New treason of the anti-intellectuals

More than 200 leading economists have signed a petition denouncing Hillary Clinton and John McCain's proposal for a gas tax "holiday" during the summer months, reasoning -- correctly -- that the scheme would discourage conservation and widen the deficit, while doing little for those it purports to help. Hillary's response:

Well I’ll tell you what, I’m not going to put my lot in with economists. We’ve got to get out of this mindset, where somehow, elite opinion is always on the side of doing things that really disadvantage the vast majority of Americans.

The statement is noteworthy in two respects. One, it elevates mere pandering to the level of metapandering -- pandering about pandering. Charged with pandering to voters' pocketbooks, she responds by pandering to their anti-intellectualism: "economists ... elite opinion..."

Two, it illustrates the uniquely precarious position of economists, and economics, in the popular imagination. Imagine! "Well I'll tell you what, I'm not going to put my lot in with doctors when it comes to decisions about medical treatment." Or: "We've got to get out of this mindset, where somehow we rely on physicists to tell us about quantum mechanics." Economics is the only profession where people who have never studied the subject, never read any of its major works, never so much as thought about it, nevertheless feel entitled to dismiss two centuries of the most rigorous intellectual spadework -- not for nothing is economics known as the queen of the social sciences -- with a wave of their hands.

The irony is that there are few subjects where it would be more important to listen to expert opinion, touching as it does so directly on immediate, bread-and-butter questions of the public interest. Yet because it is so intimately bound up in everyday matters, when it comes to economics people feel uniquely entitled to substitute their own opinions for those who actually know something about the subject.

Not that it's helped her any. Perhaps the overall impression, that she will say anything and do anything to get her hands on power, no matter how nonsensical or self-contradictory, is what did her in, in the end. "However lucky Error may be for a time, Truth keeps the bank, and wins in the long run." The man who wrote that, I need hardly add, was an economist.

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Three-Card McGuinty

You have to tip your hat to Dalton McGuinty. Another premier, on discovering that his province was about to qualify for payments under the federal equalization program, might have seized the occasion to demand that the program be enriched. But as the premier of the largest province in Canada, McGuinty no doubt feels an obligation to rise above such petty concerns. Surely statesmanship, then, explains his demand that the program from which Ontario may soon be drawing $1-billion and change should be radically curtailed -- or in McGuinty's words, to "revisit the perverse dimensions of the existing fiscal network that ties us to the rest of the country.

Statesmanship, or confusion. Perhaps aware that his adversaries would blame Ontario's impending descent into "have-not" status on his government's economic policies, McGuinty tried to change the subject by attacking the feds, dusting off his favourite complaint from yesteryear, the so-called $20-billion gap: the amount by which federal tax revenues collected in Ontario exceed federal spending in Ontario. The result was utter intellectual chaos, the premier shuffling numbers and definitions back and forth like a cardsharp at three-card monte, with casual disregard for logic, truth, or basic mathematics....

To McGuinty, there is something "perverse" in the proposition "that somehow we are in need, while at the same time we're sending $20 billion to the rest of the country." It's one thing, he said, "to send $20 billion to the rest of the country in good times, but in periods of economic challenge, this is nonsense. We can't afford to do that." The impending arrival of a billion-plus in federal equalization payments, far from redressing this imbalance, only seemed to exacerbate McGuinty's anger. "It's crazy," he told reporters. "We will be paying ourselves equalization with our own money." And one more time, for emphasis: "We have ended up with the possibility here where . . . were we to become a recipient (of equalization), we would rescue ourselves with our own money. That's how perverse and nonsensical this financial arrangement is."

Where. Does. One. Begin.

Let's start with the $20-billion gap. Not so long ago, you'll recall, it was the "$23-billion gap." That it could have shrunk $3-billion since then may indicate that this much-cited statistic has nothing to do with any entrenched unfairness to Ontario and everything to do with changing economic conditions. And even the revised figure is out of date. it's based on data from 2005 -- not 2010, the year Ontario is projected to start drawing equalization. By then, the gap is likely to be considerably smaller, if it has not disappeared altogether.

