by: Jamie Newman

I consider myself a realist but realistically I waver between optimism and pessimism.  I try to be optimistic but often reality sets in making me realistic and sometimes pessimistic.  I believe optimism has its place; when hard times hit, a little optimism and pro-activity are just what’s needed.  For those making the decisions on how our tax dollars are used, there is no place for optimism; realism based on objective, comprehensive and sound evidence is necessary for optimal decision-making.

Politicians make their bread and butter by espousing optimistic hopes and dreams.  ‘If you elect me you shall never have to worry again.’  Well – we shall have to worry if they plan on fulfilling all these promises when the campaign is over.   It is this myopia on the part of our decision-makers that has created severe debts and growing deficits in most developed nations.  The ‘spend now and it will be fine later’ Keynesian philosophy has been outed for what it is – passing the buck to the future.  The future is now and optimism is irrelevant.

Economic Impact Analysis (EIA) is a tool used to determine the worth of potential projects.     For those of you unfamiliar, EIA (in its many forms) identifies all the potential economic activity that will be generated from a certain investment (e.g. building a stadium).  They typically consider direct economic benefits (e.g. job creation, increased revenue for materials retailers, ticket sales, vending sales etc.), indirect economic benefits (e.g. additional revenue for the business community due to attraction of tourists) and induced benefits (e.g. improved spending power for employees).   Virtually always these studies lead you to believe investment is justified; how could they not when goods are bought, jobs are created with incomes used to buy things, which creates more jobs and the cycle of rainbows and sunshine continues.

What these studies fail to recognize is that people are currently working and buying in their communities.  The infusion of public dollars does not all of a sudden create an economy.  Businesses and people are currently looking for opportunities to make money. Government investment can actually prevent them from capitalizing on viable opportunities that would otherwise be available.

They also fail to recognize that there are thousands of other areas and initiatives where public investment is welcome and may be better utilized.  The lost opportunity of investing elsewhere is called the ‘Opportunity Cost’ and is an essential consideration for any investor.  EIA leads us to believe there is a mountain of money sitting around waiting to be plucked and will not be used for any other purpose.  Either that or they are willfully ignorant to alternative projects to justify one in particular.

A Stadium Now, Prosperity Later?

The Halifax stadium debate has prompted me to write this bit.  For those of you unaware, council is trying to get the funds in place to build a stadium to host the FIFA Women’s World Cup.  They are lobbying the Nova Scotian and Canadian governments to chip in for this project.  To provide evidence that this is a sound investment, HRM council has invested $375,000 in the report Halifax Stadium Analysis.  Phase 2 contains an EIA which describes the GDP growth, job creation and increased tax revenue associated with building and operating the proposed stadium.  All of these figures reveal overwhelmingly positive outcomes which would suggest we would be crazy not to invest.  Crazy if we weren’t aware of the exaggerations this report relays.

Starting with Job Creation, the study states 380 in-province and 98 out-of-province person years of employment will be created for construction.  There will be 131 full-time equivalent positions for ongoing operations.  If every one of these potential employees were unemployed we could then consider most of this an economic benefit.  Unemployment is not running rampant in the retail and construction industries, meaning many stadium employees will be harvested from other businesses.  I am not disputing that building the stadium will produce jobs but this study does not tell us how these jobs will impact other businesses in HRM and the surrounding region.  This is essential to determine the benefit of job creation on the community and exaggerates it to the intended audience (e.g. provincial and federal governments who are being asked to chip in).

The reported gains in GDP do not consider the impact on GDP if this money were invested elsewhere.  What if HRM were to use the stadium money to improve garbage collection and disposal? Or for establishing better practices in agriculture?  Or for our schools to better educate our children?  Or in our hospitals to provide better and cheaper care for our sick?  Who knows exactly how much benefit these investments would reveal but this study fails to recognize these opportunities exist.   Council must make tough decisions all the time on how to best to serve HRM residents.  EIA can identify some potential benefits of investment but they cannot tell us whether a project gives us the best bang for our buck.

I cringe when I think about the $375,000 spent on this study.  Good decision-makers know that Benefit-Cost Analysis is a much better tool for assessing the worth of a project.  It considers all impacts of a project, how they affect other aspects of the community (e.g. the labour market) and the Opportunity Costs.  It is baffling why HRM would choose to fund an EIA over a Benefit-Cost Analysis if good decision-making was their objective.  If advocacy is their objective, their decision becomes much clearer.  The results are often ambiguous from the get-go when conducting a Benefit-Cost Analysis.  They often reveal a project would yield a net cost which may deter decision-makers.  EIAs almost always suggest a project will create significant economic return, far and above the fiscal costs.  Maybe council is more interested in advocacy on this issue rather than cold hard facts – a rosey picture rather than a schematic diagram.

To justify writing this piece I conducted an extensive EIA of my own.  I estimate that approximately 12 people will read this.  If every one of those people is convinced that EIA should not be used for policy-decision-making, they convince two friends, and those two friends convince another two friends each and so on and so forth, there will be enough people to get our politicians ears.  If we tell them we will not accept EIA to be used to justify investment of our dollars and they listen, waste or pork-barrel spending will be significantly reduced.  Projecting these savings over say a thousand years this paper is worth approximately $100 trillion, give or take.   Now that the piece is written and realism has set in, I will settle for a couple of, ‘hmm, that’s interesting’s.

