Tag Archives: Too Big To Fail

Greece Is The Word

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This may come as a super big surprise to all the regular readers out there but I admittedly wasn’t at my most open-minded in my expectations of the province’s Drummond Report. Its arrival coincided with me reading the last few chapters of Andrew Ross Sorkin’s Too Big To Fail. Oh good. A former bank economist tapped to tell us how to put our fiscal house back in order while we’re still mired in the biggest economic slump since the Great Depression brought on by the egregious behaviour of our international banking system.

Step 1: tightly regulate your banks and never again believe that, left to its own devices, the free market is a self-correcting entity.

I’m sure that’s somewhere in Mr. Drummond’s 17 million page report.

What I don’t understand is, if this province is in such a pickle (mmmmm…. gherkins) financially speaking, why did the government hem itself in, seeking solutions from only one narrow perspective? Why not throw the doors open to get a variety of opinions and views, not just the one fixated on the capital side of things?

On top of which, “Our mandate precludes us from recommending increases in tax rates…” Run that by me again, would you please, Mr. Drummond? Our mandate precludes us from recommending increases in tax rates…

So, the government wants to tackle their deficit/debt problem with one hand tied behind its back. Despite being told in the report that “The roots of Ontario’s current fix lie in both the economy and in the province’s record of failing to keep growth in government spending in line with revenue growth” [bolding ours], the province doesn’t want to hear a word about one tool for growing revenue? That would be taxation.

Oh, I get it now.

Tap a guy who’s sure to deliver the goods, in terms of some scary, pant load filling, Greece-we’re-right-behind-you scenarios (slyly bringing up a spooky Grecian spectre while denying he’s doing anything of the sort: “By current international standards, Ontario’s debt is relatively small. We are a very long way from the dreadful fiscal condition of countries that have dominated the news over the past two years…Even Greece, the poster child for rampant debt, carried an Ontario-style debt load as recently as 1984”), Leopold to Dalton McGuinty’s Superintendent Chalmers, remove one possible option from the recovery tool box, so that when you come in less heavy with your next budget, we all breathe a sigh of relief and collectively say, well, it could’ve been much worse.

Regardless to what extent the Liberal government attempts to implement Drummond’s suggestions, it has already achieved its purpose. If this province is really serious about righting the fiscal ship, spending cuts are inevitable. Austerity, folks. It’s all the rage. So much so that, apparently, there’s absolutely no need to listen to other opinions on the subject.

Which is all a little strange because, early on in his report, Drummond summarizes how we got to this point in the game. “Ontario’s revenues now do not cover its spending. In 2010–11, the latest full fiscal year, the government ran a deficit of $14.0 billion — equivalent to $1,059 for every Ontarian and 2.3 per cent of the province’s gross domestic product (GDP), the largest deficit relative to GDP of any province. This is not because spending is particularly high; relative to GDP, Ontario’s spending is one of the lowest among the provinces.”

Ummm… ? What?

Our spending is already one of the lowest among the provinces relative to GDP and now we’re being told that only by reducing spending even further will we be able to dig ourselves out of this hole we’ve created? Does that not seem, I don’t know, a little counterintuitive? Despite the constant painting of the McGuinty government as a gang of reckless spenders, profligate in scandal, eHealth, ORNGE, etc., etc., we read that, in fact, Ontario’s something of a skinflint compared to our provincial brethren.

Further on in the report, Drummond comes right out and tells us how we got to this point. “The reasons are simple. Beginning in 2003, the Canadian dollar began a strong ascent that lifted it from the persistent lows of the previous decade (around 70 US cents) to the recent highs (around parity with the U.S. dollar) during the past four years, with only a brief dip in late 2008 and early 2009. This surge in the currency made Ontario’s exports more expensive for foreigners to buy and rendered the province’s exporters less competitive, while also making imports cheaper.”

