As mentioned in my last post (March 8), municipal governments in Canada are growing rapidly, which is bad news for taxpayers given the demonstrated inability of municipalities to operate efficiently and control costs.
A review of key indicators for municipalities for 2008 shows why their performance deserves a failing grade.
Salaries and benefits for employees typically represent more than 50% of the operating budget of a municipality. Since municipalities are unwilling to take the steps necessary to bring the escalating costs of employing their existing workforces under control, the next best option is for municipalities to minimize the growth in the number of their employees.
Indeed, a strong argument can be made that municipalities should freeze the growth in the number of their employees until they are operating as efficiently as the private sector. That would require resolute action by a majority of elected municipal representatives and unfortunately shows no sign of happening.
Then what to do? Restricting growth in municipal employment to no more than the growth in population would be a reasonable starting point.
Canada's population grew by 1.2% in 2008. In sharp contrast, municipal government employment grew by an astounding 3.9%, over three times faster than the growth in population. In addition, employment at business enterprises owned by municipalities, such as public transit companies, grew by 3.5%.
Are taxpayers receiving any new services as a result of this hiring rampage by municipalities? It is hard to think of any. Most municipal governments actually are quite vocal in claiming that property taxes have to rise much in excess of the inflation rate simply to, at the very best, maintain the existing level of services. So the question remains: what are all of these additional employees doing for taxpayers?
Several sub-components of the Consumer Price Index (CPI) also provide important indicators of how municipalities are performing. They all show a failing grade.
The appropriate benchmark is the increase in the overall CPI in Canada, which for the 12 months ending in December 2008 rose by 1.2%.
Three sub-components of of the CPI are directly under the control of municipal governments. The most significant of these in terms of its impact on taxpayers is property taxes. They rose by 3.2% in 2008, over two and a half times the overall increase in the CPI.
If municipalities are cutting back on services (two examples would be: reducing the frequency of recycling pick-ups or extending the time before your street is plowed to remove snow), which many are, this 3.2% increase actually underestimates the rate of inflation in property taxes. The reason for this is that the CPI property tax component is based on the assumption that municipal services continue at the same level. If Statistics Canada, which produces the CPI, actually did measure the level of municipal services and found a decline, it would adjust upward the increase in the property tax component of the CPI to reflect this.
The CPI sub-component for water rose by a staggering 9.1% in 2008, nine times more that the overall rate of inflation. This sub-component of the CPI is separate and distinct from property taxes and measures the prices charged by water utilities which are generally all owned and operated by municipal governments. Given that municipalities do not pay anything for water, these cost increases are entirely related to the operation and maintenance of water and sewer systems.
The third separate sub-component of the CPI for which municipal governments dictate price levels is local and commuter transport, which includes bus, subway and taxi fares. This CPI sub-component rose by 3.6% in 2008.
Each of these indicators demonstrates an important area where Canadian municipalities performed poorly in 2008. Taken together, they reveal a major failure by municipalities to deliver essential services to taxpayers at a reasonable cost.
Distressingly, there is no sign of an improvement in performance in 2009. In an environment where hundreds of thousands of Canadians in the private sector have lost their jobs (with even more job losses predicted) and where inflation is expected to be in the area of 1.0% for the year, Toronto has already announced an increase in property taxes of 4.0% and the city of Ottawa an increase of 4.9%.
Wednesday, March 18, 2009
Sunday, March 8, 2009
Municipalities: The Growing Black Hole for Taxpayers' Money
Canada's municipal governments collectively employ more people than either the federal government (including the military) or the total of all of the provincial and territorial governments. Over the last four years, their work forces have expanded faster than any other level of government as well as faster than total employment in all of Canada's schools, universities, and health and social welfare institutions.
If municipalities have their way, they will gain access to more sources of taxpayers' money (Toronto is leading the charge on this front) and have control over a much larger percentage of total public spending. For taxpayers, this is bad news.
Organizations that help keep taxpayers informed of what goes on inside of the federal and provincial governments, such as Offices of the Auditor General, are generally not part of municipal government. Similarly, access to information offices tend not to be a feature of the municipal landscape, nor do well-established taxpayer activist groups (e.g. The Canadian Taxpayer Federation) spend much time on municipal issues.
In addition, the municipal political process is not favourable to taxpayers. Organized political parties are typically not found in municipal governments. Consequently, there is little criticism or scrutiny within city councils of what is happening within a city. Indeed, city councillors too often play the role of ward boss - "I'll vote for project A that spends taxpayer money in your ward if you vote for project B that spends taxpayer money in my ward". The greater interest of all taxpayers in keeping taxes low and having their city run efficiently is not part of the ward boss operating environment.
Moreover, as with the provincial and federal levels of government in Canada, there is essentially no opportunity for taxpayers to vote through referendums on any issue, regardless of the financial consequences, that impacts them at the municipal level.
My post of March 5 noted that the majority of a municipality's operating budget is made up of the salaries and benefits paid to their employees. City councils have repeatedly demonstrated their inability to control these costs. As city governments get much larger, the prospects for taxpayers are grim. Annual property tax increases well in excess of the rate of inflation for the foreseeable future are all but guaranteed.
Can anything be done to force municipalities to operate in a fiscally responsible and efficient manner? Under Canada's constitution, the provinces set most of the rules under which cities operate. The provinces also provide cities with a significant percentage of their revenue.
Change in how municipalities operate would therefore seemingly have to be a provincial initiative. However, provinces are unlikely to champion such an initiative. It is hard to imagine, for instance, Premier McGuinty telling the Toronto city council that it needs to operate the city much more efficiently. As well, even if one province were to take the initiative, there would be no requirement for the other provinces to follow suit.
The federal government has committed billions of taxpayer funds to infrastructure projects, most of which will be within the jurisdiction of municipalities. It could play an important role in establishing fiscal and efficiency criteria that municipalities must meet before receiving federal money. Will this happen? Almost certainly not, but it is likely the best chance that municipal taxpayers have of seeing their cities improve the way they operate.
[Next time: the municipal report card for 2008]
If municipalities have their way, they will gain access to more sources of taxpayers' money (Toronto is leading the charge on this front) and have control over a much larger percentage of total public spending. For taxpayers, this is bad news.
Organizations that help keep taxpayers informed of what goes on inside of the federal and provincial governments, such as Offices of the Auditor General, are generally not part of municipal government. Similarly, access to information offices tend not to be a feature of the municipal landscape, nor do well-established taxpayer activist groups (e.g. The Canadian Taxpayer Federation) spend much time on municipal issues.
In addition, the municipal political process is not favourable to taxpayers. Organized political parties are typically not found in municipal governments. Consequently, there is little criticism or scrutiny within city councils of what is happening within a city. Indeed, city councillors too often play the role of ward boss - "I'll vote for project A that spends taxpayer money in your ward if you vote for project B that spends taxpayer money in my ward". The greater interest of all taxpayers in keeping taxes low and having their city run efficiently is not part of the ward boss operating environment.
