The case for and against a deficit

Few people can outright buy a house or a car, which is why they take out a mortgage or a loan. The beauty of a house is that it usually increases in price so in a sense the mortgage is you paying yourself and increase in value is above the interest you pay to the lender. Owning a home is a good investment as it becomes the most significant part of your assets which you can also use to lien against later on in a reverse-mortgage for retirement, renovations, or what-have-you. Not only do you own the house, but the property as well, which alone, has value.

A car, however, usually depreciates. Cars are not a good investment, unless it's for business purposes. With fuel, insurance, repairs, maintenance, it's a burden. But soooo worth it at times. When fuel was above $1.40/L, it was cheaper to fly than drive.

Anyway, my point here is that there's good debt and bad debt. Sometimes it's good to buy something now while it's cheaper than later.

In the case of government, the sooner we spend on infrastructure, roads, and transit now, even by going into debt, it's actually much cheaper. I could give you numerous examples, especially in Edmonton where if they spent now, the project would be done and the city would have saved money in the long run. But they don't and construction and labour costs go up and up costing much more later on.

So with the current federal budget reported to have a $40 billion deficit (!), a lot of this is supposed to be economic stimulus in the form of targeted tax cuts, bailouts (loans?) to specific industries, and massive infrastructure spending.

I am all for the infrastructure spending as I mentioned. This will actually save us cash in the long run because the longer we wait, the way more expensive it gets and this country needs a big injection. It appears that there are a lot of project where the federal government is involved and this is a good thing.

The other reason why there's going to be a big deficit is that tax revenues are decreasing. While unemployment is between 6 and 7 percent, it's not near how it was in the early-mid 90's or early 80's, between 10 and 12 percent. It could be. But the point is that if someone isn't working, the gov't can't collect payroll, EI, or income taxes. Plus the person isn't spending as much, so there's no GST collected.

And it's this reason why the gov't doesn't want to see so many autoworkers without a job right now, so that's why they're helping GM and Chrysler.

But I will say this again, and I keep hearing intelligent economists saying that what we need to do is be spending more on higher level training and education and get our economy not so dependent on manufacturing, such as auto. Basically, invest in people. There's still lots of job shortages in key areas of I.T., health, accounting, and other areas. There's a reason for that. Our economy is demanding it.

What's appearing obvious to me now is that the government, whether Conservative or Liberal, Bush or Obama, are seeing where the free-market system works and where it doesn't work as well. They see that jobs are the key component and having credit and money flowing through is important.

In the end though, I don't see how a $40 billion change in Canada or a $825 billion change in the U.S. is actually going to make a huge impact on the economy in the long run.

What it's going to do is make us all dependent on the gov't when things go awry rather than take our own personal responsibility for it.

And it's amazing how we didn't learn that 75 years ago.

Let's just hope this deficit is temporary and the way out of it is for the gov't to cut its own useless spending, sell off useless assets, just like the rest of us regular folk have done.

Deficit Spending

It appears the upcoming federal budget is going to have everything in it--infrastructure spending, bailouts, tax cuts, retraining programs, etc. to try and boost the economy. Will it help? A little, but it won't cure it.

The tax cuts won't have effect on the economy until a few years later as folks will likely pay off their own debt and save a little to put into the new Tax Free Savings Account, but I'll take what I can get.

To me, the most imporant part is the retraining aspect as job losses are increasing and people need to get into sectors that have better job stability. I think eventually, Canada has to move its manufacturing out and replace with more stable, long-term jobs and this is done through accessible education and training.

Anyway, I thought the budget was going to be a modest one, with a slight deficit, and with a spoiler to have the Liberals vote it down and likely force an election which Harper could win a majority. But it appears newly anointed (read: 'not party elected') Liberal Leader, Michael Ignatieff, will probably have his caucus support it, basically killing the coalition. Aw darn.

However, with regard to deficit spending rumoured up to 30 billion, I have this to say (which I've been saying for years)...