Why's that? Consider the actual reasons for that fabled gap. The biggest part of it is simply a result of the federal government being in surplus: the amount by which federal revenues exceed federal spending, not just in Ontario, but across the country. In 2005-06, the whole country experienced a "gap" on the order of $13-billion, of which Ontario's share would be roughly $5-billion.

Billions more is accounted for by the simple fact that incomes are higher, on average, in Ontario than in the rest of Canada. It isn't unfairness that explains why Ottawa collects more tax revenues per capita in Ontario than in most other provinces: it's arithmetic, especially under a progressive tax system, where higher average incomes are taxed at higher rates.

Sorry, did I say incomes in Ontario are higher than average? I meant they were -- 2005 was the last year that Ontario's per capita GDP exceeded the national average. By 2010, they are projected to be 5% below the average. So the situation the premier rails against -- still sending $20-billion to the rest of Canada, even as a have-not province -- does not exist now, and almost certainly will not then.

Now, even McGuinty, if pressed, would not claim that the whole gap is the product of institutional bias against Ontario. At most, you could find about $2- or $3-billion, largely arising from lower-than-average per capita federal transfers for health and social programs, a legacy of past efforts to reduce the federal deficit. But here's the thing: the feds have already moved to raise Ontario back to the national average, as of the 2007 budget.

And here's another thing: at the time, McGuinty had no problem with "paying ourselves with our own money." The higher federal transfers he had been demanding were, after all, paid for largely by Ontario taxpayers, just as surely as its equalization payments would be. That may be wasteful -- why not just leave the money in Ontario taxpayers' pockets, rather than processing it through two levels of government -- but it's hardly unusual.

It does suggest, however, some confusion between "Ontario," meaning Ontario's taxpayers, and "Ontario," meaning the Ontario government -- a confusion McGuinty routinely exploits. It isn't the Ontario government that "sends" $20-billion to the rest of the country. If anyone, it's Ontario's taxpayers. Yet when it is suggested that Ontario might improve its economic performance -- and avoid the stigma of have-not status -- by cutting taxes, notably the province's nation-leading corporate tax rates, McGuinty pleads poverty. "Some of my colleagues are in a position to reduce their corporate income taxes because we sent them 20 billion Ontario dollars," he explained. "If we could keep a few more of our dollars, we might be able to entertain that kind of a conversation."

You follow? Our taxpayers are paying so much in federal tax that we can't afford to cut their provincial taxes. We can't cut taxes, because taxes are so high. Talk about perverse.

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Missing the bus, and the point

In the wake of Toronto's fifth transit strike in 19 years, we may expect a groundswell of support for "declaring transit an essential service," ie taking away transit workers' right to strike. As appealing as this is, given the union's behaviour (union leader Bob Kinnear's professed reason for giving next to no notice of the strike -- that the public would open a can of whupass on his members -- for once has the ring of truth), it will achieve precisely nothing, or about as much as that other post-strike demand, that the union "apologize." It won't put an end to strikes, for starters: making strikes illegal, at least in this country, only brings on illegal strikes. The transit workers' last walkout was illegal, as was the last teachers' strike. But even if it did achieve the goal of ending service disruptions, all that would ensure was uninterrupted TTC service: slow, infrequent, obstructive (Toronto is the only city in the world where traffic improves in a transit strike, since the streetcars are no longer blocking both lanes), and unpleasant. If we really wanted to release the city from bondage to periodic transit strikes, and at the same time do something about the TTC's appalling regular service, there's a simple solution: end the transit monopoly that gives rise to both. Do what cities around the world have done -- allow competition on the roads. As I argued in this 2006 piece,

if we were really serious about transit, if it is as vital as we all say it is, if we wanted to make riding the bus such a delightful experience that passengers would give up their beloved cars for it, is this the model we would choose -- a monolithic, state-owned, vaguely Stalinist monopoly?

UPDATE: The C. D. Howe Institute's Bill Robson makes much the same argument, and is echoed in this National Post editorial.

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Latimer wins appeal for day parole

Robert Latimer, a Saskatchewan farmer imprisoned for killing his severely handicapped daughter, is to be released on day parole, an appeal board said Wednesday. [From Latimer wins appeal for day parole]

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It depends on what the meaning of the words "bank account" is

Mulroney's 1996 testimony (transcripts: day one and day two) is hugely entertaining in other ways, not least in light of his belated admissions before the Commons ethics committee.

