Wednesday Morning Links

Miscellaneous material for your mid-week reading.

- The Equality Trust examines the UK's increasing level of personal precarity - and how public policy needs to be changed to support the people who need it, not those who already have the most. And Eduardo Porter offers a reminder that tax cuts for the rich do nothing but exacerbate inequality:

Big tax cutters like the United States did not grow faster than countries like Denmark, which kept taxes high. What did respond to lower taxes was inequality: The income share of the top 1 percent grew much more sharply among big tax cutters like the United States than in countries like France or Germany, where top tax rates changed little.

The findings contradicted the basic proposition on Mr. Laffer’s napkin. Indeed, they suggested an entirely different dynamic: Lower taxes did encourage executives and other top earners to raise their incomes, but not in ways that benefited the entire economy, like working and investing more. Instead, they were encouraged to manipulate the system in ways that, in fact, reduced the pie for everybody else, putting every decision at the service of increasing their pay.

Think about tax avoidance or outright evasion — which simply hides money from the Treasury, reducing the government’s ability to fund often critical programs, at no gain to the economy. But executives have been known to use other tricks — say, options backdating or earnings manipulation, or simply lobbying the compensation committee of their company’s board, or putting corporate strategy at the service of the current quarter’s earnings to give the share price a bump.

Taking into account all the ways top earners respond to taxation, Mr. Piketty and colleagues suggested that the optimal top tax rate on the Americans with the highest incomes — the rate raising the most money for the government — could exceed 80 percent with no harm to growth. Loopholes would have to be closed to prevent avoidance, but only the mega-rich would lose out. From an economic perspective, soaking the rich would, in fact, do good.

...

In more unequal societies, the rich have more power to distort policy making to channel more of the fruits of growth in their direction by, say, cutting taxes and government spending that might improve productivity and growth. Politics becomes more polarized. And it becomes more difficult to recover from economic shocks: Citizens in unequal societies are less likely to buy government promises that sacrifice today will lead to gains tomorrow.

- Stephen Gordon points out that blind anti-tax rage stands in the way of needed discussions of how to pay for the public services we all value. And Andrew Coyne comments on the absurdity of applying artificial preferences to small businesses.

- Jenny Gerbasi and Don Iveson discuss what's needed to establish an effective national housing strategy - with both public investments and meaningful tenant protections included in the mix. 

- Gareth Hutchins reports on a new study from Australia showing how the mining industry is highly susceptible to corruption. And Dogwood follows up on the Clark Libs' outsourcing of British Columbia's climate change policy to Alberta oil barons.

- Finally, Trevor Herriot exposes the Wall government's auctioning off of public land - while noting that there's been far too little public notice of the selloff of the natural commonwealth.

Tuesday Morning Links

This and that for your Tuesday reading.

- Penney Kome raises the question of who will be responsible for the damage wrought by climate change. And Trish Audette-Longo reports that the Intergovernmental Panel on Climate Change is set to start examining how human behaviour contributes to, and is affected by, a changing climate.

- But Adam Klesfeld notes that the IMF looks to be enforcing about the least fair assignment of responsibility possible by squeezing Barbuda at a time when it faces the need to rebuild from Hurricane Irma. And Jonathan Ford discusses how privatized water infrastructure in the UK seems aimed at little more than extracting money from citizens.

- Stephen Gordon points out how a lack of awareness as to how privileged Canada's upper middle class is contributes to an unduly narrow public discourse, while Heather Mallick notes that more progressive taxes on the wealthy are generally a political winner as well as desirable public policy. Paul Willcocks discusses how easily-exploited loopholes make it impossible to develop a fair tax system. And the Canadian Labour Congress applauds the Libs' first step in dealing with a few particularly glaring ones - while pointing out the need to go much further, including by keeping their promise to end the stock option loophole.

- Meanwhile, Shannon Rohan and Kevin Thomas write that the business lobby which is attacking a fair minimum wage is missing the forest for the trees in arguing against wages which can support a stronger economy.

- Aruna Dhara writes that Canada can learn from Australia's example in establish a national pharmacare plan.

- Finally, Roderick Benns interviews Gary Bloch about the value of a basic income in overcoming both structural barriers to access to income, and stereotypes which result in poverty being seen as acceptable.

Wednesday Morning Links

Miscellaneous material for your mid-week reading.

- Ben Chu reports on a new study showing that the UK's economy is broken in failing to translate GDP gains into any help for workers whose wages are falling. And the Canadian Press reports on the latest survey showing how many Canadians are just barely getting by in the face of unsustainable personal debt levels:

A new survey by the Canadian Payroll Association suggests nearly half of workers are living paycheque to paycheque due to soaring spending and debt levels.

The poll found that 47 per cent of respondents said it would be difficult to meet their financial obligations if their paycheque was delayed by even a single week.

The survey, which polled 4,766 Canadian employees between June 27 and Aug. 5, also found that 35 per cent said they feel overwhelmed by their level of debt.

For the first time in the survey's nine-year history, more respondents found mortgages on principal residences the most difficult debt to pay down, with 32 per cent of respondents selecting this option compared to 23 per cent who cited credit card debt.

Results from the poll indicate that the primary reason for increased debt is higher overall spending. Of the major reasons for increased spending, 32 per cent of respondents pointed to higher living expenses while 25 per cent mentioned unexpected expenses.

- Stephen Gordon writes that the Libs should be able to ensure that the wealthy pay at least a bit more tax to ensure stronger social supports. And Aalya Ahmad argues that the labour movement should renew its push to reduce the work week expected of workers.

