Archive for the ‘Liberals’ Category

The Liberals are spending far more than they said they would – Macleans.ca

Canadas Prime Minister Justin Trudeau (L) and Finance Minister Bill Morneau walk to the House of Commons to deliver the budget on Parliament Hill in Ottawa, March 22, 2016. (Patrick Doyle/Reuters)

The Liberals campaigned on a platform that promised a short-lived period in which their government would run modest deficits. After incurring an accumulated deficit of $25 billion over 2016-19, the Liberals promised to return the budget to balance by 2019-20, the fourth year of their mandate. Instead of balancing the budget throughout their mandateas both the Conservatives and NDP were promisingthe Liberals would hold fast to two fiscal anchors of their choosing, as they stated in their costing planin 2015:

(Liberal.ca)

Yeah, well, not so much:

Neither of those promises is going to be delivered by 2019-20. According to the latest long-term projection provided by the Department of Finance, these objectives are scheduled to be achieved sometime between 2040 and 2050, which means approximately never. Fortunately for the cause of responsible governance, the federal Liberals have accepted responsibility for their failure to keep their word and are sufficiently shamefaced about the whole mess that theres not much point in investigating the matter any further.

Just kidding! The Liberals are blaming everything and everyone elseincluding their Conservative predecessorsfor the current state of public finances. So in this post, Im going to try and figure out what happened.

READ MORE:The unmasking of Bill Morneau, caped budget crusader

The Liberals standard talking point is that the larger-than-expected deficit is a result of slower-than projected economic growth. But as far as I can tell, this is only a partial explanation, accounting for roughly one quarter of the deterioration in the federal budget balance. Roughly three quarters of the increase in the federal deficit can be explained by the fact that the Liberals are spending much more than what they said they would during the election.

The idea that poor economic performance is to blame for the deficit is difficult to reconcile with near-record-low unemployment rates, but there is still something to it. The 2015 LPC platform used the economic baseline set out in the Conservatives 2015 budget. As new data have come in, these projectionsbased on an average of private-sector forecastshave been revised steadily downwards. But its important to understand how and why this has happened, and it comes down to making the distinction between nominal and real GDP.

READ MORE:A budget for make benefit glorious economy of Canada

When it comes to forecasting the revenue numbers that show up in the budget, nominal GDP is what matters: economic activity measured in current dollars. But an increase or a decrease in nominal GDP doesnt necessarily reflect an increase or decrease in real economic activitythings like output, employment and household purchasing power. If the only thing that happened in the economy was that the prices of all goods and services went up, nominal GDP would increase, even if real economic activity stayed constant. Of course, the mirror scenario can also happen: an increase in real economic activity will increase nominal GDP, even if prices stay the same.

Its useful to break down nominal GDP into its real and price components:

Nominal GDP = Real GDP x Price Level

When referring the GDP, the price level is often referred to as the deflator: to obtain real GDP, you deflate nominal GDP by dividing by the price levelthe deflator. If you take the growth rates of both sides of this equation, this relationship becomes

Growth in Nominal GDP = Real GDP Growth + Inflation

So theres a two-part explanation to lower-than-projected growth in nominal GDP:

It turns out that the price level story is actually more important than the one involving real economic activity. According to the most recent projections in the 2017 budget, most of the shortfall in nominal GDP is due to lower-than-projected inflation. Real GDP over 2016-20 is projected to come in 2.1 per cent lower than projected in 2015, while the GDP deflator is expected to be on average 2.4 per cent less than projected. The average shortfall in nominal GDP is the sum of these two components: 2.1 + 2.4 = 4.5 per cent.

(My excel file going through the various projections with risk adjustments stripped out is available here.)

Theres no great mystery about the effects of lower-than-expected real GDP growth on the budget balance: it leads to lower revenues and a deteriorating budget balance. But what about lower-than-expected inflation rates in the GDP deflator?

I think its easier to explain and understand if we ask the opposite question: what if inflation had come in higher than expected? If this were the case, then the government would be well within its rights to say something like this:

We committed ourselves to purchasing a certain quantity of goods and services. The price of respecting this commitment has gone up more than we expected, and so we will be spending more than we projectedin nominal termsto carry out our obligations. Higher inflation has also increased revenues above what had been projected, so this increase in nominal spending will not affect the budget balance in real terms or expressed as a percentage of GDP.

There is nothing wrong with this sort of statement: what matters is real economic activity, and adjusting nominal expenditures in response to a pure price change is the proper thing to do.