The 1996 Mulroney, for example, was greatly indignant at the suggestion that he had a Swiss bank account. Over and over he repeated:

I don't have a bank account in Switzerland. I don't have a bank account in any foreign country in the world. I never have.

Well, that's what he said. What he meant, of course, was "I don't have a bank account in any foreign country in the world, except for a safety deposit box in New York, where I keep $75,000 in cash."...

The 1996 Mulroney was equally outraged that the RCMP, before approaching the Swiss authorities, had not first interviewed him. Had they done so, he said, he would have given them his full cooperation, in a way that would have put their concerns to rest. Over and over, he repeated: he would have answered all their questions, opened his books, given them everything they needed.

Would you like to examine my documents? Would you like to examine my bank accounts?

I had to file my income tax returns like everybody else. He could have had my income tax returns.

Anything that you need from me, from bank accounts to ... to tax returns to whatever, I will give everything I have.

At the time, Mulroney would have known, though his listeners did not, not only that he had been paid a large sum of cash by Karlheinz Schreiber, but that neither his bank accounts nor his tax returns showed it. By his own admission, he had never deposited the money in any account (or not the kind that keeps records -- see above), nor did he report the money on his taxes until 1999.

The letter of request was to gain access to Schreiber's Swiss bank accounts. The money Mulroney was paid was drawn from one of those accounts. Had the police accepted Mulroney's offer of "cooperation," they would have known nothing of this.

All this, on top of his well-known -- and spectacular -- evasions with regard to his relationship with Schreiber. "We would have a cup of coffee, I think, once or twice... I think I had one in the Queen Elizabeth hotel with him... I had never had any dealings with him."

What is perhaps less well known is this exchange, at the very end of the first day, in which Mulroney describes that "cup of coffee" at the Queen Elizabeth.

Q. But the.., so I... perhaps I misunderstood. When you talked about having coffee with Mr. Schreiber at the Queen Elizabeth, it was in the period subsequent to November nineteen ninety-five (1995)?

A. No. No, it was after I left office in nineteen ninety-three (1993), and that's when he told me, as I indicated to you, that, that he was dismayed that my Government had not allowed him to proceed with his desire to build this Thyssen Project. And that's when he told me that he had hired Marc Lalonde to represent him, because he figured that Mr. Lalonde could prevail upon Mr. Chrétien and the Government to have this done in the East end of Montreal. Which, by the way, had they been able to do it, I... I... I thought it was a good project, and so I wouldn't have been critical of anything.

He told me he hired Mr. Lalonde to do that, he told me he was contemplating legal action against my Government, that he had hired a prominent law firm in Ottawa, I think Ian Scott's law firm, very distinguished lawyer, to take action against the, the bureaucrats in my Government who, he alleged, had frustrated the fact that he was never able to get a deal through. This deal. That was the kind of conversation we had.

Q. M'hm.

A. He expressed the hope that Mr. Lalonde would be successful in persuading the new Liberal Government to agree to conditions that would enable him to proceed with the project. That was it.

Emphasis added. That was it. Not: And then he pulled out an envelope stuffed with $75,000 in cash and handed it to me. Not: This was in December 1993, the second of three such meetings in which Schreiber handed over envelopes full of cash to me. Not: But why am I talking about Lalonde? Schreiber hired me to represent the same project overseas.

Clintonian is hardly the word.

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Let the parties work it out for themselves

I’ve tried to get excited about this “in-and-out” business, really I have. But I am hampered by two things. One, nothing about the Conservatives’ shuffling of funds back and forth between the national and local campaigns in the last election appears to have been against the law. And two, the law in question is an ass....

To recap: It is not illegal to transfer funds from the national party to a riding association. It is not illegal to transfer funds from a riding association to the party. It is not illegal for the ridings to pool their funds to purchase advertising and other campaign services, and it is not illegal if they buy these from the party. Not illegal, and not unusual: all are routine practices in other parties’ campaigns. What seems to have Elections Canada’s knickers in a twist is that the Tories did all of these things at the same time, in the course of which responsibility for the spending of these funds is somehow said to have passed from the ridings to the party. So what the Conservatives claimed as local expenses were “really” national.

