Archive for the ‘Economic policy’ Category

FEDERAL COMMITMENT JUST THE FIX FOR CRUMBLING INFRASTRUCTURE

Wednesday, December 7th, 2011

The announcement last week by federal infrastructure minister Denis Lebel that the federal government was kick-starting a process to develop a new long term strategy for public infrastructure investments was quickly dismissed by critics as smoke and mirrors.

With the President of the Federation of Canadian Municipalities at his side, the minister announced a three-step, year-long plan designed to take stock of the situation and align federal, provincial and municipal infrastructure efforts into a common strategy by 2014 when the current suite of federal programs expires.

But with Canada’s infrastructure deficit topping the $ 100 billion mark  and compounding daily, many had hoped that the federal government would announce something more definitive than studies and intergovernmental consultations.

It would be tempting to dismiss this as just  an example of Ottawa fiddling while our cities crumble. It certainly wouldn’t be the first time that a
government announced studies and consultations as a way to try and make an issue go away.

This time however, that would be wrong. In fact, last week’s announcement — if followed through – could just be the fix for Canada’s crumbling infrastructure and broken funding system.

Let’s look at the reasons why.

First, no amount of federal foot-dragging or magical thinking is going to make this particular issue go away.

By the time the current programs run their course in a couple of years, Ottawa will have been in the infrastructure funding business for two decades and will have invested over $ 30 billion while leveraging billions more from provincial and municipal governments.

Yet, not only do the problems that spurred the creation of the first infrastructure program in 1993 remain, but they’ve gotten worse with, as the collapse of a Laval overpass a few years ago reminds us, potentially deadly consequences.

In the early1980s, at the start of the cities’ campaign to get federal help for their crumbling infrastructure, the gap stood at about $ 12 billion, by 2007 studies showed the so-called infrastructure deficit had broken through the $100 billion mark. And that’s just for municipal infrastructure.

Add to that the bill for federal and provincial roads, bridges and other assorted structures and it’s easy to understand why no one level of government has claimed ownership of the problem or the solution.

Second, an overhaul of the existing programs is urgently needed.  The current system of short term, ad-hoc programs favours spending on new infrastructure more than repair, and because the focus is often on getting shovels in the ground quickly, it also tends to favour spending on second and even third tier priorities.

The minister’s commitment to taking stock of what worked and what didn’t with the old programs should lead to a basic re-think of how Ottawa delivers infrastructure funding.

Third, mayors and councillors have rightly been pushing for this kind of long term thinking from Ottawa for the last ten years and, without any new funding programs in the pipeline to act as sweeteners it’s not likely they will let the government off the hook without something tangible to bring home.

Fourth, it is in the provinces’ interest to accept the minister’s invitation and come to the table and have a say on how federal infrastructure largesse will be doled out, first to try and secure the largest possible share of federal dollars for provincial infrastructure, and second, in order to finally have a say in what the programs will look like.

Finally, the growing pressure on the Harper government to deal with a number of major infrastructure challenges – the replacement of the Champlain Bridge comes to mind– gives the minister and the government a powerful incentive to try and spread the fiscal and political burden for Canada’s infrastructure building and repair more evenly across all jurisdictions. This should be a major incentive for real progress.

But what of FCM President Berry Vrbanovic’s comment that last week’s announcement amounted to “a promise to put aside band aid solutions and find the cure for the infrastructure deficit once and for all”?  Wishful thinking on his part?

I’m not sure that the infrastructure minister  would  echo those words exactly–we all remember Paul Martin’s promise to fix health care “for a generation”.  But his commitment to engage all levels of government in a collective re-think of how we finance our roads, bridges and water works, is pragmatic, gutsy and long-overdue.  And it may just work.

NEW NARRATIVE NEEDED TO INSULATE HARPER’S AGENDA FROM ECONOMIC STORM

Monday, September 19th, 2011

As MPs return from their summer recess, a number of storylines—from Nycole Turmel’s political inexperience to Bob Dechert’s flirtations to turmoil at National Defense HQ–are coming into focus and will bear following.  None will be as important for the future of the government however, as how Prime Minister Harper stickhandles his deficit reduction agenda through a fall sitting that will likely be dominated by sour global economic news.

