We’ve been hearing reports about the Conservatives secret negotiations on ACTA and CETA. While there is public outcry over the stipulations in these agreements (now that we’ve finally learned, for example, the complete ACTA text) the Conservative government acts unconcerned. In Canada, our laws don’t seem to line up in a way that easily enable regressive, old-economy thinking like “digital locks” and other copyright-oriented failures–and that’s a source of concern to certain special interests.

What is Harper’s gang of Conservatives doing? They’re pushing a new bill, that reportedly will disregard the thousands of Canadian voices consulted on copyright last year. This new bill is already being likened to a Canadian DMCA; Michael Geist writes about Heritage Minister James Moore’s apparent about-face (5 May 2010)¹

“Moore has argued for a virtual repeat of Bill C-61, with strong digital locks provisions similar to those found in the U.S. Digital Millennium Copyright Act (DMCA) and a rejection of a flexible fair dealing approach.”

See the underlying implication? Geist pointed it out in his article, noting how the bill would immediately impact the other global negotiations (ACTA). That’s a concern. First off, the Conservatives repeatedly claimed that things like ACTA would not force Canadian law changes. The CBC reported last year (1 December 2009)¹ on Conservative Industry Minister, Tony Clement’s response to the NDP’s Charlie Angus (Angus has been a rare fount of intelligence when it comes to modern copyright reform) “The ACTA negotiations are in fact subservient to any legislation put forward in this House. . .” In other words the domestic changes now, allow the Conservatives to claim they didn’t lie. They’ll change Canadian laws in a way that just happens to be in accord with ACTA, prior to signing ACTA.

Remember, after getting a couple attempts at new copyright legislation wrong, the Conservatives set up a ruse to distract the public. The copyright consultation ended up being a bit of a catharsis for a frustrated public and a publicity stunt for the Conservatives. In fact, the public consultation on copyright issues was a great idea, if the Conservative government were actually prepared to listen to the public’s desires for fairer, less restrictive regulations.

Failings of the DMCA

The United States enacted its DMCA in 1998. Plenty of people from all perspectives expressed their dismay with the huge problems it would cause, unfortunately the DMCA took effect anyway. In March 2010, the Electronic Frontier Foundation (EFF) published a study³ (PDF) on more than 10 years of consequences of the DMCA. It found the following

“The DMCA Chills Free Expression and Scientific Research.
Experience . . . demonstrates that it is being used to stifle free speech and scientific research. . . have chilled the legitimate activities of journalists, publishers, scientists, students, programmers, and members of the public.

The DMCA Jeopardizes Fair Use.
By banning all acts of circumvention, and all technologies and tools that can be used for circumvention, the DMCA grants to copyright owners the power to unilaterally eliminate the public’s fair use rights. Already, the movie industry’s use of encryption on DVDs has curtailed consumers’ ability to make legitimate, personal-use copies of movies they have purchased.

The DMCA Impedes Competition and Innovation.
Rather than focusing on pirates, some have wielded the DMCA to hinder legitimate competitors. For example, the DMCA has been used to block aftermarket competition in laser printer toner cartridges, garage door openers, and computer maintenance services. . .

The DMCA Interferes with Computer Intrusion Laws.
Further, the DMCA has been misused as a general-purpose prohibition on computer network access. . .”

In the Canadian context, back in 2008, Michael Geist wrote up a bunch of reasons that a Canadian DMCA was problematic⁴. Although the Conservatives swapped out their Industry Minister and we’re talking about a new bill, much of Geist’s rationale still holds. Here are some of the things he pointed out about the prior Conservative DMCA attempt, if their new version is like the old, we’ll have to worry about the same problems.

“Supreme Court of Canada has emphasized the importance of balance between creators rights and user rights, the Canadian DMCA eviscerates user rights in the digital environment by virtually eliminating fair dealing. . . Canadian DMCA erects new barriers for teachers, students, and schools at every level who now face the prospect of infringement claims if they want to teach using digital media. . . Canadian DMCA will render it virtually impossible to protect against the invasion of privacy by digital media companies. . . Canadian DMCA means that consumers no longer control their own personal property. . .”

If you were to buy a media device like an iPod, your use of it is controlled by a third party. This already happens with Apple and other companies to some degree. Consider this excellent piece by Russell McOrmond⁵ (3 May 2010). He’s talking about DRM (initially known as digital rights management but more aptly called digital restrictions management for the way it is truly used), he’s not talking about the DMCA or copyright changes. However DRM is a problem compounded by DMCA-like laws because those DMCA laws prevent people from lawfully circumventing the silly (and I’d argue unethical and abusive) DRM that already exists. Russell makes it simple:

“. . . we have a scenario where people are buying something, but where they are not expected to retain ownership-like rights. To me it is obvious that if I own something that it is me, and not someone else, that maintains the keys for any locks applied to what I own. . .”

It’s worse than that though. If you continue reading, McOrmond points out a significant transformation in how we interact with our cultural manifestations.

“Anti-competitive locks on content threaten to cause a transformation of traditional retail content distribution from where the product is the content and the customer is the audience, to one where the product is the audience and the customer is the copyright holder. If a small number of locked platform providers are able to dominate the distribution networks for copyrighted works it will then be these platform providers, not copyright holders, that are in control of the business models.”

You see, the copyright holder has the reins on what the audience can get however the device manufacturers manage how. Together these manufacturers and copyright holders control everything the audience is allowed to experience. And that’s to be codified in law. No wonder major music and movie industries push so hard for these new copyright laws, they stand to control so much.

Look, it’s fine to try to appeal to everyone’s tangible pleasures with the points about not controlling your own “property”. But our very rights to interact and share our own culture are on the line. Our rights for freedom of expression are at risk of being restricted and that is going to hurt in unimaginable ways.

Why do these old industries need laws to coerce everyone into accepting their control. The control they want is contrary to the digital medium where information flows infinitely and effortlessly reproduces itself. The control they want is wrenched–flawed–from a physical realm in which control was tangible and nothing really could be reproduced infinitely or effortlessly.

