lac-Mégantic rail explosion.

- Ricardo Acuna offers up a well-deserved "I told you so" to a government which is now backtracking on a P3 scheme which can't be seen as remotely palatable no matter how the PCs cook the numbers. And of course, Saskatchewan citizens will want to file the experience away for future reference:

In 2007...the Canadian Union of Public Employees contracted economist Hugh Mackenzie to conduct an in-depth review of the Alberta government’s plans to build 18 new schools as P3s. What Mackenzie found was that the P3 would cost so much more, that building in the traditional way would have allowed the government to build 10 more elementary schools for the same amount of money. Likewise, a 2013 paper published by University of Toronto professors Matti Siemiatycki and Naeem Farooqi in the Journal of the American Planning Association found that using P3s adds, on average, 16 percent to the cost of infrastructure projects. There have been similar studies, reports and articles released over the past 10 years from the Parkland Institute, the Canadian Centre for Policy Alternatives, academics from around the world and numerous other organizations and unions.

Despite all this information, the Alberta government has held steadfast in its defence of P3s, and in its policy of defaulting to P3s for infrastructure projects. They have claimed all along that this method saves money, but they have never provided a shred of evidence that this is the case. What P3s actually do is facilitate the transfer of public money and private infrastructure to their friends in the private sector, padding their profit margins and bottom lines at our expense.

Now, for the first time ever, the government has admitted that building these schools through a P3 would cost more and is therefore not a good use of public dollars. Once again, however, we will not be allowed to see the full details of the accounting and calculations that led to this assessment. You can be certain that if the government is publicly owning the $14 million extra costs and actually backing off the P3 because of it, the real figure is significantly higher. Using Siemiatycki and Farooqi’s 16-percent figure, for example, would result in the traditional procurement method costing some $78 million less than the P3.

- Finally, Janelle Vandergrift writes that the familiar right-wing refrain of "just get a job!" is utterly counterproductive as a response to poverty.

Saturday Morning Links

Assorted content for your weekend reading.

- Marc Lee takes a high-level look at the absurdity of our destructive economic choices:

Exhibit one: the North Pole at the moment is a one-foot-deep aquamarine lake. After reaching record low ice cover and thickness at the end of summer 2012, an ice-free arctic in the summer is coming sooner rather than later. All of that blue water absorbing solar radiation instead of ice reflecting it back to space will compound global warming. And as it melts it releases the greenhouse gas, methane, which will further increase warming in one of those bad feedback loops scientists have been warming about for decades. A new study puts the cost of this methane leakage at $60 trillion, a number hard to fathom but close to the world’s GDP in a single year.

Exhibit two: extreme weather is doing some major damage. It’s going to take a while for final numbers to come in, but damages from the Calgary and region floods are estimated in the $3-5 billion range. In Toronto, total damages of $1 billion or more seem plausible. It is important to note that some damages are covered by private insurance, but there are the uninsured too, and even for those with insurance, there are deductibles, caps and fine print. Private insurance notably does not cover replacement of public infrastructure, either. Insurance coverage can be less than 20% of total damages from a natural disaster. In central Europe, flooding caused about $16 billion in total damages back in May, amid a very wet spring. Flooding is a big theme this year, but extreme heat is also a problem: the “heat dome” recently burning up eastern North America, and drought conditions across the plains. All of a sudden, air conditioning is a human right.

Exhibit three: extreme energy development is making a mess. The train derailment, explosion and spill at Lac Megantic is obviously top of mind. Pipeline spills have also been much in the news (even as pipeline companies aspire for new capacity via Keystone XL, Northern Gateway (through northern BC) and Trans Mountain (to Vancouver)). But breaking news includes spills as a result of new extreme tar sands processing, with “unstoppable” leaks from in situ extraction that injects steam below the surface to heat and pump out the bitumen.
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(O)ne has to think that all of this damage, from climate change and business-as-usual for the fossil fuel industry, portends political change. Perhaps not this year, but our collective denial of the costs of our fossil fuel addiction has to come crashing down at some point. Or not. Such is our choice right now: is humanity a plankton bloom, here for a good time not a long time, or can we stitch it together to become something more long-lasting on this planet. Life on planet earth will go on, but what will become of the great human drama that has unfolded over the past hundred thousand years? It’s our collective choice to make, so time to roll up our sleeves and build a social movement that will push our political class to action.

- And it's well worth adding Halliburton's coverup of its role to the list of appalling actions which should cause a major rethink of our assumptions about how much we can trust our corporate overlords - rather than giving rise to a paltry fine.

