Meet the New Boss

The first thing the Democratic Party does with undivided power is ignore international law and commit the United States to the course of a unilateralist rogue nation.

I figured this would happen, which was why I held out for divided government until I finally had to accept that McCain just didn't take public policy seriously.

Well, if it passes, I hope we just high tail it out of Kandahar in less than a month. If America's going to treat its allies like this, it doesn't deserve any.

Update: Reason has a post on Canadian hypocrisy.

"Not Necessarily Coalition, But Coalition if Necessary"

What do you think, faithful readers? Do I have a future as an Ignatieff speechwriter?

First Snapshot of Public Opinion

And it's divided, presumably along partisan lines.

That supports my view that Harper should concentrate on substance, not on how unfair it all is. We will see tonight.

What Should the Governor General Do?

That's easier.

She should give Harper any recess he wants ("proroguation" sp?).

She should not give him a new election ("dissolution". I know how to spell that one.)

What Should Harper Do?

Clearly, the NDP/Liberals are taking a perilous step. It is justified, if at all, by a sense that the Government has not taken the economic crisis seriously. The merits of taxpayer-subsidized political parties or bans on public sector strikes aside, no one thinks these are sensible responses to what ought to be the government's biggest priority. Harper should not have reappointed Flaherty as Finance Minister, but should have chosen someone broadly respected, like Prentice.

Harper's only chance now is to make his case about the appropriate response to the crisis. He needs to wonk out. If he swings public opinion in his direction, a few opposition MPs may get cold feet at the last minute, and he may survive. But even if the government goes down, it would be better to go down over something substantive than over process criticisms about legitimacy.

The heart of the analysis is traditional Keynesianism. We face a massive shock to aggregate demand. Normally, the Bank of Canada could address this shock just by reducing interest rates. That's better than dealing with it through fiscal measures because it doesn't leave a legacy of debt for future generations.

However, right now, governments can borrow unusually cheaply and monetary policy cannot do any more good. So we need to use fiscal policy. If the money is used for investments that pay off at better than the rate at which the government can borrow, then future generations will be better off as well.

The trouble is that emergency injections of public money tend to be spent badly. Here is where the Tories have an advantage. The public will be skeptical that a coalition between Dion's Liberals and the NDP will spend money well.

The agenda set out by the Coalition hardly sets those fears to rest. Do we want the CAW dictating how "strategic investments" in the automotive, manufacturing and forestry sectors are going to be spent? The Coalition program states aid will be "contingent on a plan to transform these industries and return them to profitability and sustainability." That is the most remarkable expression of hope in government planning I have seen in a long time. The League for Social Reconstruction lives.

The Coalition program is fundamentally incoherent, since it blames the federal government's deficit position on "the policy choices of the Conservative government", but also embraces "stimulus" -- which necessarily means increased deficit financing. I agree that bigger deficits are necessary, but it doesn't make sense to simultaneously criticize the Tories for too small and too large a deficit.

Increasing the supply of housing is got to be the craziest proposal for dealing with a popped housing bubble I have ever seen. The Coalition also makes as one of its dozen point a purely ideological insistence on ramming the Canadian Wheat Board and Supply Management down the throats of unwilling farmers.

Note the Preamble reference to "Canadians and Quebeckers". Presumably the plan is to develop a clean energy source from PET rolling in his grave.

Infrastructure investments are a good idea in principle, but there are practical limits to how quickly they can be "accelerated." Government tendering rules, made more complex by the Accountability Act, mean that new infrastructure takes a long time.

*The first priority should be ensuring that the provinces have enough money to maintain their spending programs. Provinces spend better than the federal government does. The last thing we want is pro-cyclic spending cuts by cash-strapped provincial governments. The Tories should propose a short-term boost in transfers to make sure this doesn't happen. If the feds have to borrow the money, that's fine, since they can borrow cheaply.

*The Tories should also propose more generous matching-fund programs for municipal and provincial infrastructure spending. That injects money without going through the sclerotic federal process. The Coalition appears to want federal control over municipal infrastructure.

*We should get money into the hands of the citizens. Make all federal tax credits refundable, and temporarily increase them.

We don't know how long the global downturn will last or how hard Canada will be hit. It makes sense to think through longer-run federal infrastructure programs, like a high-speed rail link between Toronto and Montreal. God forbid, we may have to partially nationalize the financial institutions -- the Tories have set up the legislative authority to do this.

Panicking now may reduce our scope for maneuver later.

Canadian Originalism

Via Larry Solum, I see Adam Dodek has written aneo-originalist defence of Bertha Wilson.