Combined with the ongoing effects of free trade that allow companies to scurry off to lower wage jurisdictions, our higher dollar helped gut this province’s manufacturing base, and those jobs left behind inevitably paid less. There was also that nasty global recession that lingers still like a cold that no amount of Echinacea can kill off. And let’s not forget the purely ideological slashing of corporate tax rates that led to the logical conclusion of a company like Caterpillar closing up shop and taking its record profits to Indiana because its workers here refused to accept a cut of some 50% to their wages and benefits.

So yeah, there are plenty of reasons why Ontario faces a record deficit and debt. Government spending just doesn’t seem to be high on that list. Why are we so intent on setting it up as the main culprit that needs to be brought to heel?

I’d be a little more down with the austerity agenda if there was a body of evidence to back up the notion that it’s the way out of our current dire fiscal situation. But so far, I’ve come across precious little of that. Austerity has not yet proven a panacea for places like the U.K., Portugal or Greece. (h/t to The Inverse Square Blog for the info.) And while it may seem a little early in the process to pronounce failure, I think history remains on the countercyclical side, suggesting it’s still too soon to cut-and-run from the idea of more stimulus, more deficits and debt until the economic outlook is a little less bleak.

This isn’t to say we shouldn’t be looking at efficiencies and alternative methods of delivering services that give a bigger bang for the taxpayers’ buck. I just think we’re given huge space to one point of view when clearly our economic problems are multifaceted. Cutting government spending is the easiest option on the table right now as long as it’s made political palatable. That’s the purpose the Drummond Report serves. We best ignore it, however, if we’re searching for actual long term solutions.

— warily submitted by Cityslikr

Responding To Our Responders

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So we here at All Fired Up in the Big Smoke received, if not a deluge of comments to our post from a couple days ago, A Plea to Conservatives Everywhere, let’s call it a handful. A good percentage of which were from almost exclusively well-behaved self-described conservatives taking exception to much of what we’d written. It would’ve been time-consumingly impossible to respond to each one individually. Instead, we’re lumping them together into a single response post which, undoubtedly, will look as if we’re misrepresenting what everyone wrote and deceptively framing the terms of debate in order to make ourselves seem much smarter than we actually are.

Alas, the burden of ultimate editorial control.

There seemed to be four currents of argument running through the anti-comments that came in. When we asked to be shown “…how further corporate tax cuts will kick start our economy,” we got a lesson in the theory of corporate taxes. Yes, we understand the concept. We just weren’t sure where the proof was that cutting them further at this particular time was going to help. Unless you’re one of those anti-Keynesian absolutists, reducing spending along with taxes in such an anemic state of recovery doesn’t make a whole lot of economic sense.

Besides, we’ve been hacking away at corporate tax rates both federally and provincially for a few years now, haven’t we? When should we expect to see positive results? And if corporate tax cuts are such an effective weapon in stimulating the economy, why not lobby for their complete removal? Eliminate them entirely. If 13% is going to help, why not 0? Point to a jurisdiction with significantly lower corporate tax rates than ours are currently and say, see? They work. And if I can’t find one, like say Mexico, that counters your argument, I’ll lay down my sword.

A number of commenters suggested the burden was on me (or the entire Left) to prove that de-regulation and less oversight was the source of the global financial meltdown. I thought they already had. Google Nobel Prize winning Paul Krugman and see what he’s been saying over the last couple years. Or Jeffrey Sachs if he’s more to your economic taste. Check out Matt Taibbi in Rolling Stone for the naked criminality at the very heart of the meltdown. Read Michael Lewis’s The Big Short or Andrew Ross Sorkin’s Too Big To Fail. Watch Charles Ferguson’s documentary, Inside Job. The case has been made quite definitively. You dispute it? You refute it.

