It's been a while since my last post, but with the provincial election on the way, it's time to weigh in on the platforms of the various parties, and see who the blog endorses.
First up, the governing party: the NDP. Here's their plan.
Followed by the opposition: the PC's. Here's their plan.
Finally, the perpetual also-rans: the Liberals. Here's their plan.
Right off the bat, the Liberals have an advantage. Their platform is coordinated in one .pdf document. I normally hate .pdf files, but I do like having everything in one convenient document, rather than spread across multiple .html files, or, for some absurd reason, multiple .pdf files. It is 2011, surely these parties can hire someone with enough web design sense to let me see the entire platform without having to load a half dozen pages. We all have broadband now.
Now that the petty rant is over let's get to the meat. I'm going to go over what I see as the highlights (and lowlights) of the plans by topics of my choice.
Economy
The NDP spends a few paragraphs bragging about their fiscal irresponsibility and slagging the PC's. On the other hand, they do promise to end the small business tax, a surprisingly wise move from them.
The PC's predictably slag the NDP's economic performance. They promise to reduce red tape by 20% and establish a more transparent procedure for creating regulations, which is a fantastic promise. They promise a decrease in income taxes and a permanent Manufacturing Investment Tax Credit (yawn).
The Liberals promise to reduce marginal tax rates. Outside of their platform, they promise to eliminate the payroll tax.
For some reason, the "conservative" party is offering less tax cuts than the other parties. Anyway, this goes to the Liberals. Eliminating the payroll tax is simply smart policy.
Fiscal Responsibility
The NDP has promised deficits until 2014, and rewrote balanced budget legislation to allow them to do so.
For some reason, the PC's think it is smart to be even more fiscally irresponsible and promise to have deficits until 2018, blaming the NDP for lying about Manitoba's fiscal problems. Given the lies the NDP has spread about the bipole costs, I'm willing to believe the PC's on that, but still, a conservative party should at least pretend to be more fiscally responsible than the social democrats. At least they make vague promises to try to end our have-not status (an admirable goal, but there's no substance to the promise). They also promise the ever-popular reduce "waste and mismanagement".
While not in their actual platform document, the Liberals vaguely promise to "act fiscally responsible."
Sadly, that vague promise is the most fiscally responsible of the 3 plans; it beast 8 years of deficits or rewriting the law to spend irresponsibly, then bragging about it. So I guess, fiscal responsibility goes to the Liberals. (sigh...)
Manitoba Hydro
As far as I can tell, the NDP do not mention their obstinate idiocy on this subject in their platform (embarrassment, perhaps?), preferring instead to lie about the PC's planning to privatize Hydro, despite there being a law that they cannot do so without a plebiscite. Although, I guess it is possible for the PC's could simply do what the NDP and simply rewrite the laws constraining their ideological impulses.
The PC's predictably promise to move it down the East Side. A good plan.
The Liberals have the intriguing under-the-lake plan. If John Ryan's figures are correct and it could come in at under $2-billion, I'd support this plan. That the Liberal platform said they would only do this if it was "feasible and affordable" makes it even better.
The NDP lose on the Bipole. The PC's and Liberals tie, because the PC's plans are known to be possible, while the Liberal's plan while theoretically better is untested.
My position on the Bipole has already been posted.
New West Partnership
The NDP do not seem to mention their refusal to enter the New West Partnership. The PC's promise to enter the partnership in their platform. The Liberals do not seem to mention it in their platform, but they promise to join elsewhere. To be fair to the NDP, it seems that they changed their mind on their initial refusal and have been exploring the partnership, but that's a little too bit, a little too late.
PC's and Liberals tie.
Law and Order
PC's: Gang database, more police, fugitive lists and bounties, and more prosecutors. Typical tough on crime stuff, I like it.
NDP: More police, more prosecutors, some community programs. A solid plan.
Liberals: More use of police Cadets, an FASD
Health Care
Why bother? They all promise more money, more doctors, more nurses, less hallway medicine, etc., etc. The specifics of the more doesn't matter, it's all more or less the same track with difference emphasis. None are promising any underlying reforms and nothing will change. The demand for free health care will continue to grow, and so will the costs, and there will be no real improvement in service.
Manitobans lose.
Child Care
The NDP promise 6500 new spaces and 1000 new nursery spaces.
The PC's offer a child care tax benefit.
The Liberals offer more spaces and the integration of some child care into public schools.
The PC's have the best plan. The government should not be subsidizing the lifestyle choices of those choosing to work over those where a parent stays home.
Post-Secondary Education
All three parties support freezing tuition at inflation. The Liberals and NDP promise to expend the education rebate program. The NDP promise to increase spending on post-secondary education by 5% a year.
No one wins on post-secondary education, as a tuition freeze is a horrible policy. The PC's do slightly less worse, because they don't promise to expand the useless rebate program.
Education
The Liberals and NDP offer a bunch of relatively meaningless fluff on education. The only seemingly important thing here is the Liberal plan provide affordable broadband to everybody, not sure what I think about that.
The PC's don't seem to mention education, except to say they will put police officers in schools. They mention some happy sounding progressive-babble about "counseling" and "relationships", but police in schools. This is Canada. Why the hell do we want or need police in our schools? This plans reeks of police state. I simply can not vote for a party advocating police officers in schools.
Conclusion
Anyway, I think the Liberals win the blog's endorsement (sigh...). Ending the payroll tax is a great idea, the NDP are sticking with the West Side route despite all the evidence that it is a wasteful idea, and the PC's want to put police in schools (police in schools!!!) and spend 8 years in deficit.
