Monday, January 30, 2017

Justin Trudeau uses divide and conquer tactic on health care funding

Just before Xmas last December the Liberal government offered the provinces a little more than half of what the previous right-wing Harper government had been paying Canadian provinces.

As mentioned in a previous Digital Journal article, the offer ran for just one day. There was no discussion of alternatives such as the 5.2 percent increase put forth by the premier of Prince Edward Island. Finance Minister Morneau's offer was 3.5 percent over five years. The Conservatives had been paying six percent. The rate will go back to three percent in April unless there is an agreement. The provinces were angry that the Liberal government came with a take-it-or-leave it attitude. They had hoped that there would be discussion and a negotiated agreement. The tactic shows the Liberal government is not willing to negotiate with the provinces but will try to impose policy on them, a policy far less liberal in its funding then that the right-wing Conservatives had been following. Ever since the meeting Ottawa has been trying with considerable success to strike deals with individual provinces.
Three eastern Liberal provinces broke ranks. First New Brunswick struck a deal and then Nova Scotia and, Newfoundland and Labrador. Also in the north Yukon and two territories came to an agreement with Ottawa. Now one of the prairie provinces, Saskatchewan, has also broken ranks and reached an agreement with Ottawa.
Saskatchewan has also reached a separate agreement with the federal government over private MRI clinics. The province will have a one year reprieve to show that private MRI's do not hurt the public health care system. Under the deal Saskatchewan will receive $190.3 million for home care and $158.5 million for mental health services but over ten years. The agreement comes just a day after the agreement with the Yukon, the two territories Nunavut and the Northwest Territories.
While Ottawa may have succeeded in destroying the solidarity among the provinces in opposing the original deal, the five most populous provinces have yet to sign, as well as Prince Edward Island. Even though they have struck a deal with the Liberal government, Saskatchewan and the territories added their signatures to a letter sent by the other provinces to the PM Trudeau:"Premiers remain united and determined in seeking a multilateral agreement. Premiers also recognize that provinces and territories face unique local circumstances, which led some of them to sign bilateral health agreements. However, premiers representing 90 per cent of Canada's population continue to seek a fair deal for long-term health funding from the federal government."
The holdout provinces have said the deal offered by Ottawa last December will further reduce the federal government's share of health spending to unacceptably low levels. Health care is jointly funded by the provinces and the federal government with each province having its own plan that must be in accord with the Canada Health Act. The federal funding helps out particularly those poorer provinces who have problems funding the level of service of richer provinces, so that there is a more uniform quality of service across the country.
The Quebec health minister criticized the Saskatchewan agreement and argued that the agreement on MRI's violated the law as MRI are to be free and publicly paid for. Saskatchewan allows residents to pay for an MRI test in a private clinic. In return the private clinic must offer a scan free to someone on the public waiting list. Back in November Jane Philpott, the federal health minister warned the Saskatchewan health minister that under the Canada Health Act the federal government could withhold funds from provinces that charged for medically necessary services. Federal officials claim that the MRI agreement is unrelated to the deal on funding. Obviously it sweetens the deal for Saskatchewan.
The Saskatchewan Health Minister Jim Reiter said that Saskatchewan would have a year to prove to the Liberal government that its policy on MRI's is consistent with the Canada Health Act. Of course it is de rigeur in Canada for politicians to claim they support our health care system, even Conservative Premier Stephen Harper did so. However politicians at the same time would like to "modernize and improve it" often by having more private involvement which pleases some lobbyists and can bring in more donations. Philpott's office displays the common rhetoric in its statement:"Minister Philpott is committed to working with Saskatchewan to strengthen our publicly funded, universal health-care system, while at the same time upholding the principles of the Act, and has asked officials to work with Saskatchewan officials over the next year in this regard,"Among the ways the Liberals are strengthening the system is by reducing funding and refusing to negotiate funding with the provinces. When a province such as Saskatchewan introduces private for profit services as with the MRIs, it does not punish the province but gives it a year to show that it does not harm the operation of the Canada Health Act. Former Conservative PM Harper who was always criticized by the Liberals provided almost twice as much.

Saturday, January 28, 2017

Canada's ethics commissioner to investigate Trudeau family vacation on private Bermuda island.