Canada needs to evolve and build its economy, especially as we move out of a recession and face a huge opportunity with digital media. The way many old media companies (those pushing for DMCA-style restrictive, unbalanced copyright reforms) used to make money is irrelevant in the digital realm. This is the greatest bone of contention that I have with the push for DMCA-like copyright reform. It’s biased toward ways of thinking that simply don’t pertain to our modern culture, economy, and way of living. It’s biased toward industries that need to evolve or be put out of their misery. Helping irrelevant non-evolving industries to struggle along just puts Canada at the very back of an emerging world economy. And it will do it at the cost of enslaving our culture making criminals out of innocent citizens.

This post is not so much about what the Conservatives have done, but rather what they’re about to do. It’s time to once again get up in arms, protest, write letters, and spread the word about the impending shortsightedness of an upcoming Conservative copyright bill. And in case copyright still sounds like a dull and arcane issue, please understand that the way these copyright bills have been going (under the Conservatives and in certain other countries’ sorry legislations) they will have profound, deep-reaching impacts on your life.

Geist recommends writing (physical) letters to your MP as well as the ministers and PM responsible, “No stamp is required – be sure to include your home address and send it to the House of Commons, Ottawa, ON, K1A 0A6″. There’s some more information from the Canadian Coalition for Electronic Rights

In January the Parliamentary Budget Officer (PBO), Kevin Page, explained that the deficit had become structural, meaning it’ll keep existing when our economy is back up to snuff (if it gets there). I’ll have more to say about the budget another time, but consider an element in what happened today, the decrease of corporate income taxes.

The Globe and Mail’s John Ibbitson explained¹ (4 March 2010) that Harper is determined to eliminate the deficit by 2015. Of course, we know that Jim Flaherty presents this as happening largely through an upbeat economy, one that grows so well he doesn’t have to raise taxes and simply must prevent spending increases. But this message has been somewhat confusing. Flaherty used to talk about not allowing spending to grow. Later the Conservatives appointed Stockwell Day as the man to make cuts. Their messaging seems to vacillate between limiting spending growth and making cuts. They certainly aren’t going to raise any taxes.

The CBC reported³ (4 March 2010) on Flaherty’s perspective

“The government’s plan to get ahead of its $54 billion deficit is built largely on the back of $17.6 billion worth of savings over the next five years that will come from streamlining and reducing the operating and administrative costs of government departments. That plus a broadening tax base as the economy improves will be enough to bridge the gap, Flaherty said.”

Ibbitson reminds us early, what the PBO reported: the deficit is structural and regardless of Flaherty’s optimism, it’s very unlikely to go away as Flaherty says.

Now, switching topics a bit, Ibbitson writes

“With costs rising by 2.5 per cent a year, after accounting for inflation and population growth, health care is consuming nearly half of the budget in some provinces, even as the baby boom heads into retirement. Canadians need to confront the truth that the health-care system as it exists simply can’t be sustained.

“The federal government will be under intense pressure from the provinces, who will not be able to make ends meet because of the explosion in health care spending,” warns Pierre Fortin, an economist who teaches at the Université du Québec à Montréal. “The provinces will always be at the door, asking for more money.”"

I think this is significant commentary. Take stock, a structural deficit is established, and now the Conservatives are on track to further decrease the amount of money the government takes in by reducing corporate taxes even more than they already have. According to page 67 of the budget² (and mentioned throughout)

“The federal general corporate income tax rate was reduced to 18 per cent on January 1, 2010. It will be further reduced to 16.5 per cent on January 1, 2011 and to 15 per cent on January 1, 2012.”

That means Canada will have the lowest corporate income tax rate in the G7. The hope is that that will attract more investment. But at what cost?

Losing the federal surplus meant we lost our safety buffer. If something unexpectedly worse occurs than this recession, which we seem to be leaving, we’re in trouble. But that’s a big if. The heart of the worry here is that faced with the inevitable stresses of both the health of an aging population and the fact that there will be fewer people generating revenue for the government, now the government is giving itself further stressors by decreasing another source of revenue, corporate income taxes. Even in good times, that means there’s less the government can do to promote Canadian well-being.

So why do this? Are the Conservatives making a big gamble that the economy is going to improve so much, our worries of greater problems will not come to pass? Or are they being irrational? I don’t think they’re gambling or being irrational. They’ve calculated exactly what’s needed to bring about a widespread crisis in the government’s ability to fund the programs we expect. The Conservatives need to bring about a crisis in order to implement their vision.

A crisis makes arguments for drastic change seem required, people react. And after gradually being lulled into a low-tax stasis without much effort, it will be easy for Conservatives to make the degraded services around us seem unworthy of funding. It’s much harder to rebuild something anew than to maintain and improve upon what is working well. I can just hear the arguments “look at the state of health care, our equipment is useless, we don’t have the staff, etc. clearly the public option doesn’t work!” of course forgetting that it can work quite well when funded and operated properly. People will just see it in crisis state.

A government lacking the funds to do much, is one that cannot ensure health care and social services to its people. Indeed, when our health care system is so far extended beyond capacity, watch, the Conservatives will argue that the only solution is to bring in the private sector. And health care is only one example, there are many other government services that will suffer similar fates probably even sooner.

(P.S. I remember a time not long ago, when one of the arguments for doing business in Canada was our health system. The argument went something like, without companies having to foot the cost of health insurance, like they do to some degree in the US, an expense is saved along with a lot of bureaucratic work that doesn’t have to be done. Cut back on your HR team! More efficient employees because they’re healthy and on-the-job! That kind of stuff. If the Conservatives’ budgeting steps really do cause the crisis I’m suggesting they’re designed to, we’ll see what happens to this little bit of persuasion.)

“The government has increased its spending on the promotion of the January, 2009, Economic Action Plan by $5-million – on top of the initial allotment of $34-million – for a 15-per-cent increase.”