I have never voted Liberal before, but I guess I will have to swallow my bile, hold my nose, and vote, (then probably try to drink away the feeling of uncleanliness and corruption) the other options are horrible.
The only consolation I have is that this is the provincial party. If this was the federal Liberals, well, I have all the disdain any Westerner has had for the party since the abomination that was the Trudeau years, and I probably would refuse to vote if the Liberals were were the best option. Even so, this is going to be one hard election day.
Sadly, the Freedom Party doesn't seem to exist anymore, because after reading these platforms I really wish I had a third (fourth party, I guess would be more accurate?) to dump my vote on.
Showing posts with label Manitoba Politics. Show all posts
Showing posts with label Manitoba Politics. Show all posts
2011-09-26
2011-06-23
Bipole III: Statistical Mutilation, Bad Math, and Outright Lies
So, in the never-ending bipole debate two numbers have recently been bandied about as the differences the cost of the east and west side route. The PC's are using $11,748, the NDP are using $13.68. Now when the $13.68 was first proposed (after the $11,748, had already been set forth) I figured someone more knowledgeable than me would come forward and destroy one (or both) of the numbers, because the completely absurd disparity between the numbers means someone (or multiple someones) is either lying or mutilating statistics to the point it might as well be a lie.
But other than some credulous partisanship, and a bunch of crap in the comments I can't say I've seen much talk on it. (The best discussion of the numbers I've seen are from the Purple Rod comments a few months back, before the $13.68 estimate). I have certainly not seen anybody analyze how two such vastly different numbers could possibly be put forward. (It is possible I may have missed it).
Time went on, then this from yesterday, and still no real analysis beyond a classic Abbott and Castello routine (of which I approve).
So given that nobody else seems to think these numbers are absurd enough to analyze, here goes:
First, the PC's number.
A decent start, but perhaps somewhat unfair. The east side cost has almost doubled since the original cost, so it's quite possible the original cost of the west side was also underestimated. On the other hand, I know of no more recent estimate so I can't argue it's wrong.
Also, the $4.1 billion was an unofficial leaked figure and the NDP claimed that it was out-of-date and meaningless and the Hydro CEO says he never saw it. But then again the accepted NDP price estimate has increased from $2.2-billion to $3.2-billion, something they insisted on until very recently.
So take that as you will.
The only people who know the true projected costs work for Hydro and would likely be risking their job if they provided information not cleared by higher-ups.
The difference in population due to the date is a minor issue and not really worth mentioning (especially given that these are not census numbers and are likely closer to estimates than an actual head count).
The main problem is that the use of population is somewhat inaccurate. The Manitoba population will (hopefully) not be paying for this, ratepayers will. (Obviously there is a huge overlap, but the distinction between ratepayers and taxpayers is important). A better number would be 510,000, the number of Hydro ratepayers. This would increase this number particular significantly.
But then again, ratepayers includes businesses and industry who would use much more power than your average home owner. I found this on residential vs. commercial/industrial usage page 16 of this forecast from 2002, where it states that general usage (all commercial and industrial use) accounts for 65.9% of the total usage, according to page 10 33.7% is residential, while street light usage takes up the last tiny chunk. I can think of no reason why this would have changed significantly in the last decade. According to this survey from 2010, there were 439,096 residential customers (which would mean about 70,000 industrial customers).
But this distinction between residential and commercial might be meaningless. Any greater costs in rates accrued by a company would simply be passed on to consumers through higher prices and/or onto workers through lower wages, so the general Manitoba population would be paying for most of the "general use" rate increases anyways.
Continuing on:
This is shoddy use of statistics. If they wanted cost per family, they should have calculated by household (which is available from StatsCan) not by individuals/4, but this is fairly irrelevant because the use of taxpayers rather than ratepayers is invalid on the face of it.
Conclusion: The PC's showed poor use of statistics and a gross error in the use of taxpayers.
So onto the NDP's number. (I know technically it's Brennan's number, but I have little doubt he was pressured by NDP to play along with their questioning for political purposes. At least, I really hope the CEO of Hydro is not actually as incompetent as this discussion makes him out to be).
See above for earlier talk on the disagreement over the cost. I'm not sure which I'd use (so I'm actually going to calculate with both later on) because both are playing partisan games with numbers, but to attack the PC's calculations based on a potentially valid number from a leaked document strikes me as fundamentally dishonest. So, write off the bat we see the NDP are using a fundamentally different start point from the PC's.
This is just plain sloppy calculation and borderline dishonest. This assumes that the cost per kilometer on both sides is the same. Whether it is, I have no idea, but there is not way I would base a cost estimate on that assumption. There are far to many variables, such as terrain, existing infrastructure, political impediments, land use compensation, etc. to make it even remotely reasonable to make this assumption.
Second, his number of $940,000 is an outright lie (I really hope the CEO of Hydro is not this incompetent). The cost was stated as $3.2-billion; according to Hydro documents, the preferred route is about 1,364 km long. Simple division makes the cost $2,346,041/km. Almost exactly two-and-a-half times the amount he calculated.
The east side route is about 479 km shorter. The calculated extra cost on this is $1.1 billion, again about 2.5 times greater than Brennan's number.
Notice this. I have no idea if it's double or not, but Brennan has stated that he didn't include part of the PC's calculations. The numbers are automatically not comparable because of this. Any number Brennan gives after this will automatically be lower than the PC's number. Any claim the numbers are comparable is a straight-out lie.
At least he's using households not individuals, but he should be using ratepayers, not households. Similar problem as with the PC's number. The last census counted 448,780 households in Manitoba in 2006. So, $953/household if we use Brennan's earlier number. $821 sounds reasonable given that the number of households has increased since 2006. But his math was wrong earlier, so the number is actually almost $2,500 per household, but we can say $2,000 as the number of households has increased since 2006.
