40% now dependent on state funding – another step to a basic income?

- Posted in Uncategorized by

Using data from government and media outlets, it can be estimated that about 40% of the adult population are now dependent on state funding to survive. For example, over 6  million workers are furloughed, there have been 1.8 million additional claims for universal credit – on top of the pre-crisis figure of well over a … Continue reading 40% now dependent on state funding – another step to a basic income?

Gaslighting 101: Mr Kenney Responds to Mr Trudeau’s Aid Package

- Posted in Uncategorized by

Gaslighting: abusive behavior where an abuser manipulates information to make his victim question their sanity by using denial, misdirection, contradiction and misinformation to destabilize the victim and delegitimize their beliefs. – Wikipedia

Last week, Prime Minister Trudeau announced $2.4 billion aid package for laid-off energy workers. It includes $1.7 billion to clean up orphaned oil and gas wells and $750 million to stop the leakage of methane gas.

Given that Premier Kenney has been pounding the table for months demanding $20 to $30 billion from the Feds to save the energy sector, his response to the $2.4 billion package was surprisingly bland. Why?

Because Mr Kenney discovered that he can’t bully Mr Trudeau or the rest of Canada, consequently instead of flying into a rage he issued a press release full of statements that were (a) contradicted by the facts, (b) contradicted by his own government’s policy, and (c) a masterful piece of gaslighting.

Mr Kenney

None of which goes far to engender trust in this government.

Mr Kenney’s response

Mr Kenney said Alberta was grateful for the Fed’s $2.4 billion package, but Alberta needs and deserves much more because:

  • 800,000 Canadian jobs depend on Alberta’s energy sector making it Canada’s largest industry
  • Alberta’s energy sector is the largest subsector of Canada’s economy
  • Alberta’s energy sector is one of the biggest employers in Canada
  • If the Feds don’t bail out Alberta’s energy sector it may not survive “the next couple of years”

Okay, let’s take it from the top.

Is Alberta’s energy sector (with 800,000 employees) Canada’s largest industry?

No. Economists define an industry as a sector that produces goods or services. There are at least 10 sectors that employ more Canadians than Alberta’s energy sector, including the wholesale and retail sector which employs 2.8 million, manufacturing which employs 1.7 million, and construction which employs 1.5 million.

Is Alberta’s energy sector the largest subsector of Canada’s economy?

No. The energy sector’s share of taxes paid by all industry sectors was 7.7% between 2013 and 2017. The sector’s contribution to Canada’s nominal GDP is just over 10%; the manufacturing and real estate/leasing sectors contribute more.

Is Alberta’s energy sector one of the biggest employers in Canada?

Nope. See above.

Bottom line: the first three reasons Mr Kenney relies on to support his argument that the Feds should contribute a whole lot more to prop up Alberta’s energy sector are contradicted by the facts.

Is there a chance Alberta’s energy sector may not survive the next couple of years?

Mr Kenney said these were unprecedented times and the energy sector was facing its biggest challenges ever with threats from both the COVID-19 pandemic and the Saudi-Russia price war. He said world energy markets will improve and there would be better times ahead “but only if the industry survives the next couple of years.”   

Which raises the question: If there is a chance Alberta’s energy sector will not survive the next couple of years, then Mr Kenney’s decision to invest $7.5 billion in TC Energy and to allow AIMCo to invest billions more the Northern Courier and Coastal GasLink pipelines was utterly irresponsible. 

Bottom line: Mr Kenny’s rationale that Alberta’s energy sector is in danger of collapse unless the Feds contribute significantly more is contradicted by his policy decision to invest Alberta taxpayers’ money in the energy sector.

Trust?

What are we to make of this bizarre press release? Either Mr Kenney doesn’t care about the facts or he’s comfortable betting Alberta taxpayers’ money on a dicey future, either way he’s gaslighting us to get what he wants out of the Feds.

Which leads me to wonder, if you can’t trust your government in the middle of a pandemic, who can you trust?

Checking In

- Posted in Uncategorized by

How are you? Are you okay?  

The Soapbox family is fine. We’re the lucky ones, we’re doing reasonably well under the circumstances. We check in with each other every day. We go for walks and play more board games than we’ve ever played before (I still suck at Rummikub).  Emails, texts and phone calls keep us connected with friends and family.  We’ve discovered Facetime is perfect for Scatagories or simply catching up over coffee.

But it’s not enough. We need our community.