Moreover, as with the provincial and federal levels of government in Canada, there is essentially no opportunity for taxpayers to vote through referendums on any issue, regardless of the financial consequences, that impacts them at the municipal level.
My post of March 5 noted that the majority of a municipality's operating budget is made up of the salaries and benefits paid to their employees. City councils have repeatedly demonstrated their inability to control these costs. As city governments get much larger, the prospects for taxpayers are grim. Annual property tax increases well in excess of the rate of inflation for the foreseeable future are all but guaranteed.
Can anything be done to force municipalities to operate in a fiscally responsible and efficient manner? Under Canada's constitution, the provinces set most of the rules under which cities operate. The provinces also provide cities with a significant percentage of their revenue.
Change in how municipalities operate would therefore seemingly have to be a provincial initiative. However, provinces are unlikely to champion such an initiative. It is hard to imagine, for instance, Premier McGuinty telling the Toronto city council that it needs to operate the city much more efficiently. As well, even if one province were to take the initiative, there would be no requirement for the other provinces to follow suit.
The federal government has committed billions of taxpayer funds to infrastructure projects, most of which will be within the jurisdiction of municipalities. It could play an important role in establishing fiscal and efficiency criteria that municipalities must meet before receiving federal money. Will this happen? Almost certainly not, but it is likely the best chance that municipal taxpayers have of seeing their cities improve the way they operate.
[Next time: the municipal report card for 2008]
Thursday, March 5, 2009
Lies Our Municipal Governments Tell Us
"Taxpayers have a choice of either paying higher taxes or receiving reduced services". How often have you heard that comment by your elected representatives at municipal budget time? If you follow municipal politics, you have likely heard it many times.
The problem is that this is the most popular and most frequent lie told by municipal politicians.
Typically well over 50% of a municipality's costs are made up of the salaries and benefits paid to their employees. In most cities those employees are virtually all members of powerful public sector unions. As a result, they receive pay and benefits that are significantly higher than are received by individuals in the private sector that perform similar functions (see my post of Jan. 23/09 for a link to a recent study on this topic).
Even though their pay and benefits are much higher, the productivity of municipal employees is much lower than it is in the private sector. To cite one visible example - you can always tell when a city crew is carrying out a street or sidewalk repair because the majority of the crew will be watching, rather than doing, the work. It sounds like a tired cliche, but it remains true to this day. By contrast, a work crew hired by the city from the private sector to do a similar repair will have fewer people at the work site and the majority will be actually working.
Other examples of inefficiency in municipalities abound. Recall the famous case a few years back of a camera crew that followed a group of municipal workers around Montreal for several days. The municipal workers were nominally responsible for patching holes in city streets. They actually did little of this. Instead, they spent most of the time in restaurants or aimlessly driving around the city.
So what the municipal politicians are actually telling us when they say that the choice is higher taxes or reduced services is that they are unwilling to confront their public sector unions and make them work as efficiently as the private sector, and at the lower wage and benefit levels that prevail in the private sector.
In the private sector there is relentless pressure to cut costs and improve efficiency particularly in the depths of a recession. The last thing a company in the private sector wants to do in a recession is to raise prices.
Unfortunately this is not the world of municipal governments. Since they levy property taxes and can seize your home if you don't pay them, it is easy for municipal politicians to raise taxes well in excess of the rate of inflation even in a recession.
How much are your municipal taxes increasing this year? Likely much more than the rate of inflation and more than the increase in your salary (at least if you work in the private sector). In the city of Ottawa, they are going up by 4.9% in an environment where inflation is about 1%.
For municipal politicians the path of least resistance runs directly to the wallets of taxpayers.
[The next post will present a short report card on the recent performance of Canada's municipalities. You won't be happy with the results.]
The problem is that this is the most popular and most frequent lie told by municipal politicians.
Typically well over 50% of a municipality's costs are made up of the salaries and benefits paid to their employees. In most cities those employees are virtually all members of powerful public sector unions. As a result, they receive pay and benefits that are significantly higher than are received by individuals in the private sector that perform similar functions (see my post of Jan. 23/09 for a link to a recent study on this topic).
Even though their pay and benefits are much higher, the productivity of municipal employees is much lower than it is in the private sector. To cite one visible example - you can always tell when a city crew is carrying out a street or sidewalk repair because the majority of the crew will be watching, rather than doing, the work. It sounds like a tired cliche, but it remains true to this day. By contrast, a work crew hired by the city from the private sector to do a similar repair will have fewer people at the work site and the majority will be actually working.
Other examples of inefficiency in municipalities abound. Recall the famous case a few years back of a camera crew that followed a group of municipal workers around Montreal for several days. The municipal workers were nominally responsible for patching holes in city streets. They actually did little of this. Instead, they spent most of the time in restaurants or aimlessly driving around the city.
So what the municipal politicians are actually telling us when they say that the choice is higher taxes or reduced services is that they are unwilling to confront their public sector unions and make them work as efficiently as the private sector, and at the lower wage and benefit levels that prevail in the private sector.
In the private sector there is relentless pressure to cut costs and improve efficiency particularly in the depths of a recession. The last thing a company in the private sector wants to do in a recession is to raise prices.
Unfortunately this is not the world of municipal governments. Since they levy property taxes and can seize your home if you don't pay them, it is easy for municipal politicians to raise taxes well in excess of the rate of inflation even in a recession.
How much are your municipal taxes increasing this year? Likely much more than the rate of inflation and more than the increase in your salary (at least if you work in the private sector). In the city of Ottawa, they are going up by 4.9% in an environment where inflation is about 1%.
For municipal politicians the path of least resistance runs directly to the wallets of taxpayers.
[The next post will present a short report card on the recent performance of Canada's municipalities. You won't be happy with the results.]
Tuesday, February 24, 2009
Canadian Con(tent) Artists: "Just Give Us the Money"
After two days of hearings last week, the Canadian Radio-television and Telecommunications Commission (CRTC) resumed its hearings yesterday on whether to apply traditional broadcasting-style regulation to the Internet. As described in my post of Feb. 16, Canadian cultural groups want the CRTC to mandate new taxes on the customers of Internet Service Providers (ISPs) and wireless carriers, with the proceeds being given to these groups to produce Canadian content.
Of the 15 parties that have appeared so far, almost all have been Canadian cultural groups. Later in the proceeding, ISPs and wireless carriers will have the opportunity to present their views on why their customers (most Canadians) should not be taxed to pay for Canadian content.
Two small and fleeting moments of clarity emerged during last week's sessions where the cultural groups pressed their case for new taxes. In response to questions from the CRTC, a spokesperson for the actors' union cut through the thin veneer of the Canadian content mantra and confessed that their position essentially amounts to saying "just give us the money".
The second highlight was a representative of the Canadian Conference of the Arts stating that "consumers are not my concern".
Boil it all down and that is the main issue in this proceeding: Canadian cultural groups want money from consumers, but have no interest in what consumers think. And in Canada, it can happen if the CRTC says so.