- Stephen Tweedale discusses how a NAFTA provision reining in the U.S.' anti-labour laws would make eminent sense in order to ensure fairer trade.

- CBC reports on Food Secure Canada's efforts to establish a national school nutrition program.

- Finally, Nancy Krieger discusses the dangerous health effects of structural racism. And Hilary Beaumont finds that the Libs' promises to fix just one aspect of discrimination against First Nations (the lack of safe water) have seen plenty of shiny announcements paired with backsliding in terms of actual drinking water advisories.

Thursday Morning Links

This and that for your Thursday reading.

- Wray Herbert examines Lukasz Walasek and Gordon Brown's work on the psychological links between inequality, status-seeking and reduced well-being. And Linda McQuaig writes about the harm increasing inequality has done to Canada both economically and socially:

(The OECD's recent) report puts actual numbers on how much growth has been reduced as a result of trickle-down. In the case of Canada, the reduced economic growth amounts to about $62 billion a year — which economist Toby Sanger notes is almost three times more than the estimated annual loss to the Canadian economy of lower oil prices.

But while dropping oil prices are grabbing headlines, the serious negative economic consequences of Canada’s pro-rich economic policies are largely ignored. Certainly the Harper government promises to entrench these policies more deeply if re-elected.
...
The OECD’s powerful message is clearly of little interest to the Harper government, which is planning to exacerbate Canada’s rich-poor gap by introducing an income-splitting scheme that will benefit rich families almost exclusively. Harper’s plan to provide an additional $60 a month per child to all families won’t be nearly enough to allow the bottom 40 per cent of Canadians to invest meaningfully in their children’s education.

The OECD stresses the need “not only for cash transfers, but also increasing access to public services, such as high-quality education, training and healthcare” — areas where Harper’s planned cutbacks to the provinces will hit hard.

What’s striking about the entrenchment of policies favouring inequality is how out of sync they appear to be with popular will.
...
While the world’s elite may still be slapping their knees and marveling at what they’ve managed to pull off, the fact that the most prestigious international economic bodies have lined up against trickle-down orthodoxy may mean there are now prospects for real change.

At the least, it suggests that, in a showdown with the world’s billionaires and multi-millionaires, the world’s people may actually stand an outside chance.

- Of course, if free money for the rich is a demonstrably foolish policy, the Cons remain all too happy to destroy the evidence. But Tavia Grant reports that we can still see an alarming number of Canadians living with low incomes - signalling that the promise of trickle-down economics remains as empty as ever.

- Stephen Gordon takes a look at the fiscal squeeze Stephen Harper has placed on the federal government. But it's well worth pointing out one more piece to the puzzle, as the eroding resources nominally allocated for public services are increasingly being applied to spin rather than anything which could help anybody besides the Cons themselves.

- Thomas Walkom weighs in on the fallout from the Ontario Libs' failed P3 schemes - including needless debts which the province will be paying off for decades to come.

- Finally, Pablo Iglesias discusses how social justice principles reach far beyond partisan lines - even as they've been applied to turn Podemos into an emerging political force (as both a party and a movement) in Spain:

When you study successful transformational movements, you see that the key to success is to establish a certain identity between your analysis and what the majority feels. And that is very hard. It implies riding out contradictions.
...
Politics is not what you or I would like it to be. It is what it is, and it is terrible. Terrible. And that’s why we must talk about popular unity, and be humble. Sometimes you have to talk to people who don’t like your language, with whom the concepts you use to explain don’t resonate. What does that tell us? That we have been defeated for many years. Losing all the time implies just that: that people’s “common sense” is different [from what we think is right]. But that is not news. Revolutionaries have always known that. The key is to succeed in making “common sense” go in a direction of change.

César Rendueles, a very smart guy, says most people are against capitalism, and they don’t know it. Most people defend feminism and they haven’t read Judith Butler or Simone de Beauvoir. Whenever you see a father doing the dishes or playing with his daughter, or a grandfather teaching his grandkid to share his toys, there is more social transformation in that than in all the red flags you can bring to a demonstration. And if we fail to understand that those things can serve as unifiers, they will keep laughing at us.

New column day

Here, featuring my take on the IMF's recent report (PDF) on the relationship between equality, redistribution and growth.

I've already linked to other responses to the report from the Guardian and the Economist. But the column raises a point left largely unaddressed in those pieces - and which seems particularly important given some of the advice regularly dispensed to Canadian progressives.

I'll sum up that advice as being "don't worry about market inequality - instead, address poverty and inequality through taxation and redistribution". Which makes for a neat enough recommendation on its face - and has led me to see a guaranteed annual income as the single policy with the greatest potential to ensure broad equality and security.

But Ostry, Berg and Tsangarides find that while an equal initial distribution of income doesn't harm an economy's growth (and indeed contributes a small positive effect), particularly high levels of after-market redistribution give rise to some negative effect on growth. And those naturally arise only where pre-market distributions are so unequal to give rise to a need for exceptionally high transfers.

In other words, the study shows no drag on growth arising out of policies which encourage pre-market equality (though I'll note that it doesn't break down the policies and social factors supporting those more equal market distributions). But it does identify some perceptible drag on growth arising out of policies which settle for redistribution after the fact - which suggests to me that we should be focusing relatively more attention on the former than the latter.

Naturally, I'll invite any questions or comments about that line of reasoning. And I certainly don't see it as ruling out transfers as an important means of ensuring equality. But it does seem to me to suggest that a singular focus on after-market redistribution may have harmful economic effects (in addition to being politically implausible) - which confirming that broadly-shared high wages and effective worker bargaining power are necessary elements of a fair and prosperous economy.

