Deficit saving

(StatsCan, 2008)

In the past federal election, all parties including the NDP and Greens promised to run a balanced budget no matter what. 3 months later, the Conservatives' budget does indeed have a deficit, and they are roundly criticized for it.

We know from "governing" our own affairs that running a long-term deficit is bad because sooner or later debt payments grow out of control and force us to make painful spending cuts. It is OK to keep a certain level of debt--in fact, nearly everyone does--but too much is a recipe for disaster. The same logic should be applied to governments... or should it?

1. Just like businesses, governments take on debt to pay for profitable projects. Such a deficit is worthwhile if the profits from the project are larger than the interest payments. In some cases, the deficits and profits are within the same organization, such as the now-privatized Ontario Hydro; in other cases, a different department or the citizenry itself benefits, such as treatment of raw sewage to prevent an expensive epidemic of waterborne disease. Water treatment plants will always run a deficit, but it is silly to say that we shouldn't treat our water because of that. Many academic, social, and cultural projects have no financial benefit whatsoever but are still worthwhile.

2. When interest rates are lower than inflation, as they were for decades, the real value of the debt shrinks by itself. In other words, government revenues rise naturally with time as the money supply increases, and as long as the deficit is smaller than that rise, there is no problem. So if a government really wants to reduce its debt, it should have a low-interest macroeconomic policy. Perversely, since the mid-80's our government has had both balanced-budget and high-interest-rate policies. Interest payments went way up, and the debt still grew despite painful cuts to social programs.

3. The government is also concerned with encouraging investment. That way, unproductive capital can be put to good use. Government bonds are an excellent investment: in return for regular (and 100% guaranteed) interest payments, the rich lend their cash to fund public programs. Without government debt, there would be no government bonds, and investors would turn to speculative "investment" like that which lately shattered the global economy. Government could also tax the rich directly to finance its public programs, but acquiring debt is considered less intrusive. From that point of view, the only problem with a large debt is that tax dollars from the working class are being continuously given to the rich with nothing in return.

4. The government is also concerned with the well-being of its citizens and with the productivity of the overall economy. There are social and financial benefits when citizens have good jobs, and sometimes it's worth it for the government to step in and provide such jobs in sectors or regions too unprofitable for private corporations.

5. Another pertinent question is to whom the interest payments are paid. In most of the 20th century, government departments borrowed from the Bank of Canada, which meant that there was no net cost to the public. When they borrow from private banks, they are paying for the privilege of creating their own currency.


With that said, it should be clear that running a government deficit is not automatically a bad thing.

Vicarious vitriol

As a rule, I don't reprint the words of others on this site; too many blogs do that, and taken together it often turns the Internet into an echo chamber dominated by one or two narrow viewpoints. I'll make an exception this time because the polemic below is both well-reasoned and entertaining... and because its target is someone who has annoyed me for years--Thomas Friedman. (Lately he reinvented himself as a Green, which I definitely can't take lying down.)

Flat N All That by Matt Taibbi

For those who don't know the man, he is a famous author and New York Times columnist. Not because he is insightful or talented or diligent or knowledgeable; his only qualifications seem to be an unwavering support of whatever the New York establishment wants at the time (electricity and banking deregulation, the invasion of Iraq, tax cuts for the rich, lavish corporate subsidies without oversight) and his marriage to a multibillionaire. His analysis, predictions, and advice are almost always catastrophically wrong. His artless writing and baffling logic would be funny if it weren't so horrifying. For instance, here is his view on the Gaza attack:

"Israel’s counterstrategy [in 2006] was to use its Air Force to pummel Hezbollah and, while not directly targeting the Lebanese civilians with whom Hezbollah was intertwined, to inflict substantial property damage and collateral casualties on Lebanon at large. It was not pretty, but it was logical. Israel basically said that when dealing with a nonstate actor, Hezbollah, nested among civilians, the only long-term source of deterrence was to exact enough pain on the civilians — the families and employers of the militants — to restrain Hezbollah in the future. […] In Gaza, I still can’t tell if Israel is trying to eradicate Hamas or trying to educate Hamas, by inflicting a heavy death toll on Hamas militants and heavy pain on the Gaza population…If it is out to educate Hamas, Israel may have achieved its aims."

Truly chilling. This man can justify anything. I could go on, but I think I've made my point.

I should add that Friedman is not by any means writing alone. For example, during the buildup to the Iraq war in 2003, the New York Times played fast and loose with the facts in its news section, which gave more weight to Friedman's pro-war arguments. (Remember Ahmed Chalabi's insider account, the White House's secret WMD evidence, "Saddam gassed his own people", "Iraq can strike within 45 minutes", "Saddam kicked out UN inspectors"?) Throughout America's TV and radio networks, newspapers, and magazines, there were similar pundits and journalists who repeated the same arguments and half-truths enough times that they seemed self-evident. As with Friedman, they bent logic and facts to the breaking point to stay on message. And six years later, 25% of Iraqis were killed or displaced and America threw trillions of dollars into a hole in the ground (mass grave?), which could have paid for universal high-quality health care and education in both countries.