If there are direct income tax cuts in this budget, then I could care less what the deficit is. Canadians have their own bills to pay and have been cutting their own expenses, using credit cards, getting loans for decades to get by. I'm mostly talking about low to middle income folks here who are taxed to the gills.

And if the gov't wants to get out of deficit, they'll have no choice but to sell off useless 'assets' like empty buildings, cut waste and improve departmental efficiencies.

This is really too bad as it appears they'll be deficits for the next several years, completely negating the paying down of debt and freeing up money from debt interest payments, which still makes up the largest piece of the budgetary pie.

Unfortunately, because Canada's gov't is one of the biggest in the world per capita, even ever since we've been in the black for the past 12 years, they only got to pay about a third of the debt down, because they were still increasing spending, although their tax revenues shot up.

So I'm glad both Harper and Ignatieff agree on tax cuts. In fact, they seem to be agreeing on a lot of things, including deficit spending.

Blackjack Ontario

Prime Minister Stephen Harper met with Ontario Premier Dalton McGuinty and the agreed that Ontario would get an extra 21 seats under the House of Commons redistribution plan, where before Ontario MPs represented on average about 115,000 residents, where the average in other provinces is 105,000.

At first I was like, "Oh no! Not more for Ontario! More Liberals!"

Then I thought, "Wait a sec .., the Conservatives didn't get a majority because Ontario didn't pull through, they did very well in Ontario. It was Quebec where they lost to the Bloc. But the Bloc ain't gonna run in Ontario are they?" If Ontario had those 21 seats in play and the Conservatives only needed 13 of them.... um, majority?

Another brilliant political move by Prime Minister Stephen Harper.

Many have argued that REDUCING the number of representatives would be better and cheaper. But would it?

Look at it this way... what would be the reasonable number be? 200,000 per MP? 300,000? How far do we go? What's the right balance? Or how about 1 MP per million. Now we're further from a representative democratic system aren't we? If we had 1 MP per 100 people, now THAT would be democracy, wouldn't it? But expensive.

Despite the myth, Members of Parliament work quite hard and are under a lot of pressure. Sure some stay in it for a long time, but there are many who leave on their own accord due to being away from their families and flying back and forth from Ottawa all the time. It's a difficult job. Not only that, but you have a pile of constituents requests to try and handle. Sure they have local and Ottawa assistants, but why would we want to pile more work on them? Then if they've been in politics for so long, makes it difficult to return to private life, unless you're a lawyer.

Anyway, I just hope Alberta and BC get their fair share as well.

Man, the House of Commons is going to get crowded! Pretty soon it'll look like the the British House of Commons (no desks, just MPs packed like sardines on benches).

Oh those Liberals...

From ctv.ca:

Liberal Sen. Céline Hervieux-Payette, who participated in the conference call, was reportedly furious over the process by which Ignatieff will take power, [Bob] Fife said.

"This will destroy the Liberal Party, I'm devastated by what this will do to the party, they don't understand anything about democracy," she said, according to notes obtained by Fife.

And how did you get your job Senator?

Egging on Iggy

Bob Rae just bowed out of the Liberal leadership as well in the name of "party unity", when just yesterday he was saying that not having a race probably wasn't a good idea. Man, Bob Rae is the master of changing his tune when it suits him, doesn't it? Anyone doubting he's a Liberal should have no doubt now!

So nicely played, Mr. Ignatieff. Use a crisis and panic to have everyone unify around you. Paul Martin didn't even do as well.

At least Stephen Harper fought TWO contentious leadership races, unifed two parties, and has won a second mandate. Martin didn't. Ignatieff lost a leadership race to Dion (!), isn't going to unify two parties, and I predict he won't win the next election either.

That is, if he wants a fight come January.

Even if Ignatieff is the leader of a coalition, Canadians don't want it. Iggy knows this.