But of course, thats not what has happened: prices are coming in lower than expected. If you thinkas I dothat the above statement makes sense in a context of higher-than-expected prices, then this is what youd expect a government to say when prices come in below projection:

We committed ourselves to purchasing a certain quantity of goods and services. The price of respecting this commitment has gone up less than we expected, and so we will be spending less than we projectedin nominal termsto carry out our obligations. Lower inflation has also reduced revenues below what had been projected, so this reduction in nominal spending will not affect the budget balance in real terms or expressed as a percentage of GDP.

Here is where the Liberals have tripped up. Instead of adjusting nominal spending down as inflation came in below projection, the path of nominal expenditures has been revised upwards in the first two Liberal budgets. Real levels of spending are higher than what the Liberals had promised.

READ MORE:21 ways the federal budget will hit Canadians wallets

We now have to make a detour to note that the Liberals never actually set out what their revenue and spending commitments were in the last election. Their costing was set out in terms of the 2015 budget balance baseline (with adjustments), where items were added and subtracted to obtain a projection for the budget balance over 2016-20: no numbers for revenues or spending were provided that could be used as a basis for comparison with what came later.

In this excel file, Ive tried to fill that gap, using the original 2015 budget baseline as a starting point, adding the Liberals risk adjustments, and then classifying the various proposals in the Liberal platform as either revenue or expenditure measures. For example, the canceling of the Universal Child Care Benefit is a revenue increase (the UCCB was a tax credit), the introduction of the Canada Child Benefit is a revenue decrease (the CCB is also a tax credit), the Middle Class Tax Cut is a revenue reduction, and so on. The final budget balances reproduce the projections in the Liberals platform. (Some of these revenue/spending classifications are judgment calls, so if you see an item that Ive misclassified, Ill be pleased to make the necessary changes.)

This table summarizes nominal revenue and spending projections in the Liberal platform and in their two budgets:

Although Ive broken the numbers down for each year, Ill try to keep things as simple as possible by talking only about the four-year totals for 2016-2020. Total nominal spending as projected in the 2017 budget ($1 240.1 billion) is four per cent less than the total projected in the platform ($1 292.4 billion)a gap slightly less than 4.5 per cent average shortfall in nominal GDP. On the spending side, the projected total of $1 229.8 billion is 2.5 per cent higher than projected in the platform.

Lets look at the primary balance, which is the difference between revenues and spendingthat is, the balance with debt service payments excluded. Revenues in the 2017 budget are $52.3 billion lower than in the platform, and spending is $30.3 billion higher, for a total reduction in the primary balance of $82.6 billion over 2016-20. The Liberal government would presumably argue that since most of this reduction52.3 out of 82.6, or 63 per centcomes from revenue side, revenues are the principal culprit in the deterioration of the federal budget balance.

But this story leaves out the part where prices undershot the projection. If the Liberals wanted to maintain their spending commitments in real termswhich is what mattersthey should have reduced nominal spending below the targets set out in their platform. Because prices came in under projection, and because nominal spending has actually increased over the platform commitments, real federal government spending is running 5.1 per cent higher on average than what the Liberals promised during the election.

By the same token, lower-than-projected prices also means that the shortfall in real revenues is less than the shortfall of nominal revenues. Real revenues are running 1.6 per cent on average below projection, compared to 4 per cent in nominal terms.

In constant 2007 dollar terms, the 2016-20 primary balance is $68.7 billion below what was projected in the Liberal platform. Of that, some $51.2 billion, or about three-quarters, is due to real expenditures running above projection. Translated back to nominal terms, the Liberals are spending about $15 billion dollars a year more than they had promised to spend during the election campaign. Put another way, the Liberals would have to cut spending by about fiveper cent a year to bring real expenditures down to the commitments in their platform. And put yet another way, the 2016-20 federal deficit would be reduced by two-thirds if the Liberals had stuck to their spending commitments in real terms.

It should be noted that the conclusion here is not that spending has increased under the Liberals: the obvious retort to that claim is that increased spending is a campaign commitment that the Liberals have a mandate to carry out. The point is that real federal spending has increased to levels significantly greater than what the Liberals had promised in 2015.

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The Liberals are spending far more than they said they would - Macleans.ca

Angered by Trump, liberals are transforming city politics – MyAJC

WASHINGTON

The liberal resistance to President Donald Trump hasn't managed to capture any new congressional seats for Democrats but it's having a major effect on politics at a more local level.

In Jackson, Miss., progressives elected a candidate last month who promised to make his Deep South town "the most radical city on the planet." In Cincinnati, a liberal favorite earned more support than the incumbent mayor in the first round of voting this spring.

And in Philadelphia, a Black Lives Matter advocate won the Democratic primary in May to be the next district attorney in a city where even Democratic law enforcement officials have traditionally taken a hard line.