And on a couple little side notes. One commenter asked if we wanted to return to the days of the Glass-Steagall Act “…which limited credit growth and therefore slowed down economic growth…” Errr, am I wrong in remembering that the full repeal of Glass-Steagall occurred in 1999, at the height of one of the biggest economic expansions in history? So how exactly did it slow down economic growth? The commenter then went on to point out that no Canadian banks failed due to smart regulations — which, while in opposition, the current Conservative government fought against — and kind of proves my point for me, doesn’t it? We missed the brunt of the financial shitstorm because of government regulation and oversight not because a lack of it. Or am I missing something?

“Prove this whole trickle-down theory to me,” I taunted. “How rising tides raise all boats.” That brought forth a litany of indignation, mostly in two forms. One, things were much better now than they were 100 years ago, owing to the miracle of free market capitalism. OK, sure. But my line of attack wasn’t necessarily directed at the idea of free market capitalism, only how it’s been conducted in the last 30 years or so. Cast your minds back, 50, 60 years ago, to the more immediate post-War era. Where governments taxed the richest of the rich more prodigiously and spent massively on things like infrastructure, established universal health care and sent men to the moon. An era when a single bread winner could buy a house, raise a family, put the kids through college and retire comfortably.

A picture, I’m sure, more idyllic than it actually was but one that is a pipe dream nowadays. Much of our prosperity is built on a mountain of debt. Two income households are the norm. Post-secondary education has grown into an onerous financial burden that is increasingly failing to deliver on its promise of leading to better lives.

Secondly, please, please, please stop bringing up China and India when attempting to defend modern day capitalism. Yes, millions of people are climbing their way out of poverty. And yes, China in particular has turned away from its Maoist past and heartily embraced aspects of the free market. But as another commenter pointed out, both countries remain planned economies, control highly centralized. If our governments here attempted to intrude into the economy the way the Chinese and Indian governments do, conservatives would howl in outrage before soiling themselves and passing out. Witness the reaction to the various stimulus packages.

Finally, conservative commenters took exception to our painting them all with the same brush. There were pro-environmental conservatives who believed in anthropogenic climate change. Conservatives who suspected the War on Drugs was a bust. Pro-choice conservatives. Non-Rob Ford voting conservatives.

Fair enough but that type of red Toryism or socially liberal conservatism is hardly in the ascendancy. Your movement has been hijacked by the radicals under your umbrella and they’ve seized Washington, Ottawa and city hall in Toronto. They’re attacking women’s rights. They’re declaring climate change hokum and maybe even beneficial. The federal Conservative government is trying to close down a safe injection site in Vancouver in the face of overwhelming evidence of its positive contribution. At the same time they’re attempting to roll back drug laws to a Draconian state in order to fill the prisons that they are building. These neocons hate government and everything it stands for.

They don’t believe much of anything you’re claiming to believe. In fact, your views sound much closer to my left wing bias. So why are you fighting me and not those who are doing great damage to your conservative brand and giving you all a bad name?

— respondingly submitted by Cityslikr

Running On Empty

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Sitting alone (again, naturally) on a Saturday morning in the office, my 2nd cup of tea still refusing to warm me up. I will not turn on the electric baseboard heating and give our landlord the satisfaction or the cash. I will not!

I am pondering the rightward tilt the race for mayor seems bound and determined to follow and for the life of me, I cannot figure out why. OK, so people are angry. I get it. The recession lingers on like the first autumn cold that will not quit regardless of what you throw at it. (My suggestion? Plenty of booze and cigarettes. Take it out for an all-night bender. Show it just how unwelcome a host you really can be.) We’re told that we’ve weathered the blow but that the turnaround is going to be painfully slow and drawn out. There’s still some bloodletting to be done in order to get us back to fighting weight.

We’re looking for somebody to blame for this mess and who better than government? There is an orderly process in place for us to make our displeasure known: voting. The alternative is dicier and slightly more involved as it would mean gathering together in groups and tearing some shit up. But, judging by the reaction to things in June during the G8 meeting here, such recourse is frowned upon in official circles.