The Prime Minister has a lot going for him at the start of this session. He enjoys a healthy majority in both the House and Senate and is in the enviable position of being the only non-interim leader of a major party in the House.

With the stronger legislative engine the May 2 election gave him, some observers suggest that the road is clear for an ambitious agenda that includes a massive overhaul of Canada’s crime legislation and policy, Senate reform and a markedly slimmer federal government.

That is far from certain.

While rent-a-cops may be pulling traffic duty on the Opposition benches, they are still in a position to slow the government’s legislative plans, particularly if their arguments gain traction in public opinion.

Majority or not, the Prime Minister runs the risk of seeing his agenda of institutional change run aground if Parliament becomes gridlocked because of worsening economic conditions and political opportunism.

After all, who wants to see their government push Senate reform when the economy is tanking?

For the Prime Minister, how well he finesses this will be measured less by the level of short term political pain than by how well he safeguards his ability to implement key planks of his non-economic platform and lay the foundations for a lasting conservative legacy.

The challenge for Prime Minister Harper and his government this fall will be to craft a narrative and a policy approach that balances political and economic imperatives.

As currently crafted, the dominant story—going from funding roads and bridges to cutting government workers and programs–won’t be an easy one to explain or sell to Canadians.

First, the public can be forgiven for not “getting” this coming policy shift as the same conditions that are now creeping into daily newscasts–a stumbling economy and flat jobs growth–were cited as the reasons for the 2009 stimulus-laden Economic Action Plan.

Second, the story coming from the U.S. is all about stimulus, as president Obama is taking one more kick at the Keynesian can. His massive economic package, unveiled last week, aims at recovering jobs and boosting consumer demand.

While Obama’s approach sets his administration apart from many European governments that have opted for austerity measures, the news from Washington has more immediacy and impact for Canadians than stories from Berlin or Paris.

The task for the Prime Minister and his front bench lies less in attacking the Opposition–of whom the public care little about–than in reassuring Canadians that they have a plan and explaining how it will work to safeguard jobs of which the public cares a great deal about.

With the economic news continuing to be gloomy–the Toronto Dominion bank revised its 2011 growth forecast from 2.8 to 2.2 percent and its 2012 forecast from 2.5 to 1.9 percent—in the next few days look for a subtle shift in the government’s narrative away from strict deficit reduction toward a balanced approach that includes protecting jobs.

If there is no marked improvement in the economic outlook by early November, expect the government to take a page out of Jean Chretien’s 1994-95 playbook and push a new government narrative revolving around cutting unnecessary expenditures—getting our house in order–while spending on public infrastructure and jobs.

While we are not likely to see the stimulus spigots opened to the extent they were under the Economic Action Plan, we might see the renewal of elements of the Building Canada Fund, the government’s flagship infrastructure program.

Although the government’s deficit reduction action plan may be temporarily sidelined as a branding narrative, every indication is that all federal departments and agencies will continue to have all of their spending—program and operations—placed under a microscope, and a scalpel.

A subtle shift in tone and policy will provide political cover for the government’s austerity plans, and more importantly, help keep Prime Minister Harper’s transformative legacy agenda on the rails.

INFRASTRUCTURE “ENDGAME” NEEDED

Thursday, January 27th, 2011

By 2014, when the current suite of  infrastructure programs expires, the federal government will have been in the municipal infrastructure business for two decades, investing nearly $ 30 billion and leveraging billions more from provincial and municipal governments.  

Yet this week at a national infrastructure conference in Regina, mayors and councilors from across the country are debating the same question they were 20 years ago: how to get rid of the infrastructure deficit.

This should not come as a surprise given that in the early1980s, at the start of the cities’ campaign to get federal support in erasing the municipal infrastructure deficit, the gap stood at about $ 12 billion and that by 2007 studies said it had broken through the $100 billion mark. 

One conference participant suggested we simply stop using the term and  start calling it an “infrastructure obligation” instead.  If the last 17 years are any indication, it could well be the only way the infrastructure deficit will disappear any time soon.

So how does one explain such figures in light of multi-billion dollar public investments? And what do these figures mean for the future of federal spending in this area?

Answering these questions is particularly relevant now that the federal government has turned its attention to the fiscal fallout from the recession.

In this period of virtuous frugality some in Ottawa might be tempted to simply walk away from programs and strategies that appear to have missed the mark.