So now we're left two scenarios for Ignatieff:

A) Defeat the budget and fight an election in February/March, which the Liberals would lose, and Iggy is mired as opposition leader for 4 years.

B) Build the Liberal party and fight an election next fall or thereafter. Much better chance at winning.

But don't you find it amazing how all Liberals sign a letter supporting Dion as leader of a coalition gov't, then the next week in a two day period, they dump him, and two leadership candidates drop out and support Ignatieff.

Just like that.

There was some MAJOR backroom play going on for Ignatieff and the Liberal party membership was completely shut out of the whole thing. And this coalition is shutting out the Canadian voter.

It's the Liberal way folks. Circumvent democracy at every turn.

Completely opposite of how Stephen Harper and the Conservatives climbed their way to the top.

Oh, and congratulations to Premier Jean Charest in winning a 7 seat majority in Quebec last night. Mario Dumont quits as ADQ leader (that party is done like dinner). I'd like to know how many folks who voted Bloc in the federal election voted Liberal in this Quebec election.

Anyway, back to federal...

You know what I think Harper is going to do? I think he and Flaherty are going to present another modest budget with some help for the auto and forest industry, but it just isn't going to be good enough for Iggy and Co. And Iggy is going to be caught in a tough spot. Now that he's crowned, and the Liberals are "unified", many Liberals are going to want to push for an election with their new leader.

Harper WANTS an election. He knows he'd win a majority.

Is Ignatieff's ego that big that he'll call Harper's bluff and have an election?

Or will he do the smart thing and wait?

The egg awaits.

That's the Iggy

Well, it "seems" that Michael Ignatieff wants to follow his party's constitution and have the leadership race in May. But that'll only happen now if his old roommate Bob Rae stays in the race.

I'm telling ya, if Ignatieff becomes the interim leader and the Liberals defeat the budget in January, he'd wouldn't be smart embracing this coalition government. He also wouldn't be smart in him asking the Governor General for an election, but Stephen Harper would, because the Conservatives would get a majority.

So what Ignatieff will do is threaten an election or dangle the coalition so Harper puts a half-decent budget together, then pulls the numbers game to avoid both a coalition and delay an election until a later time. He'll have 15 or so of his caucus members abstain and the budget will pass.

Look, Iggy's a smart guy like Harper. They both see the long game and aren't much different on policy.

It's a very interesting chess game.

That's my prediction.

Rob Silver asks the tough question

I've been glued to one of the best new political blogs, "Silver-Powers", a dual (duel?) blog on GlobeAndMail.com by two very bright party strategists, Liberal Rob Silver and Conservative Tim Powers.

One of Rob's latest postings asks THE tough question for Liberal MPs...

So either:

(a) The Liberal caucus was UNANIMOUS in supporting both the coalition and Dion as leader until May; or

(b) There are a bunch of MPs in the Liberal caucus who are both cowardly and whose word means little (or whose opinions change with the wind).

Really, this is a binary situation - make your choice.

Rob, a very good question, and I have an answer for you regarding why Liberal MPs do these types of things...

Very few have principle, they go whichever way the wind blows at the moment (or seems to blow), and thus, they have miscalculated the overwhelming view among Canadians that the coalition government isn't what we want, and why the polls show the Liberals at their lowest point in HISTORY.

Friends, that is NOT leadership. And this party wants to form government? That's how they've always been and always will be. If they can't even decide or stand up for anything, you really want them managing the economy at this time?

What drove them ALL to sign the letter for the Governor General? As your blogmate said, "The sniff of power."

Canadians saw that too.

Now that the sniff of power appears to be with Michael Ignatieff, leadership contender, Dominic LeBlanc has ended his bid and joined with Iggy. Too bad. Too bad the Liberal party doesn't respect democracy.

While the other contender, Bob Rae, has embraced the coalition because he's going to need new members joining from the NDP to be delegates at the Liberal convention, perhaps Ignatieff set him a trap and he fell into it.

