Hurricane Irene came and went, but not without leaving a major impact. Properties were destroyed, people were killed, and homes were flooded. New York City closed its public transportation system for the first time in history and evacuated over 370,000 of its citizens. Before the storm hit, eight states had declared states of emergency, with President Obama weighing in with added measures on some states, such as North Carolina, New Jersey and New York who were anticipating potentially greater risk.
News media organizations were on high alert. It seemed no other event was taking place on the planet. Citizens showed great discipline and cooperation as many were asked to leave their homes. By the end of the weekend, the hurricane had been downgraded to a tropical storm, but still left billions of dollars in damage and destruction.
Despite the damage, most believe that the worst was averted, with the storm losing its punch as it moved inland up the coast. Still, expect some critics to claim that the media overhyped the dangers of Irene, officials overreacted, and politicians like New York City Mayor Michael Bloomberg and New Jersey Governor Chris Christie used the potential crisis to restore their respective images following the criticism they got during a major snow blizzard last December.
Bloomberg and Christie seemingly anticipated the possible criticism by arguing that safety and prevention were their primary concern, not politics. Having experienced the extensive security measures first hand, I believe that the politicians, irrespective of party affiliation, got it right.
Make no mistake about it: Hurricane Irene packed a wallop, but crisis prevention had a lot to do with avoiding a greater catastrophe and a greater loss of life. There are some who are quick to criticize the role of government, but this was government service at its best. Republican presidential candidate Ron Paul actually called for the abolition of FEMA, the organization responsible for emergency management of homeland disasters, the very day the storm was heading to shores of North Carolina.
Talk about poor timing! FEMA may have failed during Hurricane Katrina, but the lessons learned since then have brought greater effectiveness, as we saw this weekend.
As for the political class, New Jersey’s Chris Christie, a Republican, and Andrew Cuomo of New York, a Democrat, both found a proper balance between calling on people’s sense of individual responsibility and putting the resources of government at play. President Obama and Homeland Security Secretary Janet Napolitano showed similar wisdom. Sure, Irene was not as bad as predicted but the politicians came through when it mattered.
After the unfortunate debt ceiling debate of this summer, during which the American electorate found its political leadership as wanting, it is important to acknowledge that this event brought out the best in U.S. leaders—cooperation and a sense of priorities. The political leaders understood it is better to overdo prevention than play catch-up when catastrophe hits.
August 29, 2011
August 23, 2011
Dealing with Debt and Deficits, Canadian Style
Posted at Americas Quarterly on August 23, 2011
In the wake of the debt ceiling debate in the U.S. and Euro zone summits about the precarious financial situation of some of its members, articles and editorials in The Wall Street Journal and the Washington Post have referred to Canada as a potential model to emulate in order to eliminate deficits and reduce the debt. They refer to how deficits in Canada in the early 1990s were eliminated mostly through spending cuts, and how tax cuts were the source of the growth that put Canada’s fiscal house back in order.
There is some truth to this narrative but it is highly incomplete and one needs to state that the overriding factor in Canada's success had more to do with a political class of different stripes working together, although not without debate or conflict. In practical terms, a federal Liberal government in Ottawa, which was not allergic to an activist governmental agenda, decided to lead the way to a balanced budget. The message was clear: problem solving must take precedence over winning ideological and partisan battles. Even social democratic parties like the NDP in Manitoba and Parti Quebecois in Quebec were willing to put their ideology aside and exact serious spending cuts.
In the early 1990s, the situation in Canada was dire. Deficits were 5 percent and 6 percent of GDP—substantially above the 3 percent imperative. Debt was 70 percent. of GDP and growing. Almost one out of three dollars spent then by the government went to pay the debt. The Wall Street Journal was not touting a Canadian miracle then, rather a debt-ridden country that was on its way to a third-world status. It also went on to dub the Canadian currency the “northern peso.” Moody’s acted and downgraded Canada’s credit rating from AAA.
Each province, irrespective of political party ideology, addressed the issue head on. The Canadian federal government reduced transfer payments to the provinces forcing them to make deep cuts to their operations. The feds applied similar austere measures to their programs. Tax reform resulted in a streamlined value added tax that brought in important new revenues. By the end of the decade, budgets were in balanced territory, debt was being pared down and yes, personal, as well as corporate taxes were then being reduced.
My home province of Quebec followed the national pattern to some extent, and in the first decade of the new century, it was balancing its annual budget and had set up an intergenerational fund to reduce the debt. The 2008 recession soon brought back deficits but all governments in Canada expect to be in equilibrium by 2015 through a mix of spending cuts, infrastructure investment spending, innovation, research and development programs, trade agreements and new revenues.