Tuesday Morning Links

This and that for your Tuesday reading.

- Jacob Goldstein discusses how one-time, no-strings-attached funding for the poor in developing countries can produce lasting improvements in their standard of living - while also highlighting the need for longer-term development:

A charity that gives away money, as opposed to, say, offering agricultural training or medicine, does seem a bit unusual. That’s partly because governments and philanthropists have emphasized solving long-term economic problems rather than urgent needs. But in the past decade it has become increasingly common to give money right to the very poor. After Mexico’s economic crisis in the mid-1990s, Santiago Levy, a government economist, proposed getting rid of subsidies for milk, tortillas and other staples, and replacing them with a program that just gave money to the very poor, as long as they sent their children to school and took them for regular health checkups.

Cabinet ministers worried that parents might use the money to buy alcohol and cigarettes rather than milk and tortillas, and that sending cash might lead to a rise in domestic violence as families fought over what to do with the money. So Levy commissioned studies that compared spending habits between the towns that received money and similar villages that didn’t. The results were promising; researchers found that children in the cash program were more likely to stay in school, families were less likely to get sick and people ate a more healthful diet. Recipients also didn’t tend to blow the money on booze or cigarettes, and many even invested a chunk of what they received. Today, more than six million Mexican families get cash transfers.

...

Lots of people [in a Kenyan study] used the money in productive ways. An inordinate number, it seemed, used it to replace their thatched roofs, which are not only lousy but also weirdly expensive, as they need to be patched every few months with a special kind of grass. A metal roof costs several hundred dollars, but lasts for 10 years, making it a much better investment. Omondi was among those who bought metal roofs. He also purchased a used Bajaj Boxer, an Indian-made motorcycle that he uses to ferry people around, for a small fee; he is also currently paying off a second motorcycle, which he rents out. Now Omondi makes about $6 to $9 a day in his taxi operation, several times his previous income, and he works almost every day. Several of his neighbors also used the money to start businesses­. One man bought a mill and charges villagers to grind their corn. Others became microretailers, buying goods like soap and oil at wholesale and reselling them at a markup.

But while Omondi and his neighbors have metal roofs, their houses still have dirt floors and no running water or electricity. And their prospects for making it to the middle class are pretty bleak. “You give people cash to start a business or expand their business, and in a lot of cases, they shoot forward,” Blattman says. “Then they start screeching to a halt when they hit the next constraint.” If Omondi wanted to further expand, he’d probably find it hard to get a small-business loan from a bank. The problems holding Omondi and his neighbors back — underdeveloped financial systems, bad infrastructure — are the generic but defining problems of the developing world, and they won’t be fixed by a one-time windfall. 

- Meanwhile, Michael Laxer highlights the avoidable mix of waste and want when it comes to food security in Canada. 

- Michael Woods and Mike de Souza report on the Cons' latest damage to Statistics Canada, which has been forced to delay the release of National Household Survey data at the last minute due to previously-unidentified errors. And Stephen Gordon writes that the NHS has lost the benefit of any doubt.

- Jennifer Hoelzer discusses the attempts of some U.S. legislators to be honest with the public about NSA surveillance - and the the flat refusal of anybody associated with the program to allow for public debate.

- Which leads to another answer to the question of "why don't we like politics?" - as more and more important decisions are removed from the realm of elections and party politics. But that can only signal the importance of making a statement when we have the chance - and Duncan Cameron makes the case for Linda McQuaig as a progressive activist voice.

Monday Morning Links

Miscellaneous material for your Monday reading.

- Bill Gardner discusses the effect of inequality and poverty starting at birth:

There are three important facts packed into this slide. First, the lines stack up in order of increasing age, meaning that older people reported worse health than younger people. Second, all the lines slope downward, meaning that the poorer you were, the more likely you had poor health.

These facts are unsurprising, until you notice how powerful the income effect is. The leftmost point of the youngest (turquoise) line is above the rightmost point of the oldest (purple) line. This means that the poorest teenagers reported themselves as less healthy than rich middle-aged people.

- The Council of Canadians catches Enbridge trying to put off compliance with basic pipeline safety measures - in what's surely an example of the corporate sector adequately managing its own risk by operating under the assumption that, say, a power outage and a natural disaster couldn't possibly happen at once (or based on a common cause):

NEB inspectors discovered that the required back-up power supplies were missing in dozens of pumping stations during an inspection in October 2011, and ordered Enbridge to submit a corrective action plan. Eighteen months later, when Enbridge finally submitted its plan, the company requested that the NEB keep the details secret.
...
“It is indefensible for Enbridge to delay the installation of safety equipment that should have been in place decades ago. They don’t even seem to grasp why the safety equipment is necessary.”

From the Enbridge cover letter regarding its corrective action plan:

“It is only in the event of a power outage and an emergency situation occurring simultaneously that the alternate power source would be called upon to isolate the station. In that regard, Enbridge still has questions with respect to the need, from a practical perspective, for installing power generation of this nature.”

- Meanwhile, Jessica McDiarmid reports on the combination of deregulation and wage suppression that looks to have contributed to the Lac-Mégantic rail explosion. And Les Perreaux takes a closer look at MMA in particular.

- Cory Doctorow writes that the only safe home burglary is one carried out under the authority of a bank.