A little bit of background will explain why the cultural groups appearing before the CRTC want broadcasting-style regulation applied to the Internet: they are major beneficiaries of the current broadcasting regulations that govern Canadian television and radio.
In the regulated broadcasting system, the two central pillars are the programming entities and the distributors (e.g., cable and satellite TV companies). A comprehensive set of intertwined regulations devised by the CRTC governs these entities and directs money to the cultural groups currently appearing before the CRTC.
Companies providing television and radio programming are required to produce significant amounts of Canadian programming. Canadian programming is produced by individuals who are virtually all members of cultural unions (e.g., actors, writers, directors) or trade associations (e.g., film and TV producers). These groups receive a significant percentage of every dollar spent in the regulated broadcasting system, where the dollars come from advertisers and from consumers who subscribe to programming services such as TSN offered by cable and satellite companies.
Broadcasting regulations also require that cable and satellite TV companies carry a majority of Canadian TV services as well as pay 5% of their revenues to produce Canadian programming. The bulk of the money collected from consumers by cable and satellite TV companies is passed on to Canadian programming entities.
Currently, no broadcasting-style regulation is applied to the Internet. (The CRTC previously considered the idea, but rejected it in 1999.) As a result, the Canadian cultural groups appearing before the CRTC do not receive any government-mandated advantages or privileges in producing content for the Internet. Nevertheless, they have the same freedom as all other Canadians to produce content for the Internet.
Many Canadians are using the Internet as a medium to distribute a wide range of content to Canadian and international audiences. The large majority of this content is not broadcasting. Increasingly, however, Canadians are broadcasting over the Internet.
This should be cause for celebration. When Canadians broadcast over the Internet they do so without having to ask a government agency's permission (when you have to seek permission, government bureaucrats restrict what you can say and how you say it based on the politically correct dictates of the time). Moreover, broadcasting over the Internet is typically being done without taxpayer funding. And it is no less Canadian because it is being done by any Canadian that wants to do it rather than the Canadians anointed by government bureaucrats.
Any form of broadcasting-style regulation of the Internet would be detrimental to virtually all Canadians except the small group of cultural insiders that benefit from the regulations that govern traditional forms of broadcasting. The CRTC is the central player in the traditional broadcasting world and is facing intense pressure from the core cultural groups in this world to apply broadcasting-style regulation to the Internet. The CRTC had the courage to say no to the idea in 1999. They should do so again.
Of the 15 parties that have appeared so far, almost all have been Canadian cultural groups. Later in the proceeding, ISPs and wireless carriers will have the opportunity to present their views on why their customers (most Canadians) should not be taxed to pay for Canadian content.
Two small and fleeting moments of clarity emerged during last week's sessions where the cultural groups pressed their case for new taxes. In response to questions from the CRTC, a spokesperson for the actors' union cut through the thin veneer of the Canadian content mantra and confessed that their position essentially amounts to saying "just give us the money".
The second highlight was a representative of the Canadian Conference of the Arts stating that "consumers are not my concern".
Boil it all down and that is the main issue in this proceeding: Canadian cultural groups want money from consumers, but have no interest in what consumers think. And in Canada, it can happen if the CRTC says so.
A little bit of background will explain why the cultural groups appearing before the CRTC want broadcasting-style regulation applied to the Internet: they are major beneficiaries of the current broadcasting regulations that govern Canadian television and radio.
In the regulated broadcasting system, the two central pillars are the programming entities and the distributors (e.g., cable and satellite TV companies). A comprehensive set of intertwined regulations devised by the CRTC governs these entities and directs money to the cultural groups currently appearing before the CRTC.
Companies providing television and radio programming are required to produce significant amounts of Canadian programming. Canadian programming is produced by individuals who are virtually all members of cultural unions (e.g., actors, writers, directors) or trade associations (e.g., film and TV producers). These groups receive a significant percentage of every dollar spent in the regulated broadcasting system, where the dollars come from advertisers and from consumers who subscribe to programming services such as TSN offered by cable and satellite companies.
Broadcasting regulations also require that cable and satellite TV companies carry a majority of Canadian TV services as well as pay 5% of their revenues to produce Canadian programming. The bulk of the money collected from consumers by cable and satellite TV companies is passed on to Canadian programming entities.
Currently, no broadcasting-style regulation is applied to the Internet. (The CRTC previously considered the idea, but rejected it in 1999.) As a result, the Canadian cultural groups appearing before the CRTC do not receive any government-mandated advantages or privileges in producing content for the Internet. Nevertheless, they have the same freedom as all other Canadians to produce content for the Internet.
Many Canadians are using the Internet as a medium to distribute a wide range of content to Canadian and international audiences. The large majority of this content is not broadcasting. Increasingly, however, Canadians are broadcasting over the Internet.
This should be cause for celebration. When Canadians broadcast over the Internet they do so without having to ask a government agency's permission (when you have to seek permission, government bureaucrats restrict what you can say and how you say it based on the politically correct dictates of the time). Moreover, broadcasting over the Internet is typically being done without taxpayer funding. And it is no less Canadian because it is being done by any Canadian that wants to do it rather than the Canadians anointed by government bureaucrats.
Any form of broadcasting-style regulation of the Internet would be detrimental to virtually all Canadians except the small group of cultural insiders that benefit from the regulations that govern traditional forms of broadcasting. The CRTC is the central player in the traditional broadcasting world and is facing intense pressure from the core cultural groups in this world to apply broadcasting-style regulation to the Internet. The CRTC had the courage to say no to the idea in 1999. They should do so again.
Monday, February 16, 2009
Canadian Con(tent) Artists Are Reaching for Your Wallet
A few short weeks after the federal budget lowered income taxes to spur economic activity, a parade of cultural groups begin appearing tomorrow before the Canadian Radio-television and Telecommunications Commission (CRTC) in an attempt to have new taxes imposed on Canadians' Internet and wireless bills.
In 1995 the CRTC imposed a hidden 5% tax on cable and satellite TV bills to help support the production of Canadian programming, ranging from cable community channels to programs on the Canadian conventional and specialty channels. The CBC is the major beneficiary of this tax (see my Feb. 12 post).
Citing this tax as a precedent, a wide range of Canadian cultural groups (ranging from the actors' union to film and TV producers to the Canadian Conference of the Arts) want the CRTC to impose taxes on the revenues of Internet Service Providers (ISPs) and wireless carriers. The tax rates proposed range up to 6% on ISP revenues and up to 0.6% of the revenues of wireless companies.
Like the 5% tax on cable and satellite revenues, the cultural groups want these new taxes to be hidden in the charges of the ISPs and wireless companies (Why let the public know. They'll only get upset and complain). Guess who would be the exclusive recipients of the proceeds of the new taxes? That's right, the cultural groups that are proposing the new taxes.
Internet access revenues in Canada were $4.6 billion in 2007. A 6% tax on this base would amount to $276 million. Wireless revenues in 2007 were $14 billion. A 0.6% tax on this base would amount to $84 million. The total in new taxes proposed: $360 million.