by: Jamie Newman

Measured progress and accountability are keys to education success

For nine years, AIMS and Progress have been presenting a broad set of information about high schools throughout Atlantic Canada. We do this to keep our education providers thinking about progress using good evidence to guide the way.   It’s our intention that you use these report cards to ask tough questions of your school boards and schools. Why do students get high marks from teachers but fail provincial exams? Why aren’t students prepared for university studies? Why is it difficult to keep students coming to school?   These questions establish a greater level of accountability regarding issues that will impact us profoundly in the future. AIMS has been instrumental in influencing our education system to collect and present evidence of their performance. Every Atlantic Canadian province now has some province-wide assessment, provides public access to some performance information, and is collecting more performance information than when we started in 2002.   This year Holland College has joined the ranks of Atlantic post-secondary institutions providing performance data for students. We now receive first-year students’ academic-achievement information from 21 of the 23 post-secondary institutions in Atlantic Canada (only the University of Prince Edward Island and Université de Moncton are MIA). Also, New Brunswick Community College has improved its reporting system to allow distribution of average marks rather than just pass-fail rates.    But as we make strides in one area, we’re knocked back in others. New Brunswick’s anglophone sector eliminated its senior-level provincial assessments six years ago.  Although they currently remain for the francophone sector, they may be in jeopardy. Financial problems for Nova Scotia’s Department of Education may threaten provincial exams. The 2008/09 language arts exams were assessed by classroom teachers rather than the typical unbiased, centralized markers. This is emblematic of an assessment regime under threat.   So the battle continues, but we’re happy to carry on the fight. In these times where fiscal constraint by our public bodies is necessary to avoid bankrupting future generations, or even this generation, all spending is up for review. Some see assessment and evaluation of public services as a prime target for cuts. But the cost of knowing if and how well a public service is achieving its objectives is miniscule compared to the cost of not knowing.

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Provincial School Performance Summaries  

New Brunswick anglophone  

Provincial exams and school marks are not made available for New Brunswick anglophone schools, making post-secondary achievement the sole academic achievement indicator. This means changes in the performance of students in their first year of post-secondary studies have a significant impact on final ranks and grades.   St. Mary’s Academy took top spot. In the previous edition, no final grade could be computed because not enough graduates engaged in post-secondary studies to provide reliable post-secondary achievement results. Enough results were available for 2008/09 to include an average score for St. Mary’s Academy, which achieved second in absolute terms and fourth when adjusting for their circumstances. This, coupled with their continuing strong performance in keeping students engaged, allowed them to achieve the top spot and the only A.   Doaktown Consolidated High School moved up 11 spots and from a B to an A-, primarily due to the improvement of their graduates in post-secondary studies. Peticodiac Regional School fell from the top spot but improved from a B+ to an A-. Their fall from first to fourth is a consequence of other schools improving more significantly rather than a decline in their performance.   Chipman Forest Avenue School fell from the middle of the pack to the bottom, primarily due to newly included post-secondary participation rates; they have the third-lowest post-secondary participation rate. They also saw a decline in the average marks for graduates who did attend post-secondary studies.

New Brunswick francophone  

New Brunswick francophone schools demonstrate little variation in performance; 20 of the 22 had grades between B and C+. No school is dominating in all aspects, and no school is down and out. This means that slight variations in performance can result in significant rank fluctuations.   Saint John’s École aux Quatre Vents demonstrated slight improvements in post-secondary achievement and both provincial exams, which gave them the boost to first overall and the only B+.    A final grade and rank for École Carrefour Beausoleil was available this year due to the inclusion of post-secondary achievement. Despite relatively poor performance on this indicator, their high performance with regard to provincial exams and keeping students engaged in learning earned them third overall spot and a B. École L’Odyssée remains at the bottom of the pack, primarily due to poor performance on provincial exams and post-secondary achievement.

Newfoundland and Labrador  

For the third year in a row, J.M. Olds Collegiate in Twillingate remained in the top spot and maintained its A-. Last year’s second- and third-ranked schools, Gonzaga High School in St. John’s and Bay d’Espoir in Milltown, both dropped in rankings, from second to sixth and third to 24th, respectively. In Gonzaga’s case, this is a result of 25 more schools receiving a final grade rather than of a decline in performance; Bay d’Espoir is due to a decline in performance. For the most part, these newly included schools received a final grade and rank because the post-secondary indicator was included for more schools.   Jane Collins Academy, last year’s third-last-ranked school, improved from a C to a B-. This is largely due to their significant improvement on provincial exams and post-secondary achievement. Appalachia High School remains at the bottom for the third straight year due to poor performance in keeping students engaged and training in essential competencies.

Nova Scotia English  

After a three-year run at the top, Cape Breton Highlands Academy has been knocked off by Dr. John Hugh Gillis Regional School, driven by their greatly improved top rank on post-secondary participation accompanied by continued strong performance in most other areas. Cape Breton Highlands Academy fell only slightly to second place and still demonstrates a great ability to keep students engaged in learning and train in essential competencies.   Charles P. Allen High School fell from second to eighth but is still achieving excellence in absolute terms, ranking second in engagement and achievement. This drop demonstrates they’re performing slightly worse considering their advantaged circumstances.  Oxford Regional High School falls from a C+ to a C- to find themselves at the bottom.  Despite their overall performance, they’re ranked second in the province with regard to their math provincial exam results.

Nova Scotia Conseil scolaire acadien provincial

We were unable to include 2008/09 data for Conseil scolaire acadien provincial schools, resulting in only one school meeting the requirements for a final grade and rank. These results represent the 2006/07 and 2007/08 school years. Look beneath the final ranks and grades to see how these schools performed in specific aspects of education delivery.

Prince Edward Island

The participation of Holland College for the first time infused the post-secondary achievement indicator for Prince Edward Island. Enough graduates’ results were available to double the number of schools with post-secondary achievement results from five to 10, allowing calculation of final grades and ranks for those 10 schools.    Souris Regional School topped the ranks due to their high post-secondary achievement and school marks results. Kinkora Regional High School received the lowest grade, C-, due to having the worst post-secondary achievement and school marks results.

A deeper understanding  

While comparing schools using this resource, a number of questions may arise. For answers or to gain a deeper understanding of the results, please see the 9th Annual Atlantic High School Report Card results and supporting materials document at www.AIMS.ca. We encourage everyone using these results to read this document.   The next step is to use this resource to improve your schools. We hope you have many questions about why your school performs the way it does, and that you voice them to principals, superintendents, school board trustees, and education bureaucrats. Your concern and action is crucial to improving education in your schools and province.
Read AIMS’ Ninth Annual Atlantic Canadian High School Report card at: http://www.aims.ca/en/home/reportcards/ACHSRC/RC9.aspx

A lot has been said about the tax dollars spent on the shipsstarthere campaign. Very little has been said about the $500,000 spent by the Irvings. Those funds represent the first tangible return on this opportunity, the first instance of the “multiplier” in action. Certainly the public relations firms, web designers and sign printers involved appreciated the business.