After all the bad math and poor statistics, this one is the most disgustingly dishonest. You can not compare a total number like the PC's with an average yearly cost over 60 years like this one. The dishonesty of it just reeks.
Not to mention that if we amortize the cost over 60 years like this calculation suggests, the interest rates will well over double the cost of the project. You can play with this amortization here, but even if we put everything in Hydro's favour: 1 payment a year, a low 3% interest rate, the total interest paid will still be 140% of the cost. So, interest costs would be more than the project itself. (I really, really hope the CEO of Hydro is not incompetent enough to amortize over 60 years).
If we aren't amortizing over 60 years, then the rate increases will not be paid over 60 years, they will be paid over the period of amortization. So the use of 60 years is fundamentally dishonest.
Conclusion: The NDP/Brennan abused statistics and math to the point where I consider it an outright lie and they even got basic division wrong. The PC's calculations were sloppy and based on poor assumptions, but the NDP/Brennan calculations were just disgustingly dishonest.
Now onto a more accurate number than either of those sad, partisan little bits of statistical mutilation.
I'll calculate a few numbers using both a low using the NDP's $3.2-billion and a high using the leaked report's $4.1-billion.
The average cost per ratepayer (510,000) for constructing the entire west side line could range from $6275 to $8039.
The average cost per ratepayer (510,000) of the east side line using the $788-million estimate is $1545.
So, if we use the original estimate for the east-side line the additional average construction cost per ratepayer of constructing the west line over the east line could range from $4370 to $6494.
An honest assessment on the available public information would put the extra cost of construction (not including transmission losses) of the west side line at somewhere from $4370 to $6494 per ratepayer. These are the numbers I would use depending on which west side project cost estimate I accepted as true.
I'll perform some other calculations and why I wouldn't use them.
Extra total cost of west side project based on the average cost per a kilometer of transmission line (calculated earlier): $1.1 billion.
Average cost per ratepayer (510,000) based on this: $2157.
This number is not exactly dishonest, but, as mentioned earlier, it assumes that the cost per kilometer is the same in both projects, which is not an assumption I would make unless there was some hard proof. It's use is fundamentally unsound unless said hard proof is offered.
Now let's calculate the cost per residential ratepayer, this will be a bit more complex, so I'll put the math in.
$3,200,000,000-788,000,000 = $2,412,000,000
(Extra total cost of west side line).
$2,412,000,000 * 33.7% = $812,844,000
(Cost of west side line borne by residential ratepayers).
$812,844,000 / 439,096 = $1851
(Lower limit extra cost of west side line per residential ratepayer).
$4,100,000,000 - 788,000,000 = $3,312,000,000
$3,312,000,000 * 33.7% = $1,116,144,000
$1,116,144,000 / 439,096 = $2542
So, the total extra construction cost (not including transmission losses) of the west side line per residential ratepayer would be somewhere between $1851 and $2542.
This would be a perfectly legitimate number to use. I would not use it myself, because the extra costs borne for commercial and industrial use will simply be passed on to either Manitoba consumers or workers as mentioned earlier. But let's calculate commercial and industrial ratepayers increased costs.
$2,412,000,000 * 65.9% = $1,589,508,000
$1,589,508,000 / 70,000 = $22,707
$3,312,000,000 * 65.9% = $2,182,608,000
$2,182,608,000 / 70,000 = $31,180
So, the total extra construction cost (not including transmission losses) of the west side line per a commercial/industrial ratepayer would be somewhere between $22,000 and $31,000.
Transmission losses have been estimated at about $300-million by a group of engineers. So that's about an extra $588 per ratepayer of losses.
The costs of this will borne by the Manitoba consumer, so prices of goods and services will go up (or it will be borne by the workers, in which case wages or benefits will go down).
So there you have it, the actual extra costs of the west side route as opposed to the east side route calculated as accurately as possible with the information publicly available.
As for what side of the debate I support, I support the East Side route because the experts that are not being leaned on by the government to express a certain view support it, and being no engineer and seeing no real flaw in their arguments I accept their expertise.
BTW, their estimate was $4,200 for a family of 5, or about $840/person. Although, it is not clear if that includes transmission losses or not. They are also using old estimates from almost a year ago, and the cost of the west side has increased.
But other than some credulous partisanship, and a bunch of crap in the comments I can't say I've seen much talk on it. (The best discussion of the numbers I've seen are from the Purple Rod comments a few months back, before the $13.68 estimate). I have certainly not seen anybody analyze how two such vastly different numbers could possibly be put forward. (It is possible I may have missed it).
Time went on, then this from yesterday, and still no real analysis beyond a classic Abbott and Castello routine (of which I approve).
So given that nobody else seems to think these numbers are absurd enough to analyze, here goes:
First, the PC's number.
The cost difference between west side line vs. east side line is an estimated $3.62 billion. East Side: $788 million ($600 million for the line, plus $188 million for licensing) West Side: $4.1 billion plus $300 million line losses (the value of the energy lost in transit via a longer route).
A decent start, but perhaps somewhat unfair. The east side cost has almost doubled since the original cost, so it's quite possible the original cost of the west side was also underestimated. On the other hand, I know of no more recent estimate so I can't argue it's wrong.
Also, the $4.1 billion was an unofficial leaked figure and the NDP claimed that it was out-of-date and meaningless and the Hydro CEO says he never saw it. But then again the accepted NDP price estimate has increased from $2.2-billion to $3.2-billion, something they insisted on until very recently.
So take that as you will.
The only people who know the true projected costs work for Hydro and would likely be risking their job if they provided information not cleared by higher-ups.