"We have a president who any sentient person recognizes is a wannabe dictator," said Larry Krasner, who won the Democratic Party's primary for district attorney in Philadelphia. "That's the kind of thing that can wake you up in the morning, make you lace up your shoes, and go vote. So, yes, I think that had impact."

Indeed, while Trump's election has whipped progressives into a frenzy and driven new activists and big dollars into high-profile federal races for the House and Senate, it's in cities and towns that the vociferous response against the president is transforming politics.

The effect has major implications for the Democratic Party, both in the agenda it pushes and its electoral bench of future candidates for higher office.

Krasner is the crown jewel of liberal success in local elections this year, winning a competitive multi-candidate primary in a city where the winners of Democratic primaries almost always win the general election. The civil rights attorney an open critic of the city's police who is closely aligned with the Black Lives Matter movement is on track to take office just eight years after the retirement of former District Attorney Lynne Abraham, who over the course of nearly two decades in office earned the moniker "Queen of Death" for the frequency with which she sought the death penalty.

Liberals also have had success elsewhere: In Cincinnati, for instance, City Councilwoman Yvette Simpson won 45 percent of the mayoral race vote in May's election, earning more support than even the incumbent mayor. Democracy for America, a nationwide liberal group based in Vermont, endorsed Simpson.

They also scored a major victory in Jackson, Miss., where Chokwe Antar Lumumba became mayor-elect just three years after narrowly losing the mayor's race. Lumumba already has a national presence, after thrilling an audience of several thousand liberals gathered last month at a conference in Chicago, where he vowed to govern not as a calculating centrist but as a progressive champion.

Trump hasn't explicitly been at the forefront of any of these campaigns. But officials involved say the backlash he has elicited has left liberal voters hungry for aggressive candidates who promise big changes.

"In the Age of Trump, the political power of bold progressive visions and the social movements that generate them has increased substantially," said Joe Dinkin, spokesman for the unabashedly liberal Working Families Party.

The Working Families Party endorsed Lumumba, and its Pennsylvania chapter endorsed Krasner.

The national liberal groups involved in these races say they're also focused on even more obscure races than those for mayor or district attorney. Democracy for America, for instance, endorsed a candidate in a Library Board race in a western Chicago suburb, arguing that progressives should seek to press their advantage in every race.

"I don't think there's a position too small to start building progressive power, especially with all the energy you're seeing among progressives this year not just in opposing Trump, but also recognizing how important it is to push for progressive policies like minimum wage to universal health care," said Vivek Kembaiyan, DFA spokesman.

The effect of electing unapologetic liberals to local positions will be consequential immediately Krasner supporters argue that his election literally could mean life or death for some people.

But progressive strategists are also eyeing the long-term effect of putting so many liberal candidates in local office. For a party that often looks to citywide officials as its next generation of leaders, installing progressives now means that future governors, House members and senators share the activists' liberal values.

"Electing the next progressive president or a new generation senator or governor, really that work begins immediately and it begins at the local level, in city council and in mayor's offices and changing the way DAs think about their jobs," Kembaiyan said. "That's what it's going to take."

Liberals have had more success in municipal races even before Trump's election. In New York City, for instance, the election of Bill de Blasio in 2013 was a triumph of a liberal-backed candidate over the party's Democratic establishment.

The movement's ambition grew further still after the unexpectedly competitive presidential campaign of liberal icon Bernie Sanders.

"Bernie's movement expanded people's view of what was possible," Dinkin said. "And the Trump presidency has made people hungrier for a more aggressive vision of change."

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Angered by Trump, liberals are transforming city politics - MyAJC

Man arrested outside Jeff Flake’s office said liberals will get ‘better … – Washington Examiner

A man was arrested for telling staffers to Sen. Jeff Flake that liberals will solve their Republican problem by getting "better aim," and made a reference to the shooting at a practice for the congressional baseball game last month.

Jason Samuels, Flake's communications director, told Tuscon News Now a protester was arrested on Thursday morning after making threatening statements to staffers.

"You know how liberals are going to solve the Republican problem? They are going to get better aim," he said. "That last guy tried, but he needed better aim. We will get better aim."

The protester was likely referencing last month's shooting in Alexandria, Virginia.

House Majority Whip Steve Scalise, R-La., was wounded along with four others at baseball practice in preparation for the annual Congressional Baseball Game. Scalise remains in the intensive care unit at a Washington, D.C., hospital.

Flake, R-Ariz., was one of the first people to tend to Scalise on the field after the gunman, James Hodgkinson, had been subdued by Capitol Police.