Mary Dawson, Canada's ethics commissioner said that she was satisfied that a letter to her by Conservative ethics critic Blain Calkins brought up issues regarding a Trudeau family vacation that met the requirement for an investigation.

The Trudeau family took a vacation to the private island home of the rich philanthropist and spiritual leader Aga Khan in Bermuda:
Aga Khan is also transliterated as Aqa Khan and Agha Khan;[1] born 13 December 1936) is the 49th and current Imam of Nizari Ismailism, a denomination of Isma'ilism within Shia Islam consisting of an estimated 25 million adherents (about 20% of the world's Shia Muslim population).[2][3][4][5] The Aga Khan is a British[6] business magnate,[2][7][8][9] racehorse owner and breeder.[7][10]His worth is estimated at around $800 million USD. Aga Khan was the first faith leader to address a session of the Canadian parliament on the 27th of February 2014. He has received honorary degrees from several Canadian universities.
The Conservative MP pointed out to Dawson that the visit pointed to potential violation of the Conflict of Interest Act. Trudeau used the philanthropists private helicopter and accepted hospitality from a "friend" whose foundation receives millions of dollars in funds from the federal government. Dawson said: "I have therefore commenced an examination under subsection 44(3) of the Act to determine whether Mr. Trudeau has contravened sections 11 and 12 of the Act in connection with his recent stay at and travel to the Aga Khan's privately owned island. I will also examine whether Mr. Trudeau may have contravened his obligations under sections 6 and 21 of the Act."
The National Post reported that Trudeau and his family went to Khan's Bell Island for a post-Xmas family vacation. Trudeau confirmed they were flown to the island by Khan's private helicopter. The Prime Minister's Office(PMO) also confirmed that others were guests on the trip including Liberal MP Seamus O'Regan and his husband Steve Douss, and President of the Liberal Party, Anna Gainey and her husband.
Section 11 of the Conflict of Interest Act prohibits office holders from accepting gifts that could be seen as influencing the recipent with respect to an official power, duty, or function. An exception is if the gift is part of a protocol or is from a relative or friend. Section 12 forbids ministers from accepting travel on non-commercial or private aircraft for any purpose unless it is required by his or her position, unless there are exceptional circumstances or with prior approval of the Commissioner. The Liberal government's own guidelines also do not allow sponsored travel unless it is "exceptional circumstance and only with the prior approval of the ethics commissioner." Trudeau admits he did not go to the ethics commission before he took his trip.
NDP leader Thomas Mulcair and NDP ethics critic Alexandre Bouleric also wrote to Dawson calling the trip deeply disturbing and asking her to expedite part of the investigation. Their letter read in part: "We recognize that a full investigation of the inappropriate trip may take some time, but the use of private aircraft is a clear-cut violation that could be addressed more swiftly. We are therefore requesting that you fast track this piece of your investigation and that you make a clear declaration that the Prime Minister has broken the law." The maximum penalty that Trudeau could face for violation of this section of the act is a "notice of violation". However, it would enable opposition politicians to claim that Trudeau's action brings into question the government's commitment to ethical conduct and transparency. The office of the ethics commissioner was established in 2007 by then Prime Minister Stephen Harper.
Trudeau will be able to argue that his travel by private helicopter to Bell Island involved exceptional circumstances since he claims travel to the island "only happens through private means". Trudeau pointed out that Khan was a long time friend of his family and had been a pallbearer at his father's funeral. Calkins asked whether given Trudeau's friendship with Khan that he should recuse himself when the government was dealing with the Agha Khan Development Network(AKDN). For Trudeau, Khan's being a friend allows him to accept the gift.
The AKDN has received millions of dollars for projects from both the Liberal and Conservative government. The most recent grant was for $55 million to improve health services in Afghanistan. It was announced by the Trudeau government. The vacation certainly raises questions of conflict of interest involving Trudeau.

Chrystia Freeland new Canadian International Trade Minister banned from Russia

In a surprise move, Justin Trudeau, Canadian Prime Minister, replaced prominent Liberal Stephan Dion by Chrystia Freeland who had been serving as international trade minister.