How the agency arrived at this metaphysics is as unclear as why any of it matters. The Tories gained no particular advantage from the exchange, since it is the combined effort, local and national, that makes up a campaign: whatever extra spending they were permitted to engage in at the national level came out of unused local budgets. But even calling them “national” or “local” makes little sense, since local campaigns by and large are extensions of the national campaign -- the same themes and motifs appear, only with the addition of a candidate’s name here and there. 

What we are left with are arbitrary distinctions, selectively enforced, according to invisible criteria. That’s not a criticism of Elections Canada. It’s the law that’s the problem. It makes no more sense to set separate spending limits for national and local campaigns than it would as between TV commercials and lawn signs. These are matters best left to the parties to work out for themselves.

But then, it doesn't make a whole lot of sense to set overall spending limits, either. The premise is that there should be a level playing field between the parties. But should fairness between parties be the guiding principle? The constitution speaks of the equality of every individual, not the equality of parties. And what are parties but associations of individuals? Surely it is fairness between individuals that should concern us: the equal ability of each individual citizen to make his voice heard at election time. That, after all, is why we give each of them one vote.

To constrain every party within the same spending limit, whether it has 10 members or 10 million, is in fact to put the individuals of which these parties are composed on a distinctly un-level footing: in our admittedly extreme example, each member of the larger party is permitted precisely one-millionth the “voice” of those in the smaller. Does that imply we should have no limits of any kind? Not a bit. But the place to impose such limits is not on the parties, but on individuals; not on spending, but on contributions.

Of course, we have contribution limits now. The Chretien reforms banned union and (most) corporate donations at the federal level, and set limits on individual contributions for the first time. These were tightened further under the Conservatives’ Accountability Act. But important loopholes remain. And indeed, even contribution limits, in traditional form, don’t get it quite right.

Set a limit on how much an individual can contribute to a particular candidate or party, after all, and you simply invite the establishment of parallel groups to receive donations, like the “political action committees” familiar from American politics. A similar problem bedevils spending limits: what do you do with so-called “third-party” advocacy groups, who may or may not be affiliated with the political parties? Either you end up with a total free-for-all, or you impose draconian controls on what private groups can spend to advance their cause, at great harm to freedom of speech.

The answer? Go back to the principle we established earlier: fairness between individuals -- the  ability of each to contribute to the national conversation at election time, in this case financially. If every individual had the same income, this would cease to be a concern. The nearest approximation is to set an annual ceiling on the amount individuals can contribute, not just to a particular party or a candidate, but to all of them -- the sum total of all of his political donations in that year. But how he chose to divide these up within this limit, whether between parties, candidates, or third-party groups, would be up to him. 

The beauty of this is that it’s self-limiting: the more you contribute to one party, the less you have left to give to another. Spending limits would likewise be unnecessary. Since only individuals could contribute, and since no individual would have any greater capacity to contribute than any other, the only limit the parties need face would be their ability to raise funds in this manner. And not just the parties: third-party groups would be under the same constraint, so far as they spent money to support or oppose a particular candidate or party. 

At a stroke, parity would have been achieved -- between individuals, and between the different avenues through which each might seek to express his views in the political arena. Yet at minimal cost to free speech, and without requiring Elections Canada to decide how many local candidates can dance on the end of a pin.

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TV as if viewers mattered

“Two of Canada's largest television broadcasters set aside their fierce rivalry yesterday ... imploring the federal regulator to put consumers first ...”

“Cable and satellite carriers say consumer choice and market forces should dictate which channels are carried...”

“Rogers Communications Inc. has warned the CRTC that fee-for-carriage would inflate cable bills by as much as $10 a month, provoking a ‘consumer revolt’...”

“Shaw blasted the regulator for ‘continuing on a path of protectionism’ at the expense of consumers...”

“Independent broadcasters are urging the federal regulator to step up enforcement of existing rules governing cable and satellite companies ... to protect the programming interests of consumers...”