When my sister in BC spends her free time sewing masks for my family and says she’ll leave the house for the first time in two weeks to take the package down to the local post office instead of leaving it in her rural mail box for pickup and delivery so we’ll get it quicker, I tear up.  

When I walk the dog and meet someone coming the other way with his dog and we scramble to get away from each other, I understand but am saddened.    

When I attend a board meeting by conference call and our chairman starts the meeting by saying it’s so nice to hear our voices, I’m moved.  

Something has happened. Time slowed down. And we’ve learned a few things.

First and foremost, we now recognize the importance of every single member of our society, regardless of their position in the economic and social hierarchy.

Second, we know our local, provincial, and federal governments can move mountains in a very short space of time if they have to. It turns out there’s always enough money to do what’s right and decent.

Third, we understand that when this is over, we cannot go back to the old way of doing things. As the economist Armine Yalnizyan said, COVID-19 fast tracked the discussion of economic policies like universal basic income and modern monetary theory into the mainstream. The pandemic is changing the way we think about economic policy and how we implement it.

If we can tackle the fallout from a pandemic, then nothing is too big or too difficult to contemplate.

And you know what, the politicians can and will get it done…if they get a big push from the community.  That must be our focus when we reached the other side of this tunnel.  

Until then, how are you? Are you okay?

Lock down will hit young people the hardest

- Posted in Uncategorized by

If medical evidence shows young people to be least affected by coronavirus, they are most likely to suffer economically.  The Institute of Fiscal Studies reports that employees aged under 25 are about two and a half times as likely to work in a sector that is now closing down. https://www.ifs.org.uk/publications/14791 Some economists  are predicting that … Continue reading Lock down will hit young people the hardest.

Jason Kenney and the KXL Deal

- Posted in Uncategorized by

Last week Mr Kenney threw away (yet again) his belief in the sanctity of the free market by announcing his government (ie. us) would invest $1.5 billion in TC Energy (formerly TCPL) to complete Keystone XL and provide a $6 billion loan guarantee.

Saved by the Alberta government

Mr Kenney speech was peppered with comments about Saudi “predatory dumping” and “lawfare” waged by foreign funded interests, but his most disturbing comment was that if Alberta did not intervene, KXL “would not be built” or would not be built at “any time in the foreseeable because “there are no prospective private sector bidders for the KXL project at this time.”  

This raises two questions (1) was TC Energy looking for “private sector bidders” for KXL and (2) without such “private sector bidders” was KXL doomed to fail.

The answer these questions lies in TC Energy’s filings under Canadian and American securities laws. There TC Energy takes a sanguine position, simply saying KXL “continues to advance” and TC Energy will continue to manage various legal and regulatory matters before making its final decision to start construction.

Premier Kenney buys a pipeline

Unlike Teck who made it crystal clear it would not proceed with Frontier unless it had a partner, TC Energy has never said it would not proceed with KXL unless it found a “prospective private sector bidder” which I think is Jason Kenney’s convoluted way of saying, a partner.  

So unless Mr Kenney knows something TC Energy’s executives, Board of Directors, bankers, shareholders and investors do not know, one has to wonder why he said KXL was kaput without the intervention of the Alberta government.

But let’s assume for the sake of argument that Mr Kenney was correct when he said KXL could not proceed without billions of dollars from the Alberta taxpayer; is the risk of this investment worth the benefits?  

Risks?

Mr Kenney said while the risks are “obvious” this billion-dollar investment was a “solid bet” because it will deliver $30 billion in royalties and taxes over the next 20 years. However, he refused to provide the forecasts supporting his prediction and given how badly he miscalculated oil prices in Budget 2020 we will take Mr Kenney’s promise of a $30 billion upside with a grain of salt.

Mr Kenney told the House that Alberta taxpayers are protected because our $1.5 billion equity investment is “at the top of the capital stack” and this is a “preferred investment where we’ll sell the shares at a profit.”

Umm, no, this doesn’t allay our concerns.  

Firstly, while TC Energy has agreed to reacquire the Alberta government’s “preferred investment” after the project is completed and placed into service, TC Energy says there’s no agreement on the “sell back” price so how can Mr Kenney promise he’ll sell at a profit?  

Secondly, can someone nudge Mr Kenney’s Justice minister, a bankruptcy lawyer, and ask him to explain to Mr Kenney that equity investments whether they’re preferred or common, rank below debt, and creditors take priority over shareholders (that would be us).