For us in Ontario, the first crack we’re getting at expressing ourselves at the ballot box is at the municipal level, by-elections aside and who really counts those? The thing that’s baffling me about how it’s all playing out, at least in Toronto, is why are people reacting so, well, reactionarily? We’ve been down this road before, people. Remember?

That hapless and spendthrift Bob Rae government at Queen’s Park in the mid-90s? We ushered in the fiscally austere and oh-so competent Mike Harris Conservatives to clean up the mess. They didn’t. Or how about the corrupt and profligate Jean Chretien/Paul Martin team up there in Ottawa, blowing through all our hard earned dollars on pet projects like… what was it called again? Shawinigate? Time to bring in the restrained and prudent sensibilities of the conservative Harperites to restore order. Except, ooops, they didn’t.

Modern day conservatives never solve problems. They only exacerbate them, deepen them and create ones where none existed. It is a bankrupt ideological movement that successfully achieves two objectives, and two objectives only. One, to roll back any and all social and economic gains made over the last 80 years or so. Two, to dismantle the mechanisms of government in order to render it inoperable for society as a whole so they can turn around and parrot the empty words of their patron saint, Ronald Reagan. “Government is not a solution to our problem, government is the problem.”

After that? They’ve got nothing but a dog whistle to call forth the furies of outrage and resentment lurking just below the surface.

Rather than spend time and space today running down the shortcomings, lies and delusions of the anti brigade vying to retake City Hall for us here come October 25th, let’s take a glance south of the border to our American neighbours who are taking neoconservative/libertarian thinking to its illogical extreme.

Watching the last couple episodes of Real Time with Bill Maher, we encountered 3 cases in point. There was P.J. O’Rourke, the satirical lion of Reagan era libertarianism now simply looking old and tired, stating emphatically that ‘governments don’t create jobs’. When questioned by co-panelist Andrew Ross Sorkin, author of Too Big To Fail, an account of the economic meltdown of 2008, that if by choosing to build, say, a bridge, wasn’t government creating jobs? O’Rourke’s response? Don’t get him started on bridge safety. He was all for bridge safety. Aren’t we all, P.J.? Now, would you please answer Mr. Sorkin’s question.

Next up on the same show was one S.E. Cupp, a shiny-faced conservative pundit star on the internet. In the midst of a discussion about America’s need to start investing more fully in developing alternative sources of energy, she declared that alternative energy solutions were a rich country’s concerns. Again, somewhat flummoxed, Sorkin pointed out that China had surpassed America in pursuing alternative energy solutions which only seemed to prove Cupp’s point. For her, China is now a rich country because it owns a big chunk of U.S. debt and it was the U.S. that was broke. So no alternative energy for America. By reducing a complex economic system to one single factor, this conservative mind believed China was rich and the United States poor. O’Rourke then piped in with the view that we couldn’t do anything about climate change anyway because everyone in China ‘wanted a Buick’. Seriously, kids. He used to be funny.

Last night’s episode featured another conservative internet star, radio show host and proud member of the Tea Party party, Dana Loesch, “… the sweet Midwestern goth version of Laura Ingraham.” Railing against the bailouts and stimulus spending as un-American, she was unimpressed by the notion that the move probably helped staunch the bleeding and ward off another Great Depression. “Why does the government get to decide who succeeds and who doesn’t?” she responded. Uhhh… well, I guess since the private sector was collapsing in on itself, somebody had to step up and try to avoid long breadlines and overcrowded soup kitchens. When Dan Neil, a Wall Street Journal writer, corrected her earlier assertion that more money was spent on the bailout and stimulus then on the war in Iraq, she countered that ‘there are a lot of figures out there that dispute that’.

Ah, yes. Those mystical, magical ‘figures out there’ used to dispute whatever needs disputing in order to keep the belief system going. Or what rational people call, clutching at straws. Because that’s all modern conservatism is capable of anymore. Clutching at straws.

And yet, we keep turning back to it attempting to solve our problems. Our delusion seems to be mutual.

— consternatedly submitted by Cityslikr