It’s problematic that the amount being spent on these ads is so massive. Surely there are a multitude of ways to spread this information that would not cost an outrageous $40 million of taxpayer money, which could otherwise be spent on the actual action.

Conservative spokespeople justify the ad spending as a form of educating the public on what is available to help, which seems like a good idea in principle. Interesting that much of the actual help provided, for example assistance to the unemployed, is available against the Conservative’s wishes. They were largely forced into that one by the NDP.

The tone of the ads tends toward optimistic and uplifting, suggesting lots of government help is available and things will be better. Again, this seems good in principle, but the frequent intentional public linkage of Conservatives with these ads, ties that strong, action-bound feeling in the ads with one party in particular–the Conservatives. It’s not too hard to find images in the press featuring Conservatives against the backdrop of the EAP imagery. And that’s no accident. Stephen Harper’s iron-fisted control of information and imagery is notorious (there are often press reports of not being allowed the normal freedoms in the photos it takes of him, and pre-made shots are provided instead).

The photograph in this CBC article³ (9 November 2009) on the subject of the American company contracted to produce the EAP signs. I don’t know who took that picture or under what conditions. There’s nothing inherently wrong with it–just the PM seeming to give a talk about the EAP. But when these images pop up frequently and are positioned so that that’s what is maintained in the public eye, something starts to feel wrong–like we, the public, are being propagandized for one party’s message.

A Canadian Press² article (10 October 2009) had an in-depth article on the subject, mentioning:

“The Privy Council Office, the non-partisan bureaucratic arm of the Prime Minister’s Office, has never been comfortable administering the website for the Economic Action Plan – and informed Harper of its misgivings at the time of last January’s federal budget. . . . While the story is being denied by both PCO and PMO, the extraordinary claim originates from several sources within the famously discreet Privy Council Office.”

Notice the screenshot on that page laden with Conservative imagery and photos. Rather than being a useful non-partisan service about what the government is engaged in, it appears to be serving as ads that help guide public sentiment toward the Tories.

Rick Mercer pokes fun at the controversy in this clip

Notice the images in the background–they cycle through various Conservative publicity pics involving the EAP. Mercer’s bit manages to call attention to all three controversies. The Tory tie-in, the amount being spent on the ads, and the not-to-be-missed irony, that the EAP signs themselves weren’t even produced in Canada (tax payer money paid to a foreign company rather than helping a Canadian one, all for the sake of promoting the idea that the EAP is here to help).

Dani Rodrik‘s thoughtful post on Share the World’s Resources¹ (15 September 2009) explains

“The beauty of a Tobin tax is that it would discourage short-term speculation without having much adverse effect on long-term international investment decisions. Consider, for example, a tax of 0.25 percent applied to all cross-border financial transactions. Such a tax would instantaneously kill the intra-day trading that takes place in pursuit of profit margins much smaller than this, as well as the longer-term trades designed to exploit minute differentials across markets.”

Why does he say “the beauty”? Because the type of speculation under concern can be problematic in a number of ways. He mentions the resources it consumes. There is also the notion that countries have to increase their interest rates to deal with some of the fallout from speculation activities. That can be a big problem for a country’s economy and thus the citizens that have to deal with that problem.

A Tobin tax also could raise, overall, extremely large quantities of money without causing an undue burden on those taxed. Currently, it’s that money that would get raised, which is attracting interest in the tax. The money could be used to cushion banks in the event of further economic disaster, or else be put to important use for various problems like world health or environmental improvements.

An article in The Globe and Mail² (5 February 2010) quoted French Minister of Economic Affairs, Industry and Employment, Christine Lagarde saying “I am, economically speaking, a liberally minded person – I’m not a state interventionist. . .” and yet she is in favour of the tax, recognizing the potential for raising money that world governments could use in myriad beneficial ways.

The article explains some technological hurdles, which are easy to overcome. One point it mentions is that

“The world would need to design a centralized financial clearinghouse for all transactions. As it happens, this idea is popular elsewhere, notably among governments hoping to put an end to tax havens and other tax-avoidance schemes.”

So, an unintended consequence of implementing a Tobin tax might also be to clean up tax havens. But let’s return to Flaherty and the Conservatives. On 7 November 2009, the Financial Post³ quoted him saying

“It’s one of the ideas that’s on the table, but is not particularly attractive to me as finance minister of Canada. . . We have been a government that has been reducing taxes.”

I’ve argued previously that reducing taxes in Canada has generally not been a good move, but the momentum of reduction seems to be the basis for which Flaherty doesn’t want to consider a completely different sort of tax. He doesn’t seem to care about the reasons the tax could be useful or not. According to another Globe and Mail article⁴ (19 February 2010) the Harper Conservative government stated

“Canada will not be supporting the introduction of a new global tax on financial services and urged countries instead to adopt sound regulatory practices like Canada’s. . .”

I’m not suggesting that adopting sound regulatory practices is a bad idea, it’s not, it’s a good one. Rather I’m calling into question why the Conservative government will not also consider the Tobin tax as a means for generating revenue that could be used to help it dig its way out of things like, the structural deficit it’s created? Or even further the safeties provided by sound regulatory practices.

Finally, I’d like to sum up with commentary from The Council of Canadians⁵ (22 February 2010) blog.

“At only 0.05% on top of speculative banking transactions, the Tobin Tax (named after the economist, James Tobin, who proposed it in 1972) or Robin Hood Tax (named after a new British campaign) could help all countries meet essentially all today’s pressing needs: food insecurity, climate change mitigation, underdevelopment, water pollution and lack of access to public services, etc. By the way, Harper — this tax you oppose could help mothers and children, too.”

For more information about the Tobin tax idea, take a look at the UK’s Robin Hood Tax Web site. It explains how it works, who it really affects, and why it’s needed.