Bottom line: not only are Alberta taxpayers bearing the risk of losing their $1.5 billion investment, they’re on the hook for $6 billion in loan guarantees. And they’re taking this risk on the strength of Mr Kenney’s fuzzy assurance they’ll reap $30 billion down the road.  

Benefits?

Mr Kenney listed other benefits of investing billions of taxpayer dollars in TC Energy, including:   

  • Kick-starting the oilsands. He did not explain how KXL will reverse the double whammy of rock bottom oil prices as a result of the Saudi-Russia price war and tepid demand due to the Covid crisis. Perhaps because KXL will have zero impact on either.
  • Creating 1,400 direct jobs in Alberta, 1,200 in Saskatchewan and 300 elsewhere in Canada and 5,400 indirect jobs in Alberta and 12,000 indirect jobs in Canada…oh wait, that’s not the whole story…KXL will also create 10,400 direct jobs and 42,000 indirect jobs in the United States. Listen, I have no problem with Americans going to work, but I question why Mr Kenney was satisfied with Albertans bearing all the risk while Americans reap eight times the benefit.  
  • Getting to work now. Mr Kenney and his energy minister insist Albertans are working on KXL right now (with “now” being Apr 1 or 2 depending on who’s speaking), however TC Energy’s CEO said in light of the Covid crisis “construction will advance only after every consideration for the health and safety of our people, their families and of those in the surrounding communities has been taken into account.” On Apr 3, TC Energy posted a video describing its Covid protocols which at this point appear to apply only to its construction site in Montana. We’re still waiting for a Covid protocol video relating to Alberta.  

?????   

At the same time Mr Kenney told Albertans our financial position was so dire we could no longer afford to pay our healthcare workers, teachers and other public servants properly, he was negotiating a deal which required him to borrow billions of dollars to support TC Energy’s KXL pipeline.

TC Energy posted record financial results in 2019. It says dividends will grow by 8% to 10% through 2021 and 5% to 7% thereafter. It prides itself on its ability to “access sizable amounts of competitively-priced capital” while preserving its financial flexibility to fund its capital program “in all market conditions.”

TC Energy’s securities filings do not paint a picture of a company under financial stress.

So why did Mr Kenney decide it was necessary for Alberta taxpayers to make a $1.5 billion equity investment in TC Energy and issue $6 billion in loan guarantees?

If, on the other hand, TC Energy is legitimately concerned that legal and regulatory challenges will sink the KXL pipeline why did Mr Kenney (who has no jurisdiction whatsoever over American federal and state legal/regulatory matters) make a $1.5 billion equity investment that is not repayable until after the completion of a pipeline that may never get built and further, agree to backstop $6 billion in loans.

Either way it looks like Mr Kenney made a questionable decision.

All we know for certain is Albertans will be living with the consequences of his decision for a very long time.

‘There’s no place like home’? – working practices after the crisis

- Posted in Uncategorized by

Management and personnel journals are well versed in the advantages of working from home.   Working from home is supposed to improve employee retention   – by eliminating  increasingly long commutes,  it allows employers to recruit applicants from more geographically remote areas, improves motivation and efficiency and of course, produces financial benefits, savings on office space and … Continue reading ‘There’s no place like home’? – working practices after the crisis.

‘Helicopter drops’ and the magic money tree…

- Posted in Uncategorized by

“………….. governments need to deploy massive fiscal stimulus, including through “helicopter drops” of direct cash disbursements to households. Given the size of the economic shock, fiscal deficits in advanced economies will need to increase from 2-3% of GDP to about 10% or more. Only central governments have balance sheets large and strong enough to prevent … Continue reading ‘Helicopter drops’ and the magic money tree…

There is a magic money tree (or a forest) after all!

- Posted in Uncategorized by

Just think. Barely a month ago government was still sticking to its ‘fiscal rules’ about how much it could borrow and for what. Loosening the ‘austerity’ straitjacket slightly but still reminding us that there was no ‘magic money tree’,  everything needed to be costed and paid for. On the eve of Chancellor’s ‘coronavirus’ budget, announcing … Continue reading There is a magic money tree (or a forest) after all!

Budget 2020 and the Snake

- Posted in Uncategorized by

On Feb 27, 2020 the Kenney government released Budget 2020. The day it was tabled it was under water, less than two weeks later it drowned.

It sank beneath the surface once and for all because of a snake (or some other creature) in a wild animal market in Wuhan, China that unleashed the coronavirus which could trigger “the most severe oil market shock in history by throttling demand from heavy industry and airlines.”