Each country has its own dynamic, often conditioned by its political institutions and culture. There is no one-size-fits-all solution to eliminating deficits, reducing debt and spurring economic growth. So we must be careful when the success of one country leads some to generalize about how to solve a similar problem in another.
The American economy is the largest economy in the world and how it deals with its slow growth economy, high unemployment, huge deficit, and climbing debt will impact the world economy. Will policies that could lead to a double-dip recession prevail? Will confrontation eliminate any possibility of compromise or finding solutions?
The Canadian way, while laudable, may not be the magic formula. A pragmatic, balanced and non-ideological approach requiring spending cuts, new revenue and adopting job stimulus measures aimed at solving the problems, is.
In the wake of the debt ceiling debate in the U.S. and Euro zone summits about the precarious financial situation of some of its members, articles and editorials in The Wall Street Journal and the Washington Post have referred to Canada as a potential model to emulate in order to eliminate deficits and reduce the debt. They refer to how deficits in Canada in the early 1990s were eliminated mostly through spending cuts, and how tax cuts were the source of the growth that put Canada’s fiscal house back in order.
There is some truth to this narrative but it is highly incomplete and one needs to state that the overriding factor in Canada's success had more to do with a political class of different stripes working together, although not without debate or conflict. In practical terms, a federal Liberal government in Ottawa, which was not allergic to an activist governmental agenda, decided to lead the way to a balanced budget. The message was clear: problem solving must take precedence over winning ideological and partisan battles. Even social democratic parties like the NDP in Manitoba and Parti Quebecois in Quebec were willing to put their ideology aside and exact serious spending cuts.
In the early 1990s, the situation in Canada was dire. Deficits were 5 percent and 6 percent of GDP—substantially above the 3 percent imperative. Debt was 70 percent. of GDP and growing. Almost one out of three dollars spent then by the government went to pay the debt. The Wall Street Journal was not touting a Canadian miracle then, rather a debt-ridden country that was on its way to a third-world status. It also went on to dub the Canadian currency the “northern peso.” Moody’s acted and downgraded Canada’s credit rating from AAA.
Each province, irrespective of political party ideology, addressed the issue head on. The Canadian federal government reduced transfer payments to the provinces forcing them to make deep cuts to their operations. The feds applied similar austere measures to their programs. Tax reform resulted in a streamlined value added tax that brought in important new revenues. By the end of the decade, budgets were in balanced territory, debt was being pared down and yes, personal, as well as corporate taxes were then being reduced.
My home province of Quebec followed the national pattern to some extent, and in the first decade of the new century, it was balancing its annual budget and had set up an intergenerational fund to reduce the debt. The 2008 recession soon brought back deficits but all governments in Canada expect to be in equilibrium by 2015 through a mix of spending cuts, infrastructure investment spending, innovation, research and development programs, trade agreements and new revenues.
Each country has its own dynamic, often conditioned by its political institutions and culture. There is no one-size-fits-all solution to eliminating deficits, reducing debt and spurring economic growth. So we must be careful when the success of one country leads some to generalize about how to solve a similar problem in another.
The American economy is the largest economy in the world and how it deals with its slow growth economy, high unemployment, huge deficit, and climbing debt will impact the world economy. Will policies that could lead to a double-dip recession prevail? Will confrontation eliminate any possibility of compromise or finding solutions?
The Canadian way, while laudable, may not be the magic formula. A pragmatic, balanced and non-ideological approach requiring spending cuts, new revenue and adopting job stimulus measures aimed at solving the problems, is.
August 18, 2011
The Uniqueness of the Québec-New York Relationship
The attraction began over 70 years ago when the Québec government of the day set up an office in Rockefeller Plaza. It is quite unique that a predominantly French-speaking society would choose to locate its first stand-alone international presence in New York. So why is New York so special for Québec?
It is obvious that the relationship primarily focused on trade and tourism at first. Québec’s manufacturers and exporters in the late 1930s and early 1940s saw the U.S. as a crucially important export market. In addition, our values, customs, consumption habits and peoples had much in common. Cross-border trade and exchanges only reinforced what brought us together. Over the past 70 years, the partnership between Québec and New York State has broadened to become ever more important to one another, with security issues being an increasingly vital area for cooperation since 9/11.
Today, Québec businesses such as Bombardier, Cascades (pulp and paper), Novabus (transport), CGI (IT), and Peerless Clothing are well established in NY State and employ thousands of New Yorkers. Canam, Québec’s largest steel manufacturer, has contributed to major projects well-known in the New York City area, including Yankee Stadium, Citi Field and Red Bull Park.