By using a Manitoba population figure of 1,232,550, the per person differential cost is estimated at $2,937. This population figure is not a current Statistics Canada number. It looks like an about June 1, 2010 number.
Using the most current population number of April 1, 2011 of 1,246,396 gives a per capita value of $2,904.
The difference in population due to the date is a minor issue and not really worth mentioning (especially given that these are not census numbers and are likely closer to estimates than an actual head count).
The main problem is that the use of population is somewhat inaccurate. The Manitoba population will (hopefully) not be paying for this, ratepayers will. (Obviously there is a huge overlap, but the distinction between ratepayers and taxpayers is important). A better number would be 510,000, the number of Hydro ratepayers. This would increase this number particular significantly.
But then again, ratepayers includes businesses and industry who would use much more power than your average home owner. I found this on residential vs. commercial/industrial usage page 16 of this forecast from 2002, where it states that general usage (all commercial and industrial use) accounts for 65.9% of the total usage, according to page 10 33.7% is residential, while street light usage takes up the last tiny chunk. I can think of no reason why this would have changed significantly in the last decade. According to this survey from 2010, there were 439,096 residential customers (which would mean about 70,000 industrial customers).
But this distinction between residential and commercial might be meaningless. Any greater costs in rates accrued by a company would simply be passed on to consumers through higher prices and/or onto workers through lower wages, so the general Manitoba population would be paying for most of the "general use" rate increases anyways.
Continuing on:
So, if the differential cost is $2,937, then the differential cost for four individuals is 4 x $2,937 or $11,748.
In this analysis the number of families of size four is not used at all. It’s a per individual approach.
This is shoddy use of statistics. If they wanted cost per family, they should have calculated by household (which is available from StatsCan) not by individuals/4, but this is fairly irrelevant because the use of taxpayers rather than ratepayers is invalid on the face of it.
Conclusion: The PC's showed poor use of statistics and a gross error in the use of taxpayers.
So onto the NDP's number. (I know technically it's Brennan's number, but I have little doubt he was pressured by NDP to play along with their questioning for political purposes. At least, I really hope the CEO of Hydro is not actually as incompetent as this discussion makes him out to be).
So when I multiply that number by the number of families that the chief statistician tell us exist in Manitoba, I get a total amount of $3.8 billion. Now I’ve looked at the presentation you made. The total cost estimate of the bipole is $3.2 billion. So this advertising seems to suggest a total that’s more than the cost,
See above for earlier talk on the disagreement over the cost. I'm not sure which I'd use (so I'm actually going to calculate with both later on) because both are playing partisan games with numbers, but to attack the PC's calculations based on a potentially valid number from a leaked document strikes me as fundamentally dishonest. So, write off the bat we see the NDP are using a fundamentally different start point from the PC's.
yeah, I took the difference in length between the two routes. I took the total transmission cost, calculated the cost per kilometre, which really works out to quite an expensive amount I think it was $940,000 a kilometre, and applied that to the incremental length and got a number of $428 million,
This is just plain sloppy calculation and borderline dishonest. This assumes that the cost per kilometer on both sides is the same. Whether it is, I have no idea, but there is not way I would base a cost estimate on that assumption. There are far to many variables, such as terrain, existing infrastructure, political impediments, land use compensation, etc. to make it even remotely reasonable to make this assumption.
Second, his number of $940,000 is an outright lie (I really hope the CEO of Hydro is not this incompetent). The cost was stated as $3.2-billion; according to Hydro documents, the preferred route is about 1,364 km long. Simple division makes the cost $2,346,041/km. Almost exactly two-and-a-half times the amount he calculated.
The east side route is about 479 km shorter. The calculated extra cost on this is $1.1 billion, again about 2.5 times greater than Brennan's number.
I did not include what Mr. McFadyen was talking about, increases losses that occur, I excluded that. But that, it wouldn’t double this number, that’s for sure, it would be even less than that.
Notice this. I have no idea if it's double or not, but Brennan has stated that he didn't include part of the PC's calculations. The numbers are automatically not comparable because of this. Any number Brennan gives after this will automatically be lower than the PC's number. Any claim the numbers are comparable is a straight-out lie.
So then I took the number of households, escalated up to 2017. And that number’s less than the current number of customers, and I took the incremental cost per household (inaudible…)
That number came out to $821 per household.
At least he's using households not individuals, but he should be using ratepayers, not households. Similar problem as with the PC's number. The last census counted 448,780 households in Manitoba in 2006. So, $953/household if we use Brennan's earlier number. $821 sounds reasonable given that the number of households has increased since 2006. But his math was wrong earlier, so the number is actually almost $2,500 per household, but we can say $2,000 as the number of households has increased since 2006.
And then I said, well, that’s over the life of the line so I divided that by 60. And so the annual cost would be $13.68.
After all the bad math and poor statistics, this one is the most disgustingly dishonest. You can not compare a total number like the PC's with an average yearly cost over 60 years like this one. The dishonesty of it just reeks.
Not to mention that if we amortize the cost over 60 years like this calculation suggests, the interest rates will well over double the cost of the project. You can play with this amortization here, but even if we put everything in Hydro's favour: 1 payment a year, a low 3% interest rate, the total interest paid will still be 140% of the cost. So, interest costs would be more than the project itself. (I really, really hope the CEO of Hydro is not incompetent enough to amortize over 60 years).
If we aren't amortizing over 60 years, then the rate increases will not be paid over 60 years, they will be paid over the period of amortization. So the use of 60 years is fundamentally dishonest.
Conclusion: The NDP/Brennan abused statistics and math to the point where I consider it an outright lie and they even got basic division wrong. The PC's calculations were sloppy and based on poor assumptions, but the NDP/Brennan calculations were just disgustingly dishonest.