Friedman &co are not a sign of American stupidity, callousness, or ignorance. Friedman, especially, has little in common with real Americans, those who buy their own groceries, worry about their jobs, or drive an aging car on their yearly vacation. They are a symptom of concentrated private media ownership, witting or unwitting agents in a concerted effort to shape public opinion in the desired direction. I can't say that for a fact, but it seems more likely than the alternative, which is that American journalists and editors are exceptionally sloppy, illogical, and credulous.


Bonus reading: There are some places which do offer intelligent commentary and debate, such as the Manchester Guardian Online, ZNet (see also here), Informed Comment, or TomDispatch. They clarified a lot of things which mystified me as a young man, eg. how someone like Friedman can be a famous and respected commentator. These articles from Noam Chomsky and Justin Podur are the some of the ones I read back in the day, but there are many articles, lectures, and books on these and other issues out there.

Deconstruction in a dark alley

Above: Dr Manhattan misses his ex. On Mars.

Lately I discovered that they are making a movie of the graphic novel Watchmen, a longtime favorite of mine. Graphic novel adaptations (Sin City, Ghost World, V for Vendetta) are generally better than comic adaptations (Spiderman, Hulk, Punisher movies), so I'm cautiously hopeful. Even so, it will be impossible to capture all the subtleties of the original, which makes good use of the graphic novel format (colour palette, splash panels, mixed media).

Watchmen is set in an alternate 1980's in which our 30's and 60's superheroes really exist. The major characters are reminiscent of Superman, Batman, Captain America, Wonder Woman, and so on. I won't spoil the plot, but the story proceeds on several levels:

First, there is a straight narrative, a murder mystery with global consequences. Even those who don't know comics at all will enjoy the colourful characters. It also has one of the best plot twists I've ever read. The central story will survive intact into the movie because with half the story, it won't make any sense.

For those who do know comics, it is a sort of deconstruction of superhero archetypes. How would Batman &co react to the Cold War, Vietnam War protests, a police strike? How would the individuals and teams change with the years? In short, how would superheroes react to the vagaries and ambiguities of the real world?

The other side of the coin is, how would superheroes change the world? What if, as the song goes, God is an American? How would societies, governments, businesses react? This is revealed piecemeal at the edges of the plot through newspaper headlines, graffiti, and conversations on the street. One major theme is heroism in an era of nuclear brinkmanship; each chapter opens with the Doomsday Clock one minute closer to midnight. There is a reflection of our own passivity (perhaps blackly humourous) in the heroes' predicament: "I'm just some guy who wears tights and punches petty criminals... what can I do when a few men in Washington and Moscow can singlehandedly destroy civilization?" (Incidentally, I think nuclear war is still the greatest threat to mankind, despite its lack of news coverage.)

The last level of the story is a broader commentary on human society. The characters can be interpreted as imagination, empathy, egotism, etc.; or as specific historical movements; or as commerce, science, the arts, benign and malicious government, etc. I can't elaborate much more without revealing the plot, but it'll be interesting to see to what extent the different layers are visible in the movie version.

Update: I've seen the film now. It brings the book's main characters and events to life effectively, but other elements such as Ozymandias' hellish journey or Dr Manhattan's timelessness just can't be translated to film. As well, the supporting characters were reduced to cameo roles or eliminated entirely, which leaves holes in the plot and character development. I enjoyed it, but those who haven't read the book will likely be confused.

Winter and dog

My parents' dog, Corby, is a retriever. Naturally, his favorite pastime is to retrieve thrown tennis balls, sticks, bones, etc. It becomes rather comical in deep snow because he can't see or smell it when it lands. He'll search the whole yard, breaching snowdrifts and running up and down the hill. (It's a good way to tire him out when it's too cold to walk him.) But as you can see, it's the searching he enjoys, not the finding.

Winter

You can't really tell in the pictures, but there is gusting snow:

Death in Gaza

Israel has launched an unprecedented attack on Gaza. Since last week, about 400 Gazans have been killed in intense bombing, and a few hours ago Israeli troops entered the territory. Four Israeli civilians were also killed by Palestinian rockets. Fragmented reports (there is a media blackout) suggest that nearly all mosques, police stations, government offices, and homes of government officials in Gaza have been destroyed as well as the only university. (In case you were worried, Israeli synagogues, police stations, government offices, and homes of government officials are all undamaged.) The stated aim is to destroy Hamas; presumably, the surviving Palestinians will then realize that Tel Aviv is their true friend and will be become loyal citizens again. Oh wait, they never were citizens--they have no parliamentary representation, no civil rights, minimal infrastructure and medical care... even food and water supplies are often interrupted by the military blockade. If I were in that situation, I wouldn't feel like co-operating either.

