Posted on Americas Quarterly, January 21, 2011
Real concerns about government debt and deficits are bringing politicians to a moment of truth. Whether you are a recently elected member of Congress or a finance minister in Canada or in a Canadian province about to deliver the next budget, you know the exercise will be painful and the road arduous. Earlier this month I attended Governor Andrew Cuomo’s State of the State Address and it was clear that the efforts to reduce the budget deficit will require a sustained commitment over a number of years. This message is being repeated across the land and we can expect President Obama to present essentially the same approach at the State of the Union Address next week.
Despite the well deserved praise by observers of Canada’s performance in the Great Recession, Canadian political leaders are facing similar obligations. After over a decade of balanced and surplus budgets allowing for the reduction of the public debt, governments at both the federal and provincial levels are facing significant deficits. While the ratio of debt to GDP is more favourable in Canada than in the U.S., the problem remains the same—an increasing gap between lower revenue coming in and increased spending in entitlement programs.
Remedies in both jurisdictions vary from a call to reductions in spending to increasing revenues without affecting economic activity. With economic recovery modest in both Canada and the U.S., political leaders are reluctant to stifle demand from consumers by raising taxes and seem to be turning increasingly their attention to cutting spending. In the U.S., a presidential commission headed by Democrat Erskine Bowles and Republican Alan Simpson has proposed a combination of massive cuts and a need for tax reform. In Canada, social programs are coming under greater scrutiny. The caveat is the risk to confuse cutting waste, eliminating inefficient or outmoded programs, or reforming existing programs with stopping investment in future and necessary infrastructures projects needed for a competitive economy in the future. Countries like China and Brazil are investing massively in building roads, high speed rail, energy related projects. China itself spent 9 percent of GDP in infrastructure building in 2009. The temptation to balance the books can lead to a failure to invest in necessary public goods and it represents the biggest danger to our long term prosperity.
Investing in high speed rail in the U.S., building our energy potential in Canada, rebuilding roads, improving airports, revamping seaports, and building transmission lines should be considered as vital to future generations. It is my belief that it is possible to rein in government spending, invest in public goods and build for a more prosperous future. History is on our side.
Consider our case in Québec. After close to a decade of balanced budgets, the Québec budget was back in deficit territory by 2007-2008. What has the Québec government chosen to do? It decided to invest in rebuilding the infrastructure networks as it anticipated the economic slowdown in 2007. It then produced a five-year plan to return to a balanced budget while continuing to invest massively in developing hydroelectric power plants in northern Québec. In the coming months, it will announce the North Plan aimed at developing 72 percent of its land mass (nearly twice the size of Texas!), north of the 49° with investments in mining, energy and sustainable tourism. The approximate cost of the project over the next 25 years will be $50 billion.
Currently, Québec’s economy is among the most performing in North America with an unemployment rate two percentage points below the U.S. and for the first time in decades it is lower than the Canadian national average and the neighbouring province of Ontario. Granted, Québec is not unique in this approach, but the fiscal hawks would have advised otherwise. Québec’s economic outlook remains promising, but more important, Québec continues to invest in its economic infrastructure in the firm belief that prosperity for future generations is best achieved by finding the balance between fiscal management and creating wealth.
Creating wealth provides economic development and stimulus for economic activity. Both Canada and the U.S. have acted in that direction following other difficult economic slowdowns. This will be the challenge facing decision makers in the 2011-2012 budget cycle.
January 21, 2011
January 18, 2011
Québec Participates at CG/LA Conference
These presentations show Québec’s construction ingenuity and Québec’s belief that creating wealth is both a good short term strategy for economic activity and a necessary approach to create wealth for future generations. Where would Québec be had it not built the James Bay Hydroelectric project in the 1970’s?
The 4th Annual Global Infrastructure Leadership Forum is a strategic projects marketplace focused on top global infrastructure projects. Projects are selected through analysis and consultation with experts from the public and private sectors.
For Québec, it is an occasion to come out from under the radar to show that it intends to continue to be the leader in hydroelectricity projects and a major player in developing our mining potential to meet the needs of emerging markets.
January 10, 2011
The Legacy of Martin Luther King
On January 15, we remember Dr. Martin Luther King Jr.’s legacy. I thought it would be a good idea to write an imaginary letter to this great man.
Dear Dr. King,
The tragic events this weekend in Tucson, Arizona, just few days before the national holiday commemorating your work and achievements made me reflect upon the power of words. So I went back and reread “Letters from a Birmingham Jail” and your “I Have a Dream” speech.
I realized that your efforts to achieve change through non-violent means had a lot to do with boycotts, marches, and sit-ins. But there was much more. It had everything to do with tone, manner, and words.
The analysts and politicians who commented on the tragedy that took the lives of six people and injured 14 others in Tucson, including Representative Gabrielle Giffords, are leading many to discuss the current political climate in the U.S. and its effect on creating such violence. We are all tempted to blame someone or one side for instigating overheated rhetoric that lead deranged people, or potential plotters, to use violent means for their ends. Unfortunately, there are no simple answers, and to do so, would be too simplistic.