Stockwell Day is getting “glory” as a no-man. In other words he’s being praised for his ability to cut spending. Apparently Jim Flaherty and Stephen Harper can’t do all the cutting themselves. The article states

“The Conservatives must to find $19-billion a year in savings if they want to balance the books by 2014 without raising taxes, according to the latest analysis from Parliamentary Budget Officer Kevin Page.”

Then again, cuts aren’t the only approach the Conservatives favour, they also seem to like firesales of crown assets. The Canadian Press² (28 May 2009)

“The Harper government plans to put Atomic Energy of Canada Ltd.’s nuclear reactor business up for sale. It’s part of a major restructuring that will also mean private-sector management for AECL’s Chalk River research facility, which makes the medical isotopes used in diagnostic scans.”

Maybe they can sell Day’s “Prayer Force One” bus too.

(Update: 21 January 2010: Scott Ross blogged in detail about the costs of incurred during the prorogue, which seems to rise above $130 million. The CBC has a brief video overview on the cost subject and job/pension losses of many government employees through the unexpected prorogue. The Conservatives’ prorogue isn’t doing anyone any good, especially not our poor, battered, budget.)

CBC News reported¹ (13 January 2010) on the PBO report. The CBC article describes a structural deficit as “…a portion of a country’s budget deficit that exists even when the economy is running at full capacity during a period of expansion.” Which is important to keep in mind when listening to Conservative Finance Minister, Jim Flaherty, explain that future economic growth will be an important contributor to ridding ourselves of this deficit.

Page’s just-released report² Estimating Potential GDP and the Government’s Structural Budget Balance (13 January 2010) states a number of interesting points. Right upfront it points out the worry in accepting the Flaherty-growth-justification.

“It’s unlikely that future economic growth will be able to alleviate the deficit.PBO’s estimates suggest that the Canadian economy was operating significantly below its potential in 2009. More importantly, PBO’s estimates also suggest that the downward trend in potential GDP growth observed since 2000 will continue over the projection horizon, averaging 1.9 per cent over the 2009 to 2014 period. The projected decline in potential GDP growth is a function of the projected decline in the growth of trend labour input, which reflects slower growth of the working age population and a decline in the trend employment rate associated with the shifting age composition of the workforce.”

Lest anyone is tempted to argue the PBO and Conservative government form their estimates through different accounting frameworks, the PBO report makes an interesting statement on its method. It notes that the frameworks are different but shows that its method nevetheless almost always produces results that since 1976 are strongly correlated with Finance Canada’s. It only recently began to diverge, as in, when the Conservatives took over and tried to paint a more rosy picture of their budgeting. Here’s a snapshot of that portion of the report.

“Despite the differences in accounting frameworks, calendar/fiscal years, and methodologies, Finance Canada and PBO’s estimates of the Government’s structural balance track each other closely over history (the correlation coefficient is 0.96). However, since 2006-07 (calendar year 2006) when the structural balance was estimated at $8.8 billion by both Finance Canada and PBO, the structural balance estimates appear to have diverged. Indeed, in 2008-09 (calendar year 2008) Finance Canada estimates a structural surplus of $13.8 billion while PBO estimates a $3.2 billion structural deficit.”

An article on the subject in The Globe and Mail³ (13 January 2010) said

“…even if the government successfully shuts off the taps on all stimulus spending by 2011 and keeps government growth below four per cent, it still will not have enough money coming in to erase the deficit. As a result, Mr. Page said there will be a structural deficit of $18.9-billion in 2013-14, which is the period when Ottawa expects to be narrowing in on a balanced budget.”

Since the report essentially rules out the possibility that economic growth could cover the deficit or even return us to non-deficit status, the other most obvious options are to either increase taxes or cut services. I don’t think it takes much effort to imagine the direction the Conservatives will go with that choice. They’ve already proven their propensity toward cutting taxes even when there isn’t good reason to do so, and repeatedly said they want to cull the government programs and services that help define the wellbeing of our society. Indeed in the same Globe and Mail article, it says

“Mr. Flaherty has said that if economic growth comes in lower than expected, savings can be found by not renewing government programs that have a set end date.”

Flaherty and Harper have been talking this way quite a bit. They’ve been chomping at the bit to cut government programs since they came to power. I’ve argued in the past that the Conservatives engineered much of the deficit specifically to create a rationale for cutting programs. Unfortunately many of those programs are important to our present well-being and our future growth, for example the recently cut CCL.

A larger portion of the population is heading toward retirement (particularly over the next few years). Additionally the global economic downturn means more people in Canada need assistance through programs such as unemployment insurance. Taken together that means the government receives less money in taxes but simultaneously has a greater responsibility to provide to social programs.

Finally, the rather more severe Toronto Star⁴ (13 January 2010) quoted Page

“We are going to have to take drastic measures, either spending reduction or tax increase, to get us back to balances… The question is, do they (the Conservative government) want to make short-sighted decisions or long-sighted decisions?”

The article continues to relate Harper’s lack of worry about a structural deficit and a debt-interest payment trap. It notes that during the 1970s/80s (the last time there were large deficits) Canada had to spend $.35/dollar on public debt interest charges.

(Update: I found an article from Reuters⁵ 13 March 2009, in which Harper talks about seeing a surge in the jobless rate. However, he comments that “It doesn’t change our assessment that when the global economy does recover, all the demographic indications are that we will have labor shortages.” He’s thus recognized for a long time, the demographic trend toward having a smaller total workforce–inline with the problem of a smaller tax intake.)

The CCL describes itself as “a catalyst for lifelong learning, promoting and supporting evidence-based decisions about learning throughout all stages of life, from early childhood through to the senior years.” That seems like a worthy thing to promote in Canada. It’s important after all, to ensure that people’s knowledge and skills are up-to-date with those required to keep Canada competitive and successful in the world economy. Additionally, I’d argue that lifelong learning has intrinsic value to individuals and our society as a whole–but that’s for another post.