The Canadian government has been explicit about their intention to leverage our ongoing national need for ships into the base for a vibrant, sustainable, world leading ship building industry. They have done their part. First by letting a few very large long term contracts instead of a series of signficant but largely patchwork smaller deals. Second, and this was a near miracle, keeping politics largely out of the process of awarding those contracts.

Now it’s our turn. The Irvings showed the way, by putting their own money at risk to engage the community and market our skills to the world. Others are following suit. Small and medium companies alike are trying to identify the components and the likely quality standards that will be required to be sub-contractors on this project. This is a natural extension of what we learned from our offshore opportunity: that our region is small and local contracts are limited as a consequence, but that the skills and expertise built on those contracts open up a huge vista for global work. Our revenues from the offshore are declining, as will the federal spending on ships, but our offshore service industry is still here, and the goal is to ensure our shipbuilding capacity outlives this first 25 year contract. I trust the folks on the current trade mission in Israel are enquring about the age of the Israeli coast guard fleet.

What else can business do to help our province maximize this opportunity? Well, they can throw a party, as the Halifax Chamber is about to do. That is not sarcasm, boosterism is important, just ask the companies who funded Calgary Mayor Nenshi’s recent across Canada dog and pony show. Indeed, that was almost entirely what the shipsstarthere campaign was about and it was a huge success in that regard. Its success rivals that of the smartcity campaign of almost a decade ago.

Of course, the smart city energy died out, even as smart industry continued to grow in our region. That is our second biggest challenge today, sustaining the shipsstarthere enthusiasm and using it to leverage growth in other, unrelated, sectors. Gordon Stevens from Uncommon Group has suggested that two ways to do this are for consumers to spend and businesses to hire. That’s a good place to start. He would prefer you buy “local”; I am content if you just buy, but either way, get out the debit card please.

On the hiring front, yes take the leap, but while you are it lower the bar. We have a  talented workforce who may not have five years experience or who may have fewer working years ahead than they do behind them. In either case, learn from the Irving example and share some of the risk. Model successful companies who hire and grow their workforce, unafraid to lose a well trained “investment” to a competitor because they are confident in their ability to attract a similar investment away from the competition in return.

On that “skills” theme, I hope parents, young people and society alike will use the shipsstarthere resources to revaluate the skilled trades. I have always been struck by the disconnect between people complaining about the outrageous rates they pay for plumbers, electricians and carpenters and the disregard we have collectively held for these, and other, skilled trades as the basis for a prosperous and well rounded life. We have spent at least two generations pushing everyone to go to university. But such a one-track mind has predictable results: high student debt loads, high student unemployment, “education inflation” (a degree isn’t worth what it once was), and a shortage in skilled trades people. Aerospace and the offshore helped put a dent in our collective bias against skills, here’s hoping ships can torpedo it entirely.

Finally – and this will be the hardest of all – don’t demand government start spending this money. With a $25 billion contract, and talk of $600 million added to our annual GDP and $100′s of millions added to the tax take of federal, provincial and municipal governments, it seems like nothing is now unaffordable. Nothing could be further from the truth. We have deep, structural issues on all of our government’s books. This contract and its spin-offs give us a good chance of fixing those problems, but not if we keep demanding ever more spending and ever lower taxes. Business can help set an example by tempering their own expectations for new boutique tax credits or targeted incentives.

Restraint, prudence, and sustainable growth – like ships – start here.

Charles Cirtwill is President of AIMS, an independent economic and social policy think tank based in Atlantic Canada.

by: Dianne Kelderman

The issues our Member of Parliament raised in the Truro Daily News  (Small Business Week, October 15th) are important issues for Atlantic Canada. They are issues of economics, vision and leadership.

Surely, our Member of Parliament is not suggesting that exporting our young talent to Alberta is good for the economy of Nova Scotia?

If he is, then I respectfully suggest that he take a course in Economics 101, and/or perhaps drink less of the Ottawa Kool-Aid.

The empirical evidence and research clearly shows that a “remittance economy”, such as the one our MP seems to be suggesting, is not an effective economic development strategy, nor is it good for families and communities. It may work , if indeed we were recruiting people to “come here” with their skills and talents, at the same or similiar rate that we are sending our people “there”. But that is not the case.

A strong economy, one based on sustainable growth, involves as a minimum, three things:

A strong Country – based on economic opportunity and diversity

Strong Regions – based on economic opportunity and diversity

Brain circulation, labour mobility & capital

Perhaps what our MP meant, is that opportunity in Alberta represents opportunity here?

Our cost of labour and capital are lower here; and accessible, cost effective transportation and infrastructure is largely in place across the country. Many of our companies are already making product here and shipping it West. More of us should follow their lead!

Creating jobs, opportunities and income “here” from opportunities “there” – that is sustainable economic growth!

Building a vibrant East by meeting the needs of a vibrant West, is an economic model worth chasing.

Simply sending home a cheque to the wife and kids (or the husband and kids), while important, dosen’t cut it as an economic development strategy.

Dianne Kelderman, M.A, M,ED, M. CED

President, Atlantic Economics

by: Gordon L. Weil

The demise in 2010 of the proposal to sell NB Power to Hydro-Quebec left the New Brunswick government with the challenge of reforming its electric utility to operate more efficiently with less debt.

The Progressive Conservative government to which that task fell was new, having been elected in part because of the public’s opposition to the sale and the resulting loss of provincial control. Now that government has announced what it will do in its “Energy Action Plan.”

Most attention has been focused on its decision to reassemble NB Power from the various parts – generation, distribution, transmission, and nuclear – into which it had been broken. The purpose of the separation was to allow for open competition among electricity suppliers on NB Power’s wires, which alone would remain subject to regulation.

In its policy statement, the government concluded that “the competitive electricity market model has not worked for New Brunswick.” But it fails to note that the principal reason is that NB Power was dismantled only in theory not in fact. By capturing almost all transmission rights for itself, the generating company managed to limit any potential competitors. And the separate NB Power companies shared the same board and president.