New taxes in the midst of a recession. Only in Canada you say. Pity (Canadians).
If you haven't already done so, don't bother contacting the CRTC with your views on the proposed taxes. The CRTC's window for comments from the public has closed. Your options are to contact your MP, or the federal Ministers responsible for the CRTC ( Tony Clement at Industry Canada and James Moore at Canadian Heritage), or all three. The Ministers can't stop the CRTC from reaching its own decision, but they can overturn a CRTC decision to impose the new taxes.
In 1995 the CRTC imposed a hidden 5% tax on cable and satellite TV bills to help support the production of Canadian programming, ranging from cable community channels to programs on the Canadian conventional and specialty channels. The CBC is the major beneficiary of this tax (see my Feb. 12 post).
Citing this tax as a precedent, a wide range of Canadian cultural groups (ranging from the actors' union to film and TV producers to the Canadian Conference of the Arts) want the CRTC to impose taxes on the revenues of Internet Service Providers (ISPs) and wireless carriers. The tax rates proposed range up to 6% on ISP revenues and up to 0.6% of the revenues of wireless companies.
Like the 5% tax on cable and satellite revenues, the cultural groups want these new taxes to be hidden in the charges of the ISPs and wireless companies (Why let the public know. They'll only get upset and complain). Guess who would be the exclusive recipients of the proceeds of the new taxes? That's right, the cultural groups that are proposing the new taxes.
Internet access revenues in Canada were $4.6 billion in 2007. A 6% tax on this base would amount to $276 million. Wireless revenues in 2007 were $14 billion. A 0.6% tax on this base would amount to $84 million. The total in new taxes proposed: $360 million.
New taxes in the midst of a recession. Only in Canada you say. Pity (Canadians).
If you haven't already done so, don't bother contacting the CRTC with your views on the proposed taxes. The CRTC's window for comments from the public has closed. Your options are to contact your MP, or the federal Ministers responsible for the CRTC ( Tony Clement at Industry Canada and James Moore at Canadian Heritage), or all three. The Ministers can't stop the CRTC from reaching its own decision, but they can overturn a CRTC decision to impose the new taxes.
Thursday, February 12, 2009
Getting Your Money to the CBC Without You Knowing It
The CBC receives close to $ 1 billion annually in taxpayer money directly from Parliament. This subsidy is visible and relatively well know. Very few Canadians know that the CBC receives over an additional $215 million annually of their money via the actions of federal government bureaucrats.
My post of January 19, 2009 outlined how all cable and satellite TV subscribers (90 % of all Canadian households) are forced to pay for the CBC's Newsworld and RDI services. This generates approximately $120 million annually for the CBC.
In addition, the CBC is the major beneficiary of a 5% tax that is built into the bills of cable and satellite TV customers. Unlike the provincial and federal sales taxes, which are explicit line items on bills, the 5% tax is hidden in the various charges of the cable and satellite TV providers.
This tax was mandated by the Canadian Radio-television and Telecommunications Commission (CRTC) - the federal regulator of broadcasting and telecommunications - in 1995. The proceeds are used to fund Canadian programming, from cable community channels to programs on the major Canadian television networks.
The bulk of the proceeds from the 5% tax are handed over to the Canadian Television Fund (CTF). In recent years the CTF has also received $120 million annually in taxpayer money from the federal government.
In the fiscal year 2007-08 (ending March 31), the CTF dispensed $242 million for the production of Canadian programming. The CBC was the largest beneficiary by far of this $242 million, receiving $97 million or 40% of the total.
Adding the $97 million from the CTF to the $120 million in compulsory fees for Newsworld and RDI provides the CBC with $217 million in taxpayer money above and beyond the explicit $1 billion annual parliamentary appropriation. That is over 20% in additional taxpayer subsidies for the CBC that few Canadians know about.
My post of January 19, 2009 outlined how all cable and satellite TV subscribers (90 % of all Canadian households) are forced to pay for the CBC's Newsworld and RDI services. This generates approximately $120 million annually for the CBC.
In addition, the CBC is the major beneficiary of a 5% tax that is built into the bills of cable and satellite TV customers. Unlike the provincial and federal sales taxes, which are explicit line items on bills, the 5% tax is hidden in the various charges of the cable and satellite TV providers.
This tax was mandated by the Canadian Radio-television and Telecommunications Commission (CRTC) - the federal regulator of broadcasting and telecommunications - in 1995. The proceeds are used to fund Canadian programming, from cable community channels to programs on the major Canadian television networks.
The bulk of the proceeds from the 5% tax are handed over to the Canadian Television Fund (CTF). In recent years the CTF has also received $120 million annually in taxpayer money from the federal government.
In the fiscal year 2007-08 (ending March 31), the CTF dispensed $242 million for the production of Canadian programming. The CBC was the largest beneficiary by far of this $242 million, receiving $97 million or 40% of the total.
Adding the $97 million from the CTF to the $120 million in compulsory fees for Newsworld and RDI provides the CBC with $217 million in taxpayer money above and beyond the explicit $1 billion annual parliamentary appropriation. That is over 20% in additional taxpayer subsidies for the CBC that few Canadians know about.
Saturday, January 24, 2009
Taking a Break
Although this blog has only been up and running for two weeks, there will no new posts for the next two weeks. The reason? A vacation that was planned long before the blog was launched.
I plan to resume new posts on Feb. 10.
I plan to resume new posts on Feb. 10.
Friday, January 23, 2009
Governments Win First Prize in Environmental Hypocrisy Contest!
If you really want to be environmentally friendly, you use the fewest possible resources to do whatever it is you need to do. Consumers and businesses do this by necessity. Governments don't.
Consumers have income constraints on what they can spend to run their households. This makes them spend wisely and minimize waste.
Similarly, businesses in competitive markets have to be efficient in how they use resources in order to keep their prices low and thereby keep customers from switching to competitors. If they don't, their sales fall and they face the possibility of going out of business (unless of course they can convince governments to spend taxpayers' money to keep them afloat).
Governments are a very different creature. They have little incentive to operate efficiently. Indeed, in the massive government bureaucracies, the primary motivation of senior managers is to expand their empires and thus increase their status and pay.
Elected officials, in nominal overall charge, know little of what is going on in the bureaucracies and are not around long enough to find out. Moreover, their ambition is more focused on unveiling new programs to win voter recognition rather than on making the bureaucracy run efficiently.
The waste in government operations is well documented in the reports of auditor generals. It is also evident in the salaries and benefits paid to government employees, which are much higher than those in the private sector for employees of the same skill level (see Note below). Further, it takes more employees to do a given amount of work when the work is done inside of government compared to what is required if the work is done in the private sector.
In short, governments by their nature are hostile to the environment.
So the next time you see, read or hear an expensive advertising campaign from your government telling you to use less of (fill in the blank here: electricity, plastic bags, water, land, etc.), get angry. Get very angry. Tell the people that are supposed to be working for you that they are hypocrites. They have a long way to go before they will use resources as efficiently as you do.
