Monday 16 September 2013

NDP Socialism is Not Done Properly

"In a country well governed, poverty is something to be ashamed of. In a country badly governed, wealth is something to be ashamed of."
-Confucius


Canada isn't doing particularly well at the moment. We may have survived the financial crisis because we didn't deregulate our banks and allow them to over-leverage themselves into the nonsensical derivatives market that so brutally whacked Europe and the US. Still, despite that and having what is supposed to be an economically conservative government in power federally, we are running large deficits. The combined debt of the provinces and the federal government is about $1.2 trillion. The provinces account for about half of that and from 2012-13, only Saskatchewan managed to avoid a deficit.

For the point of this post, I'll focus on my home province of Manitoba as we are performing extremely poorly and don't really have an excuse. At least Ontario can blame a high dollar for hurting their manufacturing exports. As of July 30th and according to the Canadian Taxpayers Federation, Manitoba's debt was increasing by 72 bucks a second or $6.25 million per day. Our total debt is estimated to be at around $30 billion by the end of 2013. Even if these numbers are being exaggerated to some degree, they are still scary figures for a province that only had an estimated 1,274,000 people at the start of this year. This equals out to about $23,548 owed per person.

You may argue that Manitoba faces some unique challenges which means we need a government that sometimes spends more than others. And you're right, we do. We have floods and harsh, snowy winters. We have some Northern Manitoba communities that need government assistance which is expensive to provide since they are scattered and remote. We have a perpetually impoverished North End filled with people having difficulty breaking out of Winnipeg's downtrodden underclass. A combination of isolated Northern communities, a ghettoized North End, and our infamously long and cold winters where people are often stuck lethargically inside means that our health care is going to cost more than in other provinces.

On the other hand, we have a fairly balanced economy consisting of agriculture, mining, tourism, finance, energy, and manufacturing which should buffer us from the commodity price fluctuations that occasionally hammer Alberta's oil fields and Saskatchewan's oil and potash industries. We already have the infrastructure in place to prevent the type of flood damage recently witnessed in Calgary. We have enough hydroelectricity from our dams to provide for our own needs quite cost effectively while being able to export the excess for a profit. Our housing market, although quite inflated like the rest of Canada, has not bubbled as outrageously as some of the bigger and less mosquito-infested cities. In addition, we're nicely in the center of the continent which should allow us to return to being the major transport hub we once were, especially as fuel prices rise and make flying less attractive.

These are some pretty decent perks and provide a stability which should allow our budgeting to be fairly predictable. This means we should be able to have balanced budgets by slashing spending when we know we won't be able to afford it. Remember folks, debt and its accumulated interest is stealing from your children unless it's being invested in a way that will provide greater returns. If you're just blindly hoping the returns will be better, that's the equivalent of gambling with Lil Jimmy's college fund which is still pretty crappy.

So why are we doing so badly? The NDP were able to continue their inherited balanced budget for a straight decade, from 1999 until 2009, under the leadership of Gary Doer. In 2008, the final year before Doer was replaced by Greg Selinger, we had a surplus of $451 million. That's pretty good and certainly helped the NDP brand-name. Doer did this while investing in education and health care and managed to keep taxes down so that they could be raised on a rainy day. Of course a lot of this came from raiding Manitoba Hydro's revenues but at least it was still balanced.

Selinger seemed to have just went nuts soon after coming into office though. His first year, the surplus immediately became a $183 million deficit. This was the period directly following the financial crisis so some economic slowdown was expected but “According to Statistics Canada, Manitoba was the only provincial economy not to experience a decline in real economic activity in 2009." This is coming from the NDP themselves (A2) in 2011 which means they are admitting they don't really have an excuse for ballooning deficits. The 2011 flood that was blamed for the almost $1 billion dollar deficit that year only accounted for about half that billion after the feds had pitched in. Then there was $583 million in deficit spending just last year and no flood to credit for that. 

The NDP's response was to raise taxes while not reducing spending, a response that could potentially work if done intelligently as it would allow the continued spending to work as stimulus. However, it was not. A lot of the funds went to a growing, unproductive bureaucracy. From 2006 to 2012, the number of provincial civil servants jumped by 1599, or 12%, well above population growth in this period. All of these except 364 of them were from 2009 onwards and so can be blamed on Selinger's administration. This number also doesn't include "nurses, hospital staff, teachers or any other public sector workers outside of provincial government departments." Some of these jobs were necessary but during deficit times, we should be doing our best to keep these numbers down and find places to make savings. The Winnipeg Regional Health Authority employs a large bureaucracy that includes 7 vice-presidents and 15 communications staff. Why would it need that many of either of those?