So there’s less to this reunion than meets the eye. It will make little practical difference other than to signal that the promise of creating competition in electricity has been abandoned. NB Power will own all the generation and all the wires in the province.

How can people be sure that the utility will work to keep rates down? The new plan provides for improved, professional regulation and a permanent public energy advocate. But the government of the day will still be able to override them, so their independence may be limited.

The government cites the lower residential customer rates in the province compared with other areas, though this is partly due to NB Power having borrowed to pay utility costs rather than raising rates. Most customers do not care so much about rates; they care about the size of their bill. And electric bills in New Brunswick are high, because of the use of electric home heating. For example, average household use is almost three times as high as in Maine.

The government’s Energy Commission recommended that, above a certain level of usage, a higher electric rate should be applied to encourage people to shift some of their usage away from electricity. The lower rate would cover “needed use” but would be small enough to encourage conservation. Likely, as a result, less new electric heating would be installed. The government flatly rejected this proposal, thus refusing the measure most likely to promote electric efficiency.

Another reason that rates may not come down is the decision to allow NB Power to use revenues derived from any efficiency improvements in its operations to build up equity and rely somewhat less on debt, accumulated by its excessive use in the past. This should help with the debt problem.

The previous restructuring of NB Power included creating the NB System Operator (NBSO), an independent body with its own board and officers responsible for maintaining system reliability and fairness in the power market.

To sell power into the U.S. market, NB Power must meet certain American requirements. The most important is that it must provide open access to its transmission system for those who want to sell at wholesale – say, to the Saint John or Edmundston municipal utilities – or who want to transmit power across its system. The NBSO was the guarantor that would be possible. The government admits that, with its elimination, somebody other than NB Power may end up having to assure reliability and monitor open access.

The NBSO could also have provided the nucleus of a long-discussed Atlantic Canada regional market. By sharing the use of transmission resources regionally without affecting ownership, it might be possible to realize economies in what is a comparatively small electric market. This idea was gaining some ground, but it will recede because of the loss of the NBSO, one of the few real assets created when NB Power broke up.

Most of the remainder of the new plan with respect to electricity consists of expressions of good intentions about the use of renewable resources, cooperation with other provinces, and appliance and building standards. There is no mention of reducing electric heating.

After turning away from the Hydro-Quebec deal, New Brunswick seems to be turning in on itself. The general message of the plan is that the provincial power policy will be inward looking. The historic NB emphasis on power exports is absent, and regional cooperation is downplayed. The competitive effort is abandoned. NB Power returns to a distant past.

Gordon L. Weil is president of Standard Energy Company of Maine, and author of several studies on the regional electricity grid for the Atlantic Institute for Market Studies.

by: Don McIver

A year in politics, they say, can be a lifetime. But a few years in politics shouldn’t entitle Nova Scotia’s MLAs to a lifetime on the public payroll. As it stands now, with as little as five years service a retiring or defeated Member of the Legislative Assembly could start collecting a pension as early as age forty-five.  A government minister with just fifteen years service could draw more than $100,000 each year for the rest of his or her life.  If they are still serving at age 71 they could even collect that pension while receiving their paycheque.

For sure, political duty can be an onerous calling and our MLAs are entitled to reasonable compensation for their service.  But it should not be a primary motive for seeking election.  The driving force should be a willingness to serve their fellow Nova Scotians.

Legislative office is rarely lifelong employment.  Most politicians have already-established careers before seeking office, and many return to private business with an augmented resume afterwards.  At the federal level, the average term of all our Members of Parliament since Confederation has been just eight years.

MLAs are essentially contract employees, hired for a specific task for a limited term.  As such, they have a right to know the terms of remuneration—and their employer, the people of Nova Scotia, have an equal right to know how much their services will cost.  An open-ended diamond studded lifetime pension for a few years of public commitment is too high a price.

There is another reason why current MLA pension arrangements should be scrapped.  Public sector pension plans are becoming increasingly strained. Years of pay-as-you go benefit payments and classic underfunding are about to collide with the realities of financial market uncertainty and population aging.  How will our legislators be able to resist demands for taxpayer bailouts of those programs when they, themselves, enjoy platinum benefits almost entirely at public expense? Most Nova Scotians have no pension plans—even those who have spent decades with a single employer.  Their retirement incomes are dependant upon their personal savings, including RRSPs, CPP and Old Age benefits.  Public sector employees generally fare much better—in fact more than half of current registered plans are now in the public sector.  The public-at-large looks with envy at the provisions of these inflation-indexed plans that are simply too expensive for private sector employers to even contemplate. The generosity of MLA pensions surpasses even these.

The government has established a committee to review the appropriateness of the current terms of MLA pensions and their report will soon appear.  To arrive at their recommendations, the committee should have looked well beyond this narrow mandate and taken into consideration the total remuneration of members. In addition to their base salary, MLAs are entitled to compensation for additional responsibilities and to a range of per diems for either attending the House or visiting their constituency.  Hopefully now no longer subject to the rampant abuse revealed in the “expense scandal”, MLAs are also entitled to reimbursement for reasonable expenses that some would still judge as perks.

The committee set as its mandate the objective of identifying the level of pension benefit that: “should not be so small as to discourage qualified persons from running, or so generous as to be a major inducement for seeking office.”

To arrive at their conclusions they should also have taken note of the level of responsibility—recognizing that several Canadian cities have a higher population than the entire province.  Another key factor should have been our ability to pay.  On average, Nova Scotians receive significantly lower incomes than in wealthier provinces like Alberta.  If we receive Nova Scotia wages, so should our legislators.

A comprehensive assessment of how we compensate our MLAs is urgently needed. As for the pension portion, the commission should give considerable thought to recommending the elimination of Members’ defined benefit pensions entirely.  They are simply not warranted and they contrast sharply with the retirement circumstances that the majority of taxpayers face. Alberta moved to matching RRSP contributions as a means to bring MLA compensation practices more into line with those experienced by the people they represent, that model would make even more sense here.
Don McIver is Director of Research at the Atlantic Institute for Market Studies.  His recent analysis of MLA pensions is available at www.aims.ca

When Mexico was added into the trade equation there were concerns in the United States as well as Canada that cheap Mexican labour and lax environmental standards would trigger a steady loss of goods-related jobs to the south.

