A Note about Defecits

In particular, government budget defecits.  We here in Canada are set to crack a doozy, $50 billion.  The next biggest budget defecit was spun out by Mulroney’s government at $39 billion.  There’s going to be a lot of noise made abot this number, but in the sum, what does a large defecit mean?  Is Canada on it’s way back to the poor house?  Is there something inherently ‘bad’ about a defecit?

I read an article yesterday where the author compared personal finances with government finances.  They made the analogy that personal debt and living on credit is bad, and therefore a country’s debt and defecits are equally as bad.  This is total BS (with a capital B!  .. and S!).  Newsflash, countries and their governments are fundamentally different from an individual citizen!  Countries of the recent past are much longer lived than their citizens, and they can can print their own money.

As an individual, there are times in your life when it is prudent to take on debt and defecit spending.  Starting out into post secondary education on the back of a student loan is one of those times.  It’s a temporary state in order to reap the future benefits of obtaining some higher education.  The plan is to pay off the temporary debt when income is higher in the future.  There is a simislar story when purchasing a house using a mortgage.  You might take on a huge amount of debt, but it’s managable and people seem to enjoy owning their own house, so they do it.

For a government running a country, at this particular time, it is prudent to let the defecit balloon to ease through the recession.  The last time an economic crisis of this magnitude happened was at the start of the Great Depression, and the government response at that time was to raise taxes and cut spending to keep a balanced budget and to erect protectionist barriers to trade.  The collective actions of the world’s governments at the time were enough to send the world economy completely into the shitter.  Much misery ensued.  This time around, it appears as if the collective actions of the world’s governments have prevented catastrophe, and it’s merely going to be a bad global recession.  Governments around the world are heading into budgetary defecits, with the aim of reducing them in the future.

Now, when it comes to carrying debt, individuals are liable, and you don’t want to leave a big mess of debt for your loved ones to deal with when you leave this plane of existence.  Countries in the modern era appear to be sufficiently long lived that this problem doesn’t exist.  Countries could carry debt into the future indefinitely, as long as that country could support carrying that debt.  For this reason, a country’s finances look very different from an individual’s finances.

Lastly, when is a budget defecit not a budget defecit?  This might seem a little strange, but if you are in a period of high inflation, and the defecit is modest, then it may in fact be what economists like to call a ‘real’ surplus.  It’s a real surplus if a country’s gross debt is reduced in percentage of GDP.  I’ll give an example, as it’s not intuitively obvious and requires an economic explanation.

Say inflation is running at 10%.  That means that prices are increasing at 10% every year, so on the whole, GDP in nominal terms will rise 10%, holding everything else constant.  Let’s also say that the government will run a defecit; this defecit will increase the country’s debt by 5% of GDP, but because GDP is rising by 10%, the country’s debt falls as a percentage of GDP.  In this case, a nominal defecit has turned into a real surplus.  Did you follow that bit of magic?   Through inflation, the government has been able to reduce it’s debt load.  Wouldn’t it be great a citizen had the same powers as a government?  It would, but that will never be the case, and people should stop comparing personal finances with a country’s finances.

Al Gore Changes His Mind?

I picked this up at the Daily Dish this morning.  It’s a reference to a post by Shellenberger and Nordhaus at The New Republic on how Al Gore, in a recent missive to president elect Obama, has subtly changed his message regarding climate change and carbon emissions.  The shift is in priority, away from putting a price on carbon to emphasising investment in green technology.  This strikes me as a tactical decision by Gore.  In order to retain relevancy in an uncertain economic environment, he has shifted his rhetoric away from taxation and regulation towards the ever hopeful idea of new technologies.  In this case, he might have been taking notes from the recent federal election in Canada where Dion’s carbon taxing initiative was a political  millstone; it confused voters, was hard to explain and difficult to justify to the public how a new tax was necessary.

The writers at the New Republic have picked up on Al Gore’s shift as it fits their world view and their belief that new technology is necessary and simultaneously the best way to deal with the problems of climate change and carbon emissions.  I am ever hopeful in new technology as well but, historically, new technologies that deal with old problems, well, they tend to develop problems that are unique and troublesome in their own right.  To paraphrase that old expression, technology happens.

Here’s a response and a criticism of that piece over at The Bellows by Ryan Avent.  He suggests that regulation is already happening in a rather awkward and scatter shot way, by various levels and branches of government.  He also criticizes Shellenberger and Nordhaus.  The money quote,

But it should be clear that pricing and investments ought to go hand in hand. Pricing provides information about where and how to invest and incentives to adopt new technologies, while investments in research ease the transition off fossil fuels as carbon prices slowly ramp up over time. That’s the necessary carbon policy. And it’s hard to see how we get to where we need to be without both.