To be fair, COVID-19 was unforeseeable, however Budget 2020 is fatally flawed because it continues to promote Alberta’s one-trick pony economy and the nonexistent Alberta Advantage which will result in Albertans being worse off than they ever were.

COVID – 19

Same old, same old

Budget 2020 is a déjà vu budget; a cut and paste of Budget 2019 right down to its key economic assumptions.*

It forecast oil prices of $58 rising to $63 in 2022. The day the budget was released oil prices were around $45; less than two weeks later they were in free fall thanks to OPEC+ failing to agree on production cuts at their meeting in Vienna this weekend.  

Exacerbating Budget 2020’s lack of credibility was the UCP government’s reliance on revenue sources, like federal transfers and more investments, that are completely outside its control.

As is par for the course, there was no hint of implementing a provincial sales tax to provide a sustainable and predictable revenue source. If Alberta had a tax system like the other provinces, we’d have a $7.6 billion budget surplus this year. But no, if the budget won’t balance Mr Kenney won’t raise taxes, he’ll simply cut deeper.  

Cuts  

Mr Kenney has repeatedly said Budget 2020 represents a minor cut, around 3%, and we should consider ourselves lucky he didn’t adopt Ralph Klein’s slash and burn approach to slaying the deficit.

This is a misstatement because:

  • It fails to account for population growth and inflation which put the cuts in the 15% range.
  • The 3% cuts aren’t evenly spread across all ministries. For example, services to seniors will be cut by close to 20%, healthcare cuts are closer to 30% and post secondary cuts are a whopping 50%.  

All Albertans are feeling the impact of these cuts and they’re hounding their MLAs and taking to the streets to voice their dissatisfaction.

Waste   

The government promises to reduce waste. That’s good right, everyone hates waste, but we can’t agree on what “waste” is.

Budget 2020 is no help. It promises to engage in activities that are “nimble”, “attentive”, and not “inefficient” without explaining how these will reduce waste.     

Instead of mucking around on the edges, let’s focus on some big ticket items, like the $30 million/year War Room, and ask the energy sector’s CEOs whether the War Room has added value over and above that generated by their own public relations, investor relations and government relations departments. Heck, let’s ask the industry associations and chambers of commerce as well. If the answer is no, then we can scrap the War Room and save $120 million over the UCP’s four-year term.

Fat cat public servants

Public sector compensation is a hot button issue for those employed in the private sector who made good money when the economy was booming and are now unemployed or underemployed. They say the public sector should share their pain.

Leaving aside the obvious point that “share my pain” is not a persuasive argument, there appears to be an underlying assumption that the public sector is grossly over paid.

This is incorrect.  

Economist, Richard Mueller, researched the public sector wage premium (the percentage difference between the earnings of public sector workers and private sector workers) from Jan 2006 to Dec 2017. He found the average wage premium in Alberta is 3.7%, which is below the national average of 5.7% and concluded there’s not much scope to balancing the budget by taking an axe to public sector wages.

Of course, we could fire the lot of them, bringing public services to a grinding halt and increasing Alberta’s unemployment rate which currently sits around 7%, but that would be cutting off your nose to spite your face.

Unemployment

Alberta lost over 100,000 jobs in the peak of the recession and needs 85,000 jobs to get back to pre-recession levels. Of major concern is the fact that half of Alberta’s unemployed are young men with high school or less in education, consequently their skills don’t match what employers require. Roughly half of these young men have signed up for retraining, the remainder have pulled out of the work force.

This is a serious problem. One would expect Budget 2020 to focus heavily on skills development, however its policies are inconsistent and contradictory. On the one hand Budget 2020 provides funding to upgrade trade skills, on the other hand, it cuts funding to post-secondary institutions, including trade schools, while at the same time fast-tracking newcomers to fill jobs the highly skilled tech sector.

This paradoxical approach does not bode well for Albertans hoping to enter or return to the workforce.

At the end of the day  

There are many ways a budget can be derailed (cue the snake in the wild animal market), but there’s no excuse for adding to the misery by turning our backs on the vulnerable and refusing to prepare Albertans, be they children or adults, for the future.  

*Much of this discussion is based on the U of C School of Public Policy panel discussion, Mar 3, 2020. Panelists: Trevor Tombe (economist), Lisa Young (political scientist), and Janet Brown (pollster). Moderator: Rob Breakenridge (770 CHQR)