Ignatieff never publicly said he's for or against the coalition and Bob Rae even had Ignatieff and LeBlanc show their public support for Stephane Dion as leader of the coalition government. I guess that is a wash, now that it appears Dion will step down (read: pushed out) in a few days at the Liberal caucus meeting instead of the originally planned May leadership convention in Vancouver.

Ignatieff's gut instinct was correct though, that the coalition is not a way to build the Liberal party, where it's Bob Rae's way to go.

Now that Dion is gone, and the party needs to accelerate that processes in getting a new leader, and that the coalition is now the so-called the backup plan, the Liberal caucus' new "instinct" is either:

A) the Liberals will support or abstain on the Conservative budget when the House starts up again in January, and resume with its May leadership convention, with Ignatieff having recently shored up caucus support, and Bob Rae will likely retreat from the coalition, but he'll be damaged goods,

or

B) the Liberals will vote against the budget and with new interim/permanent leader, Michael Ignatieff, already in place they will be 'ready' for a new election, and excited that they'll do better.

Ignatieff left the door open for Harper to have a strong budget.

I didn't mention the machinations of how the Liberals are picking their new leader, because frankly, it doesn't really matter. If the Liberal caucus does it this week and names Ignatieff as interim to replace Dion and decides it's not going to have a convention and says Ignatieff is permanent leader, it's going to divide the party for a while, but eventually, Liberals will balk, because "Ignatieff was going to be leader anyway, so get behind him or go hang out with Bob Rae."

So in my opinion, this coalition idea is as good as dead. And you know who's to thank? You. It's the thousands of Canadians who went out to show support for democracy and against the coalition takeover.

So now, it's up to Michael Ignatieff to decide if he wants to fight an election in February/March or if he wants to wait until May and spend cash on a leadership bid that he'll win anyway, raise money for the Liberals and then fight an election next fall.

Because I think he knows the Conservatives would win a majority in February/March, and so he'd will be opposition leader for 4 years.

That would be the smart thing to do, to wait, as it gives voters an opportunity to see who he is as opposition leader while they grow weary of Harper, otherwise, if he fights an election this February/March, people won't know him as well, and will be hesitant, while the Conservatives go neg on his ambition for power with the coalition, exposing his actual view against it and dividing the Liberals, while economic numbers improve, showing the Conservatives as good managers.

Parliamentary Wars

On Thursday, after a long two hour conversation, Prime Minister Stephen Harper was able to get (convince?) Governor General Michaelle Jean to prorogue (dissolve) parliament until the end of January.

So yeah.. um, this "Coalition" now reminds me of the Trade Federation and it's falling apart and I'm narrowing down the choices for Darth Sidious.

I was going to say Gilles Duceppe, but the guy is just so straightfoward and honest, so he's not really sneaking around the back rooms, that is unless someone like Jack Layton approaches him first.

It's definitely not Stephane Dion. What, with a crappy video response to Harper's short address, how could he have the dark side with him? As well, he left a crack open for Harper to work with him on the budget after the House returns in January. I think he saw the backlash against this coalition and how he would be viewed by Canadians... a power hungry politician, and not a statesman.

And speaking of backlash, check out the latest poll numbers...

65% of Canadians (55% Quebeckers) approve the prorogation.

And if an election were held today...
IPSOS: CPC 46%, LPC 23%, NDP 13%, BQ 9%, GPC 8%
COMPAS: CPC 51%, LPC 20%, NDP 10%, BQ 8%, GPC 6%

WOW!

So I've narrowed it down to two for the prize of Darth Sidious:
- Jack Layton
- Bob Rae

Bob's been wanting to marry the Liberals and NDP for many, many years and I think he sees it if he becomes Liberal Leader, he could reach out to the NDP and make that happen, like Chretien and Broadbent just did in getting this coalition off the ground in the first place. He's very pro-coalition and got leadership rival Michael Ignatieff to support Dion as the leader of the coalition, but Ignatieff doesn't really want to be a part of a coalition cabinet (very smart move).