All those fears notwithstanding, the evidence—at least as measured by Canada’s trade and current account positions—testifies that the country has benefited very significantly from trade liberalization. 

Unlike the earlier discussions, the European Union, burdened with highly regulated business and labour arrangements, hardly seems to represent a threat to Canada’s manufacturing jobs and can’t be accused of plotting to divert our fresh water supplies!  Moreover, unlike the hugely dominant role played by the United States in our trading pattern the, Canada-EU traffic is insignificant—and we have long aspired to diversify and reduce our dependence on US markets.

It is that apparently marginal importance of the Canada-EU relationship that engenders such indifferent interest in the Comprehensive Economic and Trade Agreement (CETA).  While the EU is Canada’s second largest trading partner, accounting for just over 10 percent of our exports—that trade is spread over the 27 member countries of the union.  This country represents a staggeringly inconsequential less-than-two percent of EU exports. So if we can’t be excited about the deal, why should the Europeans care?

EU officials don’t attempt to mask the reality—an accord with Canada is a test case for a future European-United States trade agreement.  If for no other reason than that, their negotiators are prepared to bargain aggressively.  There are huge and significant philosophical differences in the manner in which both government and business operate on the two continents.  From a practical perspective those differences are by no means so pronounced.  Trade agreements are no longer much about tariffs on physical items—and much more concerned with the more subtle barriers countries mount to protect their interests at the same time as gaining access to those of others.  These “concerns” run the gamut from “national security”, to agricultural policy, health and safety considerations and intellectual property protection.

Agriculture is a prime example of how non-tariff practices distort markets.  The European “Common Agricultural Policy” has long been ridiculed for its apparently senseless subsidization of unsaleable mountains of surplus foodstuffs and rigid protective regulation.  US policymakers, while deriding European practices, have endorsed massive farm subsidies and elaborate corn-ethanol programs ostensibly designed to assure energy security.  Some poorly-developed countries have complained that heavily-subsidized US rice exports have obliterated local producers.

Canada’s elaborate supply management program managed through agricultural marketing boards is on the negotiating block.  The Europeans would be pleased to wrest increased access to the Canadian market—but much more satisfied to establish a beachhead in their attack onUS agricultural protection.  Ironically, the Canadian consumer may be the biggest gainer if the agreement moves ahead.

Intellectual property protection is another example of how CETA may help Canada save itself!  Among developed countries Canada has a relatively low reputation when it comes to patent protection and copyright defence, the joint EU-Canada Scoping Exercise explicitly anticipates that stronger intellectual property protection would be part of any agreement.

What would that mean for Canada?  The European position on electronic data and artistic property safeguards are markedly tougher than those in Canada and penalties for piracy or abetting piracy are more stringent.  Harmonization with those standards would mean extended copyright protection for Canadian print, film and music talent along with improved shelter from illicit copying.

According to leaked bargaining positions, the agreement would tighten the rules related to pharmaceutical patents and extensions as well as ensure the secrecy of proprietary research findings and address the issue of expensive jurisdictional test duplication.  With this more competitive intellectual property regime in place, Canada would be better positioned to attract even more of the estimated $100 billion that is invested annually by the global life science sector across the world.

In face of the not-so-hidden agenda of the Europeans, Canada will need to negotiate skillfully, but even the peripheral consequences of reaching an agreement may provide some valuable benefits to Canadians.

Don McIver is the Director of Research at the Atlantic Institute for Market Studies, an independent economic and social policy think tank based in Halifax.

by: Andreas Korfmann & Jamie Newman

In May we elected a majority conservative government that ran with a mandate to cut $4 billion in government waste. The final goal of this promise is to balance the budget by 2014; not debt-reduction, but deficit reduction. In a time like this, when our debt is as high as it is, and the United States is facing the problems it has been facing, we need to be focusing on our deficit as soon as we can so that we can jump ahead to fixing the debt issue.

Last Thursday, the Hon. Tony Clement (President, Treasury Board of Canada) made an announcement that the Board will go about cutting the $4 billion in public spending. It was made rather clear that the board itself is not directly responsible for the cutting of the spending, but rather will be giving directives to 67 government programs and agencies to develop scenarios representing the impacts of 5% and then 10% cutting to their budgets. When asked why this set-up was chosen, his response was that this would be an effective way for the experts in their field to determine what and where spending can be cut.

The original mandate by the board is stated on their website as “67 organizations are reviewing operating expenses as well as grants and contributions expenditures. The goal is to find ongoing savings of at least $4 billion by 2014–15. There will be no cuts to major transfers, to persons and others levels of government, nor to public debt payments. This review is an opportunity to modernize how we do business.” As great of a plan as this sounds; when applying it, it is an inefficient method of finding efficiencies.

Politically this plan has its benefits; it allows the Conservative government to pass the buck to top bureaucrats in their fields, for the time being. This will effectively put the power of the austerity planning in the hands of the very organizations that need to be cut and/or scaled down in the first place. It is essentially a plan where the people in charge of the programs will do everything in their power to save their own jobs and organizations; it becomes a game of who can paint the darkest, albeit somewhat plausible, picture of cuts on their organization. “We will loose 348,000 doctors” or “a billion in economic development will be lost” and “people may die”, and what else are they to do other than fear-monger to protect the mandate of their organization. That is their role, isn’t it? It is definitely not to sacrifice their budgets willingly.

We saw this before too, right in our own backyard; recall when school boards were tasked by the province with the very similar “scoping exercises” of what cuts to education might look like at certain levels. The shenanigans that went on between the school boards and the province over spending included finger pointing, foot dragging, fear mongering, name calling, and competing expenditure of PUBLICLY funded time and resources on enrolment graphs, press releases, impact studies and the like. Too bad the minister didn’t stop by Province House on his visit to Halifax last Thursday; he could have learned a thing or two about these sorts of spending delegations.