Freeland is banned from Russia as part of Russian counter-sanctions. In 2014 after the referendum and Crimea's joining Russia, the Harper Conservative Government imposed sanctions on some Russian officials. Russia responded by sanctioning 13 Canadians. Freeland responded in a tweet in March 2014: "Love Russ lang/culture, loved my yrs in Moscow; but it's an honour to be on Putin's sanction list, esp in company of friends Cotler & Grod." Freeland is a proponent of personal asset seizures and travel bans a part of an economic sanctions program against Russia. She visited Ukraine on behalf of the Liberal Party. She met with MP Petro Poroshenko who was subsequently elected president of the Ukraine. She owns an apartment with her sister in Kiev overlooking Maidan square.
Freeland is known for her support for the Comprehensive Free Trade Agreement (CETA) between Canada and the EU that she helped negotiate. Wikipedia notes that many oppose the treaty:Critics oppose the treaty on the grounds that it will weaken European consumer rights, including those concerning food safety, and that tariffs are already very low.[8] It has also been criticized as a boon only for big business and multinational corporations, while risking net-losses, unemployment, and environmental damage impacting individual citizens.[9][10] [11]The deal also includes a controversial investor-state dispute settlement mechanism. The agreement has prompted protests in Europe and Canada.[12]
Michael Carley, head of the history department at the University of Montreal, and specialist in relationships between the West and Russia said that the decision to appoint Freeland may be related to Trump's stated desire to renegotiate the North Atlantic Free Trade Agreement (NAFTA) which Trump has called the worst trade deal in history. Her experience in negotiating CETA may be helpful. However, Carley also said:"This appointment is a catastrophe for Canadian-Russian relations, I cannot understand why the government would have selected her to be minister for external affairs with her stated position with respect to Russia, Crimea, and Ukraine. She's a Russophobe, a hater of Putin, of Russian politics. To me this looks like the Prime Minister Trudeau is just abandoning any thought of better relations with Russia, for me it's an incomprehensible appointment."
Carley notes that Stephane Dion had made it quite clear that he wanted to improve relations with Russia. Apparently, Dion did not have much support for that policy. Radio Canada International reported: "Dion had sought to reverse the policy of the previous Conservative government of Prime Minister Harper who cut almost all political contacts with Moscow."
An article by Craig Scott a professor of law at Osgoode Hall Law School and former NDP MP for Toronto-Danforth is also critical of Trudeau's appointment. The article sarcastically claims that the presence of Dion in the cabinet served as a constant reminder to Trudeau of progressive positions he would rather forget on climate change, electoral reform, and handing over detainees --in Afghanistan--to be tortured. There is no mention of Dion's desire for better relations with Russia. Dion is a strong supporter of electoral reform and favors a system of proportional representation. Scott suggests that Trudeau appointed Dion as foreign minister to keep him away from the issue of climate change and electoral reform. Dion stressed environmental issues in the Green Shift while he lead the Liberal Party from 2006 to 2008. Trudeau also removed Dion from the cabinet environmental committee because he was allegedly stepping on toes in an attempt to make Liberal policies more progressive.
Scott also notes that he would be put in a position where he would immediately face problems such as the sale of armoured vehicles to Saudi Arabia and apparently officials did not provide him with important information about the sale. The time to "kill" Dion came early with the election of Trump. Freeland could be given Dion's cabinet position as having expertise on negotiating trade agreements and could deal with Trump who wants NAFTA renegotiated. Nowhere does Scott mention that Freeland is banned from Russia and is strongly against improving Canadian relations with Russia. Trump on the other hand is friendly towards Putin and wants to improve relations with Russia. Freeland is unlikely to hit it off with Trump.
An article in the Globe and Mail relates some of the problems Dion had with the Saudi contract and other issues. The Globe reports a "long-time Liberal who worked with Dion" who worked with DIon saying he has an insufficint ability to read people which he claimed would be a challenge dealing with Donald Trump who is quick to take offence. Apparently Feeland, banned from Russia and who approves sanctions would be a much better fit for negotiating NATO deal with Trump, who is friendly to Putin and wants better relations. The anonymous Liberal said: “The No. 1 job of a diplomat, especially the top diplomat, is relationships. It’s all about relationships. [Mr. Dion] has got a bunch of strengths, but that is one area in which he was the wrong fit.” Fen Hampson, distinguished fellow at the Centre for International Governance Innovation said: “Trump is the great communicator and I think [the Prime Minister’s Office has] come to the conclusion that they need a foreign minister who is also going to be an effective communicator at a time when there is a risk we could get sideswiped on a whole bunch of issues from auto trade to softwood lumber." There is no mention in the article of Freeland being sanctioned by Russia. This seems to have escaped the notice of at least two significant Canadian media outlets. We need to turn to a Russian propaganda outlet and alleged fake news producer Sputnik for such trivial information.
UPDATE: A friend sent me the following link which shows that Russia offered to withdraw the sanction but Freeland rejected the offer. He also included a link that argues the annexation of Crimea was in accordance with international law:

Saturday, January 14, 2017

Liberals break promise to plug tax loophole for the rich

The loophole involves executives taking remuneration in stock options rather than cash. If the price of the stock is lower than the market the difference is taken as remuneration. An executive can claim a 50 percent tax deduction. when selling the stock.

The decision to not plug the loophole was made after pressure on Finance Minister Bill Morneau by bigwigs from the financial elite. Liberal campaign literature from the 1915 election proposed that as many as 8,000 people were claiming an average of $400,000 a year through the loophole. In the campaign the party platform called the loophole a disproportionate benefit for the wealthy and promised to cap the benefit at $50,000.
One of those who contacted the new Liberal government was John Manley himself a former Liberal finance minister who now heads the Business Council of Canada. In November of 2015 Manley wrote: “Doubling the tax rate with a retroactive impact on existing options would be unfair. Allow for a gradual phase-in of the changes.” Just a few weeks later Morneau announced that the changes would not be retroactive.
However, last March Morneau went even further and said that closing the loophole was completely off the table. The concern about wealthy executives profiting from the loophole is now replaced by concern that "small firms and innovators" will find their businesses hurt by blocking the loophole. When asked why Morneau never mentioned messages from larger firms and others, he replies that the Liberals are concerned to strengthen the middle class through broad consultation and notes that the department gets a large range of correspondence.
NDP finance critic Guy Caron noted: “There are many problems. I think that shows the influence Bay Street has over the Liberal Party. That’s something we knew in the past and it’s still very much like this nowadays. I think this is a perfect example of this.” The move shows a cynical attitude on the part of the government according to Caron.
Dennis Howlett, president of Canadians for Tax Fairness, noted: “The prime minister campaigned on a promise to get rid of the stock option loophole which has put billions back into the pockets of wealthy CEOs, including bank presidents, real estate moguls, and heads of powerful multinationals. Those guys send their lobbyists to talk to the Finance Minister and — just like that — their commitment disappeared.” The group also criticized the Liberal government for having private dinners with Liberal cabinet ministers and even Prime Minister Trudeau for a high fee. A ticket can cost over $1500. At first Trudeau denied that there was any lobbying at these cash-for-access events. Just before Christmas, Trudeau admitted that lobbying did take place but did not affect his decisions.
By the end of October this year, 16 fundraisers were reportedly held by Trudeau. But he had reportedly held 16 such fundraisers by the end of October. The Tyee has reported on two dinners in private homes — one in Toronto, one in Vancouver — attended by a combined 120 people. Some might have not been paying guests, but if 90 per cent were, the haul from those two nights would be about $165,000. Trudeau’s cash-for-access events to the end of October could easily have pulled in $1.3 million. Cabinet ministers and officials had held more than 70 similar fundraisers by the end of October. t=_blank]The Tyee reported on two dinners, one in Toronto and the other in Vancouver attended by about 120 people in all. Even if only 90 percent were paying guests the take from the two nights would be around $165,000. For all 16 the take could be up to $1.3 million. During the same period cabinet ministers and government officials held more than 70 similar fundraising dinners.
The tax loophole deprives Canada of about $750 million in lost revenue each year. It is now the little guys and struggling startups that are going to be hurt by the change even though most of the benefits go to executives who are already doing well. Canada's top CEOs earn 193 times what the average worker earns. They earn so much that they benefit greatly by taking much of their compensation as stock options which are taxed at half the rate of regular salaries. Yet Morneau justifies his refusal to act by saying: "I heard from many small firms and innovators that they use stock options as a legitimate form of compensation, so we decided not to put that in our budget." The Liberals and Conservatives agree on promoting policies that make the rich richer while the burden of taxes is placed squarely on less wealthy taxpayers. Some industry representatives suggested different ways of closing the loopholed that would have a less drastic effect on the wealthy. The Liberal government decided that they simply would not bother even to try to close the loophole at all. Maybe Stephen Harper the former Conservative Prime Minister suggested that idea to Morneau.