So if Harper can compromise with Dion (forget the other two guys) and gain confidence of the house again on the budget in January, then Harper can come out on top and be like Luke Skywalker and defeat the dark side. Even if he doesn't and the Governor General calls for an election, with those poll numbers Harper will kick ass.

But, there's always Ignatieff. Maybe he's got metachorians in him too!

Nightmare on the Hill

I had a very vivid dream last night that played out in the House of Commons. Kind of a nightmare.

I was a page next to the Speaker's chair watching everything unfold with the Liberal/NDP coalition. Governor General, Her Excellency Michaelle Jean entered the chambers and called all the party leaders into her office while we all waited in anxiety.

Ten minutes later, they all returned and I stood next to Her Excellency. MP Jim Prentice stood up and announced to everyone that the Governor General has asked that the Prime Minister, Stephen Harper compromise and work with Opposition Leader Stephane Dion in coming up with a viable solution to prevent defeat of the duly elected government.

Everyone rejoiced. Mostly Conservatives.

Afterward, there was a party to celebrate, and I spoke with Her Excellency and thanked her for her wisdom.

Then I realized that I was dreaming within a dream and a friend of mine who works on the Hill told me that the Governor General actually allowed the coalition government to form with Stephane Dion as Prime Minister.

One of these dreams will come true. And one of them is a nightmare.

I can't understand for the life of me how on one hand that Stephane Dion can say that they will not defeat the government on the Throne Speech one week and the next day push for a confidence motion based on an economic update with basically the same content, save, of course, removing public party financing.

Any Liberal or NDP who says its about the economy is pushing poppycock. Its about a power grab, pure and simple.

And anyone who says the Harper government doesn't have the support of the majority of voters, although our parliamentary system allows a minority government to form, and then supports the coalition using the same parliamentary system to overturn the election results which gave the Harper government a mandate based on their economic proposals during the campaign, flies in the face of our parliamentary democracy.

Hypocrites abound and shameful.

"Good shot [pro]Rogue II" or another Rebel Alliance?

The current situation in Parliament reminds me of the Star Wars series--how an elected official, Senator Palpatine, was elected chancellor of the Galactic Senate, while as Sith Lord, Darth Sidious, secretly creates a mass crisis and war between the clones and robot army, and in order to restore "peace", single-handedly creates the Galactic Empire with himself as Emporer. Then with one swift move, wipes out the Jedi, the protectors of democracy, and rules for over a decade.

Thing is, with Parliament, I can't tell who to compare Palpatine/Sidious to.

With the release of the NDP taped conference call and claims that leader Jack Layton had a deal with the Bloc well before the Tory gov't's economic update, could this make Jack the Sith Lord. Is it Bloc leader Gilles Duceppe in helping to prop up a coalition giving the balance of power to his separatist movement? Or is it Ed Broadbent and Jean Chretien putting the deal together between the NDP and Liberals in the back room? Is it Stephane Dion who would be leader of the coalition gov't and thus prime minister, although he was resoundly rejected by voters. Or is it Prime Minister Stephen Harper, who has just prorogued parliament until the new year? Or is it Tory insiders, with new leadership websites for John Baird and Jim Prentice, secretly plotting a coup against Harper, so their future leadership hopefuls have a chance to move in and save the day?

See! Hard to tell, isn't it?

But what I do know is, whomever wins this recent situation in the end and stability returns, will be deemed "The New Hope", a.k.a. Luke Skywalker. That said, by properly applying The Force, the winner will also have to finally defeat his enemies, returning peace, order, and good government to Canada (a.k.a. winning a majority).

And this could apply to Liberal leadership contender, Michael Ignatieff, winning the race in May, raising the Liberal party out of the ashes, and defeating Harper in an election.

But it could also still apply to Stephen Harper, in his quest to destroy the Liberal party.

But as they often say in Star Wars, "I got a bad feeling about this."