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The Progressive Economics Forum

Archive for February, 2010

Investment and corporate taxes

Thanks to Stephen Gordon, who made a link to a new unpublished study (fourth draft, 2009), The effect of corporate taxes on investment and entrepreneurship, by Djankov, Ganser, McLiesh, Ramalho and Shleifer. Stephen claims this study settles the matter that Canada should not reverse corporate tax cuts made in recent years. That discussion was happening […]

Private sector just not getting it up

We’ve been told for years that corporate tax cuts would work like viagra to boost private sector investment and productivity, and no doubt we’ll hear much more about it in next week’s budget.  But it just ain’t working.  Today’s release by Statscan of private and public investment intentions shows just how limp private sector investment is […]

Government Deficits and the Private Sector Balance

In an important series of columns in the Financial Times, economics editor Martin Wolf has been making the argument that – to avoid a relapse into recession – governments must run deficits so long as the private sector is running large surpluses of savings over spending. “Jumps in fiscal deficits are the mirror image of […]

Financial Literacy … for Bankers!

            A year ago, as part of his 2009 crisis budget, Finance Minister Jim Flaherty created a Task Force on Financial Literacy.  The goal was to equip Canadians with more knowledge to traverse the minefields of high finance.  This week, just in time for Flaherty’s next budget, the Task Force released its initial “consultation” report. […]

The Greek Crisis

Greece is being played in the media as a morality play in which a profligate government is brought to account by the  bond market and forced to submit to stern – but justified – austerity measures.  While Greek economic governance before the socialists recently returned to power was not without huge flaws, this account misses […]

Recession, Recovery and the Workplace

Following are my speaking notes for a presentation I was asked to make to labour ministers last week. I found myself much much more gloomy than my fellow panelists who think that we shall soon be experiencing labour and skills shortages. I hope they are right – but fear that this theme is being developed […]

Paper on Financial Transactions Tax

Here is the link to a very good paper by Pierre Habbard of the Trade Union Advisory Committee to the OECD. http://www.tuac.org/en/public/e-docs/00/00/06/7C/document_doc.phtml The IMF appears to be consulting quite widely and with some sympathy to proponents of an FTT , so we may yet get a positive report to the G20, opening up a realistic […]

Reversing Harper’s Corporate Tax Cuts

Last week, I argued that discussions about reversing tax cuts should not be limited to the GST. To advance this debate, I have crunched some numbers on corporate taxes using federal budget documents and tax expenditure reports. Budget 2009 (see Table A2.2 on page 255) indicates that federal corporate tax cuts since 2006 will reduce […]

TVO Trade Panel

It is not every day that two Relentlessly Progressive Economists appear on the same TV panel. But Andrew and I did exactly that on last Wednesday’s episode of The Agenda with Steve Paikin. We debated international trade with a World Bank economist, Cato Institute analyst and Canadian trade lawyer.

Purchasing Power Parity – New Estimates

Statsitics Canada has released some interesting new obscure research on what constitutes a “purchasing power parity” exchange rate for Canada.  It was summarized in an article in the December Canadian Economic Observer, and is explained more fully in an on-line technical paper by John Baldwin and Ryan Macdonald. First off, let me remind everyone that […]

R-E-S-P-E-C-T

I guess I must be a Rodney Dangerfield economist.  Because I just don’t get no respect — at least not in some quarters. It all started with an interesting CBC on-line column from the erstwhile Don Newman: http://www.cbc.ca/canada/story/2010/01/07/f-vp-newman.html He was taking Stephen Harper to task for proroguing Parliament.  Among other aguments, he noted that Canada’s […]

Housing Bubble Denial

Some puzzling comments in today’s Globe story casting cold water on the notion that there is a housing bubble.  The story makes the classic anti bubble argument that national averages conceal a lot of local variation, reflecting local conditions. http://www.theglobeandmail.com/report-on-business/economy/the-home-price-puzzle/article1475073/ “Toronto-Dominion Bank economist Pascal Gauthier says the diverse nature of Canada’s real estate market means […]

A Short History of Fiscal Constraint

As the budget yak-fest approaches, the focus is on how we’re going to balance the books. People pointing out we have bigger fish to fry – like making a dent in the nation’s $125 billion infrastructure deficit, addressing growing poverty, or preparing for a massive wave of retirements – are viewed as off-topic. But simply […]

EI Runs Out

The number of Canadians receiving Employment Insurance (EI) benefits plummeted in December. The drop of 40,100 was the largest monthly decrease in years. One would anticipate some decline in the number of EI recipients as the job market begins to recover. But the magnitude of December’s decline suggests that, in addition to those former recipients who […]

The Conference Board on P3s: more myths

The Conference Board of Canada published a report late last month, Dispelling the Myths, which purports to show that public-private partnerships (P3s) have delivered major efficiency gains for the public sector, a high degree of cost certainty, and greater transparency than conventional procurement. While the report maintains it provides an impartial assessment of the benefits and […]