Better yet, tell them to let the private sector do whatever is they do that really needs doing, and then stop doing the rest. The environment and taxpayers will be better off.
Note: In December 2008, the Canadian Federation of Independent Business (CFIB) published a comprehensive analysis of salaries in the public sector compared to those in the private sector. http://www.cfib.ca/research/reports/rr3077.pdf Overall compensation in the public sector was found to be 30% higher than in the private sector, leading to the conclusion:
"Expressed in dollar terms, public sector
employers have a combined wage and benefits bill that is $19 billion higher
than if they had kept costs to private sector norms."
That is one heck of an unnecessary cost to the environment, not to mention taxpayers.
Consumers have income constraints on what they can spend to run their households. This makes them spend wisely and minimize waste.
Similarly, businesses in competitive markets have to be efficient in how they use resources in order to keep their prices low and thereby keep customers from switching to competitors. If they don't, their sales fall and they face the possibility of going out of business (unless of course they can convince governments to spend taxpayers' money to keep them afloat).
Governments are a very different creature. They have little incentive to operate efficiently. Indeed, in the massive government bureaucracies, the primary motivation of senior managers is to expand their empires and thus increase their status and pay.
Elected officials, in nominal overall charge, know little of what is going on in the bureaucracies and are not around long enough to find out. Moreover, their ambition is more focused on unveiling new programs to win voter recognition rather than on making the bureaucracy run efficiently.
The waste in government operations is well documented in the reports of auditor generals. It is also evident in the salaries and benefits paid to government employees, which are much higher than those in the private sector for employees of the same skill level (see Note below). Further, it takes more employees to do a given amount of work when the work is done inside of government compared to what is required if the work is done in the private sector.
In short, governments by their nature are hostile to the environment.
So the next time you see, read or hear an expensive advertising campaign from your government telling you to use less of (fill in the blank here: electricity, plastic bags, water, land, etc.), get angry. Get very angry. Tell the people that are supposed to be working for you that they are hypocrites. They have a long way to go before they will use resources as efficiently as you do.
Better yet, tell them to let the private sector do whatever is they do that really needs doing, and then stop doing the rest. The environment and taxpayers will be better off.
Note: In December 2008, the Canadian Federation of Independent Business (CFIB) published a comprehensive analysis of salaries in the public sector compared to those in the private sector. http://www.cfib.ca/research/reports/rr3077.pdf Overall compensation in the public sector was found to be 30% higher than in the private sector, leading to the conclusion:
"Expressed in dollar terms, public sector
employers have a combined wage and benefits bill that is $19 billion higher
than if they had kept costs to private sector norms."
That is one heck of an unnecessary cost to the environment, not to mention taxpayers.
Thursday, January 22, 2009
Quebec Calling: "Hey Alberta... Thanks for All of Those Secure Public Sector Jobs"
Canada's equalization plan, which sees the federal government transferring billions of dollars annually to the so-called have-not provinces, allows provinces to pursue all manner of anti-business policies without suffering the full financial penalty.
The reason? As anti-business policies shrink a province's tax base, more money flows to the province through the federal government from the have provinces. The have-not province is therefore able to offset some, and perhaps all, of the consequences of its actions by forcing other provinces to pay for the problem it caused.
The provinces sending the money suffer by having their businesses and residents pay taxes higher than would be the case if they did not have to pay for the anti-business policies of the receiving province.
For decades, Quebec has been the leading province in pursuing anti-business policies. From forcing English-speaking businesses and entrepreneurs out of the province, to high taxes, to the strongest pro-union regulations combined with the constant threat of separation from Canada, Quebec would be a much poorer province if it were not for massive federal transfer payments.
The current equalization plan is officially justified on the basis that it ensures a certain minimum level of public services in all provinces. The reality, however, is that Quebec provides a level of public services that is higher than in any of the other provinces, including the have provinces that send billions to Quebec year after year.
One example of this higher level of public services is found in the public school system (other examples will be provided in future posts). Quebec has a student-to-teacher ratio that is 21% lower than B.C.'s, 18% lower than Alberta's, and 8% lower than Ontario's (these three provinces typically being the have provinces). It is widely accepted that a lower student-to-teacher ratio results in a better education for students.
The other side of the lower student-to-teacher ratio is that Quebec, proportionally, employs significantly more teachers that does Alberta, B.C. or Ontario. Those extra jobs are part of Quebec's far-reaching, 100% unionized public sector where job security is way of life.
So on behalf of Quebec, thank you Alberta (and Ontario and B.C. for that matter) for giving us less crowded classrooms and more jobs immune from layoffs.
Good luck with the recession by the way.
Note: The public school system is defined as including elementary and secondary schools. Data on student-teacher ratios are for the 2005-06 school year and are prepared by Statistics Canada.
The reason? As anti-business policies shrink a province's tax base, more money flows to the province through the federal government from the have provinces. The have-not province is therefore able to offset some, and perhaps all, of the consequences of its actions by forcing other provinces to pay for the problem it caused.
The provinces sending the money suffer by having their businesses and residents pay taxes higher than would be the case if they did not have to pay for the anti-business policies of the receiving province.
For decades, Quebec has been the leading province in pursuing anti-business policies. From forcing English-speaking businesses and entrepreneurs out of the province, to high taxes, to the strongest pro-union regulations combined with the constant threat of separation from Canada, Quebec would be a much poorer province if it were not for massive federal transfer payments.
The current equalization plan is officially justified on the basis that it ensures a certain minimum level of public services in all provinces. The reality, however, is that Quebec provides a level of public services that is higher than in any of the other provinces, including the have provinces that send billions to Quebec year after year.
One example of this higher level of public services is found in the public school system (other examples will be provided in future posts). Quebec has a student-to-teacher ratio that is 21% lower than B.C.'s, 18% lower than Alberta's, and 8% lower than Ontario's (these three provinces typically being the have provinces). It is widely accepted that a lower student-to-teacher ratio results in a better education for students.
The other side of the lower student-to-teacher ratio is that Quebec, proportionally, employs significantly more teachers that does Alberta, B.C. or Ontario. Those extra jobs are part of Quebec's far-reaching, 100% unionized public sector where job security is way of life.
So on behalf of Quebec, thank you Alberta (and Ontario and B.C. for that matter) for giving us less crowded classrooms and more jobs immune from layoffs.
Good luck with the recession by the way.
Note: The public school system is defined as including elementary and secondary schools. Data on student-teacher ratios are for the 2005-06 school year and are prepared by Statistics Canada.
Wednesday, January 21, 2009
Why No Layoffs at the CBC?
Falling advertising revenues at all major private sector media companies have resulted in employees being laid off. The largest publicly owned media company, the CBC, which depends in part on ad revenue, has not announced any layoffs.
The major newspapers (the CanWest Group, the Globe and Mail, the Toronto Star) announced a significant round of layoffs last fall . Declining ad revenues were given as the reason. At the same time the two largest private television networks (CTV and CanWest) reduced employment levels for the same reason.