Now onto a more accurate number than either of those sad, partisan little bits of statistical mutilation.
I'll calculate a few numbers using both a low using the NDP's $3.2-billion and a high using the leaked report's $4.1-billion.
The average cost per ratepayer (510,000) for constructing the entire west side line could range from $6275 to $8039.
The average cost per ratepayer (510,000) of the east side line using the $788-million estimate is $1545.
So, if we use the original estimate for the east-side line the additional average construction cost per ratepayer of constructing the west line over the east line could range from $4370 to $6494.
An honest assessment on the available public information would put the extra cost of construction (not including transmission losses) of the west side line at somewhere from $4370 to $6494 per ratepayer. These are the numbers I would use depending on which west side project cost estimate I accepted as true.
I'll perform some other calculations and why I wouldn't use them.
Extra total cost of west side project based on the average cost per a kilometer of transmission line (calculated earlier): $1.1 billion.
Average cost per ratepayer (510,000) based on this: $2157.
This number is not exactly dishonest, but, as mentioned earlier, it assumes that the cost per kilometer is the same in both projects, which is not an assumption I would make unless there was some hard proof. It's use is fundamentally unsound unless said hard proof is offered.
Now let's calculate the cost per residential ratepayer, this will be a bit more complex, so I'll put the math in.
$3,200,000,000-788,000,000 = $2,412,000,000
(Extra total cost of west side line).
$2,412,000,000 * 33.7% = $812,844,000
(Cost of west side line borne by residential ratepayers).
$812,844,000 / 439,096 = $1851
(Lower limit extra cost of west side line per residential ratepayer).
$4,100,000,000 - 788,000,000 = $3,312,000,000
$3,312,000,000 * 33.7% = $1,116,144,000
$1,116,144,000 / 439,096 = $2542
So, the total extra construction cost (not including transmission losses) of the west side line per residential ratepayer would be somewhere between $1851 and $2542.
This would be a perfectly legitimate number to use. I would not use it myself, because the extra costs borne for commercial and industrial use will simply be passed on to either Manitoba consumers or workers as mentioned earlier. But let's calculate commercial and industrial ratepayers increased costs.
$2,412,000,000 * 65.9% = $1,589,508,000
$1,589,508,000 / 70,000 = $22,707
$3,312,000,000 * 65.9% = $2,182,608,000
$2,182,608,000 / 70,000 = $31,180
So, the total extra construction cost (not including transmission losses) of the west side line per a commercial/industrial ratepayer would be somewhere between $22,000 and $31,000.
Transmission losses have been estimated at about $300-million by a group of engineers. So that's about an extra $588 per ratepayer of losses.
The costs of this will borne by the Manitoba consumer, so prices of goods and services will go up (or it will be borne by the workers, in which case wages or benefits will go down).
So there you have it, the actual extra costs of the west side route as opposed to the east side route calculated as accurately as possible with the information publicly available.
As for what side of the debate I support, I support the East Side route because the experts that are not being leaned on by the government to express a certain view support it, and being no engineer and seeing no real flaw in their arguments I accept their expertise.
BTW, their estimate was $4,200 for a family of 5, or about $840/person. Although, it is not clear if that includes transmission losses or not. They are also using old estimates from almost a year ago, and the cost of the west side has increased.
2011-06-15
Public Waste: Perspective in Discussing Government Spending
This week, for those not closely tied to the public sector, is National Public Service Week (NPSW). A time where the Canadian public service engages in self-congratulations.
(That's not a knock on the public service, these special days, weeks, and/or months of self-congratulation are common; everyone from engineers to secretaries to clowns have them nowadays. The idea of special weeks of self-congratulations has always seemed silly to me, but that's not reason for this post, so I'll move on).
This morning the Sun had the op-ed "Flagrant misuse of tax dollars" on the front page, which complained about the use of tax dollars for a public service event. For some reason, probably due to its visibility and a lack of knowledge of other events, they focused on this one particular inter-government event, but most government departments and units usually have events in this week, with these events ranging anywhere from free cake to discussions/speeches on the public service to an afternoon of team-building games to the discussed party. There's even a ceremony for the awarding of the Public Service Award of Excellence in the National Capital Region.
The Sun's piece was somewhat pathetic. Generally, I am in agreement with the Sun's editorial stance against government over-spending & over-taxation and in favour of sound fiscal management, but this article was petty and borderline vindictive.
(Advice to the Sun, articles like this only serve to undermine the cause of limited government and fiscal responsibility. It may rile up parts of your base of right-wing populists, but it drives away moderates, fiscal conservatives who'd agree with you but would be more apt to read the National Post, and even parts of your own base with a little more perspective on things).
In a coincidence, the WFP had an op-ed on the Harper Hockey "scandal". The WFP article (originally from the Calgary Herald) was a well-done piece, I would suggest a read.
Also floating around in the news in the last little while are the Canada Post strike, the Conservative spending review and promise to reduce the budget by $4-billion by next year, The Auditor's report on G8 spending, and discussions on Senate reform.
This prompted me to write this post on the necessity of perspective when discussing government finances. Both the ruckus over Harper flying to the Canucks game and the Sun's reaction to NPSW event are seriously lacking in this.