The Winnipeg School Division increased the wages for its bureaucrats by 20% over the last five years which is about twice the rate of inflation. Its top people received pay increases as high as 26% over the last two years. It employs sixteen consultants for some reason with ten of them making roughly $100k as of 2011. Those numbers seems insane. Even worse, we currently have the bizarre situation where the division's administration staff get the same wage increases (7.7) that are given to teachers. This means that the administrators have a cash-incentive to vote in favor of massive wage increases for the teachers which is obviously not something the taxpayers would want. Much thanks to Trustee Mike Babinksy for bringing this to light.

In addition, Babinsky mentioned that trustees and senior administrators enjoy expensive catered lunches on the public dime for their hour-long meetings at the same time school taxes are going up. These are the same people that vote in secret on little things like their $365 million budget and keep evaluations of how schools are actually doing hidden from the public because, as Chairwoman Rita Hildahl says, "I don't feel that a report card needs to be given on individual schools." Well Rita, that's unfortunate because I do. Otherwise how do I know who is doing their job poorly?
 
To go along with this spending spree, the NDP chose to raise taxes on anything they could think of, the increase of 1% to the Provincial Sales Tax, boosting it to 8%, being only the most recent. The extra $198.5 million raised by this one percent increase was supposed to go to infrastructure which everyone in Winnipeg knows could certainly use it. However, only about 40% of this money will actually do so. Infrastructure is generally a good investment as it creates jobs, involves purchasing goods from local producers which stimulates the economy, and needs to be done for the city to function efficiently. This means actually dumping all of that money into it would have been a smart idea. Considering that the Selinger government is already having the extra PST collected before passing Bill 20 to gut the Balanced Budget, Debt Repayment, and Taxpayer Protection Act which requires they have a voter referendum on tax increases, the fact that less than half of the money raised is going towards infrastructure is simply galling.

Other cheap shots for grabbing revenue to pay for out-of-control spending have included adding sales tax to items such as hair cuts, manicures, and salons; adding sales tax to house insurance because I guess we want people to have an incentive not to buy that; adding $35 bucks to vehicle registrations; increased user fees for birth certificates and child abuse registry checks; adding an additional 2.5-cent per litre gas tax and a 62 cent per litre tax on "popular beer brands."

They've also decided to allow more VLTs in Manitoba for the tax revenue meaning up to another 500 machines may be added. As anyone who has ever known a problem gambler is aware, these machines can destroy lives and make people's kids go hungry. I'm not saying we shouldn't have gambling establishments because all that means is that people would go South across the boarder to play and cost us money. Still, "VLTs are the crack-cocaine of gambling" according to former NDP cabinet minister Larry Desjardins. They have none of the enjoyable social aspect of gambling with other people and simply allowing even more of them around town will result in more problem gambling.

In addition, just to take an arbitrary shot at young people who may wish to move here, the NDP have decided that people over 65 shouldn't have to pay the education portion of their property taxes as of 2015. Because, umm, old people don't benefit from living in an educated society and old people didn't pay their own share when they were younger? This is clearly just vote buying from older folks who tend to vote more. The loss of revenue, estimated at $50 million, will need to be picked up by other people, some of whom will be worse off than many of the seniors now excluded since wealthy seniors will also be exempt.

Add all of this to the extremely troubling gamble already underway in the form of the Conawapa and Keeyask hydroelectric facilities in Northern Manitoba. They will cost about $20 billion to construct, although that is likely low-balling it since Manitoba Hydro has often been wrong on estimates in the past. It will also require the expensive cooperation of many First Nation's communities. Negotiations have already cost $224 million without having actually paid them yet.

The fact is that we are borrowing money with interest to fund these projects which won't start even potentially making revenue until 2025 and only will if energy demand rises. The US states that are near enough to buy the energy are also those with large reserves of cheap natural gas to be gained through fracking. Unless they put a moratorium on this practice due to environmental concerns, they likely won't be needing to purchase energy from us anytime soon which means the huge investments in the form of unprofitable dams could bankrupt us.

Then there is Bipole III, a major backup power-line linking the Northern Manitoban generating complex to the Southern Manitoban power-grid. The decision to build Bipole III down the West side of Lake Winnipeg will cost more than $3 billion, at least $1 billion more than it would have on the East side, and will be 50% longer resulting in increased energy losses during transmission. Bipole III alone will cause a domestic power rate increase of 30% so there is no telling what these dams may do to our previously cheap energy rates.