It goes without saying that Middle East politics are ancient and complex. But the issue of Israel/Palestine is deeply misrepresented in North American discourse. For one thing, it is rarely mentioned that far more Palestinian civilians die than Israelis or that Israel routinely violates international law on torture, military aggression, collective punishment, etc. Using tanks and white phosphorus and cluster bombs against lightly armed militia in a dense urban area isn't a "war," it's a massacre.

Deeper issues are also ignored. The Zionists who formed the state of Israel had basically no roots in the area. They have much more in common with the 19th-century American pioneers who conquered the Indian Territories--rich, heavily-armed Europeans who gradually displaced the technologically backwards and politically fragmented natives. As in America, Palestinian natives were excluded from citizenship, displaced to marginal lands, massacred from time to time, and kept in ever-shrinking reserves where they would not inconvenience white settlers. Am I the only one who sees the parallel here?

A common straw argument is that those who are opposed to Israel's actions hate Jews and/or want to see all Israelis killed by suicide bombers. That's like saying those who oppose the extermination of American Indians hate all 19th-century Americans and/or want to see them all killed by Navajo warriors. For one thing, it excuses the mass murderers by lumping them in with everyone else, and for another, it invents a militarily ludicrous scenario to justify the genocide. Israel is here to stay, just as America was. But the oppression, dispossession, and mass murder of Palestinians must stop now. If they can't co-exist in a single state, then there must be two states. Israel is very capable of protecting its borders from a neighbouring Palestinian state à la South and North Korea, so "security risk" is a flimsy excuse. That will not immediately stop suicide bombers, but it will staunch the bloodshed and it will allow Israel to become a full democracy (ie, in which all citizens are born equal).

I know that I'm ignorant about the Middle East. Who could understand it except those who grew up there? But I do know that a decades-long military occupation and heavy bombardment of civilian areas within an apartheid state is fundamentally wrong. It will never lead to a just and lasting peace. The peace of the grave might be good enough for the Israeli government, but I will never accept it.



Jan 9 update, from Reuters. In case anyone forgot who is really bombing Gaza.

U.S. seeks ship to move arms to Israel

By Stefano Ambrogi

LONDON (Reuters) - The U.S. is seeking to hire a merchant ship to deliver hundreds of tons of arms to Israel from Greece later this month, tender documents seen by Reuters show.

The U.S. Navy's Military Sealift Command (MSC) said the ship was to carry 325 standard 20-foot containers of what is listed as "ammunition" on two separate journeys from the Greek port of Astakos to the Israeli port of Ashdod in mid-to-late January.

A "hazardous material" designation on the manifest mentions explosive substances and detonators, but no other details were given.

"Shipping 3,000-odd tons of ammunition in one go is a lot," one broker said, on condition of anonymity.

"This (kind of request) is pretty rare and we haven't seen much of it quoted in the market over the years," he added.

The U.S. Defense Department, contacted by Reuters on Friday in Washington, had no immediate comment.

The MSC transports amour and military supplies for the U.S. armed forces aboard its own fleet, but regularly hires merchant ships if logistics so require.

The request for the ship was made on December 31, with the first leg of the charter to arrive no later than January 25 and the second at the end of the month.

Media matters

The best time for a large organization to make unpopular announcements is during late August or the Christmas holidays--journalists and the public are on vacation or home with their families, and by the time they get back, the news cycle has moved on. True to form, it's been a very unsavoury season for those who are paying attention. The Governor-General suspended Parliament to keep Harper in power; Ottawa's mayor caused a month-long transit strike; Liberal leader Dion was deposed behind closed doors and replaced by the most pro-war and pro-corporate leader in their history; and the Conservatives approved a $9.5 billion bailout for those who own asset-backed commercial paper (ABCP). I was out of touch quite a bit too, and I'm sure I missed other buried stories.

Like everything important in the news, these are not obvious, and I may clarify the issues involved at some point. For now, I'll focus on the most local issue, the Ottawa bus strike, because it is an interesting illustration of how the media affects public perception.

First, a little background for those who aren't from Ottawa. Larry O'Brien, a mediocre businessman, was elected mayor in 2006 on a promise not to raise taxes--actually, that was his whole platform--despite having no experience in government. He allegedly bribed other conservative candidates to drop out of the race. When he took office, he found that he needed to raise taxes after all (whoops!). Since then, he's fought City Council unsuccessfully to cut city services and reduce taxes. Then a few weeks ago, the city's bus drivers went on strike. This was in mid-winter and during Christmas shopping season, so traffic slowed to a painful crawl. My brother needed to bike to work (!) because he doesn't own a car. Basically, everyone in the city suffered one way or the other. That's enough to make anyone surly.