- Finally, Stephen Gordon suggests that public training money should be allocated to individual workers, rather than being used solely as a subsidy to employers. And while that policy might create some distortions of its own (with the link between income subsidies and reduced wages looking ripe for employer abuse), it points toward the guaranteed annual income concept which would provide genuine security and choice for Canadians in determining what training or other options to pursue.

New column day

Here, on how the recent Munk Debate has helped to highlight Canadians' preference for a fairer, more progressive tax system - and on a couple of the most important steps we can take toward that end goal.

For further reading...
- Ipsos Reid's polling on public views toward taxing the rich is here.
- Stephen Gordon's response to the Munk Debate (referenced in the column) is here. And I'll note that there seems to be some difference in determining the tax rate applicable to high-end income: while KPMG's numbers roughly match Gordon's, the CRA's figures actually show Ontario as one of the provinces with an opportunity to increase revenue.
- Finally, the Guardian discusses David Cameron's efforts both to address tax avoidance within the G8, and to push UK territories to stop serving as cover for offshoring. And while I share some skepticism about Cameron's intentions, it's well worth pointing out the example of a right-wing leader at least recognize the unfairness of tax avoidance, rather than treating it as something to be expected and encouraged in the interest of enriching our betters.

Thursday Morning Links

This and that for your Thursday reading.

- Paul Krugman makes the case for significantly higher taxes on the rich:

What would raising tax rates at the top accomplish? It would, to some extent, mitigate the rise in inequality, which some of us consider a good thing in itself: You don’t have to be a leftist to acknowledge that extreme inequality of income and wealth has a corrosive effect on democracy.

Mainly, however, the benefit of higher tax rates on the wealthy would simply be that it would raise more revenue. We live in a time when politicians are trying to downsize even the most basic social protections, claiming that we can no longer afford to pay for them; well, why not raise taxes on millionaires instead of, say, denying nutritional assistance to the poor?

You will, of course, hear claims that raising taxes on the wealthy won’t even yield increased revenue – that the “job creators” will go on strike, or hide their income from the tax collectors. However, researchers have studied the revenue effects of tax hikes (and cuts) about as thoroughly as any topic in economics, and the evidence is decisive: Increasing top tax rates from their current level would lead to substantially higher revenue. At a sufficiently high rate – the best estimates put it above 70 per cent and possibly as high as 80 per cent – further increases would be self-defeating; but we’re nowhere near that point. 

And while Stephen Gordon partially distinguishes Krugman's U.S. numbers (at least for a couple of carefully-selected provinces), I'd think it's worth trying to reach agreement on a couple of principles: that tax rates should in fact be set such as to maximize revenue, and that for similar revenue expectations it's a reasonable public policy choice to minimize inequality rather than maximizing top-end wealth accumulation.

- Michael Wolfson discusses how health care contributes to a more equal society.

- David Climenhaga notes that the Cons are choosing yet again to attack the civil service in an effort to distract from their own scandals.

- Meanwhile, the Cons have also been caught spying on anybody who dares to challenge them. And misusing public resources for partisan gain, then falsely blaming others afterward. Is there any doubt why they're doing their utmost to prevent anybody from getting to the bottom of Robocon?

- Finally, Andrew Nikiforuk writes about new research showing that diluted bitumen doesn't act like oil when it spills - with the effect of rendering useless the oil industry's assurances that they can simply apply normal oil cleanup rules to pipelines transporting dilbit.

On transferable skills

Stephen Gordon is at least moderately panicked about the less-than-surprising news that some Lib operatives tried to recruit Mark Carney to serve as the party's national leader - and there may be worse to come. But I'll argue that there's far less to be concerned about than Gordon, Mike Moffatt and others are suggesting.

At the outset, I presume it's fairly uncontroversial that we have numerous important positions of influence intended to be filled by experts motivated by the public good.

Gordon and Moffatt seem to place the Bank of Canada on a particularly high pedestal, which may be how they'd distinguish Carney's role from others. But to my mind, the difference between Carney's position and the role of independent commissioners, judges, and public servants with decision-making authority is one of degree rather than kind. Would we genuinely be any more comfortable with, say, courts being motivated by outside considerations, rather than maintaining the credibility that comes only from being seen as a fair and neutral body populated by some of the best-informed individuals in a particular subject area?

At the same time, though, political parties have a natural and reasonable incentive to want to recruit the strongest possible candidates. And the skills and expertise which result in an individual being promoted to a prominent position of public service are likely to translate at least somewhat into the political realm - making the individuals in those positions into appealing prospects for any party seeking to develop the strongest possible organization, both for the purpose of pursuing power and for the purpose of governing well.

Based on that fact alone, I consider it preposterous to blame the Lib insiders who tried to recruit Carney into their fold. But what about his response, which indeed seems to have fallen somewhat short of "don't even talk to me, you icky partisan shills"?

Well, there too I'd think Gordon and Moffatt are making an unreasonable value judgment. In effect, their view seems to be that an even an individual with nothing but the best of intentions who occupies a neutral decision-making position based on expertise and experience isn't allowed to compare non-partisan and partisan means to pursue the public good.

That might seem to make sense based on the cynicism so many are working to foster in analyzing our democratic system. But in practice, such a dividing line serves to ensure that some of the individuals most capable of bettering that system are precluded from contributing to it.

As it happens, Carney ultimately chose the view that he could have more influence staying in the realm of independent policy-making. But I hardly think that any willingness to consider whether that was true should be held against him.