The majority of the funding for the CBC comes from taxpayers in the form of an annual appropriation from Parliament. The English- and French-language television networks of the CBC also generate hundreds of millions annually in ad revenue. It's hard to conceive that the CBC's ad revenues have not declined in the current recessionary environment.
A reasonable question from the owners, the taxpayers, is why no layoffs at the CBC? Given the poor performance of the CBC on a recent audit of government agencies' responses to freedom of information requests (it ranked last among federal agencies with a grade of D), it is unlikely that taxpayers will receive an answer anytime soon. (see the end of this post for a link to the audit).
Based on the CBC's history, this is what could be in play. Except for senior management, virtually all employees at the CBC are unionized. The unions are militant and powerful, in large part because the CBC is primarily funded by taxpayers, and is relatively immune from the discipline of the competitive market.
The CBC unions may have been given a no layoff clause in their contracts. If that is the case, it will be further evidence of the two-tier labour market in Canada. The top tier is the public sector with higher pay and benefits compared with the private sector, not to mention virtual job security. The lower tier is the private sector where all the layoffs in the current recession have taken place (see my post of January 15).
Note: Here's the link to the freedom of information audit. http://www.cna-acj.ca/en/system/files/CNA%20National%20Freedom%20of%20Information%20Audit%20-%202008_0.pdf
It was carried out for the Canadian Newspaper Association. The results for the CBC are shown on page 19.
The major newspapers (the CanWest Group, the Globe and Mail, the Toronto Star) announced a significant round of layoffs last fall . Declining ad revenues were given as the reason. At the same time the two largest private television networks (CTV and CanWest) reduced employment levels for the same reason.
The majority of the funding for the CBC comes from taxpayers in the form of an annual appropriation from Parliament. The English- and French-language television networks of the CBC also generate hundreds of millions annually in ad revenue. It's hard to conceive that the CBC's ad revenues have not declined in the current recessionary environment.
A reasonable question from the owners, the taxpayers, is why no layoffs at the CBC? Given the poor performance of the CBC on a recent audit of government agencies' responses to freedom of information requests (it ranked last among federal agencies with a grade of D), it is unlikely that taxpayers will receive an answer anytime soon. (see the end of this post for a link to the audit).
Based on the CBC's history, this is what could be in play. Except for senior management, virtually all employees at the CBC are unionized. The unions are militant and powerful, in large part because the CBC is primarily funded by taxpayers, and is relatively immune from the discipline of the competitive market.
The CBC unions may have been given a no layoff clause in their contracts. If that is the case, it will be further evidence of the two-tier labour market in Canada. The top tier is the public sector with higher pay and benefits compared with the private sector, not to mention virtual job security. The lower tier is the private sector where all the layoffs in the current recession have taken place (see my post of January 15).
Note: Here's the link to the freedom of information audit. http://www.cna-acj.ca/en/system/files/CNA%20National%20Freedom%20of%20Information%20Audit%20-%202008_0.pdf
It was carried out for the Canadian Newspaper Association. The results for the CBC are shown on page 19.
Tuesday, January 20, 2009
They've Just Shot Us in the Leg. Next Time They'll be Aiming for the Head
The city of Ottawa's elected representatives have shot their residents in the leg. Next time they'll be aiming for our heads.
Despite a 42-day and counting transit strike, Ottawa residents are limping, but managing to soldier on. However, the next strike at the public transit authority will cripple the city unless fundamental changes are made.
The drivers and mechanics at the city of Ottawa's public transit monopoly, OC Transpo (OCTR), have been on strike since December 10th. Since the city has made no effort to keep OCTR buses and trains operating, Dec. 9th was the last day the city had public transit.
There is no sign of a settlement. Yesterday residents were told by OCTR management that it will be one week after the mechanics return to work before the first buses are back on the road, and over 3 months before the system is restored to its pre-strike level of service.
The poor and disadvantaged who are dependant on OCTR have suffered the most. Businesses along major bus routes have seen sales fall off significantly. More cars are on the road and rush hour commutes are much longer.
Only a few short weeks before the strike, the city's mayor and council approved a long-term transit plan. The plan calls upon Ottawa, Ontario and federal taxpayers to spend $4.7 billion over the next 30 years on expanding and upgrading the transit system. A central focus of the plan is to make Ottawa residents use their cars less and become even more reliant on public transit.
The unions at OCTR couldn't be happier. They were not asked to provide a no-strike guarantee as a pre-condition to gaining all of the new jobs this massive taxpayer investment will generate. Their jobs will not be threatened by competition since competition to OCTR is outlawed. If residents do become more dependant on public transit, as is hoped for in the transit plan, the unions will have even greater power than they now have to hold all residents hostage to their compensation demands.
During the strike the OCTR drivers and mechanics have shown how they, and not elected officials, control transit in the city. Their view, unchallenged by any elected official, is that no one can operate any sort of transit service that would carry a passenger who would otherwise use OCTR (if it were operating).
The result is that OCTR management have had to negotiate with the striking union to obtain its permission before more specialized vehicles could be put on the road to serve the handicapped, and then accept the union's conditions under what terms this would happen.
Schools have had to plead with the union to allow their buses to make extra runs to bring children to school that normally would ride on the OCTR system. The union did in the end give its permission, but only under very restrictive conditions that cause the students to lose time in the classroom.
End OCTR's monopoly and these union tactics disappear. Elected officials gave OCTR its monopoly. They should now take it away. A transit monopoly has given the OCTR unions too much power over residents' lives. The only way to offset that power is to give residents the right to choose among multiple providers of transit service.
Public transit is not a natural monopoly. Other cities, including London, England, allow competition in public transit. Competition gives customers choice, spurs innovation and forces operators to be efficient. It also prevents unions at what are currently monopoly transit providers from completely eliminating public transit when they go on strike.
We have choice in areas that used to be considered natural monopolies, such as local telephone service and cable TV. It's time for choice in public transit.
Despite a 42-day and counting transit strike, Ottawa residents are limping, but managing to soldier on. However, the next strike at the public transit authority will cripple the city unless fundamental changes are made.
The drivers and mechanics at the city of Ottawa's public transit monopoly, OC Transpo (OCTR), have been on strike since December 10th. Since the city has made no effort to keep OCTR buses and trains operating, Dec. 9th was the last day the city had public transit.
There is no sign of a settlement. Yesterday residents were told by OCTR management that it will be one week after the mechanics return to work before the first buses are back on the road, and over 3 months before the system is restored to its pre-strike level of service.
The poor and disadvantaged who are dependant on OCTR have suffered the most. Businesses along major bus routes have seen sales fall off significantly. More cars are on the road and rush hour commutes are much longer.
Only a few short weeks before the strike, the city's mayor and council approved a long-term transit plan. The plan calls upon Ottawa, Ontario and federal taxpayers to spend $4.7 billion over the next 30 years on expanding and upgrading the transit system. A central focus of the plan is to make Ottawa residents use their cars less and become even more reliant on public transit.