All of this combined means that Manitoba is losing lots of talent. Between 2011 and 2012, 5791 more people were born than died. However, these gains were almost wiped out by the net 4675 people who left for other provinces, mainly the other three western ones. We've actually ranked between eighth and last for inter-provincial migration. Those who leave tend to be young people with work ethics strong enough to dig up their roots and travel elsewhere for greater wages, often to provide for their families. We can cover this with influxes of immigrants from other countries but these new Canadians often need extensive training and socializing before they can become net contributors.    

Personally, I don't like the NDP and haven't voted for them either federally or provincially. People find this weird considering I tend to favor social-democratic policies like those enjoyed by the Scandinavian countries. However, the NDP's base seems to be unionized government employees and the poor who tend to benefit, at least in the short-term, from redistributive policies. I explained in a previous post why I don't care much for public-sector unions and while I do sympathize with the poor and believe that government assistance is often necessary for getting them out of perpetual poverty, I believe we go about it in a wrong-headed way that has proven itself here to be quite ineffective.

When reading newspaper comment sections, I notice that people accuse socialism of simply being a way for the lazy, non-working poor to redistribute wealth from the rich to themselves. They seem to forget that socialism was created for workers so that when they created wealth, they actually got to keep it. Karl Marx certainly had no love for lower-class people who didn't work or care about societal progress. Perpetual welfare bums he would have referred to as being part of the lumpenproletariat, coming from the term lumpenproletarier, literally translated as 'miscreant' and 'rag.' It seems to me that the Manitoba NDP have chosen to court unionized government workers and the lumpenproletariat at the expense of real productive workers who they were originally created to support. You know, the people who make stuff we sell to other countries which allows us to have some money to then buy stuff from them? An emphasis on big, non-productive government at the expense of workers can only be considered an extremely confused form of socialism.

Socialist concepts I admire and believe the NDP should actually pursue are more along the lines of Germany's co-determination laws. These laws require companies with 500-2000 employees to allow a third of their supervisory board of directors to be elected by the workers. For companies over 2000, this rises to almost half. The idea is that employees should have some say in the direction their company moves and should benefit when the company does well. This prevents job off-shoring and excessive concentration of wealth in the hands of owners while creating incentives for greater job satisfaction, productivity, and loyalty among employees. All of these things make for a stronger economy and less fractured society. Germany is basically preventing the collapse of the European Union all by itself so I doubt anyone can argue this.

As for having a strong social security net, we should be looking to the Scandinavian nations to figure out how to do it right. Like Confucius says, in a well-governed country, being poor makes you ashamed. That is, in a country where the government functions well and tries to boost you out of poverty through education and training instead of simply providing enough welfare to poorly live on, people will be ashamed if they don't make something of themselves and remain poor.

In a ranking of happiest countries, Norway rated first, Denmark second, Sweden third, and Finland seventh. Overall happiness seems like a pretty good indicator of how your country is doing and the Nordic model seems to work. The Swedish pay an average tax rate of 48.2%, second only to Denmark, but mostly don't mind it because they feel it is well-spent. Their safety net works but does not create a permanently unemployed underclass the way it has here and in the UK. Whether Canadians would be able to adopt such a model with our history and interconnectedness with the US is up for debate but it's worth remembering that some countries can make it work. It's probably also worth noting that these Nordic, social-democratic countries have much lower public debt relative to GDP than countries that have adopted low-taxation regimes like the US, UK, or Canada.

In conclusion, I guess all I can say to the NDP is that if you are going to adopt socialist measures in a capitalist world economy, choose the useful ones that have been proven to work elsewhere. Whatever you think about it, socialism was able to turn Russia from a backward agrarian society into a world power capable of fighting off the Nazis and competing with the US in about 40 years. It did this by elevating cooperation and sacrifice for the common good to the level of religion. Raising taxes and borrowing money from future generations because you're too lazy to tackle and cut the wasteful bloat out of the government's bureaucracy is neither socialism nor is it leadership. It is incompetence and it will cost you the next election and it should.

Well, it will if Brian Pallister can actually get it through people's heads that his provincial party of Progressive Conservatives are not actually connected to or attached with Harper's discredited federal Conservatives.

Never really thought I'd be voting for a conservative party but allowing the failure that is today's NDP to discredit cooperative forms of organizing society and production is not something I'll let myself be a part of.

AS




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