The cost of the Canuck's flight is estimated to cost up to $10,000/hour and a direct flight is under an hour each way. Harper followed the rules, paid for his own ticket, and paid the amount of commercial-equivalent airfare, so there's no ethics questions involved in this debate. In total, this cost at most $20,000 for Harper to show support for "Canada's team" in the finals for "Canada's game". You may or may not agree whether Harper should have flown to support the team, the fact is that the cost would not matter either way in this discussion. $20,000 may seem like a large amount to individuals, but in terms of government spending it is not even a rounding error. The National Post puts it into perspective for us here. Canada paid almost $50-million in MP pensions for this year alone. Making a ruckus over a one-time use of less than $20,000 is pointless, petty, and idiotic.
I can find no data on the cost of the NPSW or any on average civil servant wages in Canada, so I'll guesstimate.
PM, EC, AS, and CR are the most common wage categories in the federal civil service, CR's are paid significantly less than the other categories, who are paid roughly the same. Rates of pay for government workers can be found here. We'll use a salary of $50,000 (roughly equivalent to a PM-02 and and easy number to work with), so the wage would be roughly $25/hour.
The event had 300 employees, and we'll estimate it took 2 hours. So, in total we can estimate cost in salary as near $15,000. $15,000 is not that big a deal when it comes to government spending. If we calculate a two hour event at that wage over the 263,000 civil servants in the federal service the cost would be a bit over $1.3-million, which would seem like a lot, but again in government finances, a million or two is hardly a rounding error. (For another example, the 2011 budget came in at an unexpected $4-billion less than was forecasted).
On top of this, team-building exercises and celebrations are common practice in private organizations, so it's not like it can even be pretended that this is some special perk for civil servants.
To put it simply, complaints, such as the Suns, about the NSPW are as petty and idiotic as complaints about Harper's trip to the Canuck's game.
The Senate debate and the Monarchy debate also sometimes display this kind of fiscal lack of perspective. In complaining about the Senate, the anti-Senate NDP notes that the Senate costs $90-million a year. A seemingly large amount, but in reality a paltry $3/Canadian. The governor general costs about $35-million a year, about $1/Canadian. In terms of government finances both of these number are next is nothing. This doesn't mean objections to the Senate or the Monarchy are not to be taken seriously, but the minimal cost should be irrelevant to whether you believe they should exist or not.
The cost of an election is another issue lacking perspective. Elections Canada pegged the cost of an election at about $300-million causing the Toronto Sun to whine. This is about $10/Canadian. Surely any reasonable person would say that $10 is worth a free electoral democracy.
At this point, though, I may be giving off an appearance of a free-spending socialist, but I am not. I am very much fiscally conservative. The thing is though, government expenses have to be evaluated realistically and in perspective, the costs of the previous issues are all examples where the impact of the costs was blown out of proportion.
Also blown out of proportion are funding cuts. The Conservatives announced that they would cut the federal budget by $4-billion/year by 2014-15. The usual suspects of socialists and unions cried foul and scare-mongered about massive job losses and cuts to public services. The reality is $4-billion is 1.7% of the 240.8 billion budgeted for last year.
1.7%
Let that sink in a bit. The biggest budget cuts since the 90's that is to bring ruin to the public service is a piddly 1.7%. This is only half of the projected $8-billion increase in federal expenditures between from last year to this year. It is also only 11% of the projected deficit for this year. $36.2-billion deficit for this year. The impact of these cuts is also grossly over-exaggerated. The cuts are substantial, but they are not earth-shattering.
Maclean's illustrates the exaggeration surrounding the impact of these cuts.
So then, how do we keep things in perspective?
First of all, little things do add up. "A billion here, a billion there, pretty soon it adds up to real money." Enough small cuts can add up to major savings. The reverse is also true, enough new small expenditures can quickly snowball to take large chunks of the budget. As the Maclean's article stated:
The federal government will spend nearly $40 billion this year in “other transfers,” that is, neither to provinces nor to people, but to organizations: big businesses, small businesses, native bands, social clubs, in fact just about anything with a business card and a mailing address. Just to list the “grants and contributions” over $100,000 takes up 280 pages in the Public Accounts, in six-point Helvetica.
Enough relatively tiny expenses can rapidly add up, so just because something might be little more than a government rounding error, does not mean it should not be evaluated, but neither should all sense of perspective be lost.
Second, don't get caught up in partisan or ideological rhetoric lacking fiscal perspective, whether from the left or right.
Third, remember that there are reasons for cutting programs other than monetary. This was mentioned earlier in relation to the Senate and Monarchy. As another example, the Gun Registry has to go. $2-billion over 15 years is pocket change, but the program is more objectionable for its purpose of controlling gun owners than for its costs (although being 2000% over-budget is a sign of gross incompetence).
Fourth, keep in mind that just because costs might be relatively small and we should avoid a lack of perspective, they can still be helpful. For example,
the CBC can be privatized for $1-billion savings each year, as TV and radio services are readily available from the private sector and as such, there would be no real loss to the Canadian public at large, despite the protestations of some special interests to the contrary. We should avoid pretending that the $1-billion would be some budgetary windfall, it would not be, but enough $1-billion cuts here and there and it would add up.
Fifth, keep in mind the big ticket items:
Civil servant salaries & pensions - Salaries, benefits, and pensions make up the bulk of operating expenses. A small percentage increase in civil servant salaries can lead to billions in new spending. Reigning in public sector unions and continual large increases in civil servant wages is important in controlling government costs. Civil servant pensions are fairly well run in Canada and should not present to much of a problem. In the US they are a lot more of a problem, because the US has had a habit of raiding pension funds to spend, leaving their plans with gaping fiscal holes. Canada only had one major pension raid in the Chretein era during a time of surplus, and is well run enough that it should not present to much problems, but with defined-benefit plans, continually lengthening life expectancies, and the boomers retiring there could always be problems if markets do not do well.