You get the picture. Preening and droning, droning and preening through three long weeks of hearings, a procession of suits -- cable, broadcast, plus a few from what are wittily referred to as the specialty channels -- took turns impressing upon the CRTC how they are all about consumers. Well of course. If there’s one group we know has a particular crush on consumers, it’s the cable industry. Unless it’s the broadcasters. Or, for that matter, the CRTC....

Even by the standards of the Canadian television industry, it was stomach-turning stuff. The routine never varies. Advertise your concern for the consumer interest. Boast of your unslakable thirst for competition. Mock your opponents as freeloaders and protectionists, sheltering from competition in the lee of the state. Then demand some regulatory preference of your own.

So the broadcasters, those “fierce rivals” who were “imploring” the regulator to “put consumers first,” were in fact there to ensure that nothing was done to open existing Canadian channels to competition from abroad, or even from each other. No change in “must-carry” rules, requiring the cable companies to distribute, and consumers to pay for, channels that nobody watches. No change in “genre protection,” granting each of the specialty channels its own absurd little monopoly -- one food channel, one dog channel, one Hitler channel -- for fear that somebody, somewhere might go out of business. No change in “simultaneous substitution,” a peculiar bit of legalized piracy alllowing Canadian broadcasters to bump an American signal off the air, substitute their own transmission of the same show in its place, and sell ads based on the combined audience -- a direct subsidy, in other words, for the display of American programming on Canadian networks.

And the cable and satellite carriers? The ones who were leading a “consumer revolt” against the broadcasters’ proposal to charge them for channels they now receive for free? That particular fit of consumerism lasted until about the next breath, when they vowed to pass on any fees that were imposed ... to consumers. For that matter, I don’t notice the cable companies leading the charge to dismantle foreign ownership restrictions, or to permit foreign-based satellites to offer their signals to Canadians (legally, that is -- thousands of Canadians are already doing so on the sly). The last time anyone tried -- remember the DirecTv “deathstar” fiasco? -- the industry practically demanded the government shoot it out of the sky. 

As you listen to this unending barrage of nonsense -- and the hearings were just the start: the CRTC has until the summer to come up with a new policy framework for the industry, with the inevitable appeals to cabinet to follow -- bear in mind three things. One, while everyone cites the need to support Canadian content, what they are invariably after is the profits from foreign content. The fees the broadcasters want are supposedly needed to pay for local news broadcasts. They are in fact the the residue from some unpleasant recent bidding wars for foreign programming.

Two, though everyone complains about the burdens imposed upon them by the regulator, nobody actually wants them removed -- since any burden can always be invoked in defense of a regulatory favour. You think broadcasters, rather than suffer under the yoke of Canadian content regulations -- but with all the subsidies that go with them -- would rather be free of both? You think the cable industry would take this deal: no must-carry provisions, in return for no protection from foreign deathstars? Not on your life.

And three, there really are no limits, whether of logic, consistency, or simple shame, on what these people will say to advance their cause. My favourite recent example is the CTV executive, writing in the Toronto Star, who was scandalized that cable and satellite providers should be allowed “to subsidize part of their business” by taking local signals and rebroadcasting them in other parts of the country without compensating local broadcasters. “It's hard to imagine any reasonable business model,” he write, “that would allow someone to confiscate your property with no compensation and resell it for a profit.” Could there be a better description of simultaneous substitution?

But hold on. Suppose we took this gaggle of special pleaders at their word. Suppose we were to design a television policy that really did put the consumer first -- a policy that treated viewers as if they were what television was for. In this world, broadcasters would succeed or fail depending on whether they put on programs that people wanted to watch, not how well they could bamboozle the regulator. Cable and satellite providers would carry only those channels that people were willing to pay for, and would charge only for those people willingly chose. New broadcasters and new carriers could enter the market at any time, whatever their nationality, based solely on their ability to compete for viewers and subscribers. And the cable and broadcast industries, rather than bawling to Auntie CRTC to settle their disputes, would work it out between themselves.

I know. Crazy talk. We return now to regularly scheduled whining. 

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Local campaigns are a fiction anyway

The so-called “in and out” affair has been bubbling away just below the surface of public consciousness since about last August. For most of that time, the media has paid it little attention, aside from the occasional puzzled yawn. That it is all over the media now, since the RCMP’s heavily publicized raid of Conservative headquarters, is because a) we now have pictures, b) we have a piece of paper -- the search warrant -- that we were not permitted to see before, and above all because c) the Tories’ heavy-handed attempt to massage the story via selective leaks of the document’s contents backfired horribly....

