If only America were more like Canada
The role reversal is hard to miss, filled with the kind of irony journalists and political activists love to pounce on. A Wall Street Journal editorial last week hailed Canada as a monument to good governance and fiscal soundness. The Weekly Standard's Fred Barnes portrays Canada as a bastion of upright conservative values and home to "the most powerful conservative leader in the Americas."
Prime Minister Stephen Harper's new-found stature, and Canada's sudden rise as a paragon of economic virtue, no doubt will help bolster Finance Minister Jim Flaherty's international clout as well. In Washington, he mildly lectured the rest of the world on the merits of fiscal discipline and balanced budgets. "It is important for all of us ... that we have a plan in place to make sure that markets are comfortable and have confidence in the fiscal plan of our governments."
Canada's image as a disciplined economic state was enhanced by U.S. editorial writers who see in Canada what they do not see in the United States.
The Wall Street Journal Conservative policy -low taxes and a willingness to allow the exploitation of rich oil and mineral deposits -has been a lifesaver for a small economy heavily integrated with the U.S.... Mr. Harper did engage in stimulus spending, but he was also mindful of the risks. Canada's stimulus did not add to the country's entitlement rolls.... he has avoided the debt explosion afflicting the U.S. and much of Europe. He has also promised to balance the budget by fiscal 2014-15 without raising taxes, which was a clear dividing line in the recent campaign.
The headline on The Wall Street Journal editorial was What Canadians Want. The bottom-line message in the editorial, however, was less about Canada and more about what The Wall Street Journal wants for America and for Republicans. "The lesson of Mr. Harper's victory is that well-implemented conservative economic policies can attract and keep a political majority. America's Republicans might want to send a visiting delegation and study up."
The tendency to portray Canada as a place where old-line American-style economic policy has emerged triumphant seems to dominate the commentaries. The underlying theme or question is: Why can't America be more like Canada, which is more like America used to be? More important, perhaps, is the implication that Mr. Harper is more American than President Barack Obama.
Investor's Business Daily Harper, who comes from the conservative and energy-rich Western province of Alberta, campaigned on making Canada an "energy superpower." He wasn't talking about wind turbines and solar panels, but about Alberta's oil-rich tar sands. According to Bloomberg, Canada "sits on the largest pool of oil reserves outside the Middle East." The Obama administration, by contrast, has imposed a seven-year moratorium on most offshore drilling, placed Alaska off-limits and locked up immense reserves of shale oil and gas in the continental U.S. Harper won in part by saying to Canadians, "Drill, baby, drill."
Well, that's some tribute to the Harper Tories, although it looks a little less like the real Harper Tories that we saw through the election campaign or in any policy agenda. Mr. Harper has in the past talked enthusiastically about turning Canada into an energy superpower. But there is no way the Tory policy on energy could be paraphrased as drill, baby, drill. As for wind turbines and solar panels, the Harper Tories have never suggested they did not think highly of greening the electricity sector.
Still another salvo in the editorial campaign to convert a fanciful version of Canadian economic policy into fodder for a Republican agenda came from a small-c conservative online newspaper.
The World Tribune It used to be that American conservatives would regularly mock our neighbors to the north as "socialists" -"The Socialist Republic of Canuckistan," they would sneer. That was back in the day when America espoused limited government and Canadians elected leaders to enlarge the state. Yet, since the later years of the Bush administration, Americans are interventionist and Canadians allow the free market to propel the economy to great heights. And the results are unmistakable: The Canadian economy is thriving while the American one barely has a pulse. Grace Vuoto is the executive director of the Edmund Burke Institute for American Renewal.
Oddly, just as a conservative Canada is emerging as a model for American policy, some Canadians are taking to advising the United States to adopt some of the policies that Canada is trying to escape from. Thomas Courchene, in a new paper this week for the Institute for Research on Policy, offers a variety of prescriptions for Rekindling the American Dream: A Northern Perspective. One of his solutions to U.S. economic problems is to raise taxes to fill what he calls America's "revenue deficit."
Mr. Courchene's idea is that the United States has room to raise taxes up to levels that are comparable to Canadian tax rates. He suggests, for example, a GST for the United States. Somehow, raising taxes doesn't look like the kind of Canadian policy U.S. editorial writers and the Edmund Burke Institute for American Renewal have in mind.
Troubled waters
'In a way, it's a victory," says Winnipeg Councillor and privatization foe Jenny Gerbasi of a sewage agreement signed last month between Winnipeg and Veolia Water. "We view it with guarded optimism," says CUPE's Wally Skomoroh. "There's no parade yet, but we're pleased that the city still drives the bus." Even the Council of Canadians grudgingly calls the agreement "a less objectionable deal than was previously contrived," adding that it "is far superior to the 'water privatization' that many of us saw on the horizon."
When usually vociferous critics cautiously praise a city's agreement with a private water and sewage company, it's a good bet that ratepayers and taxpayers are being hosed. And they are. Veolia's 30-year agreement merely provides for "expert advice" on the design, construction and operation of Winnipeg's sewage-treatment facilities. It brings no private investment, limits incentives and opportunities for savings, and blurs lines of accountability regarding costs and performance. Yet Veolia and other industry leaders tout the deal as the wave of the future.
