Bank of Canada waves a red flag at Trump’s trade threat

By: Graham Lane
Published: Winnipeg Sun, January 27, 2017

Depreciating Canada’s currency is a poor strategy when our economy is growing (albeit slowly) and oil prices are in recovery. Bank of Canada’s governor Poloz is talking our dollar down in the face of a newly-installed American President that has walked away from the Trans-Pacific Partnership and threatens to throw out NAFTA. Canada’s exports to the United States support our standard of living, employing hundreds of thousands of jobs.

Trump has put the U.S.-Canada-Mexico comprehensive quarter-century trade agreement in doubt, noting Mexico’s weak currency while also accusing China of currency manipulation. It has been a year since Poloz last made a concerted effort to talk down our dollar. Then he surprised economists, bankers and the general public by lowering rates when our economy was not in recession and American interest rates were headed up. That time the loonie tanked, falling at one point to 68 cents U.S. (Our dollar briefly hit $1.10 U.S. in 2012, oil was then selling at over $100 a barrel.)

Trump promotes “America First”, towards increasing jobs in America by dragging them away from countries America trades with. Trump’s anti-trade tirades include claims that America’s trading partners manipulate their currencies to the detriment of American manufacturers and exporters. Well, Trump need not just look at China, Mexico and the EU, with Poloz’s latest stunt he can accuse Canada too of currency manipulation.

When the loonie falls up goes prices for everything we import from the United States. As to Canadian snowbirds, a higher US dollar reduces or even ends retirement time in the warmer south in the winter. More importantly, exceptionally low Canadian interest rates keep mortgage rates at unjustified historic lows, combining with our low dollar to propel foreign house buying pressure in Toronto, Vancouver and other cities – pricing our young and even the middle class out of the market. And, lower interest rates starve revenue for seniors relying on GICs and bonds for their retirement income while punishing the solvency of pension plans.

So, why really is Poloz talking down our wounded loonie again? Because he notes weakness in Canada’s industrial base. Low productivity and successive energy boondoggles (such as Ontario’s liberal provincial governments pushing up electricity rates beyond the breaking point). Self-administrated blunders significantly damage our industrial production and exports. Making a bad case worse, talking down our dollar depreciates everything we own and sell. In short, Poloz seeks to rescue Ontario through actions damaging households and other provinces..

Poloz’s actions risks Trump seeing Canada as a habitual currency manipulator, fulfilling the role of a trade enemy of his new administration. Poloz has to be reined in before he damages us all by questionable policies and inept statements.

What we should be concentrating on is not depreciating out currency but being more productive and reducing the cost of government. Our enormous tax burden needs to be cut, particularly with coming massive U.S. tax cuts. Instead, what madness are we headed for: a naïve climate angel dancing-on-a-pin carbon tax.

Trump wants a fairer trade partner, a reasonable objective for us as well.

Start by stopping currency manipulation.

Graham Lane leads Manitoba Forward, seeking sensible public policies (manitobaforward.ca).

Trudeau Climate Change Obsessions Opens Door for Conservative Rebound

By: Graham Lane
Published: January 20, 2017, Winnipeg Sun

Justin Trudeau has set the stage for a return to power of the federal Conservatives in the next election. His comments disparage Canada’s oil sands if not our entire oil and gas industry. Just back from a family holiday as a guest of the Aga Khan, Trudeau suggests Canada move away from extracting and exporting fossil fuel (hydrocarbons). Bizarrely, he seems unaware that our bountiful natural resources significantly contribute to our good standard of living.

When he gave his negative take on our valuable hydrocarbon bounty, he had already pronounced a mandatory carbon dioxide tax would be imposed: like it or not, provinces! He surely knows that Canada’s emissions represent a minuscule 1.6% of global emissions, compared to America’s 13% and China’s 24%.

This Prime Minister likes cameras and attention, he bathes in it. Being the poster boy for the shaky theory of man-made climate change attracts attention for him at the cost of taxpayers, industry, and lower-income households. He appears oblivious to Ontario’s mortally unpopular Liberal government. Their green energy policies have damaged that province’s economy, converting a former powerhouse of Confederation to a ‘have not’ province recipient of equalization grants.

Canada’s economy depends on trade. The largest nation we trade with is the US, a country now led by a President who has no time for climate change shenanigans. Trump is aggressively promoting cheap hydrocarbon energy, tax cuts, deregulation, and an America-first trade policy. Mystifyingly oblivious to the Trump revolution, Trudeau naively slams our vibrant oil and gas industry, with promises to “phase-out” the oil sands, while muscling the provinces to heap what is set to be a ruinously misguided carbon tax regime on industry and struggling Canadians, particularly those facing energy poverty.

Imagine a Canada without oil and gas to boost our economy: it would be a much poorer country, unable to generate the living standards we now enjoy. Think about a US 60 cent loonie and inflation from higher-cost import, coming from a massive currency devaluation.