Health spending - This is the big one; the expense that really needs to be watched. The Conservatives committed themselves to a yearly 6% increase in health transfers. This is not mathematically sustainable unless GDP also increases at an unrealistic 6% a year (it usually only increases only about 3 or 4%). This does not even include the inevitable increases in provincial spending. With the boomers growing old, public health spending will likely become unsustainable in the context of the current system. It will have to be reformed, likely with some amount of privatization and market reforms or the system will break (barring massive, unexpected productivity gains from technology).
Pensions - Again, the CPP have been fairly well run, has a diverse investment portfolio, is a hybrid between pay-as-you-go and fully funded, and as far as I know the CPP has never been raided. This should be fine, but it is a big ticket item and a prolonged recession combined with extended life expectancies and the boomers retirement could cause serious fiscal problems. It is something to be watched, but should be stable.
Debt servicing - This has decreased tremendously since the 1990's, but last year we paid $30.9-billion out of a total spending of $271.7-billion, about 11% of the federal budget on nothing more than interest payments. And this is with exceedingly low interest rates. A rate hike could increase this substantially.
Notice how all the most important items are those that will have the most public resistance to cuts. This is why deficits occur and taxes increase. Few are willing to pay the political costs necessary to reign in the important items. Chretein kind of did, but did so through raiding pension funds (creating its own problems) and devolving to the provinces (simply shifting the tax burden) in addition to public service cuts.
Essentially, what I am saying is that when discussing public spending avoid losing perspective. Some expenses, such as a hockey game, are just so small they are not worth making a big deal over. Some expenses, such as elections, are large, but the value is well worth the expenses. Small changes add up, but hysteria towards either small cuts or increases does no one any good.
To finish off, I can't have a post called Public Waste without mentioning the Kipling poem of the same name, it's only tangentially related to today's topic, but an excellent poem nonetheless. I would suggest you check the link and give it a read.
(That's not a knock on the public service, these special days, weeks, and/or months of self-congratulation are common; everyone from engineers to secretaries to clowns have them nowadays. The idea of special weeks of self-congratulations has always seemed silly to me, but that's not reason for this post, so I'll move on).
This morning the Sun had the op-ed "Flagrant misuse of tax dollars" on the front page, which complained about the use of tax dollars for a public service event. For some reason, probably due to its visibility and a lack of knowledge of other events, they focused on this one particular inter-government event, but most government departments and units usually have events in this week, with these events ranging anywhere from free cake to discussions/speeches on the public service to an afternoon of team-building games to the discussed party. There's even a ceremony for the awarding of the Public Service Award of Excellence in the National Capital Region.
The Sun's piece was somewhat pathetic. Generally, I am in agreement with the Sun's editorial stance against government over-spending & over-taxation and in favour of sound fiscal management, but this article was petty and borderline vindictive.
(Advice to the Sun, articles like this only serve to undermine the cause of limited government and fiscal responsibility. It may rile up parts of your base of right-wing populists, but it drives away moderates, fiscal conservatives who'd agree with you but would be more apt to read the National Post, and even parts of your own base with a little more perspective on things).
In a coincidence, the WFP had an op-ed on the Harper Hockey "scandal". The WFP article (originally from the Calgary Herald) was a well-done piece, I would suggest a read.
Also floating around in the news in the last little while are the Canada Post strike, the Conservative spending review and promise to reduce the budget by $4-billion by next year, The Auditor's report on G8 spending, and discussions on Senate reform.
This prompted me to write this post on the necessity of perspective when discussing government finances. Both the ruckus over Harper flying to the Canucks game and the Sun's reaction to NPSW event are seriously lacking in this.
The cost of the Canuck's flight is estimated to cost up to $10,000/hour and a direct flight is under an hour each way. Harper followed the rules, paid for his own ticket, and paid the amount of commercial-equivalent airfare, so there's no ethics questions involved in this debate. In total, this cost at most $20,000 for Harper to show support for "Canada's team" in the finals for "Canada's game". You may or may not agree whether Harper should have flown to support the team, the fact is that the cost would not matter either way in this discussion. $20,000 may seem like a large amount to individuals, but in terms of government spending it is not even a rounding error. The National Post puts it into perspective for us here. Canada paid almost $50-million in MP pensions for this year alone. Making a ruckus over a one-time use of less than $20,000 is pointless, petty, and idiotic.
I can find no data on the cost of the NPSW or any on average civil servant wages in Canada, so I'll guesstimate.
PM, EC, AS, and CR are the most common wage categories in the federal civil service, CR's are paid significantly less than the other categories, who are paid roughly the same. Rates of pay for government workers can be found here. We'll use a salary of $50,000 (roughly equivalent to a PM-02 and and easy number to work with), so the wage would be roughly $25/hour.
The event had 300 employees, and we'll estimate it took 2 hours. So, in total we can estimate cost in salary as near $15,000. $15,000 is not that big a deal when it comes to government spending. If we calculate a two hour event at that wage over the 263,000 civil servants in the federal service the cost would be a bit over $1.3-million, which would seem like a lot, but again in government finances, a million or two is hardly a rounding error. (For another example, the 2011 budget came in at an unexpected $4-billion less than was forecasted).
On top of this, team-building exercises and celebrations are common practice in private organizations, so it's not like it can even be pretended that this is some special perk for civil servants.
To put it simply, complaints, such as the Suns, about the NSPW are as petty and idiotic as complaints about Harper's trip to the Canuck's game.
The Senate debate and the Monarchy debate also sometimes display this kind of fiscal lack of perspective. In complaining about the Senate, the anti-Senate NDP notes that the Senate costs $90-million a year. A seemingly large amount, but in reality a paltry $3/Canadian. The governor general costs about $35-million a year, about $1/Canadian. In terms of government finances both of these number are next is nothing. This doesn't mean objections to the Senate or the Monarchy are not to be taken seriously, but the minimal cost should be irrelevant to whether you believe they should exist or not.
