Sunday, March 01, 2009

"When ye proffer the pigge open the poke."


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"When ye proffer the pigge open the poke."

Two phrases are relevant to Harpers demands MPs put rush on $3-billion in stimulus spending on threat of an election.

Though clearly a budget item, whether by plan or by oversight, it was not spelled out in the budget while non-budgetary items, reshaping the Navigable Waters Protection Act (NWPA), The Competition Act and Investment Canada Act, were.

The $3-billion is a lump sum from the Budget 2009 stimulus package that will be handed to Treasury Board, as Ottawa's cash manager, to allocate money as it sees fit. It will later report back to Parliament on how the cash was spent

The phrases? The first is the admonition not to buy a pig in a poke, not to accept without examining first what is in the bag. The second relates to what can and does occur when there has not been due diligence. Rather than the suckling pig purchased to grow
and be of benefit, at times opening of the poke let the cat out of the bag.

We have been apprised to "Expect mistakes in stimulus spending" by Finance Minister Flaherty. This is a thoroughly reasonable statement, taken as a truism when regarding human frailty. Quite a different matter, however, should it be called upon in the future in this manner: "I told you beforehand so don't complain now!".

"Trust me" is the essence of what is being not asked but demanded.  Demanded for no change in either Bill C-10 or interim supply will be accepted or another election will be called, even though it's known that "Canadians do not want new election".

Trust? Accepting the headlines Ottawa remains in surplus as of December in the Canadian Press and the "April to December 2008: budgetary surplus of $0.5 billion" on the December 2008 Fiscal Monitor found at http://www.fin.gc.ca/fiscmon-revfin/2008-12-eng.asp both depend upon trust.

Reading deeper into the Fiscal Monitor as developed in "December 2008: Canada deeper in debt"  below the positives proclaimed alter to a negatives. They are valid only if the increase in the debt that has occurred this fiscal year is ignored.

Harper demanding MPs put a rush on $3-billion in stimulus spending will enable his government to bypass normal approval processes, which is disturbing particularly in that monies allocated in the last fiscal year have not worked their way into the economy as yet.

Have the matching-dollar obligation by provincial and municipal governments played a role in this? Will this be overcome in the spending of the new $3 billion? Or are there projects planned other than reaching down to the local level?

The answers will be Interesting, though we may not know for some time, that is unless Ignatieff follows the opinion James Travers offers in the opening sentence of his article "Harper's $3 billion fund needs oversight".

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Outdoor Life: Waterways in danger?
http://www.tbsource.com/tbLIFE/index.asp?cid=116095

Canada: Government Tables Major Amendments To The Competition Act And Investment Canada Act – Some Good,
http://www.mondaq.com/article.asp?article_id=74558&lk=1

Harper demands MPs put rush on $3-billion in stimulus spending
http://www.theglobeandmail.com/servlet/story/RTGAM.20090226.wPOLstimulus0226/BNStory/politics/home

Expect mistakes in stimulus spending: Flaherty
http://www.cbc.ca/money/story/2009/02/25/stimulus-spending.html

Canadians do not want new election: Harper
http://ca.news.yahoo.com/s/reuters/090227/canada/canada_us_election

Canada budget officer urges improved reporting
http://www.reuters.com/article/marketsNews/idUSN2639572420090226

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Harper's $3 billion fund needs oversight
http://www.thestar.com/comment/columnists/article/594542
James Travers OTTAWA Feb 28, 2009

Stephen Harper says he's ready to fight an election over a Conservative slush fund. Michael Ignatieff should call the bluff.

What the Prime Minister is proposing would create irresistible political temptations, won't effectively stimulate the economy and is dangerous to democracy. Apart from stirring sponsorship scandal memories, the plan for cabinet to distribute $3 billion behind closed doors is an acid test for public accountability. If Harper has his way, Parliament's defining responsibility to control public spending will be further diminished even as executive powers again expand.

"Trust me" is not a credible proposition from a prime minister who broke his word and law to force the fall election. Suspending fiscal oversight is not a reassuring response to a leader who ignored available evidence to campaign on the assurance that Canada would escape recession and as recently as November forecast surpluses.

It's no more prudent for taxpayers to leave politicians alone with buckets of cash than it's wise for parents to leave children alone with the cookie jar. One leads as predictably to abuse as the other to sugar fits.