Hydrocarbon energy revenues fuel our universal health system, employ hundreds of thousands of jobs and hold down our already excessive tax burdens. Without our oil and gas revenues, could we afford to transfer $18 billion a year to prop up uneconomical remote indigenous communities?

Who would imagine that only Saskatchewan alone would stand up for our oil and gas industries? Manitoba’s “paper clips to the gunfight” provincial government, rather than joining Saskatchewan’s robust push back of Trudeau’s climate change policy, appears ready to meekly fall in line with the other politically correct carbon tax cheer-leading provinces.

There was a time, not so long ago, that the governing federal Conservatives thought the Liberal party was a spent force unlikely to gain power ever again. But, 42% of voters, tired of Stephen Harper’s flatness, and disappointed by NDP’s Mulcair, became enamoured of young Justin Trudeau, the front man in the Liberal party’s band, pushing the Conservatives aside to bring the Liberals back to power.

The tables can change again. Trump changes everything. A combination of Trudeau’s fiscal mismanagement in running enormous ever-rising deficits with his tone-deaf anti-hydrocarbon climate change obsessions is bound to fuel a strong Conservative rebound.

What a change two months make.

Graham Lane leads Manitoba Forward (manitobaforward.ca).

Pallister Government Starts to Wear the Bipole Mess

By: Dennis Woodford
Published: January 10, 2017 (commenting in the Winnipeg Free Press letters section).

The Conservatives promised to halt the Bipole III construction right after the election but didn’t. And this was after many voted and experts presented valid alternatives for them in anticipation they would do so. Why did they benefit from this support and fail to meet their promise?

Instead, they appointed a new board with business expertise and little engineering capability. They hired the credible Boston Consulting Group (BCG) to review the situation of Bipole III sized to 2300 MW to carry the 695 MW of the Keeyask generating station. Bipole III being justified for “reliability” but no probability based reliability study was tabled by Manitoba Hydro to back up this need – as is accepted practice for such developments. Instead, alarmist statements of disaster were made to scare the daylights out of everyone, statements the BCG picked up on.

The board of Manitoba Hydro fed data from Manitoba Hydro to the BCG which was based on higher load growths in Manitoba than is really happening, particularly with their aggressive Power Smart Program released the day after the provincial election that is resulting in a much lower load growth. Furthermore, the data the board fed BCG an optimistic price for exported electricity than is really happening.

As a consequence, the BCG recommended continue with the development of Bipole III west side route and Keeyask as “the project is too far along to change it”. While waiting half a year for this momentous conclusion to be reached by BCG based on garbage in gives garbage out, the questionable Bipole III and Keeyask projects were racking up $10 million per day.

A benefit is an economic growth from the construction and related industries giving Manitoba a good current economy. A very severe consequence in addition to the disaster to farming and the environment is the $25 billion which the province has to borrow for Manitoba Hydro. This brings nearly $0.5 billion annually to the treasury from loan guarantees, water rentals and capital taxes all paid for from our hydro rates.

Manitoba Hydro warned the Crown Corporations Committee at the legislature several months ago that the 3.95% hydro rate increase will be inadequate. So expect a request soon from Manitoba Hydro in its general rate application for an increase of 7% or more. This will be a disaster for businesses and low-income earners on electric heat who will face energy poverty as is being experienced in Ontario. Thermostats will be turned down, and food purchases will be scrimped resulting in increased sickness and death rate – factors that appear to not be considered by the Hydro board.

To address energy poverty, the provincial government should be prepared to allocate the $0.5 billion it will receive annually into the treasury from Manitoba Hydro to compensate households with electric heat and low-income including a way to help struggling business that would be taken out by significantly increased hydro rates.

To read the original letter click here.

City overcharges for water and sewer

By: Graham Lane
Published: Winnipeg Sun, January 13, 2017

No wonder building outside the perimeter is popular. Winnipeg’s water utility rates continue to soar,
and an unjustified impact fee looms while frontage levies and property taxes increase. City water
bills will jump 8.9% in 2017, following 9.2% in 2016 – at least four times inflation. Water bill increases
are as much about subsidizing the City’s general operations as addressing utility needs. The rising
cost of water hits property owners and renters: the poor and large families hardest.

With car insurance going up by 3.7%, Hydro threatening more unending hikes, and City property tax
and frontage levies climbing, close to 10% annual water service bill increases could be the straw that
breaks the camel’s back. City council runs an annual scam, raiding its water utility to hold property
tax increases to inflation. While Winnipeg’s council pushes up water rates well beyond inflation,
Cartier Regional Water Co-operative sets a 1.3% rate hike for its beyond-the-perimeter customers,
Bowman continues the pretense of holding down property tax increases to meet his election
promise. Easier to bilk customers by stripping money off the water utility than take responsibility for
an inability to hold down tax increases validity through actually achieving more efficient less costly
operations. And, ripping off households keeps the water utility’s balance sheet weak, allowing the
City to pressure the federal government for more taxpayer-backed infrastructure money. Of course,
more federal money works for the Province as well as the City.

