Canada's Opposition Parties Vow to Bring Down Government, 1 month into its term...

[Asher]

So the Liberals and NDP officially reached a deal to form a coalition govt:

http://www.cbc.ca/canada/story/2008/11/30/canada-coalition.html?ref=rss

NDP, Liberals reach deal to topple minority Tory government



The NDP and Liberals have reached a deal to topple the minority Conservative government and take power themselves in a coalition, CBC News has learned.

A deal has been negotiated between NDP Leader Jack Layton and Liberal Leader Stéphane Dion that would see them form a coalition government for two and a half years, the CBC's Keith Boag reported, citing sources.

The NDP would be invited into cabinet and get 25 per cent of seats, Boag said, adding that the party wouldn't get the position of the finance chair or the deputy prime minister's post.

"That's the big step forward tonight," Boag reported.

The Bloc Québécois wouldn't be a part of the coalition, but would have to support it, he said.

"The most difficult question is who'll be the leader," Boag said, adding that Dion, who negotiated the deal, believes he has the right to be prime minister.

Opposition parties say they have lost confidence in the government of Prime Minister Stephen Harper after Thursday's economic update by Finance Minister Jim Flaherty failed to provide a stimulus package for Canadians.

Since then, the Liberals have been in negotiations to form a coalition with the NDP, and the concessions made by the Conservatives this weekend have done nothing to change the party's view that Harper must go.

I give the GG about a 90% chance of rejecting the motion.

[notyoueither]

Originally posted by KrazyHorse
It doesn't need to HOLD EXACTLY. It is there as an extremely important confounding effect. There will be a TENDENCY to reduce private spending as public spending increases. The MAGNITUDE of this effect can vary from place to place and time to time.

Assume that tax policy is somewhat stable.

Why would public borrowing in a crisis that is widely understood to be temporary affect private behaviour?

Rather, if public spending is expected but is not forthcoming, then I could see private behaviour changing as people look elsewhere for soundly managed economies.

[KrazyHorse]

Some economists claim that the best way to stimulate the economy is to cut taxes, others claim that the best way is to spend more money. I don't think any of them suggest that both those actions actually shrink the economy.

That's because you've been listening to blowhards, not serious economists.

[CrONoS]

Does Ricardian Equivalence have anything to do with this:

" If I am a government and I promise to raise tax next year, people and industry would consume earlier"

And vice versa
" If I am a government and I promise to lower tax next year, people and industry would consume more right now"

[notyoueither]

Originally posted by Asher
So the Liberals and NDP officially reached a deal to form a coalition govt:

http://www.cbc.ca/canada/story/2008/11/30/canada-coalition.html?ref=rss

I give the GG about a 90% chance of rejecting the motion.

She'll be in a pickle if they follow through and ask.

She can't really say no out of hand though. If the leaders of a majority of MPs turn up on her doorstep and say 'hi, we have a plan' she will be compelled to listen.

Then she will listen to the leader of the largest group of MPs.

My money is on she gives Dion the opportunity to try unless Harper is especially convincing.

But then my money is this never gets to her door. The Liberals will back down as they soak in the ramifications.

[Victor Galis]

Originally posted by CrONoS
Does Ricardian Equivalence have anything to do with this:

" If I am a government and I promise to raise tax next year, people and industry would consume earlier"

And vice versa
" If I am a government and I promise to lower tax next year, people and industry would rise their consumption right now"

This is: If I'm an individual and I see the government spend more, I assume the government will raise taxes in the future to pay for it, so I cut my own spending so I can pay future taxes. (And vice versa)

[KrazyHorse]

First of all, from your response it isn't even clear that you understood which section of the table I was quoting. That table is the effect of spending upon taxation. If Ricardian equivalence held perfectly, those numbers would all be 1.00. If it held approximately, they'd be somewhere near 1. Instead they're all over the place. That is exactly what I would predict because I don't believe in Ricardian equivalence.

No, apparently you don't understand the table you were quoting (or Ricardian equivalence, or both). If it held exactly you would expect to see 0, not 1.

[KrazyHorse]

Originally posted by CrONoS
Does Ricardian Equivalence have anything to do with this:

" If I am a government and I promise to raise tax next year, people and industry would consume earlier"

And vice versa
" If I am a government and I promise to lower tax next year, people and industry would consume more right now"

I don't understand your question.

[KrazyHorse]

The "naive keynesian" view is that in times where there is a significant output gap the fiscal multiplier is large and positive.

I have offered evidence that, at least recently, this has not been the case. In fact, the fiscal multiplier has been close to 0 in most places, but in Canada (strangely enough) there appears to be a significantly positive multiplier associated with tax cuts and a significantly negative multiplier associated with spending increases. Postulate whatever mechanism you want for this, but this is what the data constrains you to, unless you would like to offer a criticism of the methodology.

Top-down theorising is useless when it contradicts data. Otherwise you're practicing religion, not science.

[notyoueither]

Economics is not a science in the sense that you are used to.

[Victor Galis]

No, apparently you don't understand the table you were quoting (or Ricardian equivalence, or both). If it held exactly you would expect to see 0, not 1.

I quoted the effect of spending on taxes not on deficits. If the government spends 1% more, the tax burden must increase by 1% to compensate.

Er... you're right about the fact that I did screw up (you're just wrong about the way in which I screwed up). I somehow assumed that the change in spending was a one-time event (d'oh!). I left out part A: Spending's effect on Spending.