The cost of an election is another issue lacking perspective. Elections Canada pegged the cost of an election at about $300-million causing the Toronto Sun to whine. This is about $10/Canadian. Surely any reasonable person would say that $10 is worth a free electoral democracy.
At this point, though, I may be giving off an appearance of a free-spending socialist, but I am not. I am very much fiscally conservative. The thing is though, government expenses have to be evaluated realistically and in perspective, the costs of the previous issues are all examples where the impact of the costs was blown out of proportion.
Also blown out of proportion are funding cuts. The Conservatives announced that they would cut the federal budget by $4-billion/year by 2014-15. The usual suspects of socialists and unions cried foul and scare-mongered about massive job losses and cuts to public services. The reality is $4-billion is 1.7% of the 240.8 billion budgeted for last year.
1.7%
Let that sink in a bit. The biggest budget cuts since the 90's that is to bring ruin to the public service is a piddly 1.7%. This is only half of the projected $8-billion increase in federal expenditures between from last year to this year. It is also only 11% of the projected deficit for this year. $36.2-billion deficit for this year. The impact of these cuts is also grossly over-exaggerated. The cuts are substantial, but they are not earth-shattering.
Maclean's illustrates the exaggeration surrounding the impact of these cuts.
So then, how do we keep things in perspective?
First of all, little things do add up. "A billion here, a billion there, pretty soon it adds up to real money." Enough small cuts can add up to major savings. The reverse is also true, enough new small expenditures can quickly snowball to take large chunks of the budget. As the Maclean's article stated:
The federal government will spend nearly $40 billion this year in “other transfers,” that is, neither to provinces nor to people, but to organizations: big businesses, small businesses, native bands, social clubs, in fact just about anything with a business card and a mailing address. Just to list the “grants and contributions” over $100,000 takes up 280 pages in the Public Accounts, in six-point Helvetica.
Enough relatively tiny expenses can rapidly add up, so just because something might be little more than a government rounding error, does not mean it should not be evaluated, but neither should all sense of perspective be lost.
Second, don't get caught up in partisan or ideological rhetoric lacking fiscal perspective, whether from the left or right.
Third, remember that there are reasons for cutting programs other than monetary. This was mentioned earlier in relation to the Senate and Monarchy. As another example, the Gun Registry has to go. $2-billion over 15 years is pocket change, but the program is more objectionable for its purpose of controlling gun owners than for its costs (although being 2000% over-budget is a sign of gross incompetence).
Fourth, keep in mind that just because costs might be relatively small and we should avoid a lack of perspective, they can still be helpful. For example,
the CBC can be privatized for $1-billion savings each year, as TV and radio services are readily available from the private sector and as such, there would be no real loss to the Canadian public at large, despite the protestations of some special interests to the contrary. We should avoid pretending that the $1-billion would be some budgetary windfall, it would not be, but enough $1-billion cuts here and there and it would add up.
Fifth, keep in mind the big ticket items:
Civil servant salaries & pensions - Salaries, benefits, and pensions make up the bulk of operating expenses. A small percentage increase in civil servant salaries can lead to billions in new spending. Reigning in public sector unions and continual large increases in civil servant wages is important in controlling government costs. Civil servant pensions are fairly well run in Canada and should not present to much of a problem. In the US they are a lot more of a problem, because the US has had a habit of raiding pension funds to spend, leaving their plans with gaping fiscal holes. Canada only had one major pension raid in the Chretein era during a time of surplus, and is well run enough that it should not present to much problems, but with defined-benefit plans, continually lengthening life expectancies, and the boomers retiring there could always be problems if markets do not do well.
Health spending - This is the big one; the expense that really needs to be watched. The Conservatives committed themselves to a yearly 6% increase in health transfers. This is not mathematically sustainable unless GDP also increases at an unrealistic 6% a year (it usually only increases only about 3 or 4%). This does not even include the inevitable increases in provincial spending. With the boomers growing old, public health spending will likely become unsustainable in the context of the current system. It will have to be reformed, likely with some amount of privatization and market reforms or the system will break (barring massive, unexpected productivity gains from technology).
Pensions - Again, the CPP have been fairly well run, has a diverse investment portfolio, is a hybrid between pay-as-you-go and fully funded, and as far as I know the CPP has never been raided. This should be fine, but it is a big ticket item and a prolonged recession combined with extended life expectancies and the boomers retirement could cause serious fiscal problems. It is something to be watched, but should be stable.
Debt servicing - This has decreased tremendously since the 1990's, but last year we paid $30.9-billion out of a total spending of $271.7-billion, about 11% of the federal budget on nothing more than interest payments. And this is with exceedingly low interest rates. A rate hike could increase this substantially.
Notice how all the most important items are those that will have the most public resistance to cuts. This is why deficits occur and taxes increase. Few are willing to pay the political costs necessary to reign in the important items. Chretein kind of did, but did so through raiding pension funds (creating its own problems) and devolving to the provinces (simply shifting the tax burden) in addition to public service cuts.
Essentially, what I am saying is that when discussing public spending avoid losing perspective. Some expenses, such as a hockey game, are just so small they are not worth making a big deal over. Some expenses, such as elections, are large, but the value is well worth the expenses. Small changes add up, but hysteria towards either small cuts or increases does no one any good.
To finish off, I can't have a post called Public Waste without mentioning the Kipling poem of the same name, it's only tangentially related to today's topic, but an excellent poem nonetheless. I would suggest you check the link and give it a read.
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