Efficiency and being cost-effective are the two major themes in the current government’s plans to find this $4 billion in savings, so why aren’t they themselves being efficient in the process? These organizations will (and that can be pretty much guaranteed) make every effort to stall, drag on and prevent this cutting process from affecting their salaries and departments. We will then likely see the Treasury Board sending in auditors to determine what can further be cut from their proposals (because, let’s face it, it would be a pretty big political blow if they don’t cut that $4B). We are essentially witnessing the set-up of extremely risky political negotiations between the Treasury Board and these 67 organizations. If all this is set-up in the name of efficiency and modern effectiveness, why is it that the very plan that is sold to us as efficient is likely to be anything but? The treasury board should seriously consider taking the advice given in their own talking points, but no matter how many examples we see of politics perverting good decision-making, the beat goes on.

by: Andreas Korfmann

Last week, almost everybody took a sigh of relief; the Democrats and the Republicans finally settled on a deal to raise the U.S. debt ceiling, supposedly restoring confidence in financial markets. After all America is now not going to default. Notice, however I did not include everybody in this “sigh of relief”, for I, just as the global markets themselves, sure didn’t feel any less insecure over American finances- and you shouldn’t either.

As was previously made quite clear; in order for our neighbours down south to retain their top-dog credit rating at AAA, two of the major international crediting agencies stated that $4 trillion would have to be cut. Only $2.1 trillion has been put on the chopping block (and this-technically- was coupled with an effective increase of $2.1 trillion in spending over the next few years). Starting with Beijing and then to S & P, international crediting agencies have begun downgrading the U.S. credit rating- as it stands whilst I write this article, the U.S.’s once perfect credit rating has been changed to AA+. Markets have taken a sharp turn for the worse in response. Dagong Global Credit Rating commented on their downgrading of American credit scores from A to A- by stating “By raising the debt limit the U.S. temporarily prevents the government from debt default, but it does not improve the national solvency; rather the heavier debt burden on the government will cause the U.S. sovereign debt crisis to deepen further”.

This alone should make you all quiver in your boots, however there is more to this towering Pisa-style mess of a problem. The deal is only good enough to last them until 2013- increasing the ceiling by $900 billion and allowing them to accumulate more red ink in the process. This was a huge political success for Mr. Obama, and quite a humiliating defeat for the Republicans. Obama should not be exclaiming that he didn’t come out on-top, because he most certainly did. The GOP should not be running around toting the fact that their “we’re not going to raise taxes” bit was included either, because it will, sooner or later, bite them both in the proverbial. Most likely come election time.

Let’s be clear here for a second; the problems that America was facing to start this calamity are as follows; A-they were spending too much to begin with, B-they decided it would be a good idea to couple the increase in spending with tax-cuts, which would further decrease government revenue (desperately needed to PAY OFF their debts), C- they decided to elect a president (Obama) who’s main election promise was to spend MORE money, D- they refuse to cut back on the monstrosity of entitlement spending and E- they elected a Congress who are dead set against removing tax breaks, forget about raising rates!

The $14.2 trillion of debt talked about in the media and focused on by the general public over the past few weeks also only takes into consideration America’s public debt, and does not even include the money guaranteed for Medicare, Medicaid and Social Security, which according to government numbers totals a whopping $50 trillion. The real problems, which the most recent debt-deal fail to address lie in these “big three” entitlement programs; where the U.S. government, between the years 1985 to 2009, has seen an almost 9 percent average growth in Medicare per year, compared with only 5 percent growth in the gross domestic product [Kaiser Family Foundation]. Even with inflation, just ONE of the top healthcare programs alone already continues to grow at a faster rate than the GDP of the most powerful economy in the world .

Like health spending – debt too continues to spiral out of control. With more than 10 increases in the vaunted “debt ceiling” in the last 10 years alone. The fact that you can simply raise the limit of what you can borrow, at any time you like, utterly defeats the purpose of the ceiling in the first place. Why even have a debt ceiling if it just continually gets raised by the very people who implemented it in the first place? Recall, they put the cap in place with the goal being to NOT reach the cap, and instead they routinely BREECH the cap.

It is not just Obama that is to blame here though; I could probably go as far back as the FDR/Lyndon B. Johnson era of a “great society” and “The New Deal”-when government spending was seen as a remedy to all of the country’s ills. Post WWII saw a massive economic shift, indeed there was a significant increase in science due to the war-machine set-up by the winning countries; this is all common sense, if you put money into R&D, the economy will advance and become more efficient. The point that everybody failed to see though was that somebody had to PAY for it all- instead everybody assumed this “multiplier effect” would sustain itself and that the government spending would “pay for itself with the profits”. We don’t even know if the positive side-effects from government programs such as NASA could have been accomplished at a much cheaper and quicker rate- because it was effectively monopolized by the American Government and nobody else was even capable of trying.

The pickle that we are in now was not the product of a year or two of misunderstood economic thought; it was the product of more than half a century of policies created back under the presidencies of FDR and Lyndon B. Johnson, and in Canada’s case; Pierre Elliot Trudeau. What I am meaning to say is this; at the time, there was quite a bit of money floating around the economy, and subsequently just as much in public purses. This all led to governments, believing that they were doing good (and receiving great amounts of public support in the process),, spending their way into an oblivion. But this oblivion took a while to manifest, and it didn’t fully settle in until after their terms in office concluded. Yes, investment of that sort will change the economy, and it did. But at what long-term cost?

The creation of American Medicaid under Johnson and the New Deal under FDR set the foundations for an increased government, with increased influence, over an increased number of lives. This very system has now set-up a whole generation, and now society with expectations that cannot possibly be upheld under reasonable financial circumstances. What these Presidents and Prime Ministers failed to see was that borrowing money means higher interest payments (and more of them), and promising pension increases and welfare cheques to people means that the number of recipients will grow with the population and costs would increase as said population ages, and the economy (as we have learned over recent years), won’t always be as prosperous as it was in the early days of the post-war boom- leaving nobody with the funds to pay for it all.