Wages Lag Inflation

Wages had seemed to be one of the relative bright spots during the economic crisis. Despite the carnage in Canada’s job market, average hourly earnings held up fairly well. However, comparing today’s Consumer Price Index release for January with the Labour Force Survey for that month reveals that inflation exceeded fractional wage gains over the […]

Competition in the Canadian telecom market

Perhaps by now you have seen the TV commercials for Bell touting its much faster 3G network for web phones. Rogers is suing on the basis that Bell is basically making this up. What’s interesting about it, though, is that Bell, Telus and others entering the web phone (or should we just say iPhone) business […]

The Housing Bubble

It is striking that, even while moved to concern and some action, the Bank of Canada and the Minister of Finance are still desperately afraid to admit that Canada is experiencing a housing bubble. One can go on and on about how difficult it is to spot a bubble. But, as Dean Baker has often […]

Raise My Taxes

I was out of town and away from the blogosphere during the recent controversy about TD Bank CEO Ed Clark’s “raise my taxes” comment. As Terry Corcoran pointed out, CEOs are not actually proposing higher taxes on executive incomes or corporate profits. They are instead proposing to hike the GST, a tax that exempts all income […]

Reining in speculation in the housing market

This morning federal finance minister Flaherty announced a number of measures ostensibly aimed at reining in speculation in the housing market.  His announcement was typically well-timed to coincide with the Vanier Institute’s annual report on the state of Canadian family finances, which reports record high levels of household debt, growing inequality and housing prices increasingly out […]

Still in Recession

I contribute occasionally to a web based publication, The Mark.  Today they are running my piece on the continuing crisis in the job market, and the need for governments to respond. http://themarknews.com/articles/948-still-in-recession The first few paras follow: “While the situation is not quite as daunting as in the U.S., Canada’s job market is still mired […]

IMF Rethink

Who would have thunk it. Seems like there is a pretty radical rethink of monetary policy verities going on at the IMF of all places. The exchange rate rethink seems especially relevant to Canadian monetary policy and they will be aghast at the Bank of Canada on the case for higher inflation targets. From today’s […]

Vale’s Striking Fourth Quarter

Vale, the company against which my union has been on strike since July of last year, released its fourth-quarter earnings this evening. This release deflates the company’s rationale for demanding labour concessions and confirms that the strike is hurting its bottom line. Vale wants to eliminate defined-benefit pensions for new employees and drastically reduce the […]

Buy American Deal: Did We Get Hosed?

I was going to comment on Jim’s post, but ended up writing enough to warrant a new post. Jim correctly argues that Buy American provisions are tiny in the grand scheme of Canada-US trade. Similarly, whatever potential procurement preferences Canada bargained away would also have been tiny by this standard. The overall economic effect of […]

Buy American Deal: Deja Vu All Over Again

I’ve found the politics of the Buy American controversy very odd.  President Obama, to help sell his massive stimulus package to the American public, added measures to maximize domestic content in stimulus-funded projects.  From his perspective, that was sensible both economically (reduces the import leakage from the stimulus) and politically. If anything, it should have […]

Stimulating Australia

An interesting column, arguing that the very limited rise in unemployment in the Great Recession in Australia owes a lot to a well-constructed stimulus program of the Labour government, based on higher transfers to lower income households plus short and medium term infrastructure investment. http://column.global-labour-university.org/2009/11/riding-your-luck-and-adopting-right.html

Ontario Budget Advice

Last Monday, I testified twice to the Ontario legislature’s finance committee: as an “expert witness” and then on behalf of the United Steelworkers. I emphasized the provincial deficit’s manageability, the folly of trying to reduce it through cutbacks or privatization, the importance of maintaining tax rates to bolster future revenues, and the advantage of targeted […]

About that Copenhagen award

Back in December, during the Copenhagen negotiations, a group of environmentalists provided BC Premier Gordon Campbell with an award for climate leadership. Based primarily on the creation of a BC carbon tax two years ago, the Premier has gotten a lot of brownie points from the greens – in spite of the fact that there […]

Part-Time Recovery

In January, Canada gained 43,000 jobs, almost all of them part-time. Any employment increase is certainly good news and some part-time positions might eventually become full-time positions. The obvious limitation of part-time jobs is that they provide fewer hours of paid work and hence less income. Statistics Canada’s R-8 unemployment rate, which includes discouraged workers […]

CFIB on Ontario’s Budget: A Reality Check

Ontario’s pre-budget consultations include a session for which each party caucus selects an “expert witness.” This year, the Liberals invited Warren Jestin from Scotiabank, the Conservatives invited Catherine Swift from the Canadian Federation of Independent Business (CFIB) and the NDP invited me. In general, my role was not to engage with the other witnesses. The […]