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Man arrested outside Jeff Flake's office said liberals will get 'better ... - Washington Examiner

Liberals try to refute Seattle minimum wage study – Washington Examiner

Liberals are aggressively trying to debunk a recent study by the University of Washington that found that Seattle's recent move to a $13-an-hour minimum wage had left the city's low-wage workers much worse off.

The study is potentially a major threat to the national movement for a $15 minimum wage, presenting the first significant evidence that such efforts may be doing more harm than good.

Liberals have criticized the report's methodology, arguing that its findings are out of step with past studies on the minimum wage, although increases to Seattle's current level were unprecedented until recently. Mark Long, co-author of the study, shrugged off such criticisms, saying it was to be expected given the groups' politics.

"The [minimum wage] advocates have been critical because our report makes their job harder," Long, a professor with university's Evans School of Public Policy and Governance, told the Washington Examiner. If the study had found results more to the advocates' liking, they wouldn't be complaining about the methodology, he said.

For $15 minimum wage fans, the report released June 26 as a working paper by the National Bureau of Economic Research was a rude shock. It found that the city's increase to $13 an hour in 2016, up from $9.32 in 2013 and part of a planned phase-in to $15 for most employers by 2018, had sharply reduced wealth among low-wage workers because of job losses and reductions in hours worked. Businesses did both to mitigate the sharp increase in labor costs they faced.

"The lost income associated with the hours reductions exceeds the gain associated with the net wage increase of 3.1 percent.... [W]e compute that the average low-wage employee was paid $1,897 per month. The reduction in hours would cost the average employee $179 per month, while the wage increase would recoup only $54 of this loss, leaving a net loss of $125 per month (6.6 percent), which is sizable for a low-wage worker," the study concluded. It found that payrolls for low-wage workers declined by an average 5.8 percent after the $13 rate went into effect, reducing those workers' income by $120 million.

That was before the final $15-an-hour rate is phased in, suggesting the situation for those workers would get even worse. Liberals have been trying to shoot down the results ever since.

"Don't believe the headlines about a flawed minimum wage study. The Seattle economy is booming," tweeted David Rolf, president of SEIU Local 775 and author of "The Fight for $15," on Monday.

Fight for $15, an activist group funded and run by the Service Employees International Union, argued in a web posting that the study was "not credible" because it was "funded by a hedge fund manager's foundation who made a fortune at Enron." The group did not explain any relevance to the university's findings.

The liberal Center for American Progress posted an article called "Five flaws in a new analysis of Seattle's minimum wage," while the liberal Economic Policy Institute published an even lengthier critique. Liberal economists such as Jared Bernstein weighed in as well.

David Cooper, a fellow at the Economic Policy Institute, said the study was too far out of line with what other minimum wage studies had found. He argued that it didn't matter that no other studies had looked at rates as high as $13 because Seattle's increase wasn't that large relative to its prior level. "Because this was only looking at the increase from $11 to $13 in Seattle it is not outside the scope of what has been studied before," Cooper said. He said a study on the Seattle minimum wage released last week by the University of California, Berkeley, which showed no ill effects from the increase, was more credible because it was in line with earlier studies.

Other critiques noted that the University of Washington study was not peer-reviewed, didn't include data from "multi-site" employers such as chain restaurants, and had some unusual results, such as finding increases in employment for those earning more than $19 an hour.

That's all nonsense, argued Ryan Bourne, an economist with the free-market Cato Institute think tank. The University of Washington study "is one of the only robust papers we have had on this level of the minimum wage in the U.S." The different results from prior studies suggests those reports missed important effects. "The critics have this completely back to front," Bourne said.

Long said the multi-site employers weren't included because their wage and hour data wasn't available. The researchers compensated by conducting a separate survey of those employers. "What we found was that the multi-site employers were more likely to relocate or shift their work capital. That suggests we are, if anything, underestimating the impact" of the $13 rate on employer cutbacks, he said.

It is true that the paper had not been peer-reviewed but it is undergoing the process now, he said. That's why it was released as a working paper through the National Bureau of Economic Research: so the authors could get feedback from fellow economists. Thus far, the reactions from academics and researchers has been highly positive, Long says. The loudest complaints have come from the biggest advocates of a $15 rate.

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Liberals try to refute Seattle minimum wage study - Washington Examiner

India: Liberals rise up against nationalism – Deutsche Welle


Deutsche Welle
India: Liberals rise up against nationalism
Deutsche Welle
A recent mob attack on a train in India left a 15-year-old Muslim youth dead, presumably for carrying beef. The incident has prompted liberal Indians to brave criticism and raise their voices against so-called cow vigilantes and Hindu nationalists.

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India: Liberals rise up against nationalism - Deutsche Welle