Gun control, greater security for elected officials, and the toning down of political rhetoric have become the subjects of the post-Arizona discourse. In truth, we should all address these issues and it should not be limited just to the American democracy. While my country, Canada, has been spared much of the violence towards elected officials and in other public venues, no one is immune. What we need is to reflect on what you left us and understand that you lead the most successful social and political revolution of my day, and you did it by employing non-violence, and the power of words.
In “Letters,” you told us “injustice anywhere is a threat to justice everywhere.” In “I Have a Dream,” you expressed the hope that all should be judged “by the content of their character and not the color of their skin.” Powerful words that should still guide us. Thanks for this.
Sincerely,
John Parisella
Dear Dr. King,
The tragic events this weekend in Tucson, Arizona, just few days before the national holiday commemorating your work and achievements made me reflect upon the power of words. So I went back and reread “Letters from a Birmingham Jail” and your “I Have a Dream” speech.
I realized that your efforts to achieve change through non-violent means had a lot to do with boycotts, marches, and sit-ins. But there was much more. It had everything to do with tone, manner, and words.
The analysts and politicians who commented on the tragedy that took the lives of six people and injured 14 others in Tucson, including Representative Gabrielle Giffords, are leading many to discuss the current political climate in the U.S. and its effect on creating such violence. We are all tempted to blame someone or one side for instigating overheated rhetoric that lead deranged people, or potential plotters, to use violent means for their ends. Unfortunately, there are no simple answers, and to do so, would be too simplistic.
Gun control, greater security for elected officials, and the toning down of political rhetoric have become the subjects of the post-Arizona discourse. In truth, we should all address these issues and it should not be limited just to the American democracy. While my country, Canada, has been spared much of the violence towards elected officials and in other public venues, no one is immune. What we need is to reflect on what you left us and understand that you lead the most successful social and political revolution of my day, and you did it by employing non-violence, and the power of words.
In “Letters,” you told us “injustice anywhere is a threat to justice everywhere.” In “I Have a Dream,” you expressed the hope that all should be judged “by the content of their character and not the color of their skin.” Powerful words that should still guide us. Thanks for this.
Sincerely,
John Parisella
January 6, 2011
A New York State of Mind
With statistics at hand, the Governor pointed a somber picture of where New York State is and convincingly argued that the state was at a crossroads. Lagging behind in economic development, healthcare performance, education results on a national level and along with the highest taxation in the nation, he argued for reinventing, reorganizing and redesigning the state and its government. He also promised to make the necessary cuts - about $10 billion - in the next budget, due within a few weeks. Finally, he sounded a realistic tone that clearly indicated that his program and agenda were not a short term, quick fix approach. Rather, it would require an effort over the long haul and would involve both the executive and legislative branches of the government.
It was heady stuff. Using impressive technological support and an unconventional venue, Cuomo demonstrated to his audience a command of the situation, and more importantly, he engaged his most crucial partners, Assembly Speaker and fellow Democrat, Sheldon Silver, and new Senate Republican Majority Leader, Dean Skelos in the exercise. The message was clear: we are all on the same ship sailing in one direction.
Both Speaker Silver and Senate Majority Leader Skelos struck a tone of cooperation and promised to work together looking for common solutions, encouraging bipartisanship, and displaying a firm commitment to work beyond the partisan divide. The bar will be high and there will be many difficult choices ahead, but yesterday for the over 2,000 people present in the Albany State Convention Center, it marked a new beginning and indicated new opportunities to turn things around.
Governor Cuomo closed his impassioned remarks by reminding the audience that New York State was once the beacon for problem solving and innovation. This was his “New York state of mind” moment. While it is too early to predict how all this will turn out, it was a moment of attention and encouragement that New Yorkers seem to have longed for many years. Just that in itself makes it a good start for the new administration and legislature, and a moment to savor for our New York friends.
January 4, 2011
What to Look for in 2011
In a phrase - more politics than ever. The year may have ended with a fresh flavour of bipartisanship. Was this an illusion ? With the arrival of a new contingent of Tea Partiers, watch for a lot of new Congressional posturing. The Tea Party faction of the Republican Party will test the leadership skills of new Speaker, John Boehner. Will the GOP stick to an agenda of smaller government which they had promised under Reagan and Bush, but failed to deliver in the final analysis ? Or will they tackle the hard issues of entitlement and defense spending ? Will the GOP remain so steadfastly pro-free trade against some isolationist tendencies about job outsourcing,as expressed by some factions within the Tea Party in the mid terms ?
The Democrats have barely licked their wounds and the deciminated liberal -progressive wing is still smarting from the lame duck session tax deal on the Bush tax cuts. Will they show an openness to take on issues that have been so dear to their liberal progressive roots such as existing social programs ? President Obama ended on a high note and polls showed some rebound at the end of the year. But can he carry the remainder of his agenda forward with a divided Congress and Republicans eyeing the White House ?