Remember, the Conservative minority squandered our budget surplus with its poor planning over the last several years; cuts that Harper and Flaherty have been warning about have already begun. Here’s some evidence that they’re extending beyond silencing the watchdogs that keep government accountable. The Globe and Mail¹ reported (8 January 2010) that the Conservatives (through Conservative MP Diane Finley) stopped funding to the CCL and provided us with the following doublespeak:

“Ryan Sparrow, Ms. Finley’s communications director, said the government is working with the provinces and other stakeholders to create a better system that is more responsive to Canadians’ needs.

“Employers, workers, and economists in Canada have told the government that there is a need for better learning information that is more aligned with labour market demand and takes into account international competitive challenges. This need has become even more apparent due to the recent global economic downturn and the government’s focus on Canada’s economic recovery… In other words, there is a need for a more comprehensive learning information system than the CCL can provide.”"

Really? The public isn’t stupid. It doesn’t make sense to shut down an organization that was already successfully doing what the Conservatives claim they want. According to the President and CEO of the CCL² (January 2010):

“In 2004, Canada saw that it had some catching up to do. Canadians were falling behind the rest of the world in some crucial areas. Innovation. Creativity. Skills development. Learning.

There was no debate about what we had to do to stop the decline, and begin to improve. We had to figure out what works in education and learning, from early childhood to post-secondary schooling, from job training through adult literacy improvement, and we had to monitor our progress so that we were certain we were always on the right path.

That is why the Canadian Council on Learning (CCL) was created.

By any measure, CCL has a proud record of accomplishment.

Our Composite Learning Index, the first of its kind anywhere in the world, measures learning conditions, not only in the country as a whole, but in almost 5,000 individual communities. It shows that when you make learning conditions better, you inevitably make economic and social standards better. Europeans have told us they have been “inspired” by the Index, and are now working to produce a version for themselves. …”

The letter continues with more bullet points and information about the CCL’s successful program. As you can see, the CCL was doing what the Conservatives claim they want to do. The Conservatives haven’t announced any other program to accomplish their goal. So how does it make sense to cut off the funding to the program that was designed and already functioning in service of the very goal they claimed to want to reach? It doesn’t. C’mon Conservatives, that’s blatant doublespeak.

Finally as a side note, it’s interesting to contrast Harper’s Conservative approach to the perspective, Liberal leader Michael Ignatieff presented in a speech, as reported by the CBC³ (2 May 2009).

“A key strategy for Canada to emerge from the economic downturn is lifelong learning because it fosters innovation that will help to create future jobs in a knowledge-based economy, he said.

“A strategy for recovery must be a strategy for learning. We must create a society where learning is a way of life and learning is lifelong… If you ask what I want for Canada, it is this: That we surprise ourselves, astonish ourselves, that we astonish the world.”"

Truly it surprises that the Conservatives, billing themselves as good stewards of the economy, prefer to cut our economic prospects by halting and reversing Canadian know-how, competitiveness, and leadership in a knowledge-based economy.

(Update 12 January 2010: The Toronto Star has an opinion piece on this issue, further examining the politics and faulty reasoning behind this cut.)

I remember reflecting at the time of the initial GST cuts what the real rationale might be–it couldn’t be what the Conservatives were saying publicly because that had too many holes to make sense. When the Tories kept announcing what seemed like short-sighted cuts to the taxes, which would have little to no economic affect on the majority of Canadians, why did they consistently tout these as putting money back into the hands of consumers (a sham).

What is the real rationale for the Conservatives’ GST cuts? The GST cuts affect the government’s ability to support various services and programs that impact the well-being of our society. Ah, but that’s right, the Conservatives aren’t generally in favour of such services and programs, they want to shrink government, preferring to leave everyone to fare for themselves. But they can’t come out and tell everyone they want to cut federal programs and services, because then they’d risk losing the minority popular support that they have. So what to do? How about engineering some great big deficits? A deficit situation enables the Conservatives to justify cutting federal programs and services, to justify selling off our crown assets to private interests, all under the guise of being fiscally responsible.

Let’s see how this adds up.

Reuter’s¹ reported (25 July 2008) that the Conservative-led government wasn’t off to a good start to the fiscal year.

“. . . posting a deficit of C$517 million ($507 million) for April and May as corporate and sales tax collection fell sharply. The deficit compares with a surplus of C$2.78 billion in the same two months of 2007. The weak results were due to a 17 percent decline in corporate income tax revenue as well as a 21 percent drop in intake from the goods and services sales tax, the Department of Finance said in a report on Friday.” [emphasis mine]

The article continues to note that the Conservative government estimated it would have a surplus of $2 to $3 billion for the year. It contrasts sharply with the prior year’s surplus of about $10 B. Striking however, that the Conservatives were still publicly estimating a surplus, not a deficit. It suggests that either they weren’t very good at taking stock of the economic situation or else they were simply trying to keep things quiet and control public perception over eventually slipping into a deficit.

Continuing with Reuter’s reports² (18 November 2008), we can see how much the Conservatives tried to veil the situation. This is about the time that budget officer, Kevin Page, prepared to release his first forecast.

“The idea of running a budget deficit in Canada has been political anathema since the 1990s when the previous Liberal government painfully eliminated it over a period of several years. Ottawa has subsequently posted annual surpluses, the only major industrialized country to do so.

The newly re-elected Conservative government of Prime Minister Stephen Harper insisted throughout this year’s election campaign that it would continue to balance the books. However, it has since allowed that a temporary deficit is likely. Finance Minister Jim Flaherty has said he expects to post a small surplus in the 2008-09 fiscal year but the budget might slide into deficit after that as the result of possible stimulus measures that have yet to be defined. In February, when the government laid out its spending plans for 2008-09, Flaherty saw . . . the surplus slimming down to C$1.3 billion in 2009-10.

Economists, including the influential chief economist of Toronto-Dominion Bank, Don Drummond, have estimated Canada could face a budget shortfall of up to C$10 billion next year.”