How does the City get away with it? Except for Winnipeg, provincial legislation has the Public
Utilities Board set water rates for municipalities; PUB regulation would not let the City skim money
from its water and sewer utility.

Other municipal water and sewer utilities have to follow PUB’s rate decisions, and PUB doesn’t allow
cross-subsidization of general municipal operations through excessive water bills. All other
municipalities scramble for operating efficiencies to hold down their property taxes. The revenue
stripped from Winnipeg’s water utility is money that, if needed, should be directed to fix, update and
expand water and sewer treatment plants and piping.

The provincial government plays a major role in Winnipeg’s scam, regularly ignoring PUB’s strong
and repeated recommendation that the City of Winnipeg’s exemption from PUB water bill rate-setting
be removed. For years, successive city councils have trumpeted apparent success in holding down
or, before Bowman, freezing property taxes. The perception sought through the water bill scam is
one of efficiency and competency. Were the self-accolades for holding down property tax increases
deserved? No.

The City has run its scam for years. Absent the annual raid, property tax increases would have been
annual and much larger. In a 2011 review of the City’s water utility PUB found that so-called
dividends and other cross-subsidies raided the city’s utility to help the city’s general fund to the tune
of at least $45 million a year, a subsidy that would not be allowed for any other municipal
government in the province. If anything, the skimming continues even larger.
PUB concluded its review with a recommendation the Province end the City’s exemption from PUB’s
water and sewer rate-setting.

The scam should stop, either by way of City Council or, if not, by the Province.

Graham Lane leads Manitoba Forward (manitobaforward.ca).

Pallister’s first year, just a passing grade?

By: Graham Lane
Published: Winnipeg Sun, January 6, 2017

Brian Pallister is now closing in on a year at the helm. Has his government been a real
improvement over the economically clueless NDP government that ruled for seventeen long
years?

NDP finance critic James Allum had the gall to pronounce “Pallister government is disappointing
… evidence of an austerity agenda … shedding good jobs and making life harder for Manitoba
families”. Talk about the pot calling the kettle burnt: Allum and his Selinger colleagues left
Pallister with a mess – deficits, debts, high taxes, and above all the Hydro boondoggle.

As for Pallister, a more judicial view rates his performance no higher than a C-. Much promised
and said, little done or accomplished. Opportunities have been lost (Hydro in particular), many
others remain to be discovered and seized to move Manitoba to a better place.

A recent poll suggested that the PCs won mostly because the electorate had enough of the
Dippers. It also reported that 50% of those polled viewed Mr. Pallister favorably. Not surprising
given what we suffered through from the old regime.

That said, during the campaign, our now Premier said nothing about massive Hydro rate hikes
nor boosting MPI premiums, nor a brand new carbon tax. He did say he would cut the PST,
eliminate waste, and halt Hydro’s new transmission line for a proper independent review of the
utility’s $25 billion expansion.

After the election, no review, no halt for Hydro – on went the building while the export market
deteriorated further. Pallister wasted five months on a costly American consultant before
realizing that critics were right, the expansion is a disaster for ratepayers. He then
unnecessarily disrupted his farm base by allowing Hydro to plow through the Red River Valley
when an eastern detour was still available.

While he promised no new or increased taxes without a referendum, he allowed the City to
enact an anti-development ‘impact tax’ and skim money off its water utility. While the NDP has
been properly raked for its blunders, our new conservative government remains clueless so far
on breaking with its abysmal tax and spend legacy. Pallister’s wincingly off-base refusal to sign
off on Trudeau’s grandiose but likely forlorn climate change adventures unless even higher
federal health transfers are forthcoming was especially troubling.

David Descoteaux, writing in CPA magazine, a journal for professional accountants, questions
the validity of putting a price on carbon dioxide, Canada accounts for only 1.6% of the world’s
GHG emissions compared with the US and China with 13.9% and 24.5% shares respectively.

He observed that Canadians already pay “a lot of taxes”, gas taxes represent 35% of the pump
price. For a party that promised to relieve our tax load so far we see a government seeking new
and increased levies on Manitobans, as the deficit they promised to eliminate grows.

Pallister has joined the New West Partnership and recognized that the public sector’s ballooned
personnel complement and compensation levels contribute to the deficit. He should concentrate
on these issues, and call an inquiry into the Hydro debacle (Mayor Bowman wants an inquiry
into Winnipeg’s new police headquarters; Pallister would be more than justified in examining a
debacle 50 times or more than it.) Absent true results, Pallister’s stumblingly performance debut
bodes poorly.

Graham Lane heads Manitoba Forward (manitibaforward.ca).