That would be a mistake.

Most agree that, with the economy showing encouraging signs of recovery, it no longer is necessary—or even appropriate—to keep the federal stimulus taps open. But federal infrastructure programs over the last 17 years have been instrumental in helping Canada catch up to other industrialized countries in terms of public capital spending.

More practically, these programs have helped address some of the more pressing infrastructure needs in communities across the country. Everything from water treatment plants needing upgrades to crumbling and unsafe overpasses needing replacement have benefitted from federal programs.

Federal dollars were also critical in leveraging municipal and provincial funds that made important strategic investments, such as the RAV Line in Vancouver or the development of the Quartier international in Montreal possible.  

This federal spending “time out” presents an opportunity for cities, provinces and the federal government to take stock of the benefits and lessons from nearly 20 years of federal investments in municipal infrastructure.

It should be a time to assess what worked and what didn’t and to develop a plan to tackle the problem with an eye to fixing it once and for all, because that is what has been missing from the mix of infrastructure programs that have rolled out of Ottawa: an end game.

Programs have been developed with broad policy frameworks–such as investing in “green” infrastructure, but without a clearly defined sense of need or relative priority.

Mapping and understanding the nature and scope of the infrastructure problem must be the first step in developing solutions.  The second step must be a comprehensive assessment of federal infrastructure programs. This must be done collaboratively with all governments involved.

This is the kind of information that will explain why the infrastructure deficit has been compounding when it should have been shrinking.

It is also the kind information that will allow the three orders of government to develop the key elements of a national plan to eliminate the infrastructure deficit, such as:

  • planning for the total investment required and its timing;
  • tailoring the plan and priorities to fit unique regional needs, rather than relying on national, one-size-fits-all approaches;
  • exploring the impact of changing and extreme weather on infrastructure needs; and
  • developing innovative fiscal tools to support a long term approach by all governments.

As the federal government sets out to fix its fiscal deficit, it must not lose sight of the other deficit which, while off the books, has the potential to be just a debilitating socially and economically.

If Canada is to prosper, municipal infrastructure investments must support the economic potential locked within our cities and communities. For this to happen, programs and financing must reflect the long-term nature of infrastructure investments and encourage long-term thinking and planning.

Now is the time to recognize the immense benefits of recent infrastructure investments  and begin planning for a way to put our municipal infrastructure in the black.

BUDGET 2010: WRITING A NEW NARRATIVE

Tuesday, March 2nd, 2010

What a difference a recession makes. For Stephen Harper, previous federal budgets were like chess games that showcased his tactical savvy. This time it’s his high-wire skills that will be on display as he and his minister of finance walk a fine line between conflicting political and economic considerations — without a safety net.

Not only will they have to finesse a contradictory storyline of continued stimulus spending and sharp cuts; but they will have to balance the economic and fiscal needs of a country limping out of the recession with the political imperatives of a minority government gearing up for a possible fall vote.

It’s a safe bet that they will turn to the same budget playbook that is helping them set a longevity record for minority governments in this country.

In their first four budgets, tax and program spending measures targeted critical Conservative demographics with surgical precision. And while boutique politics is nothing new in Canada, the level of market segmentation and the number of sugar pills in each of the first four Conservative budgets were probably unmatched in Canadian history.

Many of those measures—from tax credits for hockey moms and home renovations, to tax deductions for truckers’ meals–were carefully calibrated to ensure the opprobrium of any number of demographic or interest groups for whatever party that threatened to defeat the budget (and the government).

This strategy provided political cover for the government as it moved its budgets through Parliament, and it  helped build support among key groups and constituencies. But it had a third, perhaps more important advantage:  it helped frame a  sustaining storyline of sound economic management tempered by down-to-earth values.

While not particularly significant from an economic or policy perspective, the government’s  Timbit strategy (sweet but not very healthy or nutritious) helped cement its brand as a party in touch with the main-street concerns and values of ordinary Canadians.

Now with the multi-billion dollar surpluses that were the staple of federal budgets over most of the last decade replaced by a $56-billion deficit, will the government change its tune and its tactics?

Not likely.

The strategy of market segmentation and targeting that served it in previous budgets will  be showcased again this week, only this time to help tell a story of restraint.

