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.
Saturday, January 24, 2009
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.
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