At about the same time, the Montreal Gazette reported³ (14 November 2008) Finance Minister, Jim Flaherty’s intentions to sell crown assets.

“Finance Minister Jim Flaherty said yesterday the Harper government is considering selling real estate and other crown assets to help keep the budget balanced as the economy worsens. . . . “We are going to review the corporate assets, the capital assets, of the government of Canada, to see whether they still perform a useful function for the Canadian people. If that review shows that there should be some assets that should be sold, then we’ll go ahead with them.”"

Clearly (because Flaherty says so) the Conservatives knew at this point that they would have at least a difficult time balancing the budget. But he puts the blame on a worsening economy, totally neglecting his own government’s reckless GST cuts. Or were they reckless? Maybe they served the Conservative strategy of reducing federal programs and services. Flaherty’s talking about selling off crown assets–those belong to us don’t they, not private parties. But this talking strategy will prove consistent with future Conservative announcements and with current Conservative ideology.

Jumping ahead, the Conservatives started predicting they’d run a $34 billion deficit for 2009/10, and a $30 B deficit the year after. Harper said the budget they’d introduce would have “permanent tax cuts”–interesting way to deal with a shortfall: lose more money.

The CBC reporting⁴ (22 June 2009) on the massive federal deficit expectation points out that we’re likely to see what had been estimated as a $1.3 billion surplus changed into a $50 billion deficit. Roughly $10 billion of that can be attributed to the GST cut. That’s $10 billion in federal social programs down the drain. The article quotes Canadian autoworks economist Jim Stanford on the link between cutting the GST and the purchasing decisions “The links are not as strong as you might think…” which corroborates others’s positions at the time of the announced cuts (I called attention to these just above).

To be fair, the article also notes that $10 B is only a portion of the ~$50 B deficit. But much of what led to the deficit was not as predictable or controllable as the $10 B portion. Part of the deficit comes from measures, like the economic stimulus taken (and to varying degrees pushed by the other parties) to deal with the severe recession.

Nevertheless $10 B of the deficit was within the purvue of the Conservatives’ decisions. That’s $10 B that could have been used toward stimulus and social programs. That’s $10 B that could have been considered a safety net for a worsening economy (which as we know now, it did). The Conservatives had a safety net coming into office, which gave them some  room to manage our country even while the world was heading into a deep recession. Rather than recognize their good fortune in having that wiggle room they put policies in place, which even at the time signalled an end to such a safety net. That’s an intentional act.

So I ask, can it be reckless planning? Lack of forsight? Or is it part of the Conservative strategy to reduce the government–recognizing that if anything dire did happen, they’d get their opportunity to cut federal programs to support only the most essential of federal duties? I think it’s the latter. While I may disagree with their goals, calling them short-sighted, I don’t actually think the Conservatives are stupidly bumbling around with these measures, rather they’re carrying through with their policies for a reason.

The United Press reported⁵ (11 September 2009)

“Canada’s budget deficit was adjusted upward to $55.9 billion this year . . . Flaherty said much of the effort to get the deficit down to $5.2 billion by 2015 will “require decisions of government that won’t always be popular or pain free,” and “it will require a lot of saying ‘no’ to pet projects and special interests.”"

In order to reduce the deficit (not even talking about hitting a surplus again) by 2015, Flaherty starts trying to get the public used to the idea that cuts will come, and that they’ll be painful. Wondering what he characterizes as “pet projects and special interests”?

My guess is that’s just about anything outside current Conservative doctrine. How long before the Conservatives proceed with deeper cuts to cultural programs, social services, and more? Could cuts required to get us out of this deficit eventually be a rationale for the Conservatives to open the door to privatized health care? So much of the Conservative agenda, reigning in the social infrastructure, which characterizes (in part) the well-being of Canadian life, comes down to cutting the programs and services that are now Canadian institutions.

The National Post⁸ (2 November 2009) discussed Kevin Page’s report (Parliamentary Budget Office) examining our future deficit in relation to the Conservatives’ plans. His office is of course, supposed to shed light on what goes on within their domain and has sometimes been at odds with the Conservatives’ numbers. Page says the federal government will be in a substanatial structural deficit for a number of years and that the government will have to raise taxes or else make cuts in its programs. He also brought up an interesting issue.

“According to Mr. Page, the government’s projections include $5.8-billion in unidentified savings over the next five years through reviews of program spending, including $2-billion this year. Mr. Page says his office has requested expenditure planning documents from the federal Treasury Board, but has thus far been rebuffed.”

And now that the holidays are upon us, the Conservatives are releasing plenty of bits warning that they’ll begin making cuts–are these the unidentified savings, Page mentioned? Perhaps the Conservatives think people will forget these warnings over the holidays, or that the warnings will sink into the background of our consciousness so we’re more receptive when they finally do occur. The Globe and Mail⁶ (21 December 2009) talks about Harper’s stimulus plan exit strategy involving years of “belt-tightening”. They quote Stephen Harper saying:

“The government’s approach will be clear. We won’t be raising taxes, but we will be constraining growth . . . And within four to five years, if we follow that path, we should be back to a balanced budget.”

Harper uses the euphemism “restraining growth” but as his government noted previously, they mean cuts to federal programs and services, along with selling off crown assets. Reading the language used by Harper and his Conservatives, and the way it gets reported frequently you can see that they use words like frugal and belt-tightening, which imply wisdom and resolve rather than the actual short-sightedness or cunning strategy. The article continues with insightful counterpoints from respected economists and ministers

“Mr. Harper’s view that his government will be able to chip away at deficits by squeezing the growth of public spending has been questioned by economists and by former officials with the Finance Department. Former deputy ministers Scott Clark and David Dodge [former Governor of the Bank of Canada] have already stepped forward to challenge the government’s plans for eliminating the deficit, which is projected to reach $56-billion this fiscal year. Mr. Clark has said that Ottawa will have to raise the GST, which Mr. Harper cut in 2006.