There remain outstanding issues that will have to be addressed: energy independance, immigration reform, deficit reduction, plans to reduce the debt, continued involvement in Afghanistan, continued reform of education, funding healthcare reform, and dealing with a slow recovery including persistent high unemployment, the key factor affecting the mood of the country. These represent a perilous political landscape and present multiple opportunities for political gridlock. Here we will see if the politicians have correctly interpreted the message from the American voter on November 2. Republicans have interpreted the results as a rejection of the Obama-Pelosi agenda. Democrats see it as a consequence of a bad economy where incumbents were made to pay the price.
It is possible that both parties may have misread the intent of the voter who, according to polls in recent years ,wish more bipartisan effort at solutions rather than scoring political points. The lame duck session and the compromises that emerged seem to find favor with American people.
Polls in recent days are sending mixed messages. Obama remains admired, yet he has disapproval numbers in the mid to high 40's. Neither party has the favor of more than 30% of the electorate. The incoming notion of divided goverment seems to perfectly reflect the mood of the electorate.
How the political leadership will navigate through this is anyone's guess. My sense is that Obama will reduce his dependence on pushing his agenda through Congress. He will engage in more foreign policy issues and will pursue free trade. He will use the bully pulpit and continue on his recent transactional track in making incremental change. He will have to deal with Congress to get financial support for his existing reforms as opposed to legislating new reforms. He will likely have to compromise on the deficit /debt debate,energy/environment, and immigration reform with possibly very little transformational change to show. Except he will have conveyed the message of working with the other side and that he has acted accordingly on the results of the mid-terms.
The GOP will be the more fascinating party to watch in 2011. It is possible that Sarah Palin will send a bombshell in the first half of the year by announcing she will not run for the presidency. Her celebrity status, however, will keep her a force in the eventual choice of the GOP nomination. But there is growing suspicion in recent weeks that the Republican establishment appears to be reluctant in wanting her as a candidate despite her obvious notoriety. Her recent low poll numbers among independant voters have done nothing to enhance her chances with key Republican operatives. Mitt Romney and Mike Huckabee seem to have the edge with rank and file Republicans at this stage. But it is too early to make predictions.
All in all, these will be interesting times in U.S. politics. By this time next year, we should have a better idea of the battleground for the 2012 presidential election. By doing the tax deal with the Republicans, Obama brought the Republicans into sharing governance on the economy. This deal has since been described as a second stimulus - a Republican inspired one. This means that a slow recovery will likely be seen as a shared responsibility making 2012 harder to predict.
The Democrats have barely licked their wounds and the deciminated liberal -progressive wing is still smarting from the lame duck session tax deal on the Bush tax cuts. Will they show an openness to take on issues that have been so dear to their liberal progressive roots such as existing social programs ? President Obama ended on a high note and polls showed some rebound at the end of the year. But can he carry the remainder of his agenda forward with a divided Congress and Republicans eyeing the White House ?
There remain outstanding issues that will have to be addressed: energy independance, immigration reform, deficit reduction, plans to reduce the debt, continued involvement in Afghanistan, continued reform of education, funding healthcare reform, and dealing with a slow recovery including persistent high unemployment, the key factor affecting the mood of the country. These represent a perilous political landscape and present multiple opportunities for political gridlock. Here we will see if the politicians have correctly interpreted the message from the American voter on November 2. Republicans have interpreted the results as a rejection of the Obama-Pelosi agenda. Democrats see it as a consequence of a bad economy where incumbents were made to pay the price.
It is possible that both parties may have misread the intent of the voter who, according to polls in recent years ,wish more bipartisan effort at solutions rather than scoring political points. The lame duck session and the compromises that emerged seem to find favor with American people.
Polls in recent days are sending mixed messages. Obama remains admired, yet he has disapproval numbers in the mid to high 40's. Neither party has the favor of more than 30% of the electorate. The incoming notion of divided goverment seems to perfectly reflect the mood of the electorate.
How the political leadership will navigate through this is anyone's guess. My sense is that Obama will reduce his dependence on pushing his agenda through Congress. He will engage in more foreign policy issues and will pursue free trade. He will use the bully pulpit and continue on his recent transactional track in making incremental change. He will have to deal with Congress to get financial support for his existing reforms as opposed to legislating new reforms. He will likely have to compromise on the deficit /debt debate,energy/environment, and immigration reform with possibly very little transformational change to show. Except he will have conveyed the message of working with the other side and that he has acted accordingly on the results of the mid-terms.
The GOP will be the more fascinating party to watch in 2011. It is possible that Sarah Palin will send a bombshell in the first half of the year by announcing she will not run for the presidency. Her celebrity status, however, will keep her a force in the eventual choice of the GOP nomination. But there is growing suspicion in recent weeks that the Republican establishment appears to be reluctant in wanting her as a candidate despite her obvious notoriety. Her recent low poll numbers among independant voters have done nothing to enhance her chances with key Republican operatives. Mitt Romney and Mike Huckabee seem to have the edge with rank and file Republicans at this stage. But it is too early to make predictions.
All in all, these will be interesting times in U.S. politics. By this time next year, we should have a better idea of the battleground for the 2012 presidential election. By doing the tax deal with the Republicans, Obama brought the Republicans into sharing governance on the economy. This deal has since been described as a second stimulus - a Republican inspired one. This means that a slow recovery will likely be seen as a shared responsibility making 2012 harder to predict.
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