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.
...

(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.

Tuesday Morning Links

This and that for your Tuesday reading.

- Paul Boothe discusses the dangers of giving in to resource-boom hype rather than planning for sustainable development:

The resource roller coaster and the crazy things it causes us to do are not new. Remember the federal government's 1980 National Energy Program? It grew out of a forecast that Alberta's oil royalties were likely to grow so large that they would fatally destabilize the Canadian federation. Remember Alberta's 1992 deficit that reached almost one-quarter of total revenues? It resulted from a forecast that natural gas prices would rise and bring on another royalty bonanza.

Resource economies grow faster on average, so what is wrong with riding the boom-and-bust roller coaster? Economists happily assume that workers can glide costlessly from one place to another in search of their next job. The reality is quite different.

Boom-and-bust economies are enormously disruptive to families and destructive of social capital. Travelling back and forth across the country searching for work means more children raised by single parents, fewer people checking in on the stay-at-home elderly, fewer minor hockey and soccer coaches. These things are the glue that binds our communities together.

Are there ways of avoiding repeating the boom-and-bust errors of the past? Yes. We can choose not to put all of our economic eggs in the natural resource basket. We can stop listening to those who proclaim the promise of the current boom and ignore the volatility that is part and parcel of staking our future primarily on natural resources. Developing our natural resources in an environmentally and socially sustainable way makes good sense. Betting the farm on them does not.

- Naturally, the obvious merit to a broader view explains why the Cons' strategy is to "lie and lie again" to distract from their reckless gamble on resource prices - and Craig McInnes is just the latest columnist to call them out on their deliberate and brazen dishonesty.

- Paul Wells summarizes the massive scope of the latest draft version of the CETA, while Heather Scoffield focuses on the EU's demand that investors take precedence over health, safety, the environment and all other considerations.

- Michael Wolfson takes aim at the lack of social mobility in Canada, along with the Fraser Institute's sad attempt to pretend there's no issues to be dealt with:

If the analysis had been done fairly, looking at relative mobility as it claims, it would have used income groups for the specific population being studied – younger earners. Then, for every person moving up a relative position on the income ladder (e.g. from the the bottom 20 per cent to the top 20 per cent, as in the Fraser analysis), someone else must have moved down, there being a fixed number of rungs (or 20 per cent income groups in this case).

Fortunately, there is an analysis of the question of income mobility in Canada based on a more careful methodology which I co-authored a few years ago, using exactly the same income tax data base. Our results lead to quite different conclusions.
...
(T)he top 1 per cent and even the top 0.01 per cent had incomes that bounced around less than the incomes of the 25 per cent at the poorest end of the income ladder. A major reason: low earnings are often the result of “precarious” jobs which not only pay low wages, but are unstable.

Life at the top may be risky, but the real risks in life lie at the bottom of the income spectrum..

This reality of precarious jobs amongst the poor, and current research standards for unbiased analysis of income mobility, are ignored by the Fraser Institute as it tries to perpetuate the Horatio Alger, ‘rags to riches’ myth.

 - Finally, Errol Mendes wonders whatever happened to the Stephen Harper who once fought against omnibus bills and top-down control.