A. Cumulative response of government spending
S1 .88* 2.23* .64* 1.24* .92* 2.41* .61* 1.41* .74* 1.32*
S2 .72* 1.48* .92* 1.33* .82* 1.51* .90* 1.99* .58* .99*

C. Cumulative response of cyclically adjusted taxes
S1 -.13 .27 1.00* .85* .08 -.31 .30* .88* .14* .95*
S2 -.25* -1.02* .34* -.09 .44* -3.47* -.22 -.17 .12 .41*

C should be the same as A, but with the opposite sign. (Change in taxes should compensate for change in spending.)

[notyoueither]

Here, here.

Wait, what!?

http://www.financialpost.com/news/story.html?id=1014855

Stop bickering, get working, MPs urged
Paul Vieira, Financial Post
Published: Sunday, November 30, 2008

OTTAWA -- The country's largest business group demanded Sunday that MPs stop "playing political games" and work together to immediately craft an economic strategy that includes a stimulus package aimed at dealing with the global financial crisis.

In a letter sent to all federal party leaders, the Canadian Chamber of Commerce said much more needs to be done now. It added the "comprehensive" federal budget that Jim Flaherty, the Finance Minister, proposes to table on Jan. 27 was "not enough."

"Concrete measures must be put in place well in advance of a Jan. 27 budget," said the letter, co-signed by Perrin Beatty, the chamber's chief executive, and Roger Thomas, chairman of the chamber's board of directors.

In an interview, Mr. Beatty said what business leaders are seeing on Parliament Hill is "frankly shocking" at a time when the Canadian economy faces its biggest crisis in a generation.

"What you are seeing is political posturing, with parties more focused on their own position than on the welfare of Canadians," Mr. Beatty said in an interview Sunday night.

"We need to have a plan in place now. We want to see the government accelerate the timing for a clear statement of what its strategy to deal with the recession is. The 27th of January is too late."

The chamber said it would be issuing its own recommendations this Tuesday as to what the federal government should do to respond to the critical factors fuelling the financial crisis.

The tabling of the government's fiscal update has sparked a firestorm on Parliament Hill that threatens the future of the minority Conservative government.

The Opposition parties have vowed to defeat the government, as early as Dec. 8, on charges that, among other things, the Prime Minister, Stephen Harper, is using the global economic crisis to push an ideological agenda, as outlined in this past week's fiscal update.

In a sign that the Conservatives are worried about their future, party fundraisers issued to letter to party members over the weekend to make "emergency donations" of $200 or $100, "or whatever you can afford to protect Canada's future and protect Canada's democracy from being hijacked."

The Opposition parties say the update provided no indication that a fiscal stimulus package was forthcoming, and also included a politically-charged measure that would eliminate the roughly $28-million in public subsidies that political parties receive for each vote they garner in federal elections. The Conservatives have since pulled out the political party subsidy from its plan, as well as a temporary ban on public service strikes.

In the fiscal update, the government left the door to further stimulus but in the same breath said it has already provided a "substantial fiscal stimulus" through legislated tax cuts of $31-billion for next year, and has $33-billion of infrastructure spending lined up from previous commitments.

The update confirmed that the country is in the midst of a recession, with the economy set to contract this quarter and next. However, the government projects it would stay out of deficit through an ambitious $15-billion plan that would extract savings from the public service over the next half decade.

Financial Post

[notyoueither]

What do we want?

Stimulus

When do we want it?

Now!

What will it do?

Errrmm... What should it do? Oh, I know...

Throw cash on the fire! We'll stay warm. It's cold here, you know.

[KrazyHorse]

Originally posted by notyoueither
Economics is not a science in the sense that you are used to.

I am well aware of the differences. But they should make us MORE reliant on data. Not less.

[notyoueither]

http://www.statcan.gc.ca/subjects-sujets/labour-travail/lfs-epa/lfs-epa-eng.htm

Latest release from the Labour Force Survey (PDF)

Friday, November 7, 2008
Released at 7:00 a.m. Eastern time in The Daily

October 2008

Following a large gain the month before, employment was little changed in October as an increase in full-time work was mostly offset by losses in part time. The unemployment rate edged up 0.1 percentage points to 6.2%, driven by an increase in the number of people looking for work.

Chart 1
Employment

Since the beginning of 2008, employment has increased 1.2% (+203,000), with gains in both full and part time. Employment rose by 2.0% (+338,000) over the same period of 2007, most of which was full time.

In October, employment increased in Alberta, where the unemployment rate remained the lowest in the country, at 3.7%. There was little employment change in the other provinces.

...

With Quebec's overall employment little changed in October, the unemployment rate edged down to 7.2%. So far this year, employment growth has been negligible at 0.2% (+7,000), as increases in information, culture and recreation; health care and social assistance; construction; and manufacturing were offset by declines in agriculture; education; and other services.

Although Ontario's employment was unchanged in October, so far this year, it is up 1.5% (+101,000), slightly above the national growth rate of 1.2%. Gains over the first 10 months of the year were in transportation and warehousing; construction; and public administration. Manufacturing is down 14,000 so far in 2008, compared with a decline of 43,000 over the same period of 2007. The unemployment rate edged up to 6.5% in October, little changed from the beginning of 2008.

In British Columbia, employment edged down in October, pushing the unemployment rate up 0.5 percentage points to 5.1%, the highest since December 2006. So far this year, employment growth stands at 0.8%, below the national average

I'm getting pissed off now.

Edit: Added data from Quebec, Ontario, and BC.

The sky is falling! The sky is falling! Let's burn billions!@!$%#