Thursday, January 12, 2017

Many Canadians believe that their province will not do well in 2017

A new Angus Reid poll shows that for most Canadians 2016 was a bad year. The survey of 5,128 Canadians found that those surveyed from Newfoundland and Labrador were most pessimistic with 57 percent predicting more bad than good in the province in 2017.

Just 16 per cent had a positive view of 2017. The online survey was released Tuesday. Dave Korzinski, research associate at Angus Reid Institute wrote by email to BNN: “Newfoundland has the highest unemployment rate of the provinces polled. We also attribute some of this to the slow energy sector in 2016, which has really hit people hard." A summary of the findings of the survey can be found here together with a link to the entire survey.
Ontario residents were also pessimistic about the New Year, with 47 percent thinking there would be more bad than good in 2017. Ontario has a large provincial debt, and high energy prices. The Liberal premier Kathleen Wynne has the lowest approval rating of any provincial premier. Albertans plagued by low energy prices and a high unemployment rate also had an extreme negative outlook. Among the provinces, only Manitoba had a significant percentage of residents who felt that 2017 would have more good than bad at 34 percent. Only 22 percent had a negative outlook. The only other province where residents had a positive attitude were in British Columbia but only by a small margin.
Although most Canadians appear to regard 2017 as likely negative for their provinces, they are at the same time twice as likely to say that the New Year will have more good than bad for them personally. 43 percent predict it will be good for them but only 18 percent think it will be worse. This number appears to be higher or lower according to those polled view of the outlook for their province. On the prospect for Canada as a whole, 33 percent think it will be a bad year as compared to 28 percent who think it will be a good one. However, the largest group 49 percent think it will be neutral.
Uncertainty about the policy of Donald Trump and its effects have perhaps led to 59 percent of Canadians believing that more bad than good is in store for the United States while only 16 percent see more good than bad happening. Canadians are also negative about the prospect for the world as a whole in 2017. Slightly more than half of those polled, 52 percent, thought that there will be more bad than good in 2017, while just 11 percent had a positive view for the world in 2017. Even with all this pessimism 2017 still looked better than 2016 for Canadians.

Saturday, January 7, 2017

Provinces and federal Liberal government fail to agree on health-care funding

The federal government and the provinces have failed to reach an agreement on health-care funding. The Liberal government had offered $11.5 billion to increase targeted spending on home care and mental health.

The Finance Minister Bill Morneau said on Monday, December 19, that the government has now taken the offer off the table. The Canada Health Transfer (CHT) will go back to only a three percent increase on April 1, 2017. Morneau had offered to increase the transfer to 3.5 percent over five years but the provinces rejected this. Morneau complained: "We came to the provinces with a significant offer of funds ... We're disappointed we weren't successful." Morneau ended the meeting early Monday. Federal health minister Jane Philpott said: "This was an historic offer. I think there is widespread agreement that the systems themselves need some transformation, and we're going to continue to look for ways to do that."
The provinces were angry that the federal government came with a take it or leave it attitude. Ontario Finance Minister Charles Sousa noted: "There was an urgency to close the meeting off. We're here, we desire an agreement, we need to come to a conclusion. Why have anybody attend if there's nothing to negotiate or discuss?" Sousa complained that the Liberal government in Ottawa was not willing to hear evidence that the federal funding plan would imperil the health-care system. Prince Edward Island premier Wade MacLauchlan said that Morneau refused to discuss a counter-offer of 5.2 percent per year.
The provinces will leave with an increase only half of that which they had under the Conservatives of six percent, a rate that started under the Liberal government of Paul Martin in 2004. However, former Conservative finance minister Jim Flaherty had unilaterally changed the rate to three per cent or if the nominal GDP increase is greater than that to the rate of nominal GDP growth. The change takes effect in 2017. As it is now, the Liberals have simply accepted the Conservative reduction.
The premiers have been united in arguing that the rate is not high enough to keep up with the rapid increase in the numbers of older Canadians. MacLauchlan pointed out that the provinces have been asking for a first minister's meeting on health-care spending with Prime Minister Trudeau but this has been repeatedly rebuffed. He said that the provincial ministers would like to hold such a meeting early in the new year. Trudeau claimed that his government would engage in collaborative federalism.
The Quebec Health Minister Gaetan Barrette threatened to walk out of the meeting if the federal government did not put more money on the table. He said: "This is not a negotiation process; this is an ultimatum. We cannot resolve that over a one-day period... and we will walk away if the proposal doesn't change." The ministers from the provinces and territories were infuriated by what was in effect a federal ultimatum with no negotiation and much less money on the table than the provinces wanted. Many provincial premiers wanted to see a transfer of 5.2 percent per year. Ontario had proposed a ten-year funding plan that would have the federal government increase transfers to the provinces by 5.2 percent each year. Ontario Premier Kathleen Wynne said the plan was a starting point for discussion. In exchange for the increase transfer provinces would agree to spend the money on priorities they agreed to with the federal government such as mental health and home-care services.
Canadian premiers have complained that federal funding as a percentage of provincial health care spending has decreased from 50 cents on the dollar when the public funding began to 16 cents on the dollar now. The federal government claims this is wrong since the numbers the provinces are using ignore tax transfers and that federal funding was never 50 percent of provincial health care costs.