“I don’t think it’s very likely that they can balance the budget without some very severe spending restraint,” said Bank of Montreal deputy chief economist Douglas Porter.”"

It’s not just Flaherty and Harper talking cuts, but well-known economists saying the Conservatives cannot follow through on their promises without backtracking their initial decisions on the GST cut or else severely cutting spending. And last but not least, let’s follow this up with the most recent news coming from Jim Flaherty’s mouth and reported by The Globe and Mail⁷ (22 December 2009).

“”Over time, what we’re going to see in the federal government in any event is some attrition because of the demographics and aging public service and we’ll have to be mindful of that as we try to watch growth in spending and restrain growth in spending,”"

Which is an oblique way of saying the Conservative minority government would look toward cutting public services. How can I justify that comment? Consider that if you don’t rehire public workers, or worse, you eliminate their jobs, then you no longer can offer the public services they were responsible for delivering. The article says

“Aiming for a leaner civil service, and looking to the salary savings of a reduced federal work force, provides a new twist on what has long been viewed as the public service’s demographic challenge. . . . “I hope he realizes that when you cut public servants, you cut public service,” said Gary Corbett, the president of the Professional Institute of the Public Service of Canada. Mr. Corbett said cutting public-service jobs means cutting back on important jobs like food safety inspectors and scientific research.”

The Star⁹ (23 December 2009) also has a piece on Flaherty’s recent announcements. It provides some other details such as marking a flippant sounding attitude toward the situation and this point of Flaherty history:

“In his 2001 Ontario budget, Flaherty handed $2.4 billion in tax cuts to the province’s corporations, promised personal tax breaks and paid down $3 billion in provincial debt – all while balancing the books by holding down badly needed expenditures for universities, hospitals and infrastructure projects.”

Furthermore, according to the Globe and Mal article, Flaherty believes government revenues will largely stem from economic growth. That’s sure a positive outlook. While that would be welcome and might even be likely, it’s far from certain. Things could even take a turn for the worse.

“The concern expressed by the deputy ministers and others is that the government’s revenues have fallen so steeply that Mr. Flaherty simply will not be able to find enough savings to wipe out the deficit. They argue that even when economic growth returns to normal, the Conservatives’ two point GST cut has left Ottawa with a continuing deficit.”

The Conservatives have thus set up the game board for a future election campaign. With the spectre of permanent deficits, they can pit their party’s harsh cuts to federal services against the other parties’ options, which will likely be to either mimic the Conservative choice or to reverse the tax cuts that the Conservatives propaganda’d their minority public support into applauding in the first place.

There is a clear example of the alternative that could have been, had the Conservatives taken prompt action. In this alternative, Canada could have been taking advantage of an opportunity to develop new green industries, and thus jobs.

Harper who talks an awful lot about his concern for the economy turned a blind eye toward an opportunity that could have repositioned Canadian industry for a more prosperous, sustainable future. The Toronto Star¹ (12 December 2009) reports on a real example of the alternative in a piece about Jack Layton’s (NDP) efforts to bring wind power to Canada after his trip to Copenhagen 13 years ago.

“Toronto had to cut a $1 million cheque to ship the wind turbines from the Netherlands. “I said why aren’t we building these things here?” Layton said.

Almost a decade later, a former Nissan auto plant in Bromont, Que., is doing just that. But now that all countries like China and the U.S. are sinking massive investment into building clean energy technology, harnessing the wind and the sun and the water, it may be too late for Canada to keep pace.”

The point is Layton, like plenty of other people, recognized long ago that there is a lot of opportunity to create new industries supporting the necessary changes countries around the world must make to our way of living in order to sustain a climate in which we flourish (both environmentally and economically). The Conservatives’ fearful tunnel vision, leading them to deny the urgency and necessity of reforms in our environment policy, blind them to real economic opportunities.

The CBC reported¹ (14 October 2009) about Conservative logos appearing on federal (not party) stimulus cheques being presented at funding announcements. One striking example (images at the CBC link) was a large cheque handed out by Conservative MP Gerald Keddy in Nova Scotia. In other words, Canadian taxpayer money is used to produce publicity linking a federal program to the Conservative party (though the Conservative party cannot and should not claim 100% responsibility for the program). The other parties have called on the ethics commissioner to investigate.

That type of publicity stunt just continued as The Star² shed light (9 November 2009) on Conservatives making themselves very visible at public events to announce funding, while they kept their colleagues from the other parties in the dark. Again, it’s a federal program. The article says

“Prime Minister Stephen Harper and his government have been using taxpayer-funding announcements to boost the fortunes of unelected Conservative candidates, critics charge…

In Edmonton-Strathcona, the only Alberta riding the Conservatives do not hold, local Tory candidate Ryan Hastman has participated in at least five government announcements over the past few months, while the local NDP MP, Linda Duncan, says she has been excluded from all of them. Hastman boasts of his participation in pictures on his Facebook page. Duncan… says it becomes doubly irritating when a Conservative candidate claims credit for funds she helped to get for the community, as the duly elected MP.”

Finally, The Star³ reported (12 November 2009) about the greater than $3 million dollars Conservatives spent, in one month, of taxpayer money advertising the notion that the stimulus spending was creating jobs. One has to wonder how useful this advertising is in a deep recession, when the $3 M could be put to far more effective use, say boosting unemployment payments to the thousands or workers that lost their jobs, or else assisting fledgling industries. According to the article, Liberal MP, Martha Hall Findlay said

“…she could understand if the money was spent educating Canadians about H1N1 flu, ‘but patting yourself on the back and making big pronouncements is not part of what taxpayers’ money should be spent on.’”

The advertising gets further criticized as promoting the Conservative brand without informing citizens of how the plan supposedly might have created any jobs.

The Ottawa Citizen¹ reported (21 October 2009) that

“A joint investigation by the Ottawa Citizen and Halifax Chronicle-Herald shows that 57 per cent of the projects with more than $1 million in federal funding nationwide went to Conservative ridings. The party holds only 46 per cent of the seats in the House of Commons. Blue ridings therefore received 23 per cent more $1-million-plus projects than if the projects were divided evenly among all ridings.