Next, the local media. It consists of the following: superficial, conservative-slanted coverage like the Ottawa Sun, CFRA, and CTV; detailed but very conservative news in the Ottawa Citizen; and alternative but scanty coverage in the X-Press or campus newspapers. Presumably there are Ottawa-centred internet sites too. Many people don't follow the news at all and get their opinions by word-of-mouth or anecdotal evidence.

How is the media portraying the bus strike? The Ottawa Sun cluster sends a simple and relentless message: greedy bus drivers and quasi-demonic union leaders ruined Christmas, and they deserve to be fired en masse and replaced with non-union workers. The union is also "undemocratic" because it won't let its members vote each time the city presents a new proposal. The mayor, when he is mentioned at all, is presented as someone working to keep the Working Man's money in his own pocket. CFRA organized a picket line around the union president's house, and there have been several death threats against him.

The Ottawa Citizen message is more sophisticated but still very anti-labour. They have multi-page explanations of the major players and issues. For instance, bus drivers in Ottawa organize their own work schedules and choose their own routes, which they negotiated for last time in return for lower pay. Now the mayor wants to remove this privilege without raising salaries. Some truth can be found, but it is obscured by a great deal of misleading statements and selective presentation.

I haven't read any alternative media since I've been in Ottawa since it's hard to get around, so I couldn't say what their angle is. I suspect they have a much smaller audience than mainstream media outlets, so their impact will be correspondingly small. Taken together, the Ottawa media helped create a virulently anti-union public opinion. (In fact, this process is repeated at every major strike, so anti-union sentiment runs quite deep.) Based on the perspective above, that seems quite deserved. So what's missing from this picture?

Let's tackle the easy accusations first. Bus drivers are no better paid than any other civil servant considering the hours they work. The union leadership doesn't hate everyone; they're doing their jobs and negotiating a better contract for their members. And they don't need to hold a vote on every offer: the mayor quite proudly declared "I will not negotiate" and presented the same non-contract to the union for weeks. Bus drivers voted 98% (!) to strike based on that proposal, so there was no need to expend all the effort to assemble the members and vote again. In a bizarre twist, the mayor asked the federal Minister of Labour Rona Ambrose to force the union members to vote on the contract again. No word yet on whether she has agreed to that.

The fact is, the strike was entirely caused by the mayor. Mayor O'Brien told the bus drivers "I won't negotiate" since day one, which defeats the whole point of collective bargaining*. Those who aren't unionized wouldn't know that, and the media never pointed it out. Furthermore, it is the mayor's responsibility to provide efficient transportation in Ottawa, not the transit union's, so the pressure should be on him to end the strike quickly, not the union or the bus drivers. The mayor benefits in two big ways from this strike: first, he saves hundreds of millions of dollars because he doesn't pay the bus drivers or run the buses during the strike. I guarantee that will turn into a tax cut next year. Second, as a businessman (and the former owner of a temp agency) he is trying to break the union. If he really could fire everyone and have non-union bus drivers, he would be ecstatic--minimum-wage drivers with no benefits would save big money and let him give another tax cut. He doesn't take the bus, so he doesn't care about the quality of service.

A common conservative catchphrase is "we should run the government like a business". That doesn't mean efficient budgeting and clear accounting--the government already has that where complexity permits. It doesn't mean running profitable industries--that's socialism. They mean that senior civil servants should think like businessmen, and Larry O'Brien is the perfect poster boy for that. He doesn't care about Ottawa citizens who can't find a job or have drug problems or face abuse at home or at work; he wants to reward those who make a lot of money with tax cuts, and everyone else is irrelevant. I find that completely repulsive.


The overall point I'm trying to make is how easily media distorts a straightforward issue and hence alters public attitudes. In the past 50 years, media have become almost exclusively corporate-owned, and corporations (which don't need buses or teachers or health care) always advocate tax cuts over improved services. On the national stage, we have CBC as a voice of reason, but in local politics, corporate control of the media allows them to fool the public into supporting politicians and policies which hurt them. That's not a difficult problem to solve. First, media conglomerates like Quebecor or Canwest need to be broken up to encourage competition and diverse voices. Why should a city like Ottawa only have one real daily paper? Second, the public needs to understand how the media works and why it is useful to have reliable information. 100 years ago, worker-owned newspapers were crucial to help citizens demand political change and improve their lives. Newspapers are a relic of the past, and we need to create electronic news agencies which cost money, employ real journalists, and provide real news. "The machine" is not as complex as people think, and with daily analysis and exposition, the public could understand it and use it to serve them better.


*In a unionized workforce like the transit union, the workers' pay and benefits are set by the collective agreement, which is negotiated between the union and the management every few years. If the management (ie the mayor) says they won't negotiate, that means none of the workers get any raise or improved working conditions until management says so. It's a sign of contempt for the workers, and no union would accept that.