He's perfectly within his rights to do so. Originalism has always been a centralizing-liberal slogan in Canada. Frank Scott is our original originalist, as it were.

"The purpose of constitutionalism, which is to subject politics to higher norms of reason, is enhanced in its comparative form."

Professor Murkens defends comparative constitutionalism in an explicitly Platonic vein.

There are two contestable premises here:

1. Politics ought to be subject to norms of reason.

2. The international community of judges is a better source of reason than democratic politics.

My Last Post on the US Presidential Election

There is much to like about John McCain. I have long thought his foreign policy instincts and advisors are dangerous, and that electing him would amount to endorsing a utopian-interventionist view of the world. At the same time, though his domestic policy positions are basically non-existent, I thought he would be useful curbing a Democratic Congress. My first-favourite result would be Obama as President and a Republican Congress, but since that was impossible, I thought that a McCain Presidency might be the lesser of two evils, at least on days when I convinced myself that budgetary considerations would keep McCain from giving way to his most interventionist impulses.

I understand that everyone on the left thinks McCain is running the most egregiously negative campaign in history. Phooey. While I don't really think the Ayers and Wright associations are that big a deal (they were useful to Obama at the time, but I trust his opportunism). On the other hand, they are perfectly reasonable subjects to give him trouble on. Neither McCain nor Obama are decent candidates for bodhisattva or saint, but by the standards of democratic politics, they are moderately honourable.

But this latest mortgage plan just shows that McCain disdains public policy too much. He proposes to buy mortgages -- not at the price their owners are willing to part with them as in the Paulson panacea, but AT BOOK VALUE! That is downright insane. The only possible excuse is that McCain just made up this policy on the fly during the debate, and has no idea what he is talking about. And that is not much of an excuse.

Obama is academically inclined, risk averse and fundamentally conventional. McCain is not quite so bright and a risk addict. I think the world would be better off with Obama.

Is Socialism the Solution?

The following is my attempt to summarize what I understand from reading economists' commentary on the financial crisis and possible remedies for it. See Delong. And Mankiw has links to most of the public comments by major economists.

Across the spectrum of responsible economists, it seems that there is concern about the solvency of banks (revealed in the increase in the TED spread) and the functioing of credit markets.

And it seems that the way to deal with it is to use the US Government's great ease of borrowing money to improve the equity of the financial institutions. The problem with the Paulson plan is that it seems to do that the wrong way: it creates a fake, subsidised market for mortgage-backed securities which thereby inflates the value of those assets above what they are really worth.

The Swedish response to their financial crisis. First, make sure the balance sheets are telling the full story. Get the bad news. Don't cover it up. Second, inject public money to make the better institutions solvent by buying equity. Merge, close down, do what you must to shrink leverage while keeping confidence in the system. Finally, sell the publicly owned equity at a profit.

The risk is that the American political system won't work as well as the Swedish one, and public ownership will just mean that decisions get politicized. But that's an even bigger problem with Paulson-Dodd: the value of the assets the government is buying up ultimately depends on the willingness to foreclose on somebody. What government is going to do that?

What Does the Financial Crisis Mean for Inflation Targeting?

The big recent argument in monetary policy is between those who think
central banks should just target core inflation -- incluidng Greenspan,
Bernanke and very much the Bank of Canada -- and those who think it
should also worry about asset bubbles -- in other words, take away the
punch bowl just when the party is getting started.

One appeal of inflation targeting is that it seems to address the
problem of legitimacy central banks face. They make decisions with
enormous impacts on the economy, but they are purposively insulated from
democratic accountability. If they can say that they have little
discretion, and simply follow a simple rule of keeping inflation steady,
then they can more easily justify themselves than if they admit that
they have massive discretion. And a mandate to deal with asset bubbles
necessarily involves discretion, since no one can precisely say when
they occur and because the central bank would have to do more than one
thing at a time, necessitating tradeoffs.

The difficulty with the simple rule, though, is that core inflation is
not as big a problem as asset bubbles. So solving a minor problem at the
risk of exacerbating a bigger problem looks like a bad idea.

But what we will be left with is a super-empoweered central bank without
a clear rule to guide it. In other words, what we will be left with is
less democracy and more technocracy.

The Leaders' Debate

Recycling what I posted on Andy's site:

I just heard part of the leaders' debate on the radio driving my daughter back and forth from choir practice (and over her loud complaints about choice of radio station). My impression was that Harper and Layton did best. Next time, the Liberal Party should consider that reasonable facility in English is an important asset in a national leader especially since they seem destined to be shut out of Quebec.

On the substance, I thought Harper dealt pretty well with corporate taxes/income trusts and Afