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  1. Le Sud-Ouest Montréal SECOND PROJET DE RÉSOLUTION - DATE LIMITE POUR SOUMETTRE UNE DEMANDE : 19 NOVEMBRE 2007. SECOND PROJET DE RÉSOLUTION INTITULÉ : «RÉSOLUTION AUTORISANT CERTAINS USAGES COMMERCIAUX EN SOUS-SOL ET PERMETTANT L’AGRANDISSEMENT DE L’ÉDICULE POUR DES FINS D’ACCESSIBILITÉ UNIVERSELLE AU 620, AVENUE ATWATER – STATION DE MÉTRO LIONEL-GROULX.» 1. Objet du projet et demande d’approbation référendaire À la suite de l’assemblée publique de consultation tenue le 24 octobre 2007, le conseil de l’arrondissement a adopté le second projet de la résolution ci-dessus mentionnée lors de sa séance du 6 novembre 2007. L’objet du présent projet de résolution vise à autoriser, à certaines conditions, certains usages commerciaux en sous-sol (épicerie, librairie (journaux) et restaurant / traiteur) et permettre l’agrandissement de l’édicule pour des fins d’accessibilité universelle au 620, avenue Atwater (station de métro Lionel-Groulx). Ce second projet contient des dispositions qui peuvent faire l’objet d’une demande de la part des personnes intéressées de la zone visée et des zones contiguës afin qu’une résolution qui les contient soit soumise à leur approbation conformément à la Loi sur les élections et les référendums dans les municipalités. Une telle demande vise à ce que la résolution contenant de telles dispositions soit soumise à l’approbation des personnes habiles à voter de la zone à laquelle elle s’applique et de celles de toute zone contiguë d’où provient une demande valide à l’égard de la disposition.
  2. Both governments are currently spending part of my money for stuff that does not interest me as much as say, having put the funds together to have saved the nordiques or expos. Now, don't get me wrong, I don't mind they spend some of my $$$ for museums, festivals, etc.. because I strongly believe that as a whole, we all win. However, not having the city of Québec on the NHL map is a disgrace and my heart aches every time spring training rolls around. The government should have done something...
  3. It's looking like New York will follow fast on the heels of Illinois in deciding not to add a luxury tax for jewelry over $20,000. The American Watch Association sent an e-mail to members on Monday saying that while the New York State Legislature has agreed to tax increases to deal with a budget deficit, the luxury tax proposal is not part of it. The luxury tax would have also applied to aircraft costing more than $500,000, yachts over $200,000, cars that cost more than $60,000 and furs over $20,000. But don't go spending yet, high earners in New York will be feeling an increased pinch. Income taxes were raised one percentage point to 7.85 percent for couples with income over $300,000 and couples with more than $500,000 in income will pay 8.97 percent. The three-year tax increase is expected to add $4 billion to the state coffers this year.
  4. Quebec Tories swapped ad expenses, Elections Canada alleges TIM NAUMETZ The Canadian Press July 22, 2008 at 9:26 AM EDT OTTAWA — The Conservative Party shifted thousands of dollars in advertising expenses from two of its top Quebec candidates to other Quebec candidates who had more spending room in their 2006 federal election campaigns, the lawyer for Elections Canada has suggested. A former financial officer for the party confirmed last month in a court examination that expenses incurred by Public Works Minister Christian Paradis and former foreign affairs minister Maxime Bernier were assigned to other candidates. But former chief financial officer Ann O'Grady said the expenses were “prorated” to the other candidates because the firm that placed the television and radio ads billed Mr. Paradis and Mr. Bernier for higher amounts than their campaign agents originally committed. Elections Canada lawyer Barbara McIsaac probed Ms. O'Grady over records involving an eventual claim for $20,000 in radio and TV advertising by Mr. Paradis and $5,000 in advertising claimed by Mr. Bernier. The financial statements and invoices – filed in a Federal Court case concerning $1.3-million in questionable Conservative ad expenses – also showed that Mr. Bernier and Mr. Paradis paid a fraction of the ad production costs compared with other Tory candidates. Mr. Bernier and Mr. Paradis are among 67 Conservative candidates whose advertising expenditures are under investigation by the federal elections commissioner. Agents for some of the candidates took Chief Electoral Officer Marc Mayrand to Federal Court after he refused last year to reimburse the expenditures on grounds that they did not qualify as local candidate expenses. The Commons ethics committee is also conducting an inquiry into the bookkeeping, which Elections Canada alleges allowed the Conservative party to exceed its national campaign spending limit by more than $1-million. The Canada Elections Act prohibits candidates from absorbing or sharing the election expenses of other candidates. NDP MP Pat Martin, a member of the ethics committee, said if the party did shift expenses from Mr. Bernier and Mr. Paradis to other candidates it would add an entirely new dimension to the controversy. “I can't get (fellow NDP MP) Judy Wasylycia-Leis to put $5,000 of my expenses into her expenses,” Mr. Martin said. “That's absolutely not allowed.” In a sworn cross-examination last month, the transcript of which was subsequently entered in the Federal Court file, Ms. McIsaac pressed Ms. O'Grady about advertising and ad production costs that were transferred from Mr. Bernier and Mr. Paradis to other candidates. Ms. McIsaac challenged Ms. O'Grady's explanations that the expenditures were reassigned because the candidates had been mistakenly invoiced for more than the amounts their official agents originally committed for the campaign. “I'm going to suggest to you that Mr. Bernier was less than $2,590 from his spending limit and that he couldn't afford to put the additional amount into his return,” Ms. McIsaac said to Ms. O'Grady. “That would be total supposition,” Ms. O'Grady responded. “Who knows what else would have been going on at the time? I can't comment on how Mr. Bernier ran his campaign.” In the case of Mr. Paradis, Ms. O'Grady conceded that the candidate had originally committed his campaign to a media buy totalling $30,000, was eventually invoiced $29,766 and subsequently received a “credit note” of $10,000 that was reallocated to another candidate, Marc Nadeau. “Now, again, the reason for this was that Mr. Paradis had reached his limit with respect to spending as well, is that correct?” Ms. McIsaac asked. “He had to allocate some of his money to Mr. Nadeau, did he not, because he was close to his limit?” “I would not know that,” replied Ms. O'Grady, who replaced former Tory chief financial agent Susan Kehoe several months after the election. Ms. McIsaac also questioned Ms. O'Grady over the fact that Mr. Bernier paid no production costs for his share of the advertising. Mr. Paradis paid only $233.93 for his share, even though Ms. McIsaac said other candidates paid $4,500 each for production costs.
  5. Stockton’s bankruptcy California’s Greece A city of nearly 300,000 goes bust. How many more will follow? Jun 30th 2012 | LOS ANGELES | from the print edition IN 2010 the demoralised police of Stockton mounted a roadside sign warning visitors that they were entering the state’s second most dangerous city. “Stop laying off cops!” the billboard urged. The fiscally troubled city of 290,000, in California’s depressed Central Valley, was slashing spending and cutting services in order to meet pension and health-care obligations. Violent crime had soared. Two years later, with crime still sky-high and city services even leaner, Stockton has given up. On June 26th, after months of closed-door negotiations with its creditors failed, the city council endorsed a budget plan to file for bankruptcy. The biggest municipal insolvency in American history will hit bondholders as well as former public workers whose health-care costs the city had covered. At the budget meeting former city workers with chronic medical conditions made heartfelt pleas to find another way out. But there were no more options. “Stockton is a cautionary tale about what happens if you don’t make dramatic fiscal changes to react to the broader economic picture,” says Chris Hoene of the National League of Cities, a think-tank in Washington DC. In the mid-1990s house prices soared and taxes flooded in. The city accumulated obligations to its workers and made rash spending pledges. When the market went sour in 2007-08 Stockton was left more exposed than most. Revenues dried up. As unemployment climbed above 20%, its foreclosure rate became one of the highest in the nation, where it remains. How many more Stocktons will America see? Perhaps fewer than some expect. “A great untold story is that a lot of cities are making dramatic decisions to bring their long-term fiscal solvency into line”, says Mr Hoene. Most municipalities were not as badly hit as Stockton, and so have more time to act on employee and retirement costs. Recent votes to cut pension benefits in San Jose and San Diego point to a growing reformist mood among some citizens. But in some respects Stockton is not alone. Like many Californian cities, notes Kevin Klowden of the Milken Institute in Los Angeles, it handed management of its pensions to CalPERS, a statewide fund. This locked it into obligations that reduced its budgetary autonomy. Even now it has no plans to cut pensions, for fear of incurring costly lawsuits. Other cities face similar difficulties, and demography is not on their side. Like Greece in the euro zone, Stockton represents a difference of degree, not of kind. http://www.economist.com/node/21557768
  6. April 8, 2009 By MERAIAH FOLEY SYDNEY — The Australian government said Tuesday that it would create a publicly owned company to build a national high-speed broadband network worth 43 million Australian dollars in one of the largest state-sponsored Internet infrastructure upgrades in the world. Prime Minister Kevin Rudd said the eight-year, $31 billion project would create up to 37,000 jobs at the peak of construction, giving a lift to the economy as retail spending slumps and mining companies cut workers amid weakening demand for Australian metals. The plan is “the most ambitious, far-reaching and long-term nation-building infrastructure project ever undertaken by an Australian government,” Mr. Rudd told reporters. The government’s announcement was a surprise rebuff to five private telecommunications firms, including Optus of Singapore and Axia NetMedia of Canada, that had been bidding to build a slower, less expensive network, with fiber-optic cables reaching as far as local nodes, worth around 10 billion dollars. But Mr. Rudd scrapped those proposals in favor of a superior but more expensive network that will deliver broadband speeds of up to 100 megabits per second — fast enough to download multiple movies simultaneously — to 90 percent of Australian buildings through fiber-optic cables that extend directly to the premises. The remaining 10 percent will receive upgraded wireless access. Analysts said the government-sponsored project would be the most ambitious fiber-to-the-premises network to have been undertaken by any nation and would be watched carefully by other governments considering Internet infrastructure spending as a way to stimulate growth as the global economic crisis continues. The Britain, Canada, Finland, Germany, Portugal, Spain and the United States have all included measures to expand broadband access and to bolster connection speeds in their planned stimulus packages. “Compared to what has been done elsewhere, this is quite a unique situation,” said Laurent Horrut, a telecommunications analyst at J.P. Morgan. Most developed countries have relied heavily on private-sector spending to upgrade their Internet networks, and those that have pledged public money have come “nowhere close” to the level of spending announced by Australia, he said. “This will set Australia up as potentially one of the international leaders here,” Paul Budde, an independent telecommunications analyst, said in a statement posted on his blog. “This government understands the trans-sector approach that is needed to stimulate the digital economy.” The government would make an initial investment of 4.7 billion Australian dollars in the enterprise, in which taxpayers would hold a 51 percent share. The remaining costs would be financed by investment from private companies and the sale of infrastructure bonds. Once the network was fully operational, Mr. Rudd said, the government would sell down its interest within five years. Mr. Rudd’s conservative opponent, Malcolm Turnbull, and some analysts criticized the plan, saying the cost of the project would likely be passed to consumers in the form of higher Internet fees. They also questioned whether consumers would embrace a fixed-line, fiber-to-the-premises network over increasingly popular wireless services. Even those who agree that the proposal is both sensible and achievable said setting the right price for companies to access the network would be “a major challenge.” “A low price will discourage private investors, but a high price will discourage consumer uptake and service innovation,” David Kennedy, research director at global advisory and consulting firm Ovum, said in an e-mailed statement. While most analysts agree that investing in communications technology makes economies more competitive, some are skeptical about whether long-term spending on communications infrastructure will provide the short-term stimulus needed to pull countries out of recession. The plan fulfills a 2007 election promise Mr. Rudd made to overhaul the country’s sprawling, antiquated Internet infrastructure. But the government is also holding the project up as a job-creating form of fiscal stimulus in a time when the private sector is shedding jobs at a faster-than-expected rate. On Tuesday, the Reserve Bank of Australia cut its benchmark cash rate by 0.25 percentage point to 3 percent, its lowest level since March 1960, amid signs the once-booming economy is continuing to deteriorate. The bank has so far slashed 4.25 percentage points from the cash rate since September in a bid to stop the country from slipping into its first recession in nearly two decades. According to government figures released last week, retail sales fell 2 percent in February, the biggest one-month drop since the introduction of a 10 percent goods and services tax in July 2000. Unemployment data has also gone from bad to worse. Australia and New Zealand Banking said Monday that job advertisements in newspapers and on the Internet had dropped 8.5 percent from February to March and a staggering 44.6 percent from the year before. It warned that unemployment could exceed 8 percent by next year. http://www.nytimes.com/2009/04/08/technology/internet/08broadband.html?_r=1&ref=business
  7. Ontario in decline: From Canada's economic engine to clunker Can Dalton McGuinty see the light and reverse the decay with his forthcoming budget? By Paul Vieira, Financial Post March 23, 2009 A month before Dalton McGuinty, the Liberal Ontario Premier, hit the election trail in the fall of 2007 to seek a second mandate, an ominous warning sign of the province's crumbling economic stature emerged that should have provided fodder for the campaign. An analysis from leading Bay Street economist Dale Orr said Ontarians' standard of living had plummeted -- from a peak of 15% above the Canadian average in the mid-1980s to just more than 5%. Accompanying the analysis was a warning of further erosion by 2010. Alas, the eye-opening report hardly generated buzz during the election campaign. Instead, most of the talk was about a Conservative proposal to provide government funding for faith-based schooling. Ontarians didn't warm to the idea and re-elected Mr. McGuinty's Liberals with another majority. Reflecting today on that report, Mr. Orr said his nightmare scenario for Ontario has unfolded as envisaged. If anything, the situation in the province may be worse. As the McGuinty government prepares to table its sixth provincial budget on Thursday, it does so knowing the province that was once the country's economic engine is now the clunker of the confederation. While former have-nots such as Saskatchewan post surpluses this fiscal year, Ontario is bleeding red ink--a cumulative two-year deficit of $18-billion. Ontario's dramatic decline comes as no accident. It was decades in the making, based on a combination of mismanaged public finances and the ascent of emerging economies at the expense of high-cost manufacturing. Upon taking office in 2003, Mr. McGuinty moved to pour tens of billions of dollars into improving government services -- health care, education and social programs targeting the downtrodden -- while neglecting the changing economic landscape. To help finance this agenda, he raised corporate taxes and slapped a health-care levy on households. These moves, analysts say, helped cement Ontario as one of the least attractive places for companies to invest. Analysts wonder whether the economic crisis is finally going to force Mr. McGuinty and Dwight Duncan, his Minister of Finance, to make tough choices on spending and undertake the kind of tax reform -- as displayed this week by New Brunswick-- that will help the province attract investment to offset heavy job losses in Ontario. Derek Burleton, senior economist at Toronto-Dominion Bank, said Thursday's budget presents a possible turning point for the province. "There is no doubt we are undergoing a period of transformation as some of the industries that have driven healthy gains in living standards are on the decline," said Mr. Burleton, who co-authored a report with TD chief economist Don Drummond last fall that called on the province to embrace a "sweeping" new economic vision. "Given the sizeable deficit the province faces, that will put increasing pressure on the government to prioritize." One of those priorities is for Mr. McGuinty to cease his preferred manner of dealing with difficulties in the industrial heartland -- funneling tens of millions of dollars to the manufacturing sector, particularly automotive, through targeted tax relief or direct subsidies. "What the province should have been doing over the years was to make the province more flexible in attracting new businesses and not diverting resources into declining sectors," said Finn Poschmann, vice-president of research at the C. D. Howe Institute, a Toronto-based think-tank that has been critical of Ontario's tax breaks for struggling sectors such as autos and forest products. "Do you want to steer resources to the sectors where the outlook is positive and growing? Or do you want to divert resources from these stars, which are more likely to generate the long-term employment and wage growth that Ontario is accustomed to?" The manufacturing sector, and its high-paying jobs, used to be the province's crown jewel. But as a component of Ontario's GDP, it has dropped from a peak of 23% in 2000 to roughly 18% on factors such as a richer Canadian dollar, higher energy costs and offshore competition. It is expected to fall further once the dust settles from this crisis. The province was largely able to mask the decline in manufacturing through a combination of a booming housing market, a surge in public sector hiring and a robust financial services sector. The financial crisis, however, has exposed those flaws. For the period starting in 2003, only Quebec and Nova Scotia have produced weaker growth than Ontario. Forecasts suggest Ontario was the only province whose economy shrank last year, and economists say it will record either the worst, or second-worst performance, among provinces this year. Scotia Capital, for instance, has Ontario's economy contracting 2.9% in 2009, and posting meagre growth of 1.4% in 2010, below the expected national average. Of the roughly 295,000 jobs lost in Canada since October, nearly half have come from the province. The result? Unemployment in Ontario, at 8.7%, is now higher than it is the United States (8.1%) and above Quebec's 7.9% jobless rate-- the first time that has happened in three decades. The news is not expected to get any better any time soon. "We believe that the unemployment rate in Canada's largest province should hit 10% by 2010, even if the automobile sector's restructuring plan works," said Sebastian Lavoie, an economist at Laurentian Bank Securities. Further, Mr. Lavoie said wage growth in the province is destined to take a hit. In the past, companies were forced to offer comparable wages and benefits based on what the Canadian Auto Workers would negotiate with the Detroit car makers. But Mr. Lavoie said that will no longer be the case, with CAW accepting salary freezes and making concessions on perks such as cost-of-living-allowance. The financial crisis has just exacerbated a growing trend, said Mary Webb, senior economist at Scotia Capital. Ontario's receipts from foreign-bound exports last year represent an 11.7% drop from a peak of $185.1-billion recorded in 2000. For the same time period, Quebec's receipts fell by just 2.9%. For the rest of Canada, excluding Ontario and Quebec, receipts have surged a whopping 72%. Compounding Ontario's problem is the emergence of big deficit, fuelled in part by shrinking tax revenue and years of escalated program spending. Under Mr. McGuinty, program spending now stands at $23-billion per year more than when he took office in October, 2003, an increase of 36%. In fiscal year, 2007-08, program spending climbed more than 10% to $87.6-billion, compared with a 5.4% increase in tax revenue. Observers note Mr. McGuinty's ascent to power in 2003 can be attributed to a desire for change among Ontarians after years of the hard-nosed, right-leaning Conservative regime that earned scorned for cutting government services. Mr. McGuinty's two terms have been dominated by a push to restore spending on public goods such as education, health care, infrastructure and social services. Analysts say Mr. McGuinty was on the right track to bolster some key building blocks, such as post-secondary education. To help pay for this, Mr. McGuinty raised the corporate tax -- to 14% from 12% --in his first budget. "The balance of [McGuinty's] approach was not quite right," said Jack Mintz, public policy professor at the University of Calgary and renowned tax expert. "The problem was trying to [reinvest in public services] while at the same time trying to maintain a vibrant industrial sector." Mr. Mintz and other analysts say Ontario's tax regime, as currently structured, is suffocating the province's ability to attract investment and rebuild the economy. Last year, Jim Flaherty, the federal Finance Minister, suggested the tax system was making Ontario the "last place" businesses wanted to invest. Mr. Flaherty took lots of heat for that remark, but he was on to something. Mr. Mintz's research indicates the province's marginal effective tax rate on capital, which encompasses all levies slapped on investment in the province, stands at 35%, six points higher than the Canadian average, 29%. Further, the Ontario rate ranks as the ninth-highest in the world, tied with Japan. Despite moves to eliminate capital tax in 2010, and other business tax reductions from the federal government, Ontario's marginal rate is expected to drop only three points to 32% by 2012 -- still higher than all provinces and exceeding the national average. "Ontario will not be successful in retaining existing businesses and attracting new ones if its taxation system is not on sound competitive footing with other provinces and countries," said the TD report by Messrs. Burleton and Drummond. There are signs that Mr. McGuinty is acknowledging the need to change. Despite previous opposition, he said in January the province would take a "long, hard look" at harmonizing its provincial sales tax with the GST. As currently structured, Ontario's sales tax derives almost half of its revenue from taxing business inputs such as productivity-enhancingequipment. Harmonizing with the GST would shift the tax burden to households, but economists argue it would boost business investment and make Ontario more attractive. In a C. D. Howe research paper he released yesterday, Mr. Poschmann said putting an end to the "archaic" sales tax and harmonizing with the GST would move Ontario from a high-tax jurisdiction to a medium-tax jurisdiction by 2012, with the marginal rate on investment falling just over 10 percentage points. A signal toward sales tax harmonization could be contained in Thursday's budget, although observers are hedging their bets given the potential voter backlash. Any further moves on taxation, whether business or personal, may have to wait given the province's monster deficit and an unwillingness to give up further revenue to fund public service initiatives. "Ontario is going to be deeply challenged," Mr. Mintz said, "because it is going to be very hard for the government to do anything when you are so fiscally restrained-- unless it wants to make the deficit even bigger now." Glen Hodgson, senior vice-president and chief economist at the Conference Board of Canada, said the needed tax reductions would not see the light of day until Ontario decides what to do about health-care spending, which is growing at an annual clip of 8% to 10% and is the single biggest expense item in the budget. "This is a catalytic moment for the province," Mr. Hodgson said. "The light bulb has gone on, but it is not burning brightly yet. A lot of people would like to return to the Old World. But I think the Old World is gone -and that's the dilemma Ontario faces." --------- MANITOBA, N.B. SET EXAMPLE: As Ontario attempts to pull itself out of its economic quagmire, it can look to the provinces of Manitoba and New Brunswick for leadership. While the recession is expected to hit every province, Manitoba comes out near the top in most forecasts as one of the country's better performers in 2009. In its outlook, the Conference Board of Canada projects slight growth in the province of 1%, powered by infrastructure projects and tax cuts. Jack Mintz, public policy professor at the University of Calgary, said Manitoba was, along with Ontario, considered a high-tax jurisdiction for business investment. But the government has moved and Manitoba's marginal effective tax rate on investment dropped from 37% in 2007 to 33.8% last year. It is now scheduled to fall to 26.7% by 2012. "It is on the high side, but it will be closer to the national average" in 2012,Mr. Mintz said. "From the point of view of people who need to make investment decisions now, they know these changes are in place over the next several years. So Manitoba looks more appealing." Manitoba also benefits from having one of the most diversified economies in Canada. Roughly 30% of its economy is agriculture, which is more resilient to economic downturns. Further, Manitoba has a diversified manufacturing base with aerospace and buses playing key roles - and, unlike autos, demand for those products continues to be fairly solid. It also has abundant, cheap hydroelectricity. In contrast, questions abound over the reliability of Ontario's power grid, especially in light of the 2003 blackout that blanketed the province and much of the U.S. northeast. Meanwhile, analysts have applauded New Brunswick for taking aggressive steps on taxation this week in an effort to make the province more attractive for both investors and workers. The main change is the replacement of the existing four-bracket personal income tax structure to a simpler two-bracket structure by 2012. The lowest rate will be 9% for workers earning less than $37,893. Beyond that threshold, a flat tax of 12% will be applied. Perhaps more stunning, however, is that New Brunswick plans to lower its general corporate tax rate from 13% to 12%, effective this year, and all the way down to 8% by 2012 - the lowest in the country. "The New Brunswick government appears to be relatively more proactive compared to other jurisdictions, taking bolder steps to improve its economic and fiscal roadmap," said Carlos Leitao, chief economist at Laurentian Bank Securities, in his analysis of the province's budget. Source: Paul Vieira, Financial Post [email protected] ONE-TIME POWERHOUSE CAN'T KEEP UP WITH REST OF THE COUNTRY: Ont. Export Receipt Drop 11.7% Que. Export Receipt Drop 2.9% Receipt Rise Rest Of Canada 72% Ontario GDP Decline, 2009 2.9% RANKS OF WORKERS IN CANADA'S LARGEST PROVINCE TAKE IT ON THE CHIN: Ontario Unemployment 8.7% U.S. Unemployment 8.1% Quebec Unemployment 7.8% Ontario Unemployment, 2010 10% © Copyright © National Post
  8. U.S. Economy: Retail Sales Drop in October by Most on Record By Shobhana Chandra and Bob Willis Nov. 14 (Bloomberg) -- Retail sales and prices of goods imported to the U.S. dropped by the most on record, signaling the economy may be in its worst slump in decades. Purchases fell 2.8 percent in October, the fourth straight decline, the Commerce Department said today in Washington. Labor Department figures showed import prices dropped 4.7 percent, pointing to a rising danger of deflation, and a private report said consumer confidence this month remained near the lowest level since 1980. ``The weakness in growth is intensifying and inflation pressures have evaporated,'' said James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut, who accurately projected the decline in sales. ``Deflation is a word that will be increasingly used over the coming months.'' Spending may continue to falter as mounting job losses, plunging stocks and falling home values leave household finances in tatters. Retailers from Best Buy Co. to J.C. Penney Co. are cutting profit forecasts ahead of the year-end holiday shopping season, when many stores do most of their business. Federal Reserve Chairman Ben S. Bernanke said at a conference today in Frankfurt that continuing strains in financial markets and recent economic data ``confirm that challenges remain.'' The Fed chief said central bankers worldwide ``stand ready to take additional steps'' as warranted. Economists surveyed by Bloomberg News predict the Fed will lower its benchmark interest rate to a record 0.5 percent by March from the current 1 percent. Policy makers next gather in Washington Dec. 16. Stocks, Treasuries Stocks fell and Treasuries rose. The Standard & Poor's 500 Stock Index dropped 1.8 percent to 894.09 at 10:11 a.m. in New York. Yields on benchmark 10-year notes fell to 3.75 percent from 3.85 percent late yesterday. The Reuters/University of Michigan preliminary index of consumer sentiment was 57.9 in November compared with 57.6 last month. The measure averaged 85.6 in 2007. Retail sales were expected to fall 2.1 percent, according to the median forecast of 73 economists in a Bloomberg News survey. Purchases in September were revised down to show a 1.3 percent decrease compared with an originally reported 1.2 percent drop. ``The September-October credit jolt to the economy is showing up in all of the numbers now,'' Ellen Zentner, a senior U.S. macroeconomist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said in a Bloomberg Television interview. ``We're expecting the worst recession, possibly, post-World War II.'' Worse Than Estimates Retailers have now logged the longest string of monthly declines since the Commerce Department's comparable data series began in 1992. Excluding automobiles, purchases decreased 2.2 percent, almost twice as much as the 1.2 percent decline anticipated and also the worst performance on record. Declines were broad based as furniture, electronics, clothing and department stores all showed loses. Demand at automobile dealerships and parts stores plunged 5.5 percent after falling 4.8 percent in September. Car sales are among the most affected as banks make it harder to borrow. Treasury Secretary Henry Paulson this week said the government will shift the focus of the second half of the $700 billion rescue plan from buying mortgage assets to unclogging consumer credit. President-elect Barack Obama and Democrats in Congress are under pressure to push through another stimulus plan even before the new administration takes over. Filling-station sales decreased 13 percent, also the most ever, in part reflecting a $1-per-gallon drop in the average cost of gasoline. Excluding gas, retail sales fell 1.5 percent. Gain at Restaurants Sales at furniture, electronics, clothing, sporting goods and department stores were also among the losers. Restaurants, grocery stores and a miscellaneous category were the only areas that showed a gain. ``Since mid-September, rapid, seismic changes in consumer behavior have created the most difficult climate we've ever seen,'' Brad Anderson, chief executive officer of Best Buy, said in a Nov. 12 statement. The Richfield, Minnesota-based electronics chain said sales in the four months through February 2009 will decline more than it previously estimated. Rival Circuit City Stores Inc. filed for bankruptcy protection this week. Macy's Inc., Target Corp. and Gap Inc. were among the chains that reported same-store sales dropped in October, while shoppers searching for discounts on groceries gave sales a lift at Wal- Mart Stores Inc., the world's largest retailer. Nordstrom yesterday cut its profit forecast for the third time this year. Worst Season J.C. Penney, the third-largest U.S. department-store company, today forecast earnings that trailed analysts' estimates and posted its fifth straight quarterly profit decline as shoppers cut spending on home goods and jewelry. Shoppers are pulling back as the labor market slumps. The unemployment rate jumped to 6.5 percent in October, the highest level since 1994. Employers cut more than a half million workers from payrolls in the past two months. The longest expansion in consumer spending on record ended last quarter, causing the economy to shrink at a 0.3 percent annual pace. The economic slump will intensify this quarter and persist into the first three months of 2009, making it the longest downturn since 1974-75, economists forecast in a Bloomberg survey conducted from Nov. 3 to Nov. 11. Excluding autos, gasoline and building materials, the retail group the government uses to calculate gross domestic product figures for consumer spending, sales decreased 0.5. The government uses data from other sources to calculate the contribution from the three categories excluded. To contact the reporter on this story: Shobhana Chandra in Washington [email protected]
  9. not good gents.. Fitch Affirms Province of Quebec at 'AA-'; Outlook Revised to Negative Thu Dec 12, 2013 5:36pm EST * Reuters is not responsible for the content in this press release. 0 COMMENTS Fitch Affirms Province of Quebec at 'AA-'; Outlook Revised to Negative Fitch Ratings affirms the 'AA-' long-term ratings on senior unsecured obligations of the Province of Quebec, Canada, as detailed at the end of this release. In addition, Fitch affirms the outstanding 'F1+' short-term ratings on the Province of Quebec. The Rating Outlook is revised to Negative from Stable. SECURITY Senior unsecured obligations are direct and unconditional obligations of the Province to which the Province's full faith and credit is pledged. Commercial paper notes are promissory notes ranking equally with Quebec's other unsubordinated and unsecured indebtedness. For Financement-Quebec, payment of debt service is unconditionally guaranteed by the Province from the consolidated revenue fund. KEY RATING DRIVERS NEGATIVE OUTLOOK BASED ON DELAYED FISCAL BALANCE: The revision of the Outlook on the Province's long-term rating, to Negative from Stable, reflects the delay in achieving budgetary balance, to fiscal 2016 from fiscal 2014. The delay is based on slower economic and revenue performance since the fiscal 2014 budget was tabled and the consequent reduction in forecast economic and revenue growth thereafter. HIGH DEBT: Debt is high relative to resources and has grown as the Province works toward budgetary balance. Debt management is strong and centralized, and the Province maintains ample access to liquidity for both operations and debt service requirements, supporting the 'F1+' short-term rating. FISCAL FLEXIBILITY: Fiscal flexibility has been provided by a willingness to date to adjust tax policy and by progress in constraining spending growth; budgeted contingency funds provide additional cushion. Longer term spending control remains the most persistent risk to fiscal balance, particularly given lower spending growth targets in the revised fiscal consolidation framework. DIVERSE ECONOMY: The economy is large and diverse, and historically slower growing and less wealthy than the Canadian average. Modestly paced growth continues. Vulnerabilities include global trade links, particularly with the U.S. market, and a significant manufacturing sector. SOVEREIGNTY MOVEMENT REMAINS: The sovereignty movement has been a source of uncertainty in the past although it is not a current issue. FINANCEMENT-QUEBEC'S RATING LINKED TO PROVINCE: The rating for Financement-Quebec reflects the credit strength of the Province given the Province's unconditional guarantee. RATING SENSITIVITIES INABILITY TO ACHIEVE ECONOMIC AND FISCAL TARGETS: Additional near-term economic and revenue deterioration, or an inability to attain revised fiscal targets under current forecast trends would result in a rating downgrade. CREDIT PROFILE The revision of the Outlook on Quebec's long-term 'AA-' rating, to Negative from Stable, is based on weaker-than-planned economic and revenue performance since the fiscal 2014 budget was tabled, reducing the province's near-term revenue forecast and resulting in a two-year delay, to fiscal 2016, in achieving fiscal consolidation. Although the revised fiscal framework includes additional corrective actions to return to balance and offset the additional deficit borrowing now expected in fiscal years 2014 and 2015, a higher accumulated debt burden further reverses the progress on debt reduction made by the Province during the decade prior to the last recession. Despite the slow, uneven economic recovery now underway, Quebec's credit quality continues to be supported by careful fiscal and debt management, ample access to debt markets for liquidity needs, and past success of achieving progress in debt reduction and spending control. The Province has drawn on its considerable budgetary flexibility to date as it carries out its fiscal consolidation framework, including raising a variety of taxes and curbing spending growth. The latter is a particularly notable achievement, and Fitch believes the Province has additional flexibility to reduce spending. DEBT BURDEN WILL REMAIN HIGH The Province's high debt remains its most significant long-term credit challenge, in Fitch's view. Outstanding gross debt, including debt of consolidated entities and pension liabilities, was C$191.8 billion in fiscal 2013, equal to 53.6% of GDP. Debt service, at C$7.8 billion in fiscal 2013, consumed 11.5% of fiscal 2013 budgetary revenues, a high but manageable level. Much of the current debt burden stems from accumulated deficits built over prior decades and in the years since the 2008-2009 recession, amounting to C$118.1 billion in fiscal 2013 or 33% of GDP. Total public sector debt, at C$256.4 billion, equals 71.7% of GDP. Under the revised forecast through fiscal 2018, projected gross debt gradually flattens out, albeit at higher levels than envisioned in the government's previous plan. The government forecasts that gross debt will begin to decline as a percent of GDP in fiscal 2015, and its statutory debt burden target includes achieving a gross debt to GDP ratio of 45% and accumulated deficit to GDP of 17%, in fiscal 2026. Debt figures are net of the Generations Fund balance, a reserve for debt reduction, funded at about C$5.2 billion in fiscal 2013. Despite its high debt metrics, the Province has demonstrated broad market access for borrowing and is a sophisticated debt manager. ECONOMIC GROWTH CONTINUES AT SLOWER PACE As of its November 2013 forecast, Quebec's economic performance in 2013 is estimated to have slowed considerably compared to forecast expectations in March 2013 when the government last updated its economic outlook. After rising 1.5% in 2012, real GDP in 2013 is now estimated to rise only 0.9%. Real GDP growth in 2013 was expected to be 1.3% as of the government's March 2013 forecast, and 1.5% in November 2012, when the fiscal 2014 budget was tabled. The disappointing performance is attributed to numerous factors, including continuing weak global economic trends, more modest domestic consumption and much lower inflation. Economic gains are continuing, even if at a slower pace than expected. November 2013 employment rose 0.4% year over year, compared to 1% for Canada; unemployment, at 7.2% in November 2013, was ahead of the 6.9% Canadian level. The revised forecast assumes modest labor market gains through 2013, with the unemployment rate at 7.7% for the year. Forecast expectations for 2014 appear reasonable, in Fitch's view, with higher economic growth rates, albeit off the lower 2013 base. The update assumes real GDP growth accelerating to 1.8% in 2014, unchanged from the March 2013 forecast. Growth going forward is driven in part by the accelerating, but still slow, U.S. recovery, among other factors. The strength of the economic recovery in the U.S., Quebec's main international trading partner, remains a key uncertainty to achieving forecast expectations. The next forecast update will be released in spring 2014, when the fiscal 2015 budget is tabled. DELAYED FISCAL CONSOLIDATION Quebec, as with many Canadian provinces, has been on a multi-year path to restore budgetary balance since the recession of 2008-2009. In its fiscal 2010 budget, the province announced a framework for returning to budgetary balance by fiscal 2014, with gradually diminishing annual deficits. Disappointing 2013 economic performance and its effect on recent actual revenue collections and forecast growth is now prompting a delay, to fiscal 2016, in achieving balance and requiring additional actions to consolidate the budget. To date, the province has relied on considerable fiscal flexibility to diminish projected operating deficits, although in Fitch's view much less flexibility now remains given the extent of actions taken to date. The Province estimates tax rate changes since the framework began will generate a cumulative $6.3 billion in revenues as of fiscal 2014; recent phased-in changes, notably in consumption taxes, are believed to have affected consumer demand, and the government's newly-revised consolidation plan avoids additional tax rate adjustments. Quebec has had notable success in reducing spending growth. The government's revised fiscal framework relies on additional spending controls both to offset lower revenues and absorb certain spending increases (including a recently-announced stimulus program and for retiree obligations). Program spending growth has fallen from an average of 5.6% annually during the fiscal 2007-2010 period, to 1.2% in fiscal 2013; lower than planned spending helped to absorb some of the unexpected revenue weakness experienced during fiscal 2013. The government's revised framework maintains fiscal 2014 spending at the budgeted level, while reducing projected annual growth in fiscal 2015 and beyond to 2%. Fiscal 2014 is now forecast to end with a deficit of $2.5 billion, essentially matching the November 2013 downward revision in own source revenues; fiscal 2014 own source revenue growth is now expected at 2.6%, down from 5.2% in the March 2013 plan. The revenue outlook in fiscal 2015 and beyond also has been lowered accordingly, although newly-announced budget measures reduce the projected fiscal 2015 deficit to $1.75 billion. To offset the higher near term deficits and resulting higher borrowing, the revised framework increases planned deposits to the Generations Fund beginning in fiscal 2017. AFFIRMED RATINGS Fitch's affirmation of the long-term 'AA-' rating and revision to Rating Outlook Negative applies to the following senior unsecured bonds of the Province of Quebec and Financement-Quebec, as follows: Province of Quebec: --Senior unsecured debt; --Local currency long-term rating; --Long-term issuer rating. Financement-Quebec: --Senior unsecured debt; --Local currency long-term rating; --Long-term issuer rating. In addition, Fitch affirms the short-term 'F1+' ratings on the Province of Quebec and Financement-Quebec, as follows: --Province of Quebec short-term issuer rating; --Province of Quebec short-term commercial paper; --Financement-Quebec short-term issuer rating. In accordance with Fitch's policies the issuer appealed and provided additional information to Fitch that resulted in a rating action that is different than the original rating committee outcome. Additional information is available at 'www.fitchratings.com'. Applicable Criteria and Related Research: --'Tax-Supported Rating Criteria', Aug. 14, 2012; --'International Local and Regional Governments Rating Criteria, Outside the United States', April 9, 2013. Applicable Criteria and Related Research: International Local and Regional Governments Rating Criteria http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=704438 T
  10. The whole blogosphere and media in Canada has said a lot of things about two mayoral elections in two of Canada's major cities the past month. Both of them had the guy expected to come in 3rd place, win the elections with a majority of votes, with high voter turnouts as well. Everyone was surprised because a "progressive", brown, unmarried and Muslim guy won the mayoralty in Calgary (of all places) and a "hyper-conservative" fat white guy won the mayoralty in Toronto, which just shatters everyone's stereotypes of both cities. Some say they should have happened the other way around But it seems that the "progressive" Mr. Nenshi is also quite respectful of the taxpayers, which is always very nice to hear of and would be most welcome in Montreal or any city. He has said he has "a lot in common" with Mr. Ford, and has been trying to find ways to cut spending in his city to reduce a planned property tax hike. So I liked this article: As for Rob Ford, I don't think he has actually become Mayor of Toronto yet or at least has done anything, except meet with all the elected councillors to get to know them. Who said things about "angry politics", he seems like he is actually trying to make the council work An interesting, contemporary TO article: This article about spending by TO city councillors is also illuminating: http://www.nationalpost.com/high+costs+council/3780393/story.html Some highlights: I don't think I even want to know what the books look like for Montreal's city council
  11. Méga article très intéressant du magazine The Economist Lien The world economy A glimmer of hope? Apr 23rd 2009 From The Economist print edition The worst thing for the world economy would be to assume the worst is over THE rays are diffuse, but the specks of light are unmistakable. Share prices are up sharply. Even after slipping early this week, two-thirds of the 42 stockmarkets that The Economist tracks have risen in the past six weeks by more than 20%. Different economic indicators from different parts of the world have brightened. China’s economy is picking up. The slump in global manufacturing seems to be easing. Property markets in America and Britain are showing signs of life, as mortgage rates fall and homes become more affordable. Confidence is growing. A widely tracked index of investor sentiment in Germany has turned positive for the first time in almost two years. All this is welcome—not least because the slump has been made so much worse by panic and despair. When the financial system was on the brink of collapse in September, investors shunned all but the safest assets, consumers stopped spending and firms shut down. That plunge into the depths could be succeeded by a virtuous cycle, where the wheels of finance turn again, cheerier consumers open their wallets and ambitious firms turn from hoarding cash to pursuing profits. But, welcome as it is, optimism contains two traps, one obvious, the other more subtle. The obvious trap is that confidence proves misplaced—that the glimmers of hope are misinterpreted as the beginnings of a strong recovery when all they really show is that the rate of decline is slowing. The subtler trap, particularly for politicians, is that confidence and better news create ruinous complacency. Optimism is one thing, but hubris that the world economy is returning to normal could hinder recovery and block policies to protect against a further plunge into the depths. Luminous indicators Begin with those glimmers. It is easy to read too much into the gain in share prices. Stockmarkets usually rally before economies improve, because investors spy the promise of fatter profits before the statisticians document a turnaround. But plenty of rallies fizzle into nothing. Between 1929 and 1932, the Dow Jones Industrial Average soared by more than 20% four times, only to fall back below its previous lows. Today’s crisis has seen five separate rallies in which share prices rose more than 10% only to subside again. The economic statistics are hard to interpret, too. The past six months have seen several slumps, each with a different trajectory. The plunge in manufacturing is in part the result of a huge global inventory adjustment. With unsold goods piling up and finance hard to come by, firms around the world have slashed production even faster than demand has fallen. Once firms have run down their stocks they will start making things again and the manufacturing recession will be past its worst. Even if that moment is at hand, two other slumps are likely to poison the economy for much longer. The most important is the banking crisis and the purge of debt in the bubble economies, especially America and Britain. Demand has plummeted as tighter credit and sinking asset prices have exposed consumers’ excessive borrowing and scared them into saving more. History suggests that such balance-sheet recessions are long and that the recoveries which eventually follow them are feeble. The second slump is in the emerging world, where many economies have been hit by the sudden fall in private cross-border capital flows. Emerging economies, which imported capital worth 5% of their GDP in 2007, now face a world where cautious investors keep their money at home. According to the IMF, banks, firms and governments in the emerging world have some $1.8 trillion-worth of borrowing to roll over this year, much of that in central and eastern Europe. Even if emerging markets escape a full-blown debt crisis, investors’ confidence is unlikely to recover for years. These crises sent the world economy into a decline that, on several measures, has been steeper than the onset of the Depression. The IMF’s latest World Economic Outlook expects global output to shrink by 1.3% this year, its first fall in 60 years. But the collapse has been countered by the most ambitious policy response in history. Central banks have pumped out trillions of dollars of liquidity and, in rising numbers, have resorted to an increasingly exotic arsenal of “unconventional” firepower to ease credit markets and loosen monetary conditions even as policy rates approach zero. Governments have battled to prop up their banks, committing trillions of dollars in the process. The IMF has new money. Every big rich country has bolstered demand with fiscal stimulus (and so have many emerging ones). The rich world’s budget deficits will, on average, reach almost 9% of GDP, six times higher than before the crisis hit. The Depression showed how damaging it can be if governments don’t step in when the rest of the economy seizes up. Yet action on the current scale has never been tried before and nobody knows when it will have an effect—let alone how much difference it will make. Whatever the impact, it would be a mistake to confuse the twitches of an economy on life-support with a lasting recovery. A real recovery depends on government demand being supplanted by sustainable sources of private spending. And here the news is almost uniformly grim. Searching for new demand Take the country many are pinning their hopes on: America. The adjustment in the housing market began earlier there than anywhere else. Prices peaked almost three years ago, and are now down by 30%. Manufacturing production has been falling at an annualised rate of more than 20% for the past three months. And the government’s offsetting policy offensive has been the rich world’s boldest. As the inventory adjustment ends and the stimuli kick in, America’s slump is sure to ease. Cushioned by the government, the economy may even begin to grow again before too long. But it is hard to see the ingredients for a recovery that is robust enough to stop unemployment rising. Weakness abroad will crimp exports. America’s banks are propped up with public capital, but their balance-sheets are clogged with toxic assets. Consumer spending and firms’ investment will be dragged lower by the need to pay back debt and restore savings. This will be a long slog. Private-sector leverage, which rose by 70% of GDP between 2000 and 2008, has barely begun to unwind. At 4%, the household savings rate has jumped sharply from its low of near zero, but it is still far below its post-war average of 7%. Higher unemployment and rising bankruptcies could easily cause a vicious new downward lurch. In Britain, given the size of its finance industry, housing boom and consumer debt, the balance-sheet adjustment will, if anything, be greater. The weaker pound will buoy exports, but fragile public finances suggest that Britain has much less scope to use government spending to cushion the private sector than America does—as this week’s flawed budget made painfully clear (see article). The outlook should in theory be brighter for Germany and Japan. Both have seen output slump faster than in other rich countries because of the collapse in trade and manufacturing, but neither has the huge private borrowing of the sort that haunts the Anglo-Saxon world. Once inventories have adjusted, recovery should come quickly. In practice, though, that seems unlikely, especially in Germany. As the output slump sends Germany’s jobless rate towards double-digits, it is hard to see consumers going on a spending spree. Nor has the government shown much appetite for boosting demand. Germany’s fiscal stimulus, although large by European standards, falls well short of what it could afford. Worse, the country’s banks are still in trouble. Germans did not behave recklessly, but their banks did—along with many others in continental Europe. New figures from the IMF suggest that European banks face some $1.1 trillion in losses, hardly any of which have yet been recognised (see article). This week’s German plan to set up several bad banks was no more than a down payment on the restructuring ahead. Japan has acted more boldly. Its latest package of tax cuts and government spending, unveiled in early April, will provide the biggest fiscal boost, relative to GDP, of any rich country this year. Its economy is likely to perk up, temporarily at least. But its public-debt stock is approaching 200% of GDP, so Japan has scant room for more fiscal stimulus. With export markets weak, demand will soon need to be privately generated at home. But the past two decades offer little evidence that Japan can make that shift. For the time being, the brightest light glows in China, where a huge inventory adjustment has exaggerated the impact of falling foreign demand, and where the government has the cash and determination to prop up domestic spending. China’s stimulus is already bearing fruit. Loans are soaring and infrastructure investment is growing smartly. The IMF’s latest forecast, that China’s economy will grow by 6.5% this year, may prove conservative. Yet even China has its difficulties. Perhaps three-quarters of the growth will come from government demand, particularly infrastructure spending. Not much to glow about Add all this up and the case for optimism fades quickly. The worst is over only in the narrowest sense that the pace of global decline has peaked. Thanks to massive—and unsustainable—fiscal and monetary transfusions, output will eventually stabilise. But in many ways, darker days lie ahead. Despite the scale of the slump, no conventional recovery is in sight. Growth, when it comes, will be too feeble to stop unemployment rising and idle capacity swelling. And for years most of the world’s economies will depend on their governments. Consider what that means. Much of the rich world will see jobless rates that reach double-digits, and then stay there. Deflation—a devastating disease in debt-laden economies—could set in as record economic slack pushes down prices and wages, particularly since headline inflation has already plunged thanks to sinking fuel costs. Public debt will soar because of weak growth, prolonged stimulus spending and the growing costs of cleaning up the financial mess. The OECD’s member countries began the crisis with debt stocks, on average, at 75% of GDP; by 2010 they will reach 100%. One analysis suggests persistent weakness could push the biggest economies’ debt ratios to 140% by 2014. Continuing joblessness, years of weak investment and higher public-debt burdens, in turn, will dent economies’ underlying potential. Although there is no sign that the world economy will return to its trend rate of growth any time soon, it is already clear that this speed limit will be lower than before the crisis hit. Start preparing for the next decade Welcome to an era of diminished expectations and continuing dangers; a world where policymakers must steer between the imminent threat of deflation while countering investors’ (reasonable) fears that swelling public debts and massive monetary easing could eventually lead to high inflation; an uncharted world where government borrowing reaches a scale not seen since the second world war, when capital controls ensured that savings stayed at home. How to cope with these dangers? Certainly not by clutching at scraps of better news. That risks leading to less action right now. Warding off deflation, for instance, will demand more unconventional steps from more central banks for longer than many now seem to foresee. Laggards, such as the European Central Bank, do themselves and the world no favours by holding back. Nor should governments immediately seek to take back the fiscal stimulus. Prolonged economic weakness does far greater damage to public finances than temporary fiscal activism. Remember how Japan snuffed out its recovery in the 1990s by rushing to raise taxes. Japan also put off bank reform. Countries facing big balance-sheet adjustments should heed that lesson and nudge reform along, in particular by doing more to clean up and restructure the banks. Countries with surpluses must encourage private spending at home more vigorously. China’s leaders are still doing too little to boost private citizens’ income and their spending by fostering reforms, from widening health-care coverage to forcing state-owned firms to pay higher dividends. At the same time policymakers must give themselves room to change course in the future. Central banks need to lay out the rules that will govern their exit from exotic forms of policy easing (see article). That may require new tools: the Federal Reserve would gain from being able to issue bonds that could mop up liquidity. All governments, especially those with the ropiest public finances, should think boldly about how to lower their debt ratios in the medium term—in ways that do not choke off nascent private demand. Rather than pushing up tax rates, they should think about raising retirement ages, reining in health costs and broadening the tax base. This weekend many of the world’s finance ministers and central bankers will meet in Washington, DC, for the spring meetings of the IMF and World Bank. Amid rising confidence, they will be tempted to pat themselves on the back. There is no time for that. The worst global slump since the Depression is far from finished. There is work to do.
  12. Quebec lags in IT spending Slowest growth. Ontario has highest investment per worker ERIC BEAUCHESNE, Canwest News Service Published: 8 hours ago Ontario and Alberta lead the other provinces in investment in information and communications technology per worker, which is increasingly seen as a key to boosting Canada's lagging productivity performance. In contrast, New Brunswick and British Columbia have invested the least in productivity-enhancing computers and telecommunications equipment and software, and Quebec's growth in such spending is the lowest among the provinces. Those are the findings of a report by the Centre for the Study of Living Standards released this week in the wake of news that Canada has suffered its longest slide in productivity in nearly 20 years, leaving output per hour worked here further behind that in the U.S., its main trading partner and competitor. The report noted that other studies have found that Canadian investment in information and communications technology, like Canadian productivity growth, lags that of the U.S. The focus of the Ottawa-based think tank's latest study, however, is on the varying levels of such investment within Canada. This year has been the first published breakdown by Statistics Canada of such investment by province. "Many factors affect productivity but ICT investment is a key one," economist Andrew Sharpe, the report's author and head of the research firm said in an interview. For example, the lower level of productivity in most of Atlantic Canada compared with Ontario has been linked to lower levels of ICT investment in Atlantic Canada, he said. Important ICT investment disparities exist, only some of which can be explained by the industrial makeup of the provinces, it said. All provinces have experienced strong growth in ICT investment this decade, led by Newfoundland with increases of nearly 15 per cent per year, almost double that in Quebec which had the weakest growth in such investment at 8.4 per cent. However, the actual level of investment per worker in 2007 varied widely. "These disparities ... may stem from many reasons: Lower levels of wealth, a lack of investment-friendly policies, policies favouring investment in other asset types or industrial structure. "Yet, the significant differences in ICT investment between provinces suggests that policy differences may be important in driving ICT investment," the report concluded. Provincial Breakdown Information and communications technology spending per worker: Ontario $3,870 Alberta $3,722 Canada $3,353 Saskatchewan $3,050 Quebec $2,953 Prince Edward Island $2,935 Newfoundland $2,765 Nova Scotia $2,716 Manitoba $2,688 British Columbia $2,674 New Brunswick $2,445 Centre for the Study of Living Standards
  13. Economic meltdown : The Big Fix Article Tools Sponsored By By DAVID LEONHARDT Published: January 27, 2009 NYC Times I. WHITHER GROWTH? The economy will recover. It won’t recover anytime soon. It is likely to get significantly worse over the course of 2009, no matter what President Obama and Congress do. And resolving the financial crisis will require both aggressiveness and creativity. In fact, the main lesson from other crises of the past century is that governments tend to err on the side of too much caution — of taking the punch bowl away before the party has truly started up again. “The mistake the United States made during the Depression and the Japanese made during the ’90s was too much start-stop in their policies,” said Timothy Geithner, Obama’s choice for Treasury secretary, when I went to visit him in his transition office a few weeks ago. Japan announced stimulus measures even as it was cutting other government spending. Franklin Roosevelt flirted with fiscal discipline midway through the New Deal, and the country slipped back into decline. Geithner arguably made a similar miscalculation himself last year as a top Federal Reserve official who was part of a team that allowed Lehman Brothers to fail. But he insisted that the Obama administration had learned history’s lesson. “We’re just not going to make that mistake,” Geithner said. “We’re not going to do that. We’ll keep at it until it’s done, whatever it takes.” Once governments finally decide to use the enormous resources at their disposal, they have typically been able to shock an economy back to life. They can put to work the people, money and equipment sitting idle, until the private sector is willing to begin using them again. The prescription developed almost a century ago by John Maynard Keynes does appear to work. But while Washington has been preoccupied with stimulus and bailouts, another, equally important issue has received far less attention — and the resolution of it is far more uncertain. What will happen once the paddles have been applied and the economy’s heart starts beating again? How should the new American economy be remade? Above all, how fast will it grow? That last question may sound abstract, even technical, compared with the current crisis. Yet the consequences of a country’s growth rate are not abstract at all. Slow growth makes almost all problems worse. Fast growth helps solve them. As Paul Romer, an economist at Stanford University, has said, the choices that determine a country’s growth rate “dwarf all other economic-policy concerns.” Growth is the only way for a government to pay off its debts in a relatively quick and painless fashion, allowing tax revenues to increase without tax rates having to rise. That is essentially what happened in the years after World War II. When the war ended, the federal government’s debt equaled 120 percent of the gross domestic product (more than twice as high as its likely level by the end of next year). The rapid economic growth of the 1950s and ’60s — more than 4 percent a year, compared with 2.5 percent in this decade — quickly whittled that debt away. Over the coming 25 years, if growth could be lifted by just one-tenth of a percentage point a year, the extra tax revenue would completely pay for an $800 billion stimulus package. Yet there are real concerns that the United States’ economy won’t grow enough to pay off its debts easily and ensure rising living standards, as happened in the postwar decades. The fraternity of growth experts in the economics profession predicts that the economy, on its current path, will grow more slowly in the next couple of decades than over the past couple. They are concerned in part because two of the economy’s most powerful recent engines have been exposed as a mirage: the explosion in consumer debt and spending, which lifted short-term growth at the expense of future growth, and the great Wall Street boom, which depended partly on activities that had very little real value. Richard Freeman, a Harvard economist, argues that our bubble economy had something in common with the old Soviet economy. The Soviet Union’s growth was artificially raised by massive industrial output that ended up having little use. Ours was artificially raised by mortgage-backed securities, collateralized debt obligations and even the occasional Ponzi scheme. Where will new, real sources of growth come from? Wall Street is not likely to cure the nation’s economic problems. Neither, obviously, is Detroit. Nor is Silicon Valley, at least not by itself. Well before the housing bubble burst, the big productivity gains brought about by the 1990s technology boom seemed to be petering out, which suggests that the Internet may not be able to fuel decades of economic growth in the way that the industrial inventions of the early 20th century did. Annual economic growth in the current decade, even excluding the dismal contributions that 2008 and 2009 will make to the average, has been the slowest of any decade since the 1930s. So for the first time in more than 70 years, the epicenter of the American economy can be placed outside of California or New York or the industrial Midwest. It can be placed in Washington. Washington won’t merely be given the task of pulling the economy out of the immediate crisis. It will also have to figure out how to put the American economy on a more sustainable path — to help it achieve fast, broadly shared growth and do so without the benefit of a bubble. Obama said as much in his inauguration speech when he pledged to overhaul Washington’s approach to education, health care, science and infrastructure, all in an effort to “lay a new foundation for growth.” For centuries, people have worried that economic growth had limits — that the only way for one group to prosper was at the expense of another. The pessimists, from Malthus and the Luddites and on, have been proved wrong again and again. Growth is not finite. But it is also not inevitable. It requires a strategy. II. THE UPSIDE OF A DOWNTURN TWO WEEKS AFTER THE ELECTION, Rahm Emanuel, Obama’s chief of staff, appeared before an audience of business executives and laid out an idea that Lawrence H. Summers, Obama’s top economic adviser, later described to me as Rahm’s Doctrine. “You never want a serious crisis to go to waste,” Emanuel said. “What I mean by that is that it’s an opportunity to do things you could not do before.” In part, the idea is standard political maneuvering. Obama had an ambitious agenda — on health care, energy and taxes — before the economy took a turn for the worse in the fall, and he has an interest in connecting the financial crisis to his pre-existing plans. “Things we had postponed for too long, that were long term, are now immediate and must be dealt with,” Emanuel said in November. Of course, the existence of the crisis doesn’t force the Obama administration to deal with education or health care. But the fact that the economy appears to be mired in its worst recession in a generation may well allow the administration to confront problems that have festered for years. That’s the crux of the doctrine. The counterargument is hardly trivial — namely, that the financial crisis is so serious that the administration shouldn’t distract itself with other matters. That is a risk, as is the additional piling on of debt for investments that might not bear fruit for a long while. But Obama may not have the luxury of trying to deal with the problems separately. This crisis may be his one chance to begin transforming the economy and avoid future crises. In the early 1980s, an economist named Mancur Olson developed a theory that could fairly be called the academic version of Rahm’s Doctrine. Olson, a University of Maryland professor who died in 1998, is one of those academics little known to the public but famous among his peers. His seminal work, “The Rise and Decline of Nations,” published in 1982, helped explain how stable, affluent societies tend to get in trouble. The book turns out to be a surprisingly useful guide to the current crisis. In Olson’s telling, successful countries give rise to interest groups that accumulate more and more influence over time. Eventually, the groups become powerful enough to win government favors, in the form of new laws or friendly regulators. These favors allow the groups to benefit at the expense of everyone else; not only do they end up with a larger piece of the economy’s pie, but they do so in a way that keeps the pie from growing as much as it otherwise would. Trade barriers and tariffs are the classic example. They help the domestic manufacturer of a product at the expense of millions of consumers, who must pay high prices and choose from a limited selection of goods. Olson’s book was short but sprawling, touching on everything from the Great Depression to the caste system in India. His primary case study was Great Britain in the decades after World War II. As an economic and military giant for more than two centuries, it had accumulated one of history’s great collections of interest groups — miners, financial traders and farmers, among others. These interest groups had so shackled Great Britain’s economy by the 1970s that its high unemployment and slow growth came to be known as “British disease.” Germany and Japan, on the other hand, were forced to rebuild their economies and political systems after the war. Their interest groups were wiped away by the defeat. “In a crisis, there is an opportunity to rearrange things, because the status quo is blown up,” Frank Levy, an M.I.T. economist and an Olson admirer, told me recently. If a country slowly glides down toward irrelevance, he said, the constituency for reform won’t take shape. Olson’s insight was that the defeated countries of World War II didn’t rise in spite of crisis. They rose because of it. The parallels to the modern-day United States, though not exact, are plain enough. This country’s long period of economic pre-eminence has produced a set of interest groups that, in Olson’s words, “reduce efficiency and aggregate income.” Home builders and real estate agents pushed for housing subsidies, which made many of them rich but made the real estate bubble possible. Doctors, drug makers and other medical companies persuaded the federal government to pay for expensive treatments that have scant evidence of being effective. Those treatments are the primary reason this country spends so much more than any other on medicine. In these cases, and in others, interest groups successfully lobbied for actions that benefited them and hurt the larger economy. Surely no interest group fits Olson’s thesis as well as Wall Street. It used an enormous amount of leverage — debt — to grow to unprecedented size. At times Wall Street seemed ubiquitous. Eight Major League ballparks are named for financial-services companies, as are the theater for the Alvin Ailey dance company, a top children’s hospital in New York and even a planned entrance of the St. Louis Zoo. At Princeton, the financial-engineering program, meant to educate future titans of finance, enrolled more undergraduates than any of the traditional engineering programs. Before the stock market crashed last year, finance companies earned 27 percent of the nation’s corporate profits, up from about 15 percent in the 1970s and ’80s. These profits bought political influence. Congress taxed the income of hedge-fund managers at a lower rate than most everyone else’s. Regulators didn’t ask too many hard questions and then often moved on to a Wall Street job of their own. In good times — or good-enough times — the political will to beat back such policies simply doesn’t exist. Their costs are too diffuse, and their benefits too concentrated. A crisis changes the dynamic. It’s an opportunity to do things you could not do before. England’s crisis was the Winter of Discontent, in 1978-79, when strikes paralyzed the country and many public services shut down. The resulting furor helped elect Margaret Thatcher as prime minister and allowed her to sweep away some of the old economic order. Her laissez-faire reforms were flawed in some important ways — taken to an extreme, they helped create the current financial crisis — and they weren’t the only reason for England’s turnaround. But they made a difference. In the 30 years since her election, England has grown faster than Germany or Japan. III. THE INVESTMENT GAP ONE GOOD WAY TO UNDERSTAND the current growth slowdown is to think of the debt-fueled consumer-spending spree of the past 20 years as a symbol of an even larger problem. As a country we have been spending too much on the present and not enough on the future. We have been consuming rather than investing. We’re suffering from investment-deficit disorder. You can find examples of this disorder in just about any realm of American life. Walk into a doctor’s office and you will be asked to fill out a long form with the most basic kinds of information that you have provided dozens of times before. Walk into a doctor’s office in many other rich countries and that information — as well as your medical history — will be stored in computers. These electronic records not only reduce hassle; they also reduce medical errors. Americans cannot avail themselves of this innovation despite the fact that the United States spends far more on health care, per person, than any other country. We are spending our money to consume medical treatments, many of which have only marginal health benefits, rather than to invest it in ways that would eventually have far broader benefits. Along similar lines, Americans are indefatigable buyers of consumer electronics, yet a smaller share of households in the United States has broadband Internet service than in Canada, Japan, Britain, South Korea and about a dozen other countries. Then there’s education: this country once led the world in educational attainment by a wide margin. It no longer does. And transportation: a trip from Boston to Washington, on the fastest train in this country, takes six-and-a-half hours. A trip from Paris to Marseilles, roughly the same distance, takes three hours — a result of the French government’s commitment to infrastructure. These are only a few examples. Tucked away in the many statistical tables at the Commerce Department are numbers on how much the government and the private sector spend on investment and research — on highways, software, medical research and other things likely to yield future benefits. Spending by the private sector hasn’t changed much over time. It was equal to 17 percent of G.D.P. 50 years ago, and it is about 17 percent now. But spending by the government — federal, state and local — has changed. It has dropped from about 7 percent of G.D.P. in the 1950s to about 4 percent now. Governments have a unique role to play in making investments for two main reasons. Some activities, like mass transportation and pollution reduction, have societal benefits but not necessarily financial ones, and the private sector simply won’t undertake them. And while many other kinds of investments do bring big financial returns, only a fraction of those returns go to the original investor. This makes the private sector reluctant to jump in. As a result, economists say that the private sector tends to spend less on research and investment than is economically ideal. Historically, the government has stepped into the void. It helped create new industries with its investments. Economic growth has many causes, including demographics and some forces that economists admit they don’t understand. But government investment seems to have one of the best track records of lifting growth. In the 1950s and ’60s, the G.I. Bill created a generation of college graduates, while the Interstate System of highways made the entire economy more productive. Later, the Defense Department developed the Internet, which spawned AOL, Google and the rest. The late ’90s Internet boom was the only sustained period in the last 35 years when the economy grew at 4 percent a year. It was also the only time in the past 35 years when the incomes of the poor and the middle class rose at a healthy pace. Growth doesn’t ensure rising living standards for everyone, but it sure helps. Even so, the idea that the government would be playing a much larger role in promoting economic growth would have sounded radical, even among Democrats, until just a few months ago. After all, the European countries that have tried guiding huge swaths of their economies — that have kept their arms around the “commanding heights,” in Lenin’s enduring phrase — have grown even more slowly than this country in recent years. But the credit crunch and the deepening recession have changed the discussion here. The federal government seems as if it was doing too little to take advantage of the American economy’s enormous assets: its size, its openness and its mobile, risk-taking work force. The government is also one of the few large entities today able to borrow at a low interest rate. It alone can raise the capital that could transform the economy in the kind of fundamental ways that Olson described. “This recession is a critical economic problem — it is a crisis,” Summers told me recently. “But a moment when there are millions of people who are unemployed, when the federal government can borrow money over the long term at under 3 percent and when we face long-run fiscal problems is also a moment of great opportunity to make investments in the future of the country that have lagged for a long time.” He then told a story that John F. Kennedy liked to tell, about an early-20th-century French marshal named Hubert Lyautey. “The guy says to his gardener, ‘Could you plant a tree?’ ” Summers said. “The gardener says, ‘Come on, it’s going to take 50 years before you see anything out of that tree.’ The guy says, ‘It’s going to take 50 years? Really? Then plant it this morning.’ ” IV. STIMULUS VS. TRANSFORMATION THE OBAMA ADMINISTRATION’S FIRST CHANCE to build a new economy — an investment economy — is the stimulus package that has been dominating policy discussions in Washington. Obama has repeatedly said he wants it to be a down payment on solving bigger problems. The twin goals, he said recently, are to “immediately jump-start job creation and long-term growth.” But it is not easy to balance those goals. For the bill to provide effective stimulus, it simply has to spend money — quickly. Employing people to dig ditches and fill them up again would qualify. So would any of the “shovel ready” projects that have made it onto the list of stimulus possibilities. Even the construction of a mob museum in Las Vegas, a project that was crossed off the list after Republicans mocked it, would work to stimulate the economy, so long as ground was broken soon. Pork and stimulus aren’t mutually exclusive. But pork won’t transform an economy. Neither will the tax cuts that are likely to be in the plan. Sometimes a project can give an economy a lift and also lead to transformation, but sometimes the goals are at odds, at least in the short term. Nothing demonstrates this quandary quite so well as green jobs, which are often cited as the single best hope for driving the post-bubble economy. Obama himself makes this case. Consumer spending has been the economic engine of the past two decades, he has said. Alternative energy will supposedly be the engine of the future — a way to save the planet, reduce the amount of money flowing to hostile oil-producing countries and revive the American economy, all at once. Put in these terms, green jobs sounds like a free lunch. Green jobs can certainly provide stimulus. Obama’s proposal includes subsidies for companies that make wind turbines, solar power and other alternative energy sources, and these subsidies will create some jobs. But the subsidies will not be nearly enough to eliminate the gap between the cost of dirty, carbon-based energy and clean energy. Dirty-energy sources — oil, gas and coal — are cheap. That’s why we have become so dependent on them. The only way to create huge numbers of clean-energy jobs would be to raise the cost of dirty-energy sources, as Obama’s proposed cap-and-trade carbon-reduction program would do, to make them more expensive than clean energy. This is where the green-jobs dream gets complicated. For starters, of the $700 billion we spend each year on energy, more than half stays inside this country. It goes to coal companies or utilities here, not to Iran or Russia. If we begin to use less electricity, those utilities will cut jobs. Just as important, the current, relatively low price of energy allows other companies — manufacturers, retailers, even white-collar enterprises — to sell all sorts of things at a profit. Raising that cost would raise the cost of almost everything that businesses do. Some projects that would have been profitable to Boeing, Kroger or Microsoft in the current economy no longer will be. Jobs that would otherwise have been created won’t be. As Rob Stavins, a leading environmental economist, says, “Green jobs will, to some degree, displace other jobs.” Just think about what happened when gas prices began soaring last spring: sales of some hybrids increased, but vehicle sales fell overall. None of this means that Obama’s climate policy is a mistake. Raising the price of carbon makes urgent sense, for the well-being of the planet and of the human race. And the economic costs of a serious climate policy are unlikely to be nearly as big as the alarmists — lobbyists and members of Congress trying to protect old-line energy industries — suggest. Various analyses of Obama’s cap-and-trade plan, including one by Stavins, suggest that after it is fully implemented, it would cost less than 1 percent of gross domestic product a year, or about $100 billion in today’s terms. That cost is entirely manageable. But it’s still a cost. Or perhaps we should think of it as an investment. Like so much in the economy, our energy policy has been geared toward the short term. Inexpensive energy made daily life easier and less expensive for all of us. Building a green economy, on the other hand, will require some sacrifice. In the end, that sacrifice should pay a handsome return in the form of icecaps that don’t melt and droughts that don’t happen — events with costs of their own. Over time, the direct economic costs of a new energy policy may also fall. A cap-and-trade program will create incentives for the private sector to invest in alternative energy, which will lead to innovations and lower prices. Some of the new clean-energy spending, meanwhile, really will replace money now flowing overseas and create jobs here. But all those benefits will come later. The costs will come sooner, which is a big reason we do not already have a green economy — or an investment economy. V. CURING INEFFICIENCIES WASHINGTON’S CHALLENGE on energy policy is to rewrite the rules so that the private sector can start building one of tomorrow’s big industries. On health care, the challenge is keeping one of tomorrow’s industries from growing too large. For almost two decades, spending on health care grew rapidly, no matter what the rest of the economy was doing. Some of this is only natural. As a society gets richer and the basic comforts of life become commonplace, people will choose to spend more of their money on health and longevity instead of a third car or a fourth television. Much of the increases in health care spending, however, are a result of government rules that have made the sector a fabulously — some say uniquely — inefficient sector. These inefficiencies have left the United States spending far more than other countries on medicine and, by many measures, getting worse results. The costs of health care are now so large that it has become one problem that cannot be solved by growth alone. It’s qualitatively different from the other budget problems facing the government, like the Wall Street bailout, the stimulus, the war in Iraq or Social Security. You can see that by looking at various costs as a share of one year of economic output — that is, gross domestic product. Surprisingly, the debt that the federal government has already accumulated doesn’t present much of a problem. It is equal to about $6 trillion, or 40 percent of G.D.P., a level that is slightly lower than the average of the past six decades. The bailout, the stimulus and the rest of the deficits over the next two years will probably add about 15 percent of G.D.P. to the debt. That will take debt to almost 60 percent, which is above its long-term average but well below the levels of the 1950s. But the unfinanced parts of Medicare, the spending that the government has promised over and above the taxes it will collect in the coming decades requires another decimal place. They are equal to more than 200 percent of current G.D.P. During the campaign, Obama talked about the need to control medical costs and mentioned a few ideas for doing so, but he rarely lingered on the topic. He spent more time talking about expanding health-insurance coverage, which would raise the government’s bill. After the election, however, when time came to name a budget director, Obama sent a different message. He appointed Peter Orszag, who over the last two years has become one of the country’s leading experts on the looming budget mess that is health care. Orszag is a tall, 40-year-old Massachusetts native, made taller by his preference for cowboy boots, who has risen through the Democratic policy ranks over the last 15 years. He received a Ph.D. from the London School of Economics, later joined the Clinton White House and, from 2007, was the director of the Congressional Budget Office. While there, he devoted himself to studying health care, believing that it was far more important to the future of the budget than any other issue in front of Congress. He nearly doubled the number of health care analysts in the office, to 50. Obama highlighted this work when he announced Orszag’s appointment in November. In Orszag’s final months on Capitol Hill, he specifically argued that health care reform should not wait until the financial system has been fixed. “One of the blessings in the current environment is that we have significant capacity to expand and sell Treasury debt,” he told me recently. “If we didn’t have that, and if the financial markets didn’t have confidence that we would repay that debt, we would be in even more dire straits than we are.” Absent a health care overhaul, the federal government’s lenders around the world may eventually grow nervous about its ability to repay its debts. That, in turn, will cause them to demand higher interest rates to cover their risk when lending to the United States. Facing higher interest rates, the government won’t be able to afford the kind of loans needed to respond to a future crisis, be it financial or military. The higher rates will also depress economic growth, aggravating every other problem. So what should be done? Orszag was technically prohibited from advocating policies in his old job. But it wasn’t very hard to read between the lines. In a series of speeches around the country, in testimony to Congress and in a blog that he started (“Director’s Blog”), he laid out a fairly clear agenda. Orszag would begin his talks by explaining that the problem is not one of demographics but one of medicine. “It’s not primarily that we’re going to have more 85-year-olds,” he said during a September speech in California. “It’s primarily that each 85-year-old in the future will cost us a lot more than they cost us today.” The medical system will keep coming up with expensive new treatments, and Medicare will keep reimbursing them, even if they bring little benefit. After this introduction, Orszag would typically pause and advise his audience not to get too depressed. He would put a map of the United States on the screen behind him, showing Medicare spending by region. The higher-spending regions were shaded darker than the lower-spending regions. Orszag would then explain that the variation cannot be explained by the health of the local population or the quality of care it receives. Darker areas didn’t necessarily have sicker residents than lighter areas, nor did those residents necessarily receive better care. So, Orszag suggested, the goal of reform doesn’t need to be remaking the American health care system in the image of, say, the Dutch system. The goal seems more attainable than that. It is remaking the system of a high-spending place, like southern New Jersey or Texas, in the image of a low-spending place, like Minnesota, New Mexico or Virginia. To that end, Orszag has become intrigued by the work of Mitchell Seltzer, a hospital consultant in central New Jersey. Seltzer has collected large amounts of data from his clients on how various doctors treat patients, and his numbers present a very similar picture to the regional data. Seltzer told me that big-spending doctors typically explain their treatment by insisting they have sicker patients than their colleagues. In response he has made charts breaking down the costs of care into thin diagnostic categories, like “respiratory-system diagnosis with ventilator support, severity: 4,” in order to compare doctors who were treating the same ailment. The charts make the point clearly. Doctors who spent more — on extra tests or high-tech treatments, for instance — didn’t get better results than their more conservative colleagues. In many cases, patients of the aggressive doctors stay sicker longer and die sooner because of the risks that come with invasive care. The first step toward turning “less efficient” doctors, in Seltzer’s euphemism, into “efficient” doctors would be relatively uncontroversial. The government would have to create a national version of his database and, to do so, would need doctors and hospitals to have electronic medical records. The Obama administration plans to use the stimulus bill to help pay for the installation of such systems. It is then likely to mandate that, within five years, any doctor or hospital receiving Medicare payment must be using electronic records. The next steps will be harder. Based on what the data show, Medicare will have to stop reimbursing some expensive treatments that don’t do much good. Private insurers would likely follow Medicare’s lead, as they have on other issues in the past. Doctors, many of whom make good money from extra treatments, are sure to object, just as Mancur Olson would have predicted. They will claim that, whatever the data show, the treatments are benefiting their patients. In a few cases — though, by definition, not most — they may be right. Even when they are not, their patients, desperate for hope, may fight for the treatment. The most pessimistic point that Orszag routinely made during his time on Capitol Hill was that the political system didn’t deal well with simmering, long-term problems. It often waited until those problems became a crisis, he would say. That may be a kind of corollary to Rahm’s Doctrine, but it does highlight the task before the Obama administration. It will need to figure out how it can use one crisis as an excuse to prevent several more. VI. GRADUATES EQUAL GROWTH A GREAT APPEAL of green jobs — or, for that matter, of a growing and efficient health care sector — is that they make it possible to imagine what tomorrow’s economy might look like. They are concrete. When somebody wonders, What will replace Wall Street? What will replace housing? they can be given an answer. As answers go, green jobs and health care are fine. But they probably aren’t the best answers. The best one is less concrete. It also has a lot more historical evidence on its side. Last year, two labor economists, Claudia Goldin and Lawrence Katz, published a book called “The Race Between Education and Technology.” It is as much a work of history — the history of education — as it is a work of economics. Goldin and Katz set out to answer the question of how much an education really matters. They are themselves products of public schools, she of New York and he of Los Angeles, and they have been a couple for two decades. They are liberals (Katz served as the chief economist under Robert Reich in Bill Clinton’s Labor Department), but their book has been praised by both the right and the left. “I read the Katz and Goldin book,” Matthew Slaughter, an associate dean of Dartmouth’s business school who was an economic adviser to George W. Bush, recently told me, “and there’s part of me that can’t fathom that half the presidential debates weren’t about a couple of facts in that book.” Summers wrote a blurb for the book, calling it “the definitive treatment” of income inequality. The book’s central fact is that the United States has lost its once-wide lead in educational attainment. South Korea and Denmark graduate a larger share of their population from college — and Australia, Japan and the United Kingdom are close on our heels. Goldin and Katz explain that the original purpose of American education was political, to educate the citizens of a democracy. By the start of the 20th century, though, the purpose had become blatantly economic. As parents saw that high-school graduates were getting most of the good jobs, they started a grass-roots movement, known as the high-school movement, to demand free, public high schools in their communities. “Middletown,” the classic 1929 sociological study of life in Indiana, reported that education “evokes the fervor of a religion, a means of salvation, among a large section of the population.” At the time, some European intellectuals dismissed the new American high schools as wasteful. Instead of offering narrowly tailored apprentice programs, the United States was accused of overeducating its masses (or at least its white masses). But Goldin and Katz, digging into old population surveys, show that the American system paid huge dividends. High-school graduates filled the ranks of companies like General Electric and John Deere and used their broad base of skills to help their employers become global powers. And these new white-collar workers weren’t the only ones to benefit. A high-school education also paid off for blue-collar workers. Those with a diploma were far more likely to enter newer, better-paying, more technologically advanced industries. They became plumbers, jewelers, electricians, auto mechanics and railroad engineers. Not only did mass education increase the size of the nation’s economic pie; it also evened out the distribution. The spread of high schools — by 1940, half of teenagers were getting a diploma — meant that graduates were no longer an elite group. In economic terms, their supply had increased, which meant that the wage premium that came with a diploma was now spread among a larger group of workers. Sure enough, inequality fell rapidly in the middle decades of the 20th century. But then the great education boom petered out, starting in the late 1960s. The country’s worst high schools never got their graduation rates close to 100 percent, while many of the fast-growing community colleges and public colleges, which were educating middle-class and poorer students, had low graduation rates. Between the early 1950s and early ’80s, the share of young adults receiving a bachelor’s degree jumped to 24 percent, from 7 percent. In the 30 years since, the share has only risen to 32 percent. Nearly all of the recent gains have come among women. For the first time on record, young men in the last couple of decades haven’t been much more educated than their fathers were. Goldin and Katz are careful to say that economic growth is not simply a matter of investing in education. And we can all name exceptions to the general rule. Bill Gates dropped out of college (though, as Malcolm Gladwell explains in his recent book, “Outliers,” Gates received a fabulously intense computer-programming education while in high school). Some college graduates struggle to make a good living, and many will lose their jobs in this recession. But these are exceptions. Goldin’s and Katz’s thesis is that the 20th century was the American century in large part because this country led the world in education. The last 30 years, when educational gains slowed markedly, have been years of slower growth and rising inequality. Their argument happens to be supported by a rich body of economic literature that didn’t even make it into the book. More-educated people are healthier, live longer and, of course, make more money. Countries that educate more of their citizens tend to grow faster than similar countries that do not. The same is true of states and regions within this country. Crucially, the income gains tend to come after the education gains. What distinguishes thriving Boston from the other struggling cities of New England? Part of the answer is the relative share of children who graduate from college. The two most affluent immigrant groups in modern America — Asian-Americans and Jews — are also the most educated. In recent decades, as the educational attainment of men has stagnated, so have their wages. The median male worker is roughly as educated as he was 30 years ago and makes roughly the same in hourly pay. The median female worker is far more educated than she was 30 years ago and makes 30 percent more than she did then. There really is no mystery about why education would be the lifeblood of economic growth. On the most basic level, education helps people figure out how to make objects and accomplish tasks more efficiently. It allows companies to make complex products that the rest of the world wants to buy and thus creates high-wage jobs. Education may not be as tangible as green jobs. But it helps a society leverage every other investment it makes, be it in medicine, transportation or alternative energy. Education — educating more people and educating them better — appears to be the best single bet that a society can make. Fortunately, we know much more than we did even a decade ago about how education works and doesn’t work. In his book, “Whatever It Takes,” (and in this magazine, where he is an editor), Paul Tough has described some of the most successful schools for poor and minority students. These schools tend to set rigorous standards, keep the students in school longer and create a disciplined, can-do culture. Many of the schools, like several middle schools run by an organization called KIPP, have had terrific results. Students enter with test scores below the national average. They leave on a path to college. The lessons of KIPP — some of the lessons, at least — also apply to schools that are not so poor. Last year, the Gates Foundation hired an economist named Thomas Kane to oversee a big new push to prepare students for college. Kane is one of the researchers whose work shows that teachers may matter more than anything else. Good teachers tend to receive high marks from parents, colleagues and principals, and they tend to teach their students much more than average teachers. Bad teachers tend to do poorly on all these metrics. The differences are usually apparent after just a couple of years on the job. Yet in a typical school system, both groups receive tenure. The Obama administration has suggested that education reform is an important goal. The education secretary is Arne Duncan, the former school superintendent in Chicago, who pushed for education changes there based on empirical data. Obama advisers say that the administration plans to use the education money in the stimulus package as leverage. States that reward good teaching and use uniform testing standards — rather than the choose-your-own-yardstick approach of the No Child Left Behind law — may get more money. But it is still unclear just how much of a push the administration will make. With the financial crisis looming so large, something as sprawling and perennially plagued as education can seem like a sideshow. Given everything else on its agenda, the Obama administration could end up financing a few promising pilot programs without actually changing much. States, for their part, will be cutting education spending to balance their budgets. A few weeks ago, I drove to Shepherd University in West Virginia to get a glimpse of both the good and bad news for education. Shepherd is the kind of public college that will need to be at the center of any effort to improve higher education. Located in a small town in the Shenandoah Valley, it attracts mostly middle-class students — from the actual middle class, not the upper middle class — and it has a graduation rate of about 35 percent. Several years ago, the state of West Virginia started a scholarship program, called Promise, in part to lift the graduation rate at places like Shepherd. The program is modeled after those in several Southern states, in which any high-school student with a certain minimum grade-point average (often 3.0) and certain SAT scores gets a hefty scholarship to any state school. When West Virginia officials were designing their program, though, they noticed a flaw with the other programs. The students weren’t required to take a course load that was big enough to let them graduate in four years. In some cases they were required to keep a minimum grade-point average, which encouraged them, perversely, to take fewer courses. Many students drifted along for a few years and then dropped out. So West Virginia changed the rules. It offered a bigger carrot — free tuition at any public college — but also a stick. Students had to take enough courses each semester so that they could graduate in four years. Judith Scott-Clayton, a young economist who analyzed the program, concluded that it had raised the on-time graduation rate by almost 7 percentage points in a state where many colleges have a graduation rate below 50 percent. Given those results, the Promise scholarship might seem like an ideal public policy in a deep recession. It pays for school at a time when many families are struggling. It keeps students busy when jobs are hard to come by. It also has the potential to do some long-term good. But nearly everyone I interviewed in West Virginia — the students, the president of Shepherd and other education officials — worried that financing would be reduced soon. The program is expensive, and state revenue is declining. Something has to give. VII. A MATTER OF NORMS WHAT STRUCK ME ABOUT the Shepherd students I met was that they didn’t seem to spend much time thinking about the credit requirement. It had become part of their reality. Many college students today assume they will not graduate in four years. Some even refer to themselves as second- or third-years, instead of sophomores or juniors. “It’s just normal all around not to be done in four years,” Chelsea Carter, a Shepherd student, told me. “People don’t push you.” Carter, in fact, introduced herself to me as a third-year. But she is also a Promise scholar, and she said she expected to graduate in four years. Her younger sister, now in her first year in the program at Shepherd, also plans to graduate in four years. For many Promise scholars, graduating on time has become the norm. Economists don’t talk much about cultural norms. They prefer to emphasize prices, taxes and other incentives. And the transformation of the American economy will depend very much on such incentives: financial aid, Medicare reimbursements, energy prices and marginal tax rates. But it will also depend on forces that aren’t quite so easy to quantify. Orszag, on his barnstorming tour to talk about the health care system, argued that his fellow economists were making a mistake by paying so little attention to norms. After all, doctors in Minnesota don’t work under a different Medicare system than doctors in New Jersey. But they do act differently. The norms of the last two decades or so — consume before invest; worry about the short term, not the long term — have been more than just a reflection of the economy. They have also affected the economy. Chief executives have fought for paychecks that their predecessors would have considered obscenely large. Technocrats inside Washington’s regulatory agencies, after listening to their bosses talk endlessly about the dangers of overregulation, made quite sure that they weren’t regulating too much. Financial engineering became a more appealing career track than actual engineering or science. In one of the small gems in their book, Goldin and Katz write that towns and cities with a large elderly population once devoted a higher-than-average share of their taxes to schools. Apparently, age made them see the benefits of education. In recent decades, though, the relationship switched. Older towns spent less than average on schools. You can imagine voters in these places asking themselves, “What’s in it for me?” By any standard, the Obama administration faces an imposing economic to-do list. It will try to end the financial crisis and recession as quickly as possible, even as it starts work on an agenda that will inspire opposition from a murderers’ row of interest groups: Wall Street, Big Oil, Big Coal, the American Medical Association and teachers’ unions. Some items on the agenda will fail. But the same was true of the New Deal and the decades after World War II, the period that is obviously the model for the Obama years. Roosevelt and Truman both failed to pass universal health insurance or even a program like Medicare. Yet the successes of those years — Social Security, the highway system, the G.I. Bill, the National Science Foundation, the National Labor Relations Board — had a huge effect on the culture. The American economy didn’t simply grow rapidly in the late 1940s, 1950s and 1960s. It grew rapidly and gave an increasing share of its bounty to the vast middle class. Middle-class incomes soared during those years, while income growth at the very top of the ladder, which had been so great in the 1920s, slowed down. The effects were too great to be explained by a neat package of policies, just as the last few decades can’t be explained only by education, investment and the like. When Washington sets out to rewrite the rules for the economy, it can pass new laws and shift money from one program to another. But the effects of those changes are not likely to be merely the obvious ones. The changes can also send signals. They can influence millions of individual decisions — about the schools people attend, the jobs they choose, the medical care they request — and, in the process, reshape the economy.
  14. How $40 oil would impact Canada’s provinces What does Canada’s economy look like with oil prices at $40 a barrel? Certainly it won’t be the energy superpower envisioned by Prime Minister Stephen Harper. If $40 a barrel still seems a ways off, consider that the benchmark price for oil sands crude is already trading in that price range. What’s more, if production from high-cost sources isn’t withdrawn from an oversupplied market, oil prices may soon be trading even lower. The first thing Canadians should recognize about the new world order for oil prices is that – contrary to what we’re being told by our federal government – the economy is no longer in dire need of any new pipelines. For that matter, it can live without the new rail terminals being built to move oil as well. Yesterday’s transportation bottlenecks aren’t relevant in today’s marketplace. At current prices there won’t be any massive expansion of oil sands production because those projects, which would produce some of the world’s most expensive crude, no longer make economic sense. The recent spate of project cancellations by global oil giants – Total’s Joslyn mine, Shell’s at Pierre River, and Statoil’s Corner oil sands venture – is only the beginning. As oil prices grind lower, we can expect to hear about tens of billions of dollars of proposed spending that will be cancelled or indefinitely postponed. Not long ago, the grand vision for the oil sands saw production doubling over the next 20 years. Now that dream is in the rear-view mirror. Rather than expanding production, the industry’s new economic imperative will be attempting to cut costs in a bid to maintain current output. With the exception of oil sands players themselves, no one will feel those project cancellations more acutely than new Alberta Premier Jim Prentice. His province’s budget is beholden to the gusher of bitumen royalties that will no longer be accruing as planned. He could choose to stay the course on spending, as former Premier Don Getty did when oil prices plunged in the 1980s, in hopes that a price recovery will materialize. That option, as Getty discovered, would soon see Alberta’s budget surplus morph into spiralling deficits. The province’s balance sheet wasn’t cleaned up until the axe-wielding Ralph Klein took over. In his first term, Klein slashed spending on social services by 30 per cent, cut the education budget by 16 per cent and lowered health care expenditures by nearly 20 per cent. Of course, falling oil prices are a concern for much more than just Alberta’s budget position. Real estate values also face more risk, particularly downtown Calgary office space. For oil sands operators, staying alive in a low price environment won’t just mean cancelling expansion plans and cutting jobs in the field. Head office positions are also destined for the chopping block, which is bad news for the shiny new towers going up in Calgary’s commercial core. If plunging oil prices are writing a boom-to-bust story in provinces such as Alberta, Saskatchewan and Newfoundland, the narrative will be much different in other parts of the country. Ontario’s long-depressed economy is already beginning to find a second wind, recently leading the country in economic growth. And the engine is just beginning to rev up. As the largest oil-consuming province in the country, lower oil prices put more money back into the pockets of Ontarians, while also juicing the buying power of its most important trading partner. Ontario’s trade leverage with the U.S. is set to become even more meaningful as the Canadian dollar continues to slide along with the country’s rapidly fading oil prospects. Just as the oil sands boom turned Canada’s currency into a petrodollar, pushing it above parity with the greenback, the loonie is already tumbling in the wake of lower oil prices. And it shouldn’t expect any help from the Bank of Canada, which continues to signal that it’s willing to live with a much lower exchange rate in the face of a strengthening U.S. dollar. A loonie at 75 cents means GM and Ford may once again consider Ontario an attractive place to make cars and trucks. Even if they don’t, you can bet others will. With the loonie’s value falling to three quarters of where it was only a few years ago, we’ll start seeing Ontario, as well as other regions of the country, start to regain some of the hundreds of thousands of manufacturing jobs that were lost in the last decade amid a severely overvalued currency. For the Canadian economy as a whole, much is about to change, while much will also remain the same. Once again, oil will largely define the fault lines that separate the haves from the have-nots (or at least the growing from the stagnating). But at $40 oil, it’s the consuming provinces that will drive economic growth. Rather than oil flowing east through new pipelines, jobs and investment will be heading in that direction instead. http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/how-40-oil-would-impact-canadas-provinces/article22288570/