I am fully on board with what Avent is saying here.  There’s not one solution, there are many and they need to be explored simultaneously.  Government investment in technology is problematic in that you have people making decisions about what to do with the dollars involved.  If those people are subject to lobbying, you might get questionable bridge technologies such as ethanol.  Using markets to find what is desired at a societal level removes decision making from potentially flawed individuals in favor of what is going to work in the market.  With a properly designed price environment, the market will find solutions to the problem.

As a matter of political signalling, I find the whole situation to be fascinating.  I have not examined the leanings of these writers, but I am assuming the writers at the New Republic are on the right.  Indicative of this is their fear of regulation, the holy belief in the saving power of technology, and the uncertain embrace of state sponsored spending bailouts and investment that is sweeping governments around the world. 

Alternately, Avent appears to be more left leaning than Shellenberger and Nordhaus, but he’s the one advocating for using the power of markets (historically the domain of the right) and the effective pricing of externalities, in this case carbon emissions.  This just goes to show, when dealing with a complex issue, ideas of left and right are quite useless.  A complex problem requires complex solutions, with contributions from all over the spectrum.

So, did Al Gore change his mind? I don’t think so. It looks like this is case of some writers wanting to say “I told you so!”, when all Gore wants to do is to keep the issue on the front burner before it’s relegated to the dustbin by current economic events.  Avent is more in tune with what is necessary to move forward on climate change and carbon pricing, but Gore has got a message and a speaking tour to maintain.

The Importance of Voting

With an election all wrapped up, and $300 million spent, a good friend asked me the other day if his vote mattered.  His concern was that on a day to day basis, who he voted for made no impact on his life.  I thought about this briefly, and agreed with him.  It’s true, not much changes from the election of a new government at the federal level for my friend’s demographic, that being single white male.  On this basis, he has no reason to vote or not to vote.

However, let’s take a broader perspective and examine the question again.  Imagine two countries, one where you can’t vote, and one where you can.  Who makes the decisions in the first country?  And if they have free reign to do as they please, with no democratic checks on power, then a citizen’s well being and future is up to the whims of whoever is in charge. 

In a country where there is a democratic system (like Canada), with votes and elections, then we’ll have leaders who want to please the citizens and keep them happy.  All parties want to either gain or hold onto power, so they all end up being mostly the same and not much changes.  And in Canada the bureaucracy and judicial branch also provide a certain amount of inertia to government policy, pushing things incrementally or resisting sudden swings of policy.  Big change, the kind that my friend would notice, is only possible when the citizens of a country either demand it or accept it from their leaders.
 
This line of thinking came to me today while I was listening to the CBC; a listener was describing the first time their parents got to vote.  The parents had immigrated from some undemocratic country, possibly communist, I missed that detail.  When it came time to vote, they put on their finest clothes and headed to the polls.  They took it very seriously and attached a strong importance to voting because prior to living in Canada they did not have the choice to vote or not to vote.  So, yes voting doesn’t really matter, but in a democratic system, it’s the only thing that matters.

Alaskans on Palin

Not my usual sphere, but I enjoy reading The Daily Dish, and here you’ll find a video where two Alaskan women are interviewed about Sarah Palin.  They discuss what they believe about Palin, including why she was chosen to run for VP, how she governed in Alaska, and an awesome comparison to Hilary Clinton.  An insightful interview from folks on the street.  Watch it here.

Dion at the Empire Club

Caught Dion’s speech today while I was at the gym.  He spoke with passion, displaying more emotion and humanity than what I’ve seen from him in the past.  He’s reaching out, attempting to identify with Canadians hopes and fears.  Also, he’s downplaying the Green Shift, which I fully support and defend, but which was proving problematic to explain and was easily distorted by Conservative attack ads.  In particular, Dion really came across as a man who loves his country, a fragmented, multicultural, complex and yet strong society. 

Here he is on Harper, “He may speak better English than I do, but I speak the truth better in both English and French than he ever will.”  That’s a sound bite that might resonate.

Harper and Dion, A Turning Point?