The U.S. is Québec’s top export market in the world and within the U.S., New York State is number one by far. In fact, Québec exports more to NYS than to China, France and Germany combined (they are number two, three and four among its international markets).
Conversely, Québec is New York’s 13th largest trading partner and thousands of jobs depend on our trade relationship. New York sells more products to Québec then it does to all of France, Australia or India.
Moreover, Québec and NYS have long been energy partners. Québec has been a steady contributor to New York’s energy security with the available capacity to help meet future needs in the years ahead.
Québec represents great potential for NYS when it looks beyond its borders. Our economies are highly integrated and Québec’s energy and innovation /research and development economies coupled with world class universities provide important business and commercial opportunities.
Québec Premier Jean Charest’s recent announcement of Plan Nord, Québec’s 25-year, $80 billion initiative for the sustainable development of the North, at the Foreign Policy Association in New York City attracted over 300 attendees from the financial and investment communities, illustrating the widespread interest for future development in mining, energy and infrastructure, and for the equally important commitment to conserve Northern Québec’s environment and biodiversity.
At a recent conference on New York’s energy needs, the discussion centered on the implications surrounding the possible closing of the nuclear energy complex at Indian Point. While NYS encourages the development of a local renewable energy industry, Québec also offers ready access to reliable, renewable and cost-competitive hydro power. This source of energy from Québec also has the flexibility to complement NY’s intermittent sources of renewable energy such as wind power. We can be, quite simply, part of the solution to meet the State’s energy, economic and environmental goals.
In the past, political and economic leaders from both jurisdictions have met in economic summits aimed at reinforcing this economic and commercial partnership. There are countless interactions daily between NY and Québec in trade, tourism, energy and, more recently, projects such as high speed rail. Enhanced cooperation will lead to more mutually beneficial economic activity.
We share a common border, and are important players on the national map in our respective countries. Over the years Québec and New York State have benefited from shared prosperity. The quality of our relationship has sparked our collective imagination, prompting us to do better and find new ways to improve the lives of our fellow citizens.
Seventy one years after we opened our Rockefeller Plaza office, the attraction between Québec and New York is still there and the will to build on this uniqueness remains as strong as ever.
August 9, 2011
A Conversation on Energy in New York State
On August 3, 2011 at Baruch College in New York City, I attended a conference organized by City Hall News, the NY Building Congress and the NY league of Conservation Voters on a timely topic: « Meeting Demand : The Policy and Politics Behind New York’s Energy Outlook ». This conference focused on energy from the perspective of New York State’s future needs. Representatives from the political world, government officials from the state and NYC, the energy community, consumer groups, and regulators were among the invitees.
The conversation was revealing as it dealt with the importance of energy to the State economy as a whole, the need for investment, and the potential to create jobs. The issue of the potential closing of Indian Point and its impact were also raised.
What struck me was the depth of the discussion and its holistic approach. Panellists spoke of the diversity of energy sources, the need for business models to develop new energy sources and attract investment, the importance of renewable energy, and the need to look for solutions beyond New York State’s borders.
All agreed that no one source of energy can meet the needs of New Yorkers and reduce the City and State’s carbon footprint. While the impacts of the possible closing of Indian Point were of course a topic of discussion, all agreed on the advantages of clean energy sources such as hydro, nuclear, wind and solar, and the importance that the City and State’s choices factor in considerations of safety and reliability as well. The need for cost efficiency, reliability and conservation were also highlighted.
The latest NYS legislative changes (the Power New York Act of 2011) which streamline the approval process for energy projects in New York State were widely praised as a step in the right direction. They create an environment for developing local industries and investing in communities that will help create jobs.
It was also noted that there is a source of energy available north of the border, one that is reliable, safe, and competitive cost wise – Quebec’s hydro power. Certainly, NYS and Quebec are already energy partners - we buy and sell electricity from each other on a regular basis- and we have the potential to expand that relationship now and in the future. Quebec applauds NYS for setting goals for the development of a greater renewable energy profile. But should Indian Point gradually close, there will also be a need to look across the border to compensate for the ensuing (and significant) reduction in capacity.
This is why discussions between Hydro-Quebec and NYS utilities have been ongoing and have included the need for better infrastructure to transport electricity from Canada to Downstate New York. This new transmission capacity would also benefit wind and solar projects in Upstate New York.
The conference concluded on an upbeat note: New York State’s energy needs are well identified, and there exists a range of solutions including Québec hydro, that are available for the future. Above all, these challenges are not insurmountable and affordable energy can become an economic engine for the future prosperity of NYS. We in Quebec share this belief. Without a doubt, we can be the providers of solutions for New York State on energy issues.
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