To be fair, there is a valid point to be made about transparency within an institution whose role may affect political interests - in effect, that there should be some reporting of the type of political involvement under consideration by people in positions like Carney's so that decisions can be better analyzed. But that reporting would have to be coupled with recognition that it would be highly unusual for anybody in such a position to completely lack political views and connections - such that we shouldn't see some actual or potential partisanship as an obstacle to making fair decisions.

Because ultimately, elected decision-makers are (and should be) the ones to set the broader policy goals which define the roles of independent officers. And the more we accept the claim that an interest in party politics is somehow incompatible with public service or acceptable decision-making, the more we'll have to complain about when it's time to evaluate the people who do work in the political sphere.

Update: Dan Gardner makes much the same point.

[Edit: fixed wording.]

Tuesday Morning Links

This and that for your Tuesday reading.

- Yesterday's Alberta election certainly proved somewhat of a shocker - producing about the best possible result short of a minority scenario that would have allowed the NDP to exercise the balance of power, as the slightly-less-right party won even as its most notorious ideologue went down in flames. But I'd still think it's a wide open question as to whether the PCs will actually govern consistently with the wishes of the progressive voters who offered strategic support (as suggested by Sheila Pratt), or whether they'll instead veer right in order to win back some of the mass of Wildrose voters - meaning that even a majority government provides virtually no certainty as to what comes next.

- Keith Beardsley points out a massive opening for the NDP to make ethics and accountability into a decisive issue in the next federal election, while Lawrence Martin has some suggestions as to reach that result. Meanwhile, a new CROP poll shows the NDP with a commanding lead in Quebec.

- Brian Topp is back writing for the Globe and Mail online after the NDP's leadership campaign - and his take on the first phase of France's presidential election is well worth a read.

- Finally, Stephen Gordon breaks down the types of taxes collected by the OECD countries.

Tuesday Afternoon Links

Assorted content for your afternoon reading.

- Alison Loat offers some suggestions to make political parties more responsive to Canadian voters:

(H)ow can parties reorient spending to encourage a more balanced focus across their responsibilities? Political parties serve at least four critical functions: engaging citizens in politics, selecting candidates for office, aggregating policy perspectives and contesting elections.

Today, most funds are directed toward elections at the expense of engaging citizens or developing policy ideas. Party financing should be structured to encourage volunteers and facilitate ways for the voices of these volunteers to be heard.
...
(H)ow do political parties encourage more citizen engagement between elections, particularly in policy development? The Study of Canadian Political Party Members revealed that fewer than half of party members engage in ongoing party activity. Six in 10 respondents said they spent less than one hour on party activity per month.

One way to address this is to establish political party policy foundations. These organizations, common in Europe, provide mechanisms for party supporters and experts to participate in developing policies that address a country’s longer-term challenges.
Political parties have the potential to touch Canadians in most communities across the country. More should be done to ensure they play a part in reinvigorating the connection between citizens and government.

- Of course, it doesn't help that the Harper Cons are indeed forging ahead with their efforts to render government as useless as possible. And if anything, Stephen Gordon is too generous in describing their impact, as they've done plenty to make sure that revenues don't rise to the level of current expenses.

- And Peter Van Loan makes it abundantly clear that listening to anybody else isn't going to be on the agenda as long as his party is in power:

Opposition parties have also complained the Tories are mechanically voting down every one of their amendments without paying attention to the substance.

In a much discussed incident this fall, the Tories refused to accept amendments to their crime bill from Liberal MP and legal scholar Irwin Cotler, only to later try — unsuccessfully — to re-introduce nearly identical amendments themselves. Cotler had sought to make it easier for victims of terrorism and their families to successfully sue the perpetrators.

Van Loan refused to say during the interview whether he thinks it is possible for an opposition party to have a good idea. He acknowledged, however, that the government had not accepted one amendment from the opposition.

- But there's some reason for hope in the latest on the NDP's leadership candidates, including Tobi Cohen's profiles of Nathan Cullen and Romeo Saganash along with Charlie Smith's feature on Peggy Nash.

Tuesday Morning Links

This and that for your Tuesday reading.

- Linda McQuaig points out how the Occupy movement has at least started to shift the terms of our political debate:

Rather than hanging out at malls or zoning out on Facebook, these young people have endured real hardship in the Canadian near-winter to fight for a more inclusive society. Any inconvenience they’ve caused through their peaceful occupation seems minor in comparison to their contribution to the public good.

As lawyers from the Law Union of Ontario point out: “Some inconveniences to local park users is a small price to pay for the larger price being paid by the 99 per cent worldwide in the face of an economic system that privileges the few over the many.”

Are occupations really necessary to draw attention to their cause? Perhaps not. But I’d trust their judgment over mine. After all, they’ve managed to change the public discourse, putting inequality front and centre — something activists and writers, myself included, have failed to accomplish despite decades of trying.

An article last week in the mainstream magazine New York notes that we’re now moving “from the terror era to the income-inequality era.”

Wow. After only two months, the Occupy movement — without backing from billionaires or governments — seems to have moved us into a new era. Not bad for a leaderless group that sleeps in tents and doesn’t even use microphones.

- Meanwhile, Stephen Gordon tries dividing discussion about inequality into "first-order" and "top-end" issues. But in noting that the effects of top-end inequality are only part of the overall problem, it's worth pointing out that any efforts to deal with both suffer when top-end inequality results in a political system being devoted toward further enriching those who already have the most.

- And there's still an awfully long way to go beyond what the Occupy movement has been able to accomplish in changing the frame of reference - particularly as governments like the McGuinty Liberals in Ontario push to keep on rewarding the corporate sector at the expense of mere citizens.