The trickier part is this; since we have let this build up for so long, people have grown old while working these entitlement programs and grants into their every-day expenses and long-term financial plans. So much that, if we were to massively cut the amount owed to recipients, quite a lot of people would suffer economic hardship. America has raised a nation once founded upon equality in the sense that all men are people earning what they work for and have just as many opportunities as the next person, on a different notion of equality; where everyone has the right to receive what their fellow countrymen do, without necessarily working as hard or in the same manner. I, by no means blame individuals for this mess, I blame the short-sightedness of political elites and the American culture for succumbing to the initial successes of their economic past. I really do hope that their case does not follow the same fate as that of the United Kingdom’s (just after the first world war, when they began to succeed as the major economic and diplomatic force of the world), but this cannot quite be ruled out at this point.

In terms of governments funding R&D programs, as much as investment works, if it is all taken out of public debt- it will not likely be the case. To put it into perspective; if you wanted to invest in something to increase your net worth, but didn’t have the funds on hand, you’d take a hike to the nearest financial institution and apply for a loan. First they’ll ask you if you have solid employment, and if you were the United States, you’d most likely respond with “well, not really, you see I’m only partly employed and most of it is part-time or temporary work” [current unemployment rate of 9%, coupled with an increase in part-time and temporary government employment in those with jobs], then they’ll ask you about income and current financial debts of which you’d respond “you see, my debt is 95% of what I earn (debt to GDP ratio), so I still have some room to “invest” some more, right?”. If you were the loans officer, what would your reaction be?

You would start laughing.

Any other response is not very likely to come from anybody with a shred of common sense.

So why is the United States an exception? Well actually, they’re not, and the fact that they’ve been able to stay afloat for this long is rather surprising. What surprises me more, however is that even though we hear the talk about fixing it, we still have yet to see the walk. Even the great Ronald Reagan that the Republicans (and even President Obama) seem to quote so much on this topic raised the debt ceiling 17 times.

But what the American government has succeeded in doing (and has succeeded in doing 103 times since the inception of the first debt ceiling in 1917), is just put-off the problem until the next generation and/or politician has spent too much and needs to figure out a way out of the problem.

Why does nobody get it?

Just like an individual borrower, it doesn’t make sense to keep giving money to someone who cannot pay it back, where is the common sense here?

But perhaps there is a reason to keep lending them cash – they are too big to fail! As we heard over and over again in the past few weeks, if the United States decides they can no longer pay for all these loans and over-spending, their economy will take a tumble and with them will go most, if not all of the other economies around the world. Economies rely on Americans to keep making their minimum debt payments, and to keep buying stuff. Economies that, without the Americans, would see poverty spike across the board..

Why we seem content to hang upon this common precipice has baffled me; until now.

If we think about this for a second we’d be faced with the discovery of something rather frustrating, and perhaps something already known to some people-just not enough of them. We would discover that putting-off administrative worries that may or may not affect the every-day economic lives of individuals affects not just those looking up at the system from below; it most surely affects the policy makers and the politicians as well.

We’ve heard it before and we heard it again in this most recent debate over American finances; “It’s all a political mess”. This is actually dead on. What we have just experienced was the political jabbering from both ends of the American political spectrum; where one side wanted large spending cuts on over-funded entitlement programs coupled with zero tax increases, while the other side pushed for a sharp increase in taxes for different groups of the population, and little-to-no spending cuts in the aforementioned entitlement programs. Both might appear to be valid- however I would argue that (and this has been proven time and time again) tax hikes only marginally increase the amount of government revenue freed-up to pay-off debts compared to spending cuts. Yet those same hikes (especially ones to the rich, as was suggested by Obama), generally take out money from the economy and leave individuals with less to spend and save while only aggravating economic hardship. Spending cuts, especially in a situation like this, are the most effective way of staying on track. You just can’t go wrong with saving the money you are earning now, to pay-off debts you owe all while making sure you STOP spending on more frivolous things. We do it every day as households; if you are facing tough economic times, you take less vacations and eat out less. Remember what was said about exceptions? There are none. You can’t increase the amount of money you take from people while they are earning less; it’s trying to squeeze water out of a rock.

The one problem here-whether you agree or disagree with my choice of spending plan- is that put together, a mixture of both of these plans are DISASTOUROUS. Let me explain; with zero tax increases and a clause written-into the deal that doesn’t let anyone touch the current levels of spending on Medicare, Medicaid, and Social Security, we’re getting nowhere. And fast. If the major problems (i.e. the largest areas of government spending) are not allowed to be fixed, then this whole idea of not even raising taxes will turn ugly- fast. As mentioned before; if government entitlement programs are increasing faster than your GDP, IT’S A PROBLEM.  Can someone please tell me why this so-called “debt solution plan” won’t let us tackle this problem?

The ONLY reason this “deal” was made is because there are significant levels of political benefits to either side of the argument. They both WANT to fight this fight again next November. The Democrats can say “those heartless Republicans caused us to make that horrible deal back in July of 2011 and now we cannot let them win this election”. The Republicans will be doing just the same, but in reverse. I can hear it now: “Back in 2011, President Obama would not let us touch upon the real issues at stake, which are the overspending on Medicare, Medicaid, and Social Security entitlements. We cannot let Mr. Obama get re-elected and mess things up even worse.”

I really wish I was yanking your chain here, but it has already started!

Worse, Mr. Obama and Mr. Boehner (and their political allies, both moderate and maniac) believe they have successfully taken the global financial markets hostage for their own political gain. I will make this clear; no-one wins if Americans continue to spend more than they can afford, or are willing, to pay.

Unfortunately, the American political system is set up to ensure just that – too much spending and too little taxation. Incentives matter, and each and every one of the cogs in this massive political and administrative machine have incentives to not cut spending, to not reform government programs, and to not solve this debt issue. What will happen when the politicians of the stars and stripes nation can no longer raise the false ceiling they claim aids in their fiscal prudence?

Who knows.

But I can pretty much guarantee you one thing; it won’t be pretty.

by: Andreas Korfmann

Living in a downtown core such as Halifax and going to school in another in Toronto, I have come across my fair share of cyclists and pedestrians. This does not bother me one bit. Most of the time I am that pedestrian. The only problems I may see arising are the growing number of cyclists and pedestrians using the same roads as vehicles. This may seem like a wonderful thing, better for our health and environment, and less vehicle traffic. But just like anything, it’s not quite that simple. In 2005, Statistics Canada released a study examining the amount of cars on the roads, and how far the average person traveled to both jobs in big city centres and the suburbs- the results were rather surprising.