- But as Democracy Watch notes, Canada's premiers apparently can't hold a meeting without turning it into a corporate-branded event.

- Rick Goldman challenges Andrew Coyne's attempt to redefine poverty out of existence. Laurel Rothman and Bill Moore-Kilgannon make the case for a national strategy to combat poverty (while recognizing that nothing of the sort is coming from the Harper Cons),

- Instead, the Cons have of course focused on boutique tax baubles which serve little purpose but to drain the federal treasury to ensure nothing useful is done with public money. And Carol Goar points out that even the C.D. Howe Institute recognizes the futility of that choice.

- Finally, Alison links together the Cons' inner circle to highlight the implausibility that payoffs to Mike Duffy wouldn't have been familiar to Stephen Harper and his office. And Lana Payne discusses the need to rebuild social trust in the wake of Harper's "binders full of enemies" attitude toward the majority of Canada:

The list of "enemy stakeholders" (which encompasses pretty much anyone who disagrees with or has disagreed with the Harper government) did serve to highlight once again this government's colossal insecurity and bullying personality.

But for most political watchers the fact that the Prime Minister's Office would keep a running list of enemies merely confirmed what they already knew.

This is a government that has taken divisive politics to new and dizzying heights. This is a government that lacks the will and, perhaps, the ability to seek compromise and consensus.

Instead, it prefers to create enemies and then abuse its power in an effort to punish those so-called enemies.

And the list is long. Long enough to fill binders.

Feminists. Environmentalists. Doctors who care about refugees. Academics and scientists for giving a darn about things like evidence and data and real research. Unions. Civil society organizations. Self-identified progressives. The Parliamentary budget officer, or specifically, Kevin Page. The premiers. Senators who don't toe the line and rubber stamp bad laws. Federal civil servants who blow the whistle when their government lies about government policy, as was the case with an EI fraud investigator recently. Bureaucrats with an informed opinion trying to offer good policy advice, rather than us-vs-them warnings.
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As we know, every government runs it course. They get old and tired. The Harper government is looking like that now, despite the attempt to put a new face on cabinet.

Capitalizing on the unpopularity of the federal Conservatives without acting to rebuild both social and political trust with Canadians might result in short-term political success for those who displace them, but what will it really mean for the country?

As Himelfarb points out, social trust is quite different from political trust. Both are needed, but it is the loss of the first that is the bigger concern.

Thursday Evening Links

This and that to end your Thursday.

- The Huffington Post discusses a study showing how poor Canadians pay the highest marginal tax rates on income that pushes them over benefit thresholds. But it should be fairly obvious that the solution is to set up rational models for social programs which avoid counterproductive incentives - rather than following the C.D. Howe Institute's apparent preference to freeze them in place. And indeed, Jordon Cooper writes that strategies based on the principle of investing where it's needed most can go a long way in propelling citizens out of poverty for the long term.

- Alex Himelfarb sees inequality and detachment at the root of Canada's current lack of broad political engagement:

The research also shows that how governments design and deliver social and labour programs is key to achieving both greater trust and greater equality. In this age of austerity and tax cuts, many governments are doing exactly the wrong things, exacerbating inequality by undermining wages and weakening the programs that reduce inequality and alleviate its consequences, moving from universal to narrowly targeted approaches or starving the programs that the research shows make the biggest difference. What Rothstein’s work demonstrates is that universal programs – universal healthcare, childcare, education, income security, and access to justice, are the most effective by far in promoting equality and social trust. They are inclusive and not subject to arbitrary income cut offs and often degrading means-testing in which officials decide who’s in and who’s out. They bring people together across income and cultural differences. Because they belong to everyone, everyone has a stake in their quality.
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In countries where social trust is low and inequality high, it is awfully hard to reverse direction. Even when people know what’s needed, there’s not enough trust to get it done. This is the classic social trap. Absent trust, people are not willing to pay the necessary taxes; each worries that they’re being ripped off by the other, those at the top effectively secede from society and those at the bottom withdraw believing that the game is rigged. It is almost impossible in those cases to imagine big new social programs or even strengthening existing ones. And so inequality and distrust grow; solutions seem increasingly out of reach.

- Meanwhile, Andrew Rawnsley sees the need for the UK's political parties to do far more to build a genuine mass membership - a point which figures to apply in Canada as well.

- Finally, Murray Mandryk suspects that Stephen Harper has become his own worst enemy. And the NDP helpfully highlights the one and only way to stay off the Cons' enemies list.