Canadian political life is now completely paralyzed, thanks to the scandal surrounding the upper house of Parliament, the Senate. The government is trying to turf out a number of senators who are accused of padding their expense accounts, but the senators in question -- Mike Duffy, Pamela Wallin and Patrick Brazeau -- are refusing to go quietly.
The story is evolving all the time, but the one thing that can safely be asserted is that everyone involved is lying. All three senators were untruthful about their place of primary residence, in order to be able to claim tens of thousands of dollars in travel and housing allowances. And Prime Minister Stephen Harper, under ferocious attack from Duffy in particular, is changing his side of the story by the day, as he tries desperately to maintain control and avoid irreparable damage to his ability to govern.
It's all good dirty fun, but it's leading more and more people to question whether we really need a Senate as a chamber of "sober second thought". The Senate was established in 1867 as part of the constitutional deal that set up the Canadian confederation, but it was a bit of a Frankenstein creation from the outset.
The UK, as the colonial power driving the constitutional process at the time, had a second chamber, in the shape of the House of Lords, so it was only natural that it would want to set up something similar for Canada. However, the House of Lords was an entirely hereditary assembly back then, and there was no basis for replicating that in Canada.
Looking south of the border, the "fathers of confederation" could see that the US had established a Senate with the explicit aim of providing equal representation for each state (by giving them two seats each, regardless of population). However, back in 1867 only four territories joined the new Canadian confederation (Ontario, Quebec, New Brunswick and Nova Scotia), so that model was not really applicable. There was also little appetite for having a second elected chamber.
The result was that the Senate was set up with the intention of providing a balancing function akin to that of the US, but on an unelected basis, like the House of Lords. Except, of course, that in the absence of an aristocracy to fill the benches, it was left to the governments of the day to select the members. This process that has been shamelessly abused ever since, as successive governments have packed the second chamber with their placemen and toadies.
Which is exactly how Duffy, Wallin and Brazeau landed there, back in 2010, when Stephen Harper decided to pad the place out a little with some high-profile Tory loyalists. Duffy and Wallin, who were both prominent TV journalists back in the day, mutated into highly partisan attack dogs for the government, racking up massive expenses as they gallivanted around doing Harper's dirty work. However, contrary to the rules of the Senate, neither of them was truly resident in the Province they purported to represent (PEI in the case of Duffy; Saskatchewan in the case of Wallin), and it was this that proved their undoing when questions began to be asked.
This being Canada, reforming the Senate would in all likelihood be an impossible task: either Quebec or the Western provinces would undoubtedly feel they were getting short-changed. But it's hard to see how it can ever regain what little credibility it may have had at one time, so getting rid of it altogether is very possibly the best option. As Oliver Cromwell famously said to the "rump Parliament" more than three and a half centuries ago, “You have been sat too long here for any good you have been doing. Depart, I say, and let us have done with you. In the name of God, go!”
Tuesday, 29 October 2013
Tuesday, 22 October 2013
Baffled of Bobcaygeon
This letter on the recently unveiled Canada-EU trade deal, which received pride of place on the Toronto Star's opinion page today, is worth quoting in full:
Thank you for drawing attention to the potential folly of the EU trade deal. In all “deals” there is a winner and a loser. There are never two winners. In recent decades China has been a consistent winner, with the rest of the world accumulating prodigious debts. In this case, the workforces of Canada and of the EU will be redeployed.
Where does one start? Evidently the writer has never heard of a win-win deal, which makes one wonder how he even does his grocery shopping each week. I mean, buying food is a "deal", right? You want the food, and the store wants your money. It's an exchange in which you both give up something you have so as to get something you want. How is there a winner and a loser?
If we upscale this reasoning to international trade, the same principle applies. Canadian drivers want BMWs and Europeans want Canadian lumber, so by trading, we both end up with something we want. The added insight that economics brings is that even if both we and our trading partners can in theory produce all the same things, there's still a benefit to trading. If Canada produces lumber more efficiently and the Europeans are better at making cars, both countries are better off doing what they do best and then trading for what the other guy does best. It's known as "comparative advantage".
Because of this, it's a fallacy to assert, as the Star's correspondent does, that "the total consumption of goods in the EU/Canada bloc remains the same". If free trade means that Canadians spend less on cheese and BMWs in the future, that frees up purchasing power and creates demand for other goods. If Europeans can buy Canadian lumber and pork more cheaply, they too have more cash to spend elsewhere.
It's because of the expected net gains for the economy as a whole that Stephen Harper feels he can promise to compensate the losers.
We still need to see the details before deciding whether this particular deal is a fair one for both sides, but one thing we can already be sure of is that it's not actually "free trade" that we're talking about. Take cheese, for example, which bizarrely seems to have occupied most of the column inches since the deal was announced. European producers aren't getting unfettered access to the Canadian market: they're getting a bigger quota, but one that will still limit them to much less than 10% of the market. The dairy supply management regime, which is the reason I pay three times as much for milk as I would if I drove a few miles across the (Niagara) river to shop each week, will remain firmly in place.
The Star's correspondent hopes that provincial leaders will "reject this folly". Looks very unlikely: most of them seem to be onside with the deal already, while expressing concerns over some of the details and vowing to hold the PM to his promise of compensation. "Baffled of Bobcaygeon" certainly has some allies, including the irritating Maude Barlow and some of the trade unions, but it seems all but certain that this deal will be put into effect in the second half of the decade.
Thank you for drawing attention to the potential folly of the EU trade deal. In all “deals” there is a winner and a loser. There are never two winners. In recent decades China has been a consistent winner, with the rest of the world accumulating prodigious debts. In this case, the workforces of Canada and of the EU will be redeployed.
More cheese makers there; fewer here. More autoworkers here; fewer there — and so on. The total consumption of goods in the Canada/EU bloc remains the same. However, some potential increases in efficiency will produce a net loss of jobs, in both places.
Stephen Harper plans to compensate the Canadian losers at taxpayers’ expense. Taxes will go up and jobs will go down. How does that help us?
The only people to gain from free trade are the traders themselves. Greed always wins.
At one time politicians could get a little boost from this kind of deal. Now they just look naive and inept. Let us not give Harper that boost. And let us hope that the provincial leaders reject this folly.
Where does one start? Evidently the writer has never heard of a win-win deal, which makes one wonder how he even does his grocery shopping each week. I mean, buying food is a "deal", right? You want the food, and the store wants your money. It's an exchange in which you both give up something you have so as to get something you want. How is there a winner and a loser?
If we upscale this reasoning to international trade, the same principle applies. Canadian drivers want BMWs and Europeans want Canadian lumber, so by trading, we both end up with something we want. The added insight that economics brings is that even if both we and our trading partners can in theory produce all the same things, there's still a benefit to trading. If Canada produces lumber more efficiently and the Europeans are better at making cars, both countries are better off doing what they do best and then trading for what the other guy does best. It's known as "comparative advantage".
Because of this, it's a fallacy to assert, as the Star's correspondent does, that "the total consumption of goods in the EU/Canada bloc remains the same". If free trade means that Canadians spend less on cheese and BMWs in the future, that frees up purchasing power and creates demand for other goods. If Europeans can buy Canadian lumber and pork more cheaply, they too have more cash to spend elsewhere.
It's because of the expected net gains for the economy as a whole that Stephen Harper feels he can promise to compensate the losers.
We still need to see the details before deciding whether this particular deal is a fair one for both sides, but one thing we can already be sure of is that it's not actually "free trade" that we're talking about. Take cheese, for example, which bizarrely seems to have occupied most of the column inches since the deal was announced. European producers aren't getting unfettered access to the Canadian market: they're getting a bigger quota, but one that will still limit them to much less than 10% of the market. The dairy supply management regime, which is the reason I pay three times as much for milk as I would if I drove a few miles across the (Niagara) river to shop each week, will remain firmly in place.
The Star's correspondent hopes that provincial leaders will "reject this folly". Looks very unlikely: most of them seem to be onside with the deal already, while expressing concerns over some of the details and vowing to hold the PM to his promise of compensation. "Baffled of Bobcaygeon" certainly has some allies, including the irritating Maude Barlow and some of the trade unions, but it seems all but certain that this deal will be put into effect in the second half of the decade.
Friday, 18 October 2013
Cheese and whine
Canadian PM Stephen Harper was in Brussels today to announce that Canada and the EU have agreed on a free trade deal -- details here. Final terms are still to be worked out, but the deal will cover a wide range of goods and services. With the EU poised to start negotiations on a much bigger free trade deal with the United States, today's announcement eases the Harper government's fears that the long-running negotiations might get shelved.
In true Canadian fashion, initial responses to the deal have focused on the probable losers. The most wide-ranging condemnation has come from the always negative Maude Barlow of the "Council of Canadians", who has said that there is no case to be made for any such deal. Jim Stanford, the thoughtful economist at trade union Unifor, has estimated that the deal could cost Canada up to 150,000 jobs, in sharp contrast to the government's own claim that it could produce 80-100,000 new ones.
Then there are the specific industries that could be severely affected. One is wine, a particularly important sector of the economy hereabouts, where a switch from an ad valorem tariff to a flat rate could make European wines more competitive at the higher price points. Potentially even more seriously affected is the cheese industry, which faces a more-than-doubling of the quota assigned to European producers. Cheese makers in Quebec seem to be particularly alarmed.
It's never easy to predict exactly how a free trade deal will play out, but there's one factor worth keeping in mind here: Canadians are world-class cheapskates*. Here in the Niagara region, a key feature of every newscast is a report of how long the lines are at the three bridges into the US. People are happy to line up for hours to save a few dollars on their weekly grocery shop, to the despair of local retailers.
Niagara is also wine country, with upwards of sixty producers in a smallish geographical area. If you go to a comparable area in Europe -- the Loire Valley in France, for example, or the Veneto in Italy -- you find that local stores and restaurants not only stock very few wines from outside the country, the don't even stock many from outside the immediate area. In Niagara, by contrast, local product is still heavily outgunned on store shelves and on menus by imported wines, despite the best efforts of the provincial liquor board (and the rising quality of the wines themselves).
Whether it's in deciding where to shop or deciding which wine to buy, most Canadians choose to ignore the fact that "shopping foreign" is putting their neighbours' livelihoods at risk, and always go for the cheapest product. It's a difficult mindset to overcome, and if I were a cheese or wine maker, I'd be worried too.
* Old Florida joke:
Q: What's the difference between a canoe and a Canadian?
A: A canoe tips.
In true Canadian fashion, initial responses to the deal have focused on the probable losers. The most wide-ranging condemnation has come from the always negative Maude Barlow of the "Council of Canadians", who has said that there is no case to be made for any such deal. Jim Stanford, the thoughtful economist at trade union Unifor, has estimated that the deal could cost Canada up to 150,000 jobs, in sharp contrast to the government's own claim that it could produce 80-100,000 new ones.
Then there are the specific industries that could be severely affected. One is wine, a particularly important sector of the economy hereabouts, where a switch from an ad valorem tariff to a flat rate could make European wines more competitive at the higher price points. Potentially even more seriously affected is the cheese industry, which faces a more-than-doubling of the quota assigned to European producers. Cheese makers in Quebec seem to be particularly alarmed.
It's never easy to predict exactly how a free trade deal will play out, but there's one factor worth keeping in mind here: Canadians are world-class cheapskates*. Here in the Niagara region, a key feature of every newscast is a report of how long the lines are at the three bridges into the US. People are happy to line up for hours to save a few dollars on their weekly grocery shop, to the despair of local retailers.
Niagara is also wine country, with upwards of sixty producers in a smallish geographical area. If you go to a comparable area in Europe -- the Loire Valley in France, for example, or the Veneto in Italy -- you find that local stores and restaurants not only stock very few wines from outside the country, the don't even stock many from outside the immediate area. In Niagara, by contrast, local product is still heavily outgunned on store shelves and on menus by imported wines, despite the best efforts of the provincial liquor board (and the rising quality of the wines themselves).
Whether it's in deciding where to shop or deciding which wine to buy, most Canadians choose to ignore the fact that "shopping foreign" is putting their neighbours' livelihoods at risk, and always go for the cheapest product. It's a difficult mindset to overcome, and if I were a cheese or wine maker, I'd be worried too.
* Old Florida joke:
Q: What's the difference between a canoe and a Canadian?
A: A canoe tips.
Thursday, 17 October 2013
No flipping
For the past year and more, the Canadian federal government has been running a shamelessly partisan advertising campaign touting "Canada's Economic Action Plan", a ragbag of policies that have supposedly kept the economy afloat while the rest of the world has been mired in recession. With the next election no more than two years away, yesterday's Throne Speech to open the new session of Parliament unveiled a bit of a change of course: the Tories are going all populist on us.
Truth to tell, it's another ragbag of stuff. The government plans to force cable TV companies to let customers pick and choose the channels they want, rather than having to buy bizarrely "bundled" services that include all sorts of dreck that nobody wants. (For example, if you want something like Bloomberg TV or BBC World, you'll probably find you have to pay for something like Nickelodeon or Homes and Gardens TV as well). Phone companies are to be forced to reduce roaming charges (though there's to be no action against the peculiar pricing regime that requires you to pay for incoming calls and messages on your cell phone). Companies that charge customers extra for paper bills, as opposed to electronic ones, will be required to cease and desist. The government even wants to ensure that Canadians shopping at home pay the same prices that they would pay for the same goods in the US, which frankly seems like a completely unattainable goal.
It's an amazingly interventionist agenda for a government that loudly trumpets its opposition to excessive regulation of the private sector. It's also a real volte face for the Harper Tories: as the opposition NDP has been quick to point out, Harper has consistently voted against any and all such pro-consumer measures that have been suggested in the past.
It's also an agenda that's largely irrelevant to the economy's real problem: inadequate employment. Although it's true that Canada has done better than the rest of the G8 in the last half-decade or so, the job market is in poor shape. The most recent monthly employment data showed rising numbers of young people becoming discouraged about finding work. Stories about unpaid internships fill the media. Increasing numbers of workers in all age groups find themselves unable to find anything other than short-term contract work. Thousands of the notionally "employed", especially in retailing, now have no guaranteed hours of work each week.
These depressing trends have gathered pace even as the ballyhooed "Economic Action Plan" has unfolded. With the government restating its fiscal austerity stance and its determination to eliminate the budget deficit by the time of the next election, there's nothing in the Throne Speech to give the unemployed and underemployed much hope.
Truth to tell, it's another ragbag of stuff. The government plans to force cable TV companies to let customers pick and choose the channels they want, rather than having to buy bizarrely "bundled" services that include all sorts of dreck that nobody wants. (For example, if you want something like Bloomberg TV or BBC World, you'll probably find you have to pay for something like Nickelodeon or Homes and Gardens TV as well). Phone companies are to be forced to reduce roaming charges (though there's to be no action against the peculiar pricing regime that requires you to pay for incoming calls and messages on your cell phone). Companies that charge customers extra for paper bills, as opposed to electronic ones, will be required to cease and desist. The government even wants to ensure that Canadians shopping at home pay the same prices that they would pay for the same goods in the US, which frankly seems like a completely unattainable goal.
It's an amazingly interventionist agenda for a government that loudly trumpets its opposition to excessive regulation of the private sector. It's also a real volte face for the Harper Tories: as the opposition NDP has been quick to point out, Harper has consistently voted against any and all such pro-consumer measures that have been suggested in the past.
It's also an agenda that's largely irrelevant to the economy's real problem: inadequate employment. Although it's true that Canada has done better than the rest of the G8 in the last half-decade or so, the job market is in poor shape. The most recent monthly employment data showed rising numbers of young people becoming discouraged about finding work. Stories about unpaid internships fill the media. Increasing numbers of workers in all age groups find themselves unable to find anything other than short-term contract work. Thousands of the notionally "employed", especially in retailing, now have no guaranteed hours of work each week.
These depressing trends have gathered pace even as the ballyhooed "Economic Action Plan" has unfolded. With the government restating its fiscal austerity stance and its determination to eliminate the budget deficit by the time of the next election, there's nothing in the Throne Speech to give the unemployed and underemployed much hope.
Monday, 14 October 2013
Ruling out all options
In common with a lot of other jurisdictions, the Province of Ontario is moving to phase out the use of coal in power generation. It's also gradually reducing the role of the existing (and aging) fleet of nuclear plants, and reconsidering plans to build new ones. Gas generating plants are still under construction, but not in areas where the power is actually needed: in a long-running scandal, the taxpayer is on the hook for more than a billion dollars in connection with a couple of plants, already under construction, that were moved from the Toronto area ahead of the last provincial election.
Still, that leaves plenty of renewable options, right? Well, not exactly. A big push by the government to increase wind power generation has fallen foul of furious opposition from rural communities that don't want their pristine landscapes scarred by arrays of ugly windmills. Solar power remains far more expensive than conventional alternatives, and can only be considered a partial solution for a country at Canada's latitude. And even hydro power proposals don't seem to be able to make it past the NIMBYs -- see this example from the bucolic Muskoka region.
Which leaves us with what, exactly? Environmentalists argue for conservation rather than generation, pointing to the fact that electricity usage has fallen by 10 percent over the past decade. However, this is largely the result of the virtual collapse of the province's manufacturing base over the same period, so it's not a good thing, and it's certainly not an indication of future trends.
And then there's the possibility of importing power from neighbouring Quebec. Hydro Quebec's generating plants at Baie James are one of the engineering wonders of the world, but for Ontario to rely on them as a base source of power would be fraught with risk. A huge network of transmission lines would be needed to bring the power to Ontario, which would undoubtedly run into massive local opposition. Moreover, as Quebecers themselves discovered back in the 1990s, a major ice storm can bring the lines down and leave whole cities in the cold and dark. Lastly, Hydro Quebec currently sells surplus power into the NEPool in the United States. While this is mostly done under short-term contract, it would seem unwise for Ontario to rely for much of its power on supplies for which it has to compete with other buyers.
A motto of the environmental movement is "think globally, act locally". In the debate over future power generation in Ontario, citizens are both thinking and acting locally because they assume that someone else is taking care of the big picture. You wonder what would happen if the citizens of Bala Falls, Muskoka, for example, were given an honest choice. Something like, "Do you agree to the construction of a hydro generating plant, or do you want to freeze to death next winter?"
Still, that leaves plenty of renewable options, right? Well, not exactly. A big push by the government to increase wind power generation has fallen foul of furious opposition from rural communities that don't want their pristine landscapes scarred by arrays of ugly windmills. Solar power remains far more expensive than conventional alternatives, and can only be considered a partial solution for a country at Canada's latitude. And even hydro power proposals don't seem to be able to make it past the NIMBYs -- see this example from the bucolic Muskoka region.
Which leaves us with what, exactly? Environmentalists argue for conservation rather than generation, pointing to the fact that electricity usage has fallen by 10 percent over the past decade. However, this is largely the result of the virtual collapse of the province's manufacturing base over the same period, so it's not a good thing, and it's certainly not an indication of future trends.
And then there's the possibility of importing power from neighbouring Quebec. Hydro Quebec's generating plants at Baie James are one of the engineering wonders of the world, but for Ontario to rely on them as a base source of power would be fraught with risk. A huge network of transmission lines would be needed to bring the power to Ontario, which would undoubtedly run into massive local opposition. Moreover, as Quebecers themselves discovered back in the 1990s, a major ice storm can bring the lines down and leave whole cities in the cold and dark. Lastly, Hydro Quebec currently sells surplus power into the NEPool in the United States. While this is mostly done under short-term contract, it would seem unwise for Ontario to rely for much of its power on supplies for which it has to compete with other buyers.
A motto of the environmental movement is "think globally, act locally". In the debate over future power generation in Ontario, citizens are both thinking and acting locally because they assume that someone else is taking care of the big picture. You wonder what would happen if the citizens of Bala Falls, Muskoka, for example, were given an honest choice. Something like, "Do you agree to the construction of a hydro generating plant, or do you want to freeze to death next winter?"
Friday, 11 October 2013
Cameron's triumphant giveaway
I see UK Prime Minister David Cameron is crowing over the success of the controversial part-privatization of the Royal Mail.
The share offering was heavily over-subscribed and the shares have jumped well above the offering price in the first day of trading. As a former investment banker, I'd be tempted to say that the offering must have been underpriced, which means that the UK taxpayer has just been royally hosed for the benefit of investors.
Then again, it's unlikely that the interests of taxpayers were topmost in Cameron's mind when he decided to carry out this fire sale -- and it's a reasonable bet that most of the investors are good Tory voters who've just received a nice little bonus at the expense of their fellow citizens. What was Cameron's catchphrase again: oh yes, "we're all in this together".
UPDATE, October 17: Royal Mail shares are now trading almost 50% above the IPO price, which means Cameron's "triumph" has now cost taxpayers almost $1 billion in foregone revenue.
The share offering was heavily over-subscribed and the shares have jumped well above the offering price in the first day of trading. As a former investment banker, I'd be tempted to say that the offering must have been underpriced, which means that the UK taxpayer has just been royally hosed for the benefit of investors.
Then again, it's unlikely that the interests of taxpayers were topmost in Cameron's mind when he decided to carry out this fire sale -- and it's a reasonable bet that most of the investors are good Tory voters who've just received a nice little bonus at the expense of their fellow citizens. What was Cameron's catchphrase again: oh yes, "we're all in this together".
UPDATE, October 17: Royal Mail shares are now trading almost 50% above the IPO price, which means Cameron's "triumph" has now cost taxpayers almost $1 billion in foregone revenue.
Wednesday, 9 October 2013
The least logical tax EVER!
We stayed in a hotel in Toronto for one night this week. At checkout I questioned an unexplained item for just under ten bucks that appeared on the bill, described only as "DMP charge". Turns out that it's one of those almost ubiquitous fees designed to finance the local tourism authority.
Remind me how that works? If you actually show up in the city, which is presumably what the tourism authority is trying to induce you to do, then you get hit with this fee. If you stay the hell away from the place, no fee! How smart is that?
Probably the threat of a ten dollar sneak addition to your hotel bill won't put you off visiting Toronto, but this might: right now the city is all but impossible to get around. Parts of the subway system, such as it is, are closed nights and weekends for essential upgrades. The main train station is being rebuilt. And just about every major road in the city is being dug up.
After years, if not decades, of neglect, the city is trying to fix all its infrastructure at once. The reason? The Pan Am Games are coming to the area in 2015, and the politicians don't want to be embarrassed when delegates from much poorer nations down south realize how badly Toronto manages these things.
I always used to joke about Toronto being a good place to live, but you wouldn't want to visit there. If you are still tempted to go, maybe best to wait until after 2015, when most of the work is finished. Just remember to budget an extra ten bucks for that fee.
Remind me how that works? If you actually show up in the city, which is presumably what the tourism authority is trying to induce you to do, then you get hit with this fee. If you stay the hell away from the place, no fee! How smart is that?
Probably the threat of a ten dollar sneak addition to your hotel bill won't put you off visiting Toronto, but this might: right now the city is all but impossible to get around. Parts of the subway system, such as it is, are closed nights and weekends for essential upgrades. The main train station is being rebuilt. And just about every major road in the city is being dug up.
After years, if not decades, of neglect, the city is trying to fix all its infrastructure at once. The reason? The Pan Am Games are coming to the area in 2015, and the politicians don't want to be embarrassed when delegates from much poorer nations down south realize how badly Toronto manages these things.
I always used to joke about Toronto being a good place to live, but you wouldn't want to visit there. If you are still tempted to go, maybe best to wait until after 2015, when most of the work is finished. Just remember to budget an extra ten bucks for that fee.
Friday, 4 October 2013
Over-determined
The US government shutdown, now rapidly being subsumed into the much more serious wrangle about increasing the debt ceiling, shows no sign of ending any time soon. President Obama clearly regrets allowing the debt ceiling to become the centerpiece of innumerable fiscal disputes in his first term, and is refusing to negotiate on the issue at all. Republicans are determined to use the leverage that they feel the looming US default gives them to drive a hard bargain on the future direction of fiscal policy. "Obamacare", the proximate cause of the shutdown, has faded into the background, as most senior Republicans seem willing to admit that prospects for its repeal are non-existent.
Most economists and media commentators realize that the debt ceiling is far more trouble than it's worth, which is why it's an unknown concept outside the United States. It's likely that most politicians on both sides of the debate (the tea party types probably excluded) know this too. The fact is that trying to set a debt ceiling separately from spending and taxation decisions makes for a mathematically over-determined system.
In simplified form, there are three variables in play: taxation, spending and the deficit (financing of which results in the government's debt). You can decide how much you want to spend and how much tax you want to raise, and then the deficit (and addition to debt) follows mechanistically. Or you can decide how much of a deficit you are prepared to tolerate and how much taxation you want to raise, and those two figures will determine how much you can spend. You can't determine all three things independently, yet that's what the debt ceiling attempts to do.
Most of the time, Congress has understood this and has basically waved through increases in the debt ceiling. However, the Republicans are running up a nasty little track record of using it to make the lives of Democratic Presidents difficult. Newt Gingrich did it to Bill Clinton back in the 1990s, and now John Boehner, egged on by the tea partiers, is doing it to Barack Obama.
In a sensible world, the GOP and the Dems would probably agree to do away with the debt ceiling altogether -- and indeed, Matt Yglesias at Slate has argued that the Democrats should be seeking exactly that, as part of their price for ending the current impasse. Chances of that happening seem infinitesimally small, and in this frankly scary article, Yglesias offers us a theory as to why that may be so, and why gridlock in Washington is likely to get worse, not better.
As Yglesias relates, a Yale political science professor, Juan Linz, concluded after researching governance in a wide variety of countries that the US system is fundamentally flawed. Successful democracies have governments headed by elected first ministers, with the President as a largely titular head of state. In the US, by contrast, both the President and the Congress can claim popular mandates to govern. As long as ideological differences among the main parties were fuzzy, this system could function with only occasional disruption. However, as the two main parties have become ever more ideologically distinct in recent years, willingness to compromise has shrunk alarmingly.
Linz, who died just last week, had come to regard the US system of government as a failure. And as Yglesias concludes, "That's very bad news for America, and nobody knows how to stop it".
Most economists and media commentators realize that the debt ceiling is far more trouble than it's worth, which is why it's an unknown concept outside the United States. It's likely that most politicians on both sides of the debate (the tea party types probably excluded) know this too. The fact is that trying to set a debt ceiling separately from spending and taxation decisions makes for a mathematically over-determined system.
In simplified form, there are three variables in play: taxation, spending and the deficit (financing of which results in the government's debt). You can decide how much you want to spend and how much tax you want to raise, and then the deficit (and addition to debt) follows mechanistically. Or you can decide how much of a deficit you are prepared to tolerate and how much taxation you want to raise, and those two figures will determine how much you can spend. You can't determine all three things independently, yet that's what the debt ceiling attempts to do.
Most of the time, Congress has understood this and has basically waved through increases in the debt ceiling. However, the Republicans are running up a nasty little track record of using it to make the lives of Democratic Presidents difficult. Newt Gingrich did it to Bill Clinton back in the 1990s, and now John Boehner, egged on by the tea partiers, is doing it to Barack Obama.
In a sensible world, the GOP and the Dems would probably agree to do away with the debt ceiling altogether -- and indeed, Matt Yglesias at Slate has argued that the Democrats should be seeking exactly that, as part of their price for ending the current impasse. Chances of that happening seem infinitesimally small, and in this frankly scary article, Yglesias offers us a theory as to why that may be so, and why gridlock in Washington is likely to get worse, not better.
As Yglesias relates, a Yale political science professor, Juan Linz, concluded after researching governance in a wide variety of countries that the US system is fundamentally flawed. Successful democracies have governments headed by elected first ministers, with the President as a largely titular head of state. In the US, by contrast, both the President and the Congress can claim popular mandates to govern. As long as ideological differences among the main parties were fuzzy, this system could function with only occasional disruption. However, as the two main parties have become ever more ideologically distinct in recent years, willingness to compromise has shrunk alarmingly.
Linz, who died just last week, had come to regard the US system of government as a failure. And as Yglesias concludes, "That's very bad news for America, and nobody knows how to stop it".
Subscribe to:
Posts (Atom)