The unions at OCTR couldn't be happier. They were not asked to provide a no-strike guarantee as a pre-condition to gaining all of the new jobs this massive taxpayer investment will generate. Their jobs will not be threatened by competition since competition to OCTR is outlawed. If residents do become more dependant on public transit, as is hoped for in the transit plan, the unions will have even greater power than they now have to hold all residents hostage to their compensation demands.
During the strike the OCTR drivers and mechanics have shown how they, and not elected officials, control transit in the city. Their view, unchallenged by any elected official, is that no one can operate any sort of transit service that would carry a passenger who would otherwise use OCTR (if it were operating).
The result is that OCTR management have had to negotiate with the striking union to obtain its permission before more specialized vehicles could be put on the road to serve the handicapped, and then accept the union's conditions under what terms this would happen.
Schools have had to plead with the union to allow their buses to make extra runs to bring children to school that normally would ride on the OCTR system. The union did in the end give its permission, but only under very restrictive conditions that cause the students to lose time in the classroom.
End OCTR's monopoly and these union tactics disappear. Elected officials gave OCTR its monopoly. They should now take it away. A transit monopoly has given the OCTR unions too much power over residents' lives. The only way to offset that power is to give residents the right to choose among multiple providers of transit service.
Public transit is not a natural monopoly. Other cities, including London, England, allow competition in public transit. Competition gives customers choice, spurs innovation and forces operators to be efficient. It also prevents unions at what are currently monopoly transit providers from completely eliminating public transit when they go on strike.
We have choice in areas that used to be considered natural monopolies, such as local telephone service and cable TV. It's time for choice in public transit.
Monday, January 19, 2009
The CBC: It Costs More than You Think
The annual direct subsidy from federal taxpayers to the CBC is about $1 billion. This figure is relatively well known, particularly among critics of the CBC. The fact that the CBC also receives $120 million annually in mandatory payments from cable and satellite TV subscribers is not well known.
All cable and satellite TV subscribers are forced [by the Canadian Radio-television and Telecommunications Commission (CRTC)] to pay for both of CBC's news channels, Newsworld and its french-language equivalent RDI. In other words, if you are in Calgary, you must pay for both the english- and french-language CBC news channels. Similarly in Quebec City.
90% of Canadian households subscribe to either cable or satellite TV - many of which no doubt would like the option not to subscribe to Newsworld and RDI.
The CRTC sets the rates that cable and satellite companies have to pay to the CBC for distributing the two services to all of their subscribers. Using these rates and the number of cable and satellite subscribers, I have calculated the amount that CBC receives for Newsworld and RDI to be approximately $120 million annually.
All cable and satellite TV subscribers are forced [by the Canadian Radio-television and Telecommunications Commission (CRTC)] to pay for both of CBC's news channels, Newsworld and its french-language equivalent RDI. In other words, if you are in Calgary, you must pay for both the english- and french-language CBC news channels. Similarly in Quebec City.
90% of Canadian households subscribe to either cable or satellite TV - many of which no doubt would like the option not to subscribe to Newsworld and RDI.
The CRTC sets the rates that cable and satellite companies have to pay to the CBC for distributing the two services to all of their subscribers. Using these rates and the number of cable and satellite subscribers, I have calculated the amount that CBC receives for Newsworld and RDI to be approximately $120 million annually.
Friday, January 16, 2009
Hope for Aboriginal Children Exists; It is Not on Reserves
Aboriginal children (ages 6-14) not living on reserves are as likely as all children in Canada to be doing well in school. The data were released earlier today by Statistics Canada and are based on parents' knowledge of their child's school work (http://www.statcan.gc.ca/daily-quotidien/090116/dq090116-eng.pdf ).
These findings are in stark contrast with the disastrous and well-documented educational outcomes for children educated on reserves.
Yesterday, Phil Fontaine and four other aboriginal leaders met with the Prime Minister Harper and the provincial and territorial leaders to make their case for an additional $3 billion in taxpayers' money to build houses, improve water systems and upgrade schools on reserves.
Mr. Fontaine and the other four leaders represent the chiefs and band councils that control virtually all aspects of life on reserves, including education. Implicit in their funding request must be the position that, if given this additional money, educational outcomes on reserves will be improved.
But will they? If so, by how much? Will the standards be raised to the level of aboriginals and all other Canadian children not on reserves?
The evidence overwhelmingly suggests that the educational results on reserves will not be improved significantly despite a massive new infusion of funding. Remember the horrendous problems several years ago at the Davis Inlet Reserve just off of the Labrador coast? Images of widespread alcoholism, children sniffing gasoline and many living in squalor were shown around the world.
The federal government quickly responded and spent $300 million to build a brand new community (Natuashish), including a school, on the nearby Labrador coast. In the winter of 2002-2003 the 700 members of the community were relocated to Natuashish. Unfortunately, life has changed little. All of the residents' earlier problems survived the move intact.
Before Mr. Fontaine and the band leaders are given any additional money, they should be required to explain to taxpayers why the outcome of this proposed new spending on infrastructure on reserves will not simply replicate the Natuashish experience.
These findings are in stark contrast with the disastrous and well-documented educational outcomes for children educated on reserves.
Yesterday, Phil Fontaine and four other aboriginal leaders met with the Prime Minister Harper and the provincial and territorial leaders to make their case for an additional $3 billion in taxpayers' money to build houses, improve water systems and upgrade schools on reserves.
Mr. Fontaine and the other four leaders represent the chiefs and band councils that control virtually all aspects of life on reserves, including education. Implicit in their funding request must be the position that, if given this additional money, educational outcomes on reserves will be improved.
But will they? If so, by how much? Will the standards be raised to the level of aboriginals and all other Canadian children not on reserves?
The evidence overwhelmingly suggests that the educational results on reserves will not be improved significantly despite a massive new infusion of funding. Remember the horrendous problems several years ago at the Davis Inlet Reserve just off of the Labrador coast? Images of widespread alcoholism, children sniffing gasoline and many living in squalor were shown around the world.
The federal government quickly responded and spent $300 million to build a brand new community (Natuashish), including a school, on the nearby Labrador coast. In the winter of 2002-2003 the 700 members of the community were relocated to Natuashish. Unfortunately, life has changed little. All of the residents' earlier problems survived the move intact.
Before Mr. Fontaine and the band leaders are given any additional money, they should be required to explain to taxpayers why the outcome of this proposed new spending on infrastructure on reserves will not simply replicate the Natuashish experience.
Thursday, January 15, 2009
Job Losses Are Reserved for the Private Sector
There is widespread agreement that Canada, the U.S. and many other countries are now in the midst of a recession. How serious and how long the recession will be are uncertain (see yesterday's post). What is certain, however, is that all the pain of job loss in Canada is being felt in the private sector.
From June to December 2008, 114,000 jobs were lost in the private sector. Meanwhile, the public sector added 39,000 jobs.
Recessions mean falling revenues for companies and governments. Falling revenues cause companies in the private sector to lay off employees. Not so in the public sector.
Any chance that there will be job losses in the public sector during this recession? I am guessing no, and I'll keep you posted as new data are released.