What Dion and the carbon tax couldn’t do for the liberal party, the banking crisis and stock market plunge apparently are.  Timing, as they say, is everything and Harper’s seems to be off, in quite spectacular fashion.  I believe pundits were observing that this election was hastily called in the fall session of parliament to take advantage of good times economically before things got too rotten.  Oops.  The Liberals are now painting Harper as being out of touch with what is happening and slow to respond.  And that was exactly the playbook the conservatives were running.  Things are good, steady as she goes.  Current events have relegated that playbook to the dustbin and Harper’s carefully managed election is getting more interesting and unpredictable.

Although his image is one of an academic and not very statesman like, Dion has always appealed to me because he seems genuine.  You’re not getting much filtering when you see Dion speak.  He’s dropped the teleprompter in his speeches, probably as a way to seem more natural in an unnatural tongue, but I think it also speaks to a growing confidence.  In comparison, I always get the feeling that Harper is tightly in control of himself and his faculties and that gives me the willies.  It seems odd, but I don’t want someone so sure of themselves in power.  Give me some complexity and a willingness to change and adjust.

With about a week to go, the Liberals are gaining ground, and the Conservative are out of majority territory.  Jack Layton appears to have the NDP on track for modest gains, but I think his populist message of tackling corporate Canada is misguided.  Making ‘big polluters’ pay, Jack?  Wake up buddy, we *are* the big polluters.  I didn’t catch the televised debates as I was in lectures, but apparently Elizabeth May came off very well in her first go at it.  Hopefully the Greens can capitalize and claim a few seats.  It’s going to be an interesting final push.

Buffett and The Banks

I believe that the rejection of the bailout bill in congress earlier this week is short sighted.  Congress might be picking up on the sentiments of Main St, in that the average joe is unwilling to bailout Wall St, but what Main St fails to recognize is their complicity in the current banking crisis.  Bankers need willing borrowers, and the borrowers have demonstrated they were just as greedy as the bankers.  Trying to put some distance between themselves and their greed, ie Wall St, is a natural reaction but one that should be ignored. 

Letting things work themselves out on Wall St is a huge unknown.  Fear is running rampant at the moment and it is a destabilizing force.  Warren Buffett, a humble and decent man not known for hyperbole, and also the most successful investor ever, just came out and said that America is looking at an economic ”pearl harbour”.  He also has been making investments in the markets this past week, in Goldman Sachs and General Electric.  However, if the bailout does not proceed, he believes his recent investments will have been a mistake.

Suzuki on Leadership

Check out David Suzuki’s blog post; here’s the money quote though,

Those who cling to fixed positions based on ideology or ignorance are not admirable but frightening. We should be watching for those who are open, who admit they don’t know all the answers, and who are willing to agree with opponents or even admit they’re wrong.

More of this would be great in our country’s election and politics in general.

Atwood on Art

What follows here is Margaret Atwood discussing art in Canada in response to Harper’s recent comments from the campaign trail.

What sort of country do we want to live in? What sort of country do we already live in? What do we like? Who are we?

At present, we are a very creative country. For decades, we’ve been punching above our weight on the world stage – in writing, in popular music and in many other fields. Canada was once a cultural void on the world map, now it’s a force. In addition, the arts are a large segment of our economy: The Conference Board estimates Canada’s cultural sector generated $46-billion, or 3.8 per cent of Canada’s GDP, in 2007. And, according to the Canada Council, in 2003-2004, the sector accounted for an “estimated 600,000 jobs (roughly the same as agriculture, forestry, fishing, mining, oil & gas and utilities combined).”

But we’ve just been sent a signal by Prime Minister Stephen Harper that he gives not a toss for these facts. Tuesday, he told us that some group called “ordinary people” didn’t care about something called “the arts.” His idea of “the arts” is a bunch of rich people gathering at galas whining about their grants. Well, I can count the number of moderately rich writers who live in Canada on the fingers of one hand: I’m one of them, and I’m no Warren Buffett. I don’t whine about my grants because I don’t get any grants. I whine about other grants – grants for young people, that may help them to turn into me, and thus pay to the federal and provincial governments the kinds of taxes I pay, and cover off the salaries of such as Mr. Harper. In fact, less than 10 per cent of writers actually make a living by their writing, however modest that living may be. They have other jobs. But people write, and want to write, and pack into creative writing classes, because they love this activity – not because they think they’ll be millionaires.

Every single one of those people is an “ordinary person.” Mr. Harper’s idea of an ordinary person is that of an envious hater without a scrap of artistic talent or creativity or curiosity, and no appreciation for anything that’s attractive or beautiful. My idea of an ordinary person is quite different. Human beings are creative by nature. For millenniums we have been putting our creativity into our cultures – cultures with unique languages, architecture, religious ceremonies, dances, music, furnishings, textiles, clothing and special cuisines. “Ordinary people” pack into the cheap seats at concerts and fill theatres where operas are brought to them live. The total attendance for “the arts” in Canada in fact exceeds that for sports events. “The arts” are not a “niche interest.” They are part of being human.