So why run the risk? Urgency is the answer. A government that resisted boosting the economy three months ago is now so determined to flush money out the door it's ready to short-circuit safeguards.

Mad-rush spending is suddenly so essential that Harper is threatening the fifth election in just nine years – if he isn't given extraordinary freedom. The logic is bizarre.

In this crisis, $3 billion is chump change and won't provide instant relief for a $1.5 trillion economy. If the justification is a stretch, the election bravado is a leap. Another campaign would delay the economic rescue package by many months and almost certainly for too long to ease the financial pain.

At least Harper, unlike Jean Chr├ętien, is announcing the fund while confirming the obvious: mistakes will be made. Even if pre-emptive damage control, that's a step forward. Still, the national comfort level should be pegged on skeptical.

Conservatives have a shoddy record of spreading infrastructure millions where they will have most impact on party fortunes. Just as worrying, this government is quietly kneecapping the independent office it noisily created to "bring truth to budgeting" and now want off Ottawa's twisted money trail.

Revealing in itself, the ugly fight with budget officer Kevin Page is rich with implications for accountability and the slush fund. Twice Page has embarrassed the government in the year since his position was created. First he revealed the rising costs of the Afghanistan mission at a sensitive moment in the last campaign. Then he projected deficits just days before Finance Minister Jim Flaherty wrongly predicted surpluses. No surprise, the government wants no repeats. It will try to control information about the $3 billion fund, leaving the bad news to some future, post-election auditor general report.

Fortunately, there's a solution that requires some Liberal backbone, not an election that would not be in the national interest now. As a condition for continuing Liberal support of the budget still making its way through Parliament, Ignatieff should insist that the $3 billion fund be transparent. One caveat would guarantee that Page gets the funding that he was promised and needs to do his job. Another would force the immediate creation of a website to allow the timely tracing of public dollars all the way into private pockets.

If the Prime Minister has nothing to hide, he has nothing to fear.

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December 2008: Canada deeper in debt
http://mikewatkins.ca/2009/02/27/december-2008-canada-deeper-in-debt/

Speaking of secrecy, our government officials and the elected mouthpieces who notionally run these departments often hide or keep secret important truths simply by talking about something else.

If one reads the latest news release from the Department of Finance one might conclude that Canada and Jimmy Flaherty are doing a good job.

Yet the secret truth, available with just a little digging, is that Canada dipped deeper in debt in December 2008, to the tune of an additional 3.8 billion on top of somewhere between 15 and 50 billion dollars of new debt incurred so far this fiscal year.

http://64.21.147.48/tv-20090227-125543.gif  

The chart illustrates a total new debt line (dark blue) and a dotted "best case" line. There are two primary factors which drive the difference between the two lines:
  1. Year over year there was an announced change in how certain crown corporations obtain their borrowing; where previously said crown corporations (Canada Mortgage and Housing Corporation (CMHC), the Business Development Bank of Canada and Farm Credit Canada) obtained their own borrowing, this fiscal year the federal government proper arranged this financing to lever the stronger borrowing power of the national government and thus save some interest charges.
  2. After the election - you might recall it was the election where Harper and Flaherty tried hard to pretend that all was well, that Canada would never go into deficit - Flaherty did an about face and called the situation facing the world and Canada a "crisis" and decided to help out the Canadian banks to the tune of buying $25 billion in CMHC-insured mortgages off the banks so they could clean up their balance sheets. Its something of a shell game.
Points 1 and 2 are related. CMHC is one of the crown corporations the government is obtaining financing for. Ultimately we taxpayers are all on the hook for what happens to these mortgages, because if as in the U.S. there is a surplus of defaulted mortgages over the insurance funds protecting them, guess who will be paying for the mess? You and me.

Even if we give Flaherty the benefit of doubt, writ large, and take off 10B + 25B = $35 billion dollars from the gross new accumulated federal debt, we are still left with over $15 billion dollars in new debt incurred by Stephen Harper's government.

Flaherty can play word games and claim that the government is still capable of operating without a deficit but the reality is that we are in fact 3.8B deeper in the hole in December, or $15.2B of new debt on a cumulative basis so far this fiscal year.