Veolia boasts that the agreement "is creating a lot of excitement in the industry." It calls it "a game changer" -one that "represents a new model for cities around the world." According to Public Works Financing, an industry journal, the company believes that the model will finally open the urban utility market in both Canada and the United States.
The agreement serves as a bad model for several reasons. First, it guarantees no private investment. This is problematic enough in Winnipeg, which plans to spend $751-million on its sewage system in the next few years. It could be a disaster in other cities across Canada, where infrastructure deficits loom large. Toronto, for example, already faces a backlog of $1.7-billion in water and sewage repairs and upgrades, and expects to spend $8.7-billion between 2011 and 2020. A number of studies suggest that Canadian municipalities need to invest $90-billion or more in their water and waste water infrastructure.
Private financing can help meet this need while transferring financial risks from taxpayers and ratepayers to the private sector. Private financing can also reduce overall costs. A private consortium that builds and finances a facility risks its own money and will invest prudently. If it is not paid until the completion of a project, it will have strong incentives to complete construction on budget and on time. If it is also responsible for long-term operations, it will try to minimize costs over the entire life of the contract.
Private investors would welcome the opportunity to put their money into water and sewage infrastructure -still the exception to the rule in Canada. Canadian pension plans, infrastructure funds and utilities are investing abroad rather than at home. The day before Winnipeg and Veolia signed their agreement, Algonquin Power & Utilities Corp. announced agreements to buy three more water utilities in the United States. The Oakville, Ont.-based company already owns 19 water and waste water utilities south of the border.
Winnipeg's agreement with Veolia falls short in other ways, as well. A good operating contract gives a private firm both the incentives and the means to achieve considerable savings. While savings can result from economies of scale and myriad efficiencies, they are often found in reductions in staffing levels -generally through attrition or voluntary early retirement, in order to protect individual workers. Some private operators have been able to cut staff by between 40% and 60% while improving performance.
Not so in Winnipeg. The contract gives the city sole discretion in decisions about employing waste water treatment managers and staff, all of whom will continue to work for the city. Although Veolia's profit will depend in part on how much money the city saves, unilateral decisions by the city about staff will not penalize the company. It is easy to imagine scenarios under which Veolia might actually benefit from bloated staffing levels.
The collaborative agreement also lacks the clear accountability mechan-isms found in well-crafted financing and operating contracts. When a private consortium is fully responsible for the design, finance, construction, and operation of a system, it is clear where the responsibility lies if things go wrong. In fully public systems, in contrast, accountability for errors is almost impossible to assign. This helps explain why municipal projects are notorious for cost overruns -why, for example, in Winnipeg, recent upgrades to one treatment plant cost 80% more than expected -and why so many municipal utilities, Winnipeg among them, perform poorly.
Winnipeg's agreement with Veolia could exacerbate this problem. In sharing responsibility for many matters while reserving some of the most difficult decisions for the city, the contract will provide opportunities for finger pointing and buck-passing if costs rise or performance is unsatisfactory.
Veolia Water president and chief executive Laurent Auguste concedes in Public Works Financing that a partnership that included private operations would likely provide greater benefits to ratepayers: "You probably can deliver more performance faster." But, he adds, the current arrangement is "more realistic." That kind of realism brought our water systems to their current state of disrepair. True realism would recognize that industry accountability, not political expediency, should rule.
Publicly operated water and sewage systems are not serving Canadians well. More than 1,000 drinking water systems violate provincial requirements or are subject to boil-water advisories. Still more sewage systems pollute local waters. Few municipalities have the resources -professional or financial -to address these problems. Most would benefit from private expertise and private capital. They would also benefit from the efficiencies that arise from competitive tendering and from the accountability mechanisms found in enforceable, performance-based contracts.
Private water companies, large and small, are lining up for municipal business. So far, they are meeting with success mainly in smaller communities. Given vocal opposition from unions and other opponents, it's not easy for municipalities to choose private financing and operations. Nonetheless, those who have the courage to seek the expertise and efficiencies that private alternatives offer will greatly benefit the public purse, public health and the environment. Anything less will leave the public high and dry.
Raymond Lavigne's attitude problem
Former Canadian senator Raymond Lavigne has spent four years fruitlessly trying to convince people he didn't systematically fleece taxpayers while cheating the government on expense claims.
It didn't work. He was found guilty, and now hopes to avoid spending time in jail for his offences. His lawyer, Dominique St. Laurent, asked a judge for either a suspended or conditional sentence, and said Lavigne "should not set any toe whatsoever in prison." Instead, he suggested the former senator be allowed to do "public service" or serve his sentence in the community.
"Public service"? Isn't that what Lavigne was paid $132,000 a year to do as a senator?
Since the charges against him were laid in 2007, he has collected $315,000 in salary and travel expenses, while rarely turning up for work. Rather than resign, he dragged out the case as long as possible, quitting the Senate only when it became evident he was about to be kicked out.
He'll still be collecting two pensions from taxpayers -as a former MP and a former senator -and hasn't shown an iota of remorse for his actions. "I don't deserve this," he told reporters Tuesday after the sentence hearing.
Lavigne, 65, has had a long and profitable ride on the public purse. And it is galling to hear him ask for light treatment without even bothering to apologize -or even acknowledge -his reprehensible conduct.
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