Moreover, “ordinary people” are participants. They form book clubs and join classes of all kinds – painting, dancing, drawing, pottery, photography – for the sheer joy of it. They sing in choirs, church and other, and play in marching bands. Kids start garage bands and make their own videos and web art, and put their music on the Net, and draw their own graphic novels. “Ordinary people” have other outlets for their creativity, as well: Knitting and quilting have made comebacks; gardening is taken very seriously; the home woodworking shop is active. Add origami, costume design, egg decorating, flower arranging, and on and on … Canadians, it seems, like making things, and they like appreciating things that are made.

They show their appreciation by contributing. Canadians of all ages volunteer in vast numbers for local and city museums, for their art galleries and for countless cultural festivals – I think immediately of the Chinese New Year and the Caribana festival in Toronto, but there are so many others. Literary festivals have sprung up all over the country – volunteers set them up and provide the food, and “ordinary people” will drag their lawn chairs into a field – as in Nova Scotia’s Read by the Sea – in order to listen to writers both local and national read and discuss their work. Mr. Harper has signalled that as far as he is concerned, those millions of hours of volunteer activity are a waste of time. He holds them in contempt.

I suggest that considering the huge amount of energy we spend on creative activity, to be creative is “ordinary.” It is an age-long and normal human characteristic: All children are born creative. It’s the lack of any appreciation of these activities that is not ordinary. Mr. Harper has demonstrated that he has no knowledge of, or respect for, the capacities and interests of “ordinary people.” He’s the “niche interest.” Not us.

It’s been suggested that Mr. Harper’s disdain for the arts is not merely a result of ignorance or a tin ear – that it is “ideologically motivated.” Now, I wonder what could be meant by that? Mr. Harper has said quite rightly that people understand we ought to keep within a budget. But his own contribution to that budget has been to heave the Liberal-generated surplus overboard so we have nothing left for a rainy day, and now, in addition, he wants to jeopardize those 600,000 arts jobs and those billions of dollars they generate for Canadians. What’s the idea here? That arts jobs should not exist because artists are naughty and might not vote for Mr. Harper? That Canadians ought not to make money from the wicked arts, but only from virtuous oil? That artists don’t all live in one constituency, so who cares? Or is it that the majority of those arts jobs are located in Ontario and Quebec, and Mr. Harper is peeved at those provinces, and wants to increase his ongoing gutting of Ontario – $20-billion a year of Ontario taxpayers’ money going out, a dribble grudgingly allowed back in – and spank Quebec for being so disobedient as not to appreciate his magnificence? He likes punishing, so maybe the arts-squashing is part of that: Whack the Heartland.

Or is it even worse? Every budding dictatorship begins by muzzling the artists, because they’re a mouthy lot and they don’t line up and salute very easily. Of course, you can always get some tame artists to design the uniforms and flags and the documentary about you, and so forth – the only kind of art you might need – but individual voices must be silenced, because there shall be only One Voice: Our Master’s Voice. Maybe that’s why Mr. Harper began by shutting down funding for our artists abroad. He didn’t like the competition for media space.

The Conservative caucus has already learned that lesson. Rumour has it that Mr. Harper’s idea of what sort of art you should hang on your wall was signalled by his removal of all pictures of previous Conservative prime ministers from their lobby room – including John A. and Dief the Chief – and their replacement by pictures of none other than Mr. Harper himself. History, it seems, is to begin with him. In communist countries, this used to be called the Cult of Personality. Mr. Harper is a guy who – rumour has it, again – tried to disband the student union in high school and then tried the same thing in college. Destiny is calling him, the way it called Qin Shi Huang, the Chinese emperor who burnt all records of the rulers before himself. It’s an impulse that’s been repeated many times since, the list is very long. Tear it down and level it flat, is the common motto. Then build a big statue of yourself. Now that would be Art! Adapted from the 2008 Hurtig Lecture, to be delivered in Edmonton on Oct. 1

Palin For VP

Things are getting murky with Palin.  For up to date commentary, check out the Daily Dish and Scott’s blog over at The Politics of Scrabble.  And if you’re into the absurd, this made me laugh out loud, where McCain reveals his VP choice of Palin was a hoax, and that his real VP running mate will in fact be a ham sandwich.  For serious.