Note: Statistics Canada defines public sector employees as those who work for a local, provincial or federal government, for a government service or agency, a crown corporation, or a government-funded establishment such as a school (including universities) or hospital.
From June to December 2008, 114,000 jobs were lost in the private sector. Meanwhile, the public sector added 39,000 jobs.
Recessions mean falling revenues for companies and governments. Falling revenues cause companies in the private sector to lay off employees. Not so in the public sector.
Any chance that there will be job losses in the public sector during this recession? I am guessing no, and I'll keep you posted as new data are released.
Note: Statistics Canada defines public sector employees as those who work for a local, provincial or federal government, for a government service or agency, a crown corporation, or a government-funded establishment such as a school (including universities) or hospital.
Wednesday, January 14, 2009
The Recession: Some Perspective
Numerous groups in Canada are proposing massive increases in government spending to counteract what they claim is a major recession in economic activity. As it turns out, those claims are based on projections of what will be and not what is. Canada is likely now in a recession, but it is far from certain that it is a major one.
Economists define a recession as a period in which economic activity declines for two or more quarters. Gross Domestic Product (GDP) is used as the measure of economic activity. GDP data are produced quarterly by Statistics Canada and typically released two months after the end of a quarter. The most recent Canadian GDP data were released on Dec.1/08. In the third quarter of 2008 (the three months ending on Sept. 30/08), GDP did grow, but by very little. In the first quarter of 2008, there was a very slight decline in GDP, which was followed by a small increase in quarter 2.
The bottom line: up to Sept. 30/08, the economy was growing, albeit anemically, but it was not in recession.
Despite all attempts by governments to prevent them, recessions are a regular occurrence in modern industrial economies. Two central features of a recession are declines in GDP and increases in the unemployment rate. Statistics Canada publishes the unemployment rate for a month within a week after the month ends. Hence, it is available more frequently than GDP data and is more timely in charting the course of a recession.
The unemployment rate in Canada reached a record low of 5.8% in early 2008. In other words, in its long history of measuring unemployment, Statistics Canada had never found the unemployment rate to be this low. By December 2008, the unemployment rate had moved higher, to 6.6%, not as good as things were earlier in the year, but still lower than the annual unemployment rate in every year from 1976 to 2005 inclusive. The annual rate in 2006 was 6.3% and in 2007 it was 6.0%.
Some further perspective. Canada did suffer through major recessions in the early 1980s and in the early 1990s. In 1982, the unemployment rate rose to 11.0% from 7.6%in the previous year. It peaked at 12.0% in 1983, and did not fall to its pre-recession level again until 1989. In 1991, the unemployment rate rose to 10.3% from 8.1% in the previous year and it took until 1999 to lower unemployment to the 1991 level.
The bottom line: with an unemployment rate of 6.6% in December, we are nowhere near the depths of previous recessions.
A major rationale cited by the parties calling for massive increases in federal government spending is declining economic activity in the U.S.A., the major buyer of Canada's exports. Yesterday's National Post ( January 13, 2008, page FP3; please scroll to the end of the following two-page article with the heading of "Milk" http://www.financialpost.com/story.html?id=1170081) has an insightful commentary by Terence Corcoran debunking the claims of economic disaster in the U.S. He notes that the U.S. unemployment rate of 7.2% in December 2008 is far blow the highest level experienced by the U.S. in the past 25 years (over 10% in the early 1980s).
Implications for the January 2009 federal budget: some further stimulation of the the economy is required, but it should not be massive. And the stimulation should be applied in carefully measured amounts over the upcoming quarters in a manner that allows it to be reduced if the economy proves to be more robust than the pessimists are predicting.
Economists define a recession as a period in which economic activity declines for two or more quarters. Gross Domestic Product (GDP) is used as the measure of economic activity. GDP data are produced quarterly by Statistics Canada and typically released two months after the end of a quarter. The most recent Canadian GDP data were released on Dec.1/08. In the third quarter of 2008 (the three months ending on Sept. 30/08), GDP did grow, but by very little. In the first quarter of 2008, there was a very slight decline in GDP, which was followed by a small increase in quarter 2.
The bottom line: up to Sept. 30/08, the economy was growing, albeit anemically, but it was not in recession.
Despite all attempts by governments to prevent them, recessions are a regular occurrence in modern industrial economies. Two central features of a recession are declines in GDP and increases in the unemployment rate. Statistics Canada publishes the unemployment rate for a month within a week after the month ends. Hence, it is available more frequently than GDP data and is more timely in charting the course of a recession.
The unemployment rate in Canada reached a record low of 5.8% in early 2008. In other words, in its long history of measuring unemployment, Statistics Canada had never found the unemployment rate to be this low. By December 2008, the unemployment rate had moved higher, to 6.6%, not as good as things were earlier in the year, but still lower than the annual unemployment rate in every year from 1976 to 2005 inclusive. The annual rate in 2006 was 6.3% and in 2007 it was 6.0%.
Some further perspective. Canada did suffer through major recessions in the early 1980s and in the early 1990s. In 1982, the unemployment rate rose to 11.0% from 7.6%in the previous year. It peaked at 12.0% in 1983, and did not fall to its pre-recession level again until 1989. In 1991, the unemployment rate rose to 10.3% from 8.1% in the previous year and it took until 1999 to lower unemployment to the 1991 level.
The bottom line: with an unemployment rate of 6.6% in December, we are nowhere near the depths of previous recessions.
A major rationale cited by the parties calling for massive increases in federal government spending is declining economic activity in the U.S.A., the major buyer of Canada's exports. Yesterday's National Post ( January 13, 2008, page FP3; please scroll to the end of the following two-page article with the heading of "Milk" http://www.financialpost.com/story.html?id=1170081) has an insightful commentary by Terence Corcoran debunking the claims of economic disaster in the U.S. He notes that the U.S. unemployment rate of 7.2% in December 2008 is far blow the highest level experienced by the U.S. in the past 25 years (over 10% in the early 1980s).
Implications for the January 2009 federal budget: some further stimulation of the the economy is required, but it should not be massive. And the stimulation should be applied in carefully measured amounts over the upcoming quarters in a manner that allows it to be reduced if the economy proves to be more robust than the pessimists are predicting.
Saturday, January 10, 2009
Coming Soon
This blog will focus on how governments in Canada spend taxpayers' money. The intent is to provide data and facts that are under-reported, or not reported at all, in the main stream media. The purpose is to provide accurate and useful information for use in public policy discussions.
I also plan to pose questions to readers when my research and analysis has yet to uncover what I think might be an important aspect of an issue. The hope is that the feedback received will help me fill in those blanks.
At this stage I foresee two main types of postings. The most frequent will be short posts highlighting new facts and data. The second will be lengthier background pieces on issues. These I plan to update on a regular basis as new information becomes available.
This is my first attempt at blogging. I have a lot to learn about its technical aspects so please bear with me through start-up. Suggestions for technical enhancements are welcome.
Subscribe to:
Posts (Atom)