What has not changed since last August are the facts of the case. It’s easy to get very meta about this sort of thing -- “just the image of the Mounties carting all those boxes out of Tory HQ has got to be very damaging... in politics, the perception is often the reality... etc.” -- but we are obliged, I think, to pay some attention to the actual substance of the charges: in Elections Canada’s brief, that the Conservative Party evaded federal campaign spending limits by routing party advertising expenses through local riding associations. And these remain as obtuse as ever.

For all the opposition hyperventilating about Tory “shell games” and “money-laundering,” it is not clear the Tories did anything wrong. There is in fact no law preventing parties from transferring funds back and forth between the national head office and local riding associations: the Canada Elections Act expressly allows it. See Sect. 404 (2.1): “A transfer of funds is permitted ... if it is (a) from a registered party to an electoral district association of the party; (b) from a registered association to the party with which it is affiliated...”

Similarly, if the local associations choose to pool their resources to purchase advertising -- even through the party -- there is, again, no law against it. Indeed, as the Tories correctly observe, all the parties do it. For example, in the last election, the Conservatives claim the Liberals transferred $1.7-million from the party to the ridings, who in turn purchased $1.3-million in goods and services from the party, without provoking Elections Canada’s wrath.

So it is a bit of a mystery why the present case should be an exception, or why a series of transactions that would each be acceptable on its own should be considered unacceptable when taken together. The closest Elections Canada’s affidavit comes to explaining this is to note that the 67 riding associations who took part in the scheme did not authorize the national party in writing to purchase ads on their behalf, as required by Section 446 (c) of the Act.

But leave aside the letter of the law. Surely this sort of thing is wrong in principle? I’ll grant the Tories were gaming the system. But the “system” assumes that a bright line can be drawn between local and national campaigns, and that however promiscuously funds may be transferred back and forth between them, the actual spending of these can and should be kept separate. That’s highly debatable.

Let’s accept for the moment Elections Canada’s contention, that by expensing local assocations for what were really national ads, the Conservative national campaign was permitted to exceed its legal spending cap of $18.2-million by $1.1-million. Does that mean the Tories had an unfair advantage -- that, as the opposition maintains, they “stole” the last election? It would, if the national campaign, and national spending limits, were all that mattered. But in fact elections to Parliament take place at the riding level -- 308 separate races, each with its own spending limit. A party’s overall ability to bend the electorate’s ear is the sum of the two, national and local. All the Tories did was to transfer funds from one to the other; the total outlay didn’t change. Funds were transferred, as Elections Canada itself observes, only to those ridings with unused spending “room,” and only within those limits.

Of course, as anyone who’s ever followed an election will know, local campaigns are largely a fiction. Probably 80% or more of a voter’s choice has nothing to do with his riding or the candidates in it. The leader, the party, the platform -- these are what matter (probably in that order) and the parties know it, which is why most local ads are more or less indistinguishable from the national ones. Yet Elections Canada appears to believe there exists somewhere a purely local campaign, where party affiliations are unknown and the issues are all contained to the riding. Indeed, had the Conservatives used that extra $1.1-million to purchase more identifiably “local” ads, it is unlikely they would have had a problem, as several commentators have noted.

So this whole business turns on the question: How local is local? Run an ad with a big picture of Stephen Harper and the slogan “Vote Joe Blow, Your Stephen Harper Candidate in Central West,” and it’s local. Run the same picture with the slogan “Support The Harper Team,” followed by a line in smaller type noting “In Central West, Your Conservative Candidate is Joe Blow,” and it’s national. Or might be -- it all depends on Elections Canada’s interpretation. Maybe if the second line were bigger? Or the camera lingered on it longer?

If you want something to get upset about, you should know that a good part of all this spending, national or local, is on your dime: whether through the tax credits for political contributions, or the reimbursement of candidates’ expenses, or the infamous $1.75-per-vote “allowance” brought in under the Chretien reforms. If you ask me, that’s a scandal. But whether a party spends with its left hand or its right? Meh.

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