While all areas showed a job increase, they also revealed that more and more people were driving farther to their jobs, or were moving their areas of work to the suburbs. Well what does this mean for pedestrians and cyclists? I’ll tell you; lots. Incentives to drive have gone up, despite higher gas prices; because, well we have to get food on the table. It’s just a fact of life. If it means having to buy a car and drive the extra 15km’s every day in order to get that job that pays an extra $12,000 a year- I’d do it. In a heartbeat. And chances are so would you.

The reason I bring up road congestion and cyclists however, is more because I see a need to deal with this problem. I drive, and I am not saying that the people riding bikes or their reasons for doing so are a problem; I am saying that the fact that they are riding tiny little metal machines next to big, heavy and more powerful ones is not ideal. Aside from the inherent risks cyclists take doing so, riding bikes next to cars also means that they will be slower, and in big cities where space is limited, this definitely slows down traffic. On top of all this, I have recently been seeing an increase in cyclists ignoring traffic rules; on more than several occasions I have spotted them running red lights, weaving in and out of traffic, riding the shoulders, and not stopping at stop-signs. I think there should certainly be a crack-down on traffic enforcement- for everybody. That aside, I believe that-as a driver- I pay into the funds going towards maintaining sidewalks and improving transit (I’ll get into the details shortly) and don’t see much improvement in terms of separating drivers from cyclists.

Most recently, in Moncton, city council decided to take two major streets and reduce them from 2 lanes each way, down to one each way; leaving the extra lanes for cyclists. Now this would appear to be fine, if the people ofMonctonactually wanted them. But they don’t. Back in 2006, city council had introduced the very same plans on the very same roads, however an angry majority of residents (all living near the roads) signed a petition to stop the project, and won. Fast forward to 2011, a different city council is proposing the same plans, but “regardless” of public opinion. They are arguing that it is better for the people there, so they will be following through this time. I don’t know about you, but I elect representatives to work on my behalf and represent my needs and interests based on what I believe and want. This does not work the other way around. So the next assumption I’m sure all of us are thinking is “well, maybe the amount of cyclists have increased since then, and they represent them too” this is completely valid; if there were more cyclists, then this project would be democratically fair. This is not the case though, only about 2% of users on these roads are currently bikes; council is running under the ideology of “if you build it, they will come”. It may work in the movies, but rarely does it work in city planning- unless we’re talking about a stadium so large that it is able to host free NHL games… but for this case, it’s highly unlikely to make any sense.

In this letter from an upset resident, C. Babineau indicates that “They (council) would be better advised to look at some of the more important items, such as repaving streets all over this city that are literally crumbling.” This is completely true for most major cities now; the problems of propping up one underrepresented, and not as important method of transportation over a more popular, and important one are becoming larger concerns- or rather they should be.

Now several a times I have been led into disagreement when comparing the two; some say cyclists and drivers shouldn’t be compared because they are totally different, and some say it is because we are the same- I say that’s not the issue. The issue is that vehicles and roads are extremely important in fueling our economy and our lifestyles, and that the practice of driving cars and/or trucks is very valuable to our society; and it’s not looked upon as such. Instead we see both local councillors, provincial politicians, businesses and citizens declare a “war on cars”- a very recent and extremely childish phenomenon.

Before I go further with identifying the causes of this “war”, I’d like to look at how cars, roads and most importantly trucks are crucial to our economic prosperity. To do this, we need not look far; exhibit a: the grocery store- how does the food you eat get transported to the stores? Trucks. All products going to and from almost every single store, restaurant, and mall you’ve ever been too was most likely brought there via truck. More than 90% of all shipping done inNorth Americais done so using roads and vehicles of some sort. We cannot directly ship goods via a train- only partially, this goes for air transportation and boats as well- there is just not way. I would also like to point out thatCanadahas the second largest land mass in the world, and with such a small population (only about 10% that of theU.S.), we wouldn’t be able to function the way we do without automobiles and trucks. To be honest, I’ve even worked for Penske Truck Leasing and I must say there is a reason why this industry is booming- because we are always going to need it! There were even shortages of trucks, and this is one of the only market shortages inCanadathat aren’t caused by government interference, these are legitimate examples of how industry provides so much for us- we just fail to see it sometimes.

Not only do vehicles serve as a means of receiving our goods, they also fuel our economy in a way just as important; they transport people to their jobs. And jobs are good, right? Of course they are! Jobs are a hot-topic inAmericaas they are approaching the 2012 presidential elections with record-unemployment and a possible re-lapse recession, and here inCanada, they are just as important. Jobs fuel the economy, they provide as a means for us to survive- and increase our standards of living. Let’s look at it this way; with the technology behind the automobile, it has become possible for us to accept jobs that would never have been possible without them. Try commuting fromBramptontoToronto, orTrurotoHalifaxwithout a car- you can’t! Enter arguments saying “well then don’t work so far”, well to that wonderful school of ignorance I say; easier said than done. The truth is, people will always look for their best interest, and in doing so will go to the jobs they want- this is a free country you know. StatisticsCanadaeven recorded a 26% increase in the amount of people accepting jobs more than 20kms away from their place of residence, and numbers just don’t lie. It would also be helpful to note that back in the days of even more affordable access to cars, labour productivity was at all-time highs. Economies keep growing, and this means the demand for better road-networks so too.

“Solutions” to this “problem” have come in the form of increasing public transportation funding, and creating bike lanes- but these are not viable solutions to anything. It has to be said- cars are far more important to society than bikes and busses. It may not sound to appealing to some, but it’s true. I know, I’ve had to use both- and all times on a frequent-basis. We have to come to some sort of truce here and stop this “war on cars”, even if it means having to build more rapid transit in the larger city cores and widening roads in smaller ones. Until we can come up with a way to transport massive amounts of goods and people without relying on cars, we need to focus more on making it easier to drive in Canada.