Thursday, January 5, 2017

Canadian debt-to-income ratio reaches record high

(December 17) In the third quarter of 2016 the Canadian household debt to income ratio rose to a record high as borrowing continues to increase faster than incomes.

According to Statistics Canada the ratio went up from 166.4 percent in the second quarter to 166.9 percent in the third. This means that for every dollar of income earned by a Canadian household almost 1.67 is owed in debt. However, Benjamin Reitzes, an economist at BMO Capital Markets said the half percentage point increase was actually below seasonal norms and the smallest increase in the third quarter since 2000. Reitzes thinks that the ratio could flatten somewhat in 2017 especially as in areas such as the Vancouver housing market has cooled, and restrictions on mortgage may slow down activity a bit in 2017. Statistics Canada reported that in the third quarter, adjusted disposable income increased by 1.0 percent while debt rose by 1.3 percent.
By the end of the third quarter total household market debt rose to a humongous $2.004 trillion. Mortgage debt was almost two thirds of this total amount. However, the debt service ratio decreased from 14.1 percent in the second quarter to 14.0 percent in the third. The ratio is of payment obligations as a proportion of disposable incomes. In spite of the increased debt the net worth of households rose 2.5 percent in the third quarter to $10.33 trillion caused mainly by a 3.2 percent rise in the value of shares, life insurance and pension assets. Other assets mostly real estate rose 1.2 percent.
Laura Cooper an economist at the Royal Bank noted that the household saving rate had also increased 5.8 percent in the quarter, the highest level since 2001 and a full percentage point above last quarter. However, she said that the higher debt to income ratio will convince the Bank of Canada to warn people about increasing household indebtedness.
An article in BNN by Pattie Lovett-Reid points out some of the reasons why household debt has been increasing and points out that a day of reckoning may be coming for many. A main factor in increasing debts is the very low interest rates available and enticing offers including no interest payments for some time. She notes that the high levels of debt are to a considerable extent among middle and high income earners. The debtors can manage their debt load as long as the status quo remains. However, if interest rates go up and the economy weakens they could be in trouble. This is a risk for the economy as well since as this group borrows less, demand will decrease and eventually production as well. If either interest rates increase, unemployment increases, or inflation strikes, these debtors may have problems still managing their debt. She thinks that measures of debt by income, age and region, such as are provided by the C.D. Howe Institute give you a more meaningful picture of the debt situation than just the household income to debt ratio. Lovett-Reid concludes: we need to take control of the variables that are within our power; spend less, save more, focus less on national headlines and more on our own household debt burdens. I believe we all have a willingness to repay our debt but I worry about our decreasing ability to repay the trillions of dollars we owe.
A recent Bank of Canada report flags rising home prices as a key factor in many Canadians entering the ranks of the highly indebted. In the third quarter almost half of those taking out mortgages in Toronto were considered highly indebted. Their loan to income ratio was over 450 percent. While Vancouver has seen a slowdown as the market becomes more expensive for foreign buyers still 4 in 10 taking out mortgages had loan to income ratios of over 450 percent. Stephen Poloz claimed that Ottawa's policy of tightening mortgage regulations will bear fruit over time.