- Finally, it's a plus to see Richard Brennan and Aaron Wherry among those picking up on Charlie Angus' strong advocacy for Attawapiskat First Nation as it begs to be evacuated - providing a stark example of the level of inequality and poverty that remains in Canada (even if all too often hidden out of sight). But unfortunately, the people with the capacity to help don't seem to be showing the slightest interest.

On intended effects

It's certainly a plus to see Stephen Gordon mention corporate governance issues as part of his latest Economy Lab piece. But there are a couple of points that demand far closer scrutiny.

First, there's the disconnect between how Gordon wants to assume executive compensation works as a general rule, and how he observes it working in practice:

(H)igh earners are different. There aren’t many of them, and they have market power that most workers do not. If their tax rates go up, they will try to leverage that bargaining power and obtain a salary increase that at least partially offsets the higher tax burden.

An extreme example of this sort of effect occurred when the UK government imposed a 50 per cent bonus ‘supertax’ on banks last year: banks simply doubled the size of the bonus pool so that after-tax bonuses would stay the same.
...
Corporate governance issues certainly deserve closer scrutiny. Again, if properly-informed shareholders are satisfied with executive pay, then it`s not obvious that there’s a policy problem to solve. But if corporate structures are sufficiently opaque as to separate ownership from control, then there may be little to stop insiders from exploiting their position for personal gain.

Now, the supertax example looks to me to be about all the disproof one would need for the assertion that actual compensation levels are proportionate to contributions to a corporation. After all, the employees receiving bonuses weren't contributing any more value to the banks involved as a result of the supertax - meaning that there was no reason based on free-market principles why they should receive an additional dime. And at the very least, one would expect any costs from the supertax to be distributed among the bonus recipients and other actors.

But as Gordon notes, upper-level employee expectations trumped any consideration of institutional benefit. And while that may signal the limitations of personal income tax hikes detached from any other policy changes, I'd think it also serves as a compelling indication that the corporate governance issues demand immediate attention, rather than an off-hand comment.

Meanwhile, Gordon also presumes the futility of top-level tax increases based on exactly the mistake most free-marketers warn us to avoid: a complete focus on how much top earners take home as a matter of envy, rather than attention to wider inequality issues.

Even if we assume that every dime of any personal income tax increase will be passed along to shareholders and employees, that doesn't negate the fact that more money is indeed being collected in taxes through the personal income tax system than would be gathered through other taxes applicable to those actors (whose rates have been slashed in the name of promoting business interest). And so the worst we can say about a high top-level personal income tax is that it's not clear how much will actually be redistributed from the absolute top end into public coffers, and how much will instead come from the not-quite-top end.

Which means that even on Gordon's account, there's reason to think a tax targeted toward top-end income earners would indeed both reduce inequality, and provide added funds for social priorities. And if the worst-case scenario is to shine a spotlight on executive capture of wealth which leads to corporate governance being dealt with more seriously, then that's hardly a result we should want to avoid.

[Edit: fixed wording.]

Wednesday Morning Links

Miscellaneous material for your midweek reading.

- Stephen Gordon weighs in again on the Cons' census disaster:

Many readers may have thought that the census issue was settled last summer; it wasn’t. We haven’t even begun to deal with the consequences of the decision to replace the mandatory long-form census with the voluntary NHS. As Economy Lab contributor Kevin Milligan and his UBC colleague David Green note in Canadian Public Policy, one of the most striking features of the census is its ‘hidden ubiquity’. The census is an invisible -- and yet essential -- element of virtually all the data that inform policy debates.
...
Employment and inflation data have the power to move markets, and policy-makers need reliable data to guide their decisions. The list is goes on, and is almost endless. For example, the labour market experiences of immigrants will be an increasing preoccupation for policy-makers as the population ages; the only source of information about immigrants is the census.

The most recent census was in 2006, and it looks as though the next usable census will take place in 2021 at the earliest. Our understanding of what is going on in the Canadian economy in the next decades will grow steadily weaker as more cars pile on the census train wreck.

- Marc Lee describes the right strategy for a government which actually wants to boost an economy emerging from a recession, rather than looking for excuses to go on a slashing spree:

Keeping up the stimulus is a top priority, and even leaning more heavily into job creation would be advised. If deficits are of concern, then increase corporate taxes and income taxes on the wealthy. Engage mortgage relief to the millions of US households who are underwater. But don’t buy into the doom and gloom stories about default. While it is true that a default would be uncharted territory, constitutionally, US debt is backed by law. The US issues debt in a currency it controls, and the Fed could play a major role by buying up some of the outstanding debt for cash. But ultimately, as James Galbraith points out, the big holder of US debt is China and it does not really have anywhere else to go to park its money (some gold, Swiss francs and some Canadian dollars on the margin perhaps).

For Canada, this means we need to keep our cool, and NOT play the austerity game revealed in last month’s budget. Piling on with spending cuts and layoffs will only make things worse. Federally and provincially, governments need to focus on employment not deficits in order to maintain robust demand in the economy (climate action is a great place to start). The Bank of Canada also needs to reconsider murmurings of interest rate increases this fall in light of these developments. Our biggest risk is that we harm ourselves to save a summary statistic rather than focus on the real challenges.

- Chantal Hebert points out how the Cons figure to start chipping away at health care across most of Canada:

The Conservative election promise to maintain the 6 per cent rate of increase in the federal health transfer for the duration of the current federal mandate will only translate in a one-year extension to the existing arrangements. And even under that regime, federal funding to most provinces could start to grow more slowly.