Expect the narrative to revolve around three principal themes:

  • Safeguarding a fragile recovery
  • Fiscal balance (without tax increases or cuts to transfers)
  • Living within our means

We  know that the government will not close the taps on billions of stimulus dollars already earmarked for projects across the country.  And the prime minister has said the government removed transfers to the provinces from the chopping block (although recent statements suggest it may be looking for some wiggle-room).

Expect the real action to be on the non-stimulus expenditure side, as the prime minister and his minister of finance display their skills at “slicing and dicing”.

With up to 80 per cent of the federal budget funding  salaries, social benefits and provincial transfers, government operations along with grants and contributions are the likely targets.

In 2008 the government undertook strategic review exercises for selected departments, with each required to identify up to 10 per cent (though only 5 percent would be expected to shift) of their budget for reallocation.

This week’s budget could well be when the results of that review become apparent.

First, we can expect the government to try to rein in the federal public service pension plan. That move, in addition to providing long-term structural savings, would play well to the Conservative base and support the government’s new “living within our means” storyline.

A fiscal sidebar to cuts to public service benefits could well see MPs pensions and benefits also cut.  Such a move would reinforce the government’s narrative and draw a line in the sand for Opposition parties that might be tempted to vote against the budget.

Second, the government will look to reduce its institutional liabilities to the many organizations it supports. This could mean cuts to institutions ranging from the CBC to obscure boards, commissions, councils and agencies.

Here too expect laser-like targeting in support of the new narrative.

As the federal government  prepares to tell Canadian households that, like them, it too will have to cut spending to balance its books, no department should consider itself immune; no agency should consider itself indispensable; and no grantee should fail to have a back-up plan.

In the new narrative being written in Ottawa, anyone who opposes the budget risks being branded as out of touch with ordinary Canadians or, worse still, fighting for their entitlements.

Memo to RIM: Play Ball by the Rules

Tuesday, August 18th, 2009

A number of questions arise about Research in Motion‘s (RIM) bid for the patents of Nortel, Canada’s largest corporate failure.

One thing that is reasonably clear is that RIM, in its last minute bid, was not actually interested in the company itself, having let its bidding opportunity lapse by invoking that it did not want to be subject to the disclosure rules.

RIM claimed that it should have the opportunity to submit a separate and apparently non-transparent bid, for reasons of keeping Nortel in Canadian hands. Nortel was not interested as it has a fiduciary duty to maximize shareholder value.

Despite some heavy lobbying, Industry minister Clement and Prime Minister Harper showed little interest in reaching down into a straightforward bankruptcy proceeding in front of an American court to test the validity of a Canadian nationalist industrial policy.

The Industry Committee of the House of Commons held some interesting hearings and will make a recommendation, but beyond some grandstanding about “Canadian champions” one should not expect too much from that quarter unless the Opposition decide to ramp up the issue.

So what’s the fuss?  RIM has had patent problems from day one. It has sued aggressively and it has been sued aggressively. A patent firm, NTP, bought up a very old telecom patent and used it to get US$612 million out of RIM.  RIM, one suspects, wants to protect itself from future patent litigation stemming out of Nortel patents, many of which may be wildly and ridiculously broad. Engineers worked for Nortel then for RIM, others for RIM then Nortel. Who knows what knowledge passed between the two companies?

RIM’s fear is that Ericsson could sell the patents or either use them as a legal club or block new patent applications as neither “unique” nor “obvious.”  Ericsson once let RIM ramp up low-level patents into a major business line. Would they do it again?  Things move rapidly and, yes, they probably would under the right conditions, not enabled by protectionist law suits.

To wrap this up and deal with the Canadian nationalist industrial strategy ploy, Ericsson is a respected multinational corporation based in Sweden, most prominently linked now to Sony Corporation of Japan.  Canada is looking for more cooperative economic ties with both Sweden and Japan.  Moreover, for RIM to consolidate its positionas a world leader, it would be counter-productive to pick fights with two significant international markets.  If you aspire to be a global commercial brand, then learn to deal with companies who are, when they come knocking on your door.

At the end of the day, RIM, as is its right, is looking to protect its intellectual property exposure given some tough situations. Fine, good luck to them. But also, good luck to Ericsson in trying to make something valuable out of what is left of Nortel, when no one else, including RIM, was willing to take on the task.