The difference between government and opposition ridings is particularly pronounced in Quebec, where Tory ridings received 22 per cent of large projects, although the party holds only 13 per cent of the ridings, which means they received 62 per cent more per riding than if the money was divided evenly.”

They used information as published by the action plan Web site. This report is not the only one to notice. Two non-partisan software engineers, Jim DeLaHunt² and Kaitlin Duck Sherwood³ (26 October 2009) put together an analysis, map, and spreadsheet (openoffice format) that show the issue. According to their analysis

“We think the real story is that Quebec is getting disproportionately less of the funding and the projects: 47% fewer dollars, and 65% fewer projects, than their population would justify.”

It’s interesting that as a whole Quebec receives less but its Conservative ridings get significantly more than the others.

I’ll quote just a few of the statements below.

First, the Conservative message says

“Canadians passed judgment on Stephen Harper when they awarded the Conservative Party a strengthened mandate.”

I’d argue that in our last election while Canadians may have passed any type of judgement on Stephen Harper, we didn’t award the Conservative Party a strengthened mandate. The Conservatives ended up with only a plurality of the seats, it did not win a majority government, thus its mandate was no stronger than before the election. If anything, I’d argue it was weaker. Why weaker? Because it was well publicized how before the election the Conservatives tried to govern as though they were a majority. Playing political games to force policies through without obtaining agreement or concensus from the other parties. What they did accomplish, they accomplished without the will of the majority of Canadians. To trigger an election and end up back where they started should have been received as a message that they haven’t won the majority of Canadians’ support and needed to work with the other parties in order to find that support.

Second, the Conservative message says

“Voters offered no mandate to Stéphane Dion and the Liberals to govern the country.  They offered no mandate to Jack Layton and the NDP to influence the economy.”

It’s a bit of an odd thing to say. Like the Conservatives, neither of these parties won a majority, however upon forming a coalition with the support of the Bloc Québécois, they do have a majority. So this coalition represents the majority of Canadian voters, and that is not something the Conservatives can claim⁴ for themselves. It seems like the coalition has more of a mandate than the minority Conservatives do.

Finally, the Conservative message ends with

“The Liberals, NDP and separatist must first face the Canadian voters.  Otherwise any coalition will be an illegitimate regime without any mandate to govern.”

Actually the Liberal/NDP and Bloc already faced the Canadian voters (see above). Their coalition is not an illegitimate regime. It’s a democratically elected one, where the majority of the parties are working together (the Conservatives failed to do this). In fact, it’s in keeping with our Parliamentary rules².

“If no party gets a clear majority, the Cabinet that was in office before and during the election has two choices. It can resign, in which case the Governor General or Lieutenant-Governor will call on the leader of the largest opposition party to form a Cabinet. Or the Cabinet already in office can choose to stay in office and meet the newly elected House — which, however, it must do promptly…

…if a minority government is defeated on a motion of want of confidence very early in the first session of a new Parliament, and there is a reasonable possibility that a government of another party can be formed and get the support of the House of Commons, then the Governor General could refuse the request for a fresh election. The same is true for the Lieutenant-Governors of the provinces.”

Finally, Ed Broadbent wrote a concise and well formulated article³ that reveals the facts on the situation that Harper and his Conservatives have been trying to distort. Broadbent observes:

Instead of following constitutional precedent and allowing a democratic confidence vote to take place when it should, we have a power-hungry man who will be recorded as the first prime minister in Canada’s history to deliberately create a political crisis and set the fire of national disunity.

Follow the links for more details

1) PDF of the Conservative page of errors, for reliable reference, review, and criticism.

2) PDF of the Parliament of Canada Web page explaining how parliamentary government operates, for reliable reference, review, and criticism.

The GST enables the federal government to collect a sizeable amount of money that supports all sorts of programs improving the well-being of Canadian living. With respect to the Conservatives’ reducing the GST from 7 percent (in 2006) to ultimately 5 percent in 2007, The Toronto Star said¹ (2 November 2007)

“Economists winced. (Reducing a consumption tax neither boosts productivity nor encourages investment.) . . .  Cash-strapped mayors, weary anti-poverty activists and disheartened aboriginal leaders looked wistfully at the foregone $5.2 billion. And shoppers quickly forgot they had an extra $3.04 a week jangling in their pockets. . . . Ottawa is passing up the chance to strengthen Canada’s industrial base, shore up its aging infrastructure and upgrade the skills of its workers. It is saying that cities can solve their own financial problems, aboriginal communities can continue to languish and the gap between rich and poor can keep growing. . . . Urban voters could have been spared a steep rise in property taxes if Harper had shared 1 cent of the GST with municipalities, rather than giving consumers a bit of extra change at the cash register.”

So if cutting the GST would cause such difficulties for fixing our infrastructure and all sorts of societal issues, who and how exactly would it help? A CanWest News article on Dose² (1 January 2008) explained

“Patti Croft, chief economist with the investment firm Phillips, Hager and North, said anyone making big-ticket purchases will benefit from the consumption tax reduction. But, she said: “In general most economists would prefer a cut in income taxes. It’s a more efficient way to reduce the tax burden. . . . “”

According to the article the cut puts $5 billion ($6 according to Harper) back into the economy. But that equates to only between $150 – $200 per family, per year.

The cut in the GST is really only felt by those capable of making very large purchases, as The Star article noted: “The biggest beneficiaries will be the affluent. A corporate executive purchasing an $80,000 luxury sport utility vehicle will save $800. A single mother buying a $10 child’s snowsuit at Goodwill will save 10 cents.”

In other words the GST cut has almost no real effect on the majority of people’s disposable income but it rips roughly $5 billion dollars out of the government’s hands to effectively use on the programs that make Canadian life better.