In one of its first budgets, the Harper government promised to bring Ontario’s share of the health transfer in line with its population as of 2014.

Topping up Ontario’s share out of the existing pie would mean that there would be less funding to go around for the other provinces.

Despite the promises of the last federal campaign, the next chapter of the medicare saga will most likely be written in red ink in the provinces.

- Finally, E3's analysis of the possible social costs of carbon provides some needed perspective on an issue where even lower-end estimates are all too often treated as making action too costly to be worth pursuing.

On posturing

Sure, there have been a couple of responses already to corporate Canada's efforts to tell scary stories about a possible NDP government. But let's add one more to the list which seems to me to highlight how the NDP's cooperative approach to politics leaves absolutely no room for such fearmongering.

Over two years ago, word came out that the NDP was fact reaching out to Canada's financial sector in the course of developing its economic policies - and impressing a number of the people it consulted along the way:

(T)he NDP caucus has been calling on external advisors and allocating more resources to strengthening its research on financial policy.

"There as been an effort to expand the capacity of the caucus," says an aide, who points to meetings with outside economists such as Glen Hodgson, chief economist for the Conference Board of Canada...

"I think you can see in Mulcair a fairly pragmatic approach to our issues. It is probably a more effective approach. I think he is on to something," says one bank lobbyist.

One former lobbyist still active on Bay Street says during meetings with senior party figures they had consistently shown themselves to be "thoughtful and backed up by good research, though we didn't always agree."

That's right: over a period of several years, the NDP has been talking with both outside experts and the financial sector - winning accolades for being "pragmatic" in its discussions generally, and having a position that was "thoughtful and backed up by good research" even where there was disagreement over the best possible policies.

And what's more, the above story came out in early January 2009, at a time when a coalition government including the NDP was still a real possibility. So one can't explain the difference between the message sent then and the fearmongering we're seeing now as being based on some sudden realization that the NDP might be close to power.

Which would seem to signal that any alarmism about what an NDP government might mean for the economy is more in the realm of utter fabrication than serious concern. Instead, the real problem for at least some interest groups seems to be that that the NDP's thoughtful policies might well catch on - and that serves as all the more reason for voters to be encouraged by the opportunity for change.

Sunday Afternoon Links

Content goes here.

- Joan Bryden notes that even pollsters are warning against paying too much attention to tiny fluctuations in their results:

(T)he media often trumpet shifts in provinces or other small sub-samples of the population, like urban women or educated males. But with MOEs of as much as 10 percentage points, seemingly huge 20-point fluctuations are actually statistically meaningless.

"I've seen pollsters comment one week, you know, 'The Tories are dead in Quebec' only to have this magical resurrection the week after and there's a pressure to sort of explain that and you come up with saying, 'You know, well, (Prime Minister Stephen Harper) made this statement or he wore this tie,'" says Mukerji.

"I think if you take a step back and look at the general trend, there hasn't actually been all that much that's changed, quite frankly, in the party standings."

- I tend to agree with the theory, raised by Alan Shanoff among others, that the recently-developed responsible communication defence to libel or slander claims should be a guiding principle in determining how the CRTC should handle false news. But it's also worth pointing out where the law of defamation falls short of protecting the public interest: shouldn't the need for responsible journalism be just as obvious when a broadcast involves subject matter that isn't so directly aimed toward an individual's reputation as to be enforceable through a private lawsuit?

- Stephen Gordon criticizes the new head of Statistics Canada for being willing to spout the Cons' party line on the census even when his organization has conclusively refuted the claim that there's any real prospect of a voluntary survey providing data of the same quality as a mandatory census:

In point of fact, Statistics Canada has done quite a bit of research documenting the fundamental flaws associated with voluntary surveys; see Kevin Milligan's guest post as well as this. Insisting that "critics cannot be sure" is a remarkable thing for a Chief Statistician to say; statistics is not in the business of providing absolute certainty.
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I understand that as Chief Statistician, there are certain truths that Mr Smith cannot speak in public. But that's no excuse for making statements that are contrary to available evidence. Statistics Canada has a reputation to maintain; Mr Sheikh resigned in order to protect it. It would be a very bad thing indeed if Statistics Canada is itself the next victim in the continuing assault on evidence-based policy.

- Finally, while the conventional wisdom is that cabinet ministers have absolutely no ability to act outside the wishes of the Harper PMO, let it never be said that at least some cabinet ministers can't take a stand on principle. That is, when it comes to true matters of conscience such as airplane colour schemes. I'm sure news will soon leak that despite his census embarrassment, Tony Clement should be seen as a maverick for refusing direct orders as to his tie selection.

Wednesday Morning Links

Miscellaneous midweek material.

- Erin nicely responds to Stephen Gordon's otherwise reasonable defence of modeling as a basis for policy-making by pointing out what's obviously missing from the models which call for constant corporate tax slashing:

I think that poorly-designed models also afflict tax policy, and WCI has recently showcased some important examples. Stephen has been promoting a conventional model of corporate taxes, which assumes that they apply to all operating profits.

This model ignores interest deductibility, Canada’s dividend tax credit, and the US government’s worldwide taxation of American corporations. These features mean that the minimum returns required to justify marginal investments are generally unaffected by Canada’s corporate tax rate.

Another recent WCI post repeats the model of sales-tax harmonization that seems to have taken over the minds of most mainstream Canadian economists. In this model, the HST is about removing sales tax from machinery and equipment to boost investment.

In fact, the previous Provincial Sales Tax already exempted much machinery and equipment. Most of the HST’s input tax credits will actually be for construction materials and intermediate goods.

On the whole, mainstream economists are too quick to discard institutional details in favour of abstract models. The institutional details often are, or should be, “the main features of interest.”

- Trish Hennessy's numbers on inequality in Canada are well worth a look generally. But the most important point is how small a number is required to make a significant dent in the problem:

• 17th
Canada ranks 17 out of 24 OECD nations on children's material well-being. (Source)

• One in 10
Canadian children live in poverty. One in four Aboriginal children live in poverty. (Source)

A solution
Shifting 1 per cent of Canadians' collective after-tax income to the one in 10 Canadians living in low income would eliminate poverty in Canada.

- Embassy reports on the misdirection involved in the Cons' efforts to conjure up some supposed economic benefits out of throwing tens of billions of dollars into F-35s. But I have to wonder about another set of links between government messaging and business interests: is it possible that the Cons are doing again what they did in forcing their softwood lumber sellout on the forestry industry, and signalling that anybody who doesn't play along can expect to be left out no matter what planes are procured in the future?

- Finally, Lawrence Martin rightly questions the direction of Canada's democratic system:

Owing to brutal partisanship, Parliament’s committee system has become increasingly dysfunctional. Watchdog groups such as the Integrity Commissioner’s Office have been turned into lapdogs. The public service’s policy development function, once significant, has been blunted. An unprecedented government-wide vetting system instituted by the Tories has stifled free speech.

In our democracy, those who dare speak out – think diplomat Richard Colvin and the Afghan detainees’ controversy – risk paying a big price. In the House of Commons, attempts to reform Question Period get nowhere. At elections, voter turnout tumbles. Our supposedly independent boards and tribunals are stuffed with partisans. Agency heads who don’t fall into line are fired or intimidated.

A system of total control by the Prime Minister’s Office, long in the making by both main parties, has come to be accepted. At the party level, an antiquated system of backroom bossism rules the Conservatives. Members either fall into line or risk going the way of Helena Guergis.

These are only some of the ways in which our system is getting worse instead of better. There are more. So while we watch the events in North Africa and the Middle East and hope democracy takes hold there as it did in the Warsaw Pact countries, we should also give a thought to the functioning of our own democratic system.

[Update: corrected Martin's name as per comments.]

On unequal distributions

There doesn't seem to be much dispute that the attempts to point to job or investment projections as somehow justifying corporate tax slashing (in the face of a decade's worth of evidence that they don't much help) are off base. But what about the argument that corporate taxes should be accepted because their main effect is on workers in the form of wages?

Let's assume for a moment that it's true that all corporate tax reductions will be returned to workers in the form of increased wages, and ask whether the result is one that we'd see as fair or desirable with a focus on how the benefits would figure to be distributed.

To test who figures to benefit most, the first obvious question is that of which industries have the most profits which would be subject to reduced taxation. There, two obvious answers appear: the financial and resource sectors, each of which (on a quick look) takes in roughly a quarter of all Canadian corporate profits.

How many workers will then be in line to benefit when half of a corporate tax cut goes to those sectors? According to StatsCan's chart of employment by industry, just under 2% of all Canadian workers are in the resource sector, and approximately 6.3% in the financial sector. So assuming that a corporate tax cut doesn't somehow alter the expected distribution of profits by industry, the result of a corporate tax cut is to deliver 50% of the expected wage benefits to just over 8% of all workers (and in sectors which are already far from hurting).

Meanwhile, there would be something close to zero anticipated benefit for large segments of the population such as the 21% of all workers who work in the public sector, the 15.5% who are self-employed, and anybody in a sector with a high ratio of workers to profits.

Now, the above division is undoubtedly oversimplified, as there would figure to be spillover effects based on mobility between industries. But the basic point is that an attempt to argue for corporate tax cuts on the basis that they'd be expected to raise wages looks to leave out an important part of the picture. And for those of us who don't count trader bonuses as evidence that the working class is getting ahead, there's ample reason for suspicion that the real effect of corporate tax cuts is only to make inequality worse - even if it does result in something that can theoretically be defined as wage gains.

Case in point

As a followup point on the NDP's home heating plan, the discussion seems to have now turned in part to the Libs' version as noted by Kevin Milligan. And in comparing the two, I'd think it's worth noting that the home heating relief offered by the Libs - sending cheques of $125 or $250 only to households receiving the GST rebate - looks to be problematic from both an economic and a political standpoint.

On the economic front, the scheme offers an ideal example of arbitrary endpoints and benefit amounts resulting in perverse incentives. After all, a household A which earns $100 more on the year than household B might actually end up worse off if the two fall on opposite sides of the cutoff point.

But perhaps more importantly, there's no rational political explanation either for that warped set of incentives, or for the outline of the plan generally. If the problem for the season in question was abnormally high heating costs, how would that not be experienced equally on both sides of the income cutoff? And how would the imminent problem with heating costs justify paying the same amount to a single person living in an apartment in Vancouver making in a warm year as a single mother of three living in a house in Timmins in a cold year (to use the example given by RayK)?

As best I can tell, there's absolutely no principled answer to those questions; it's simply a matter of setting arbitrary cutoff points and benefit amounts on the assumption that some have to be put in place under the "give money to poor people" model. But it's far from clear that anybody was particularly well served by the plan - and worth wondering how things might have been different if the Libs hadn't been so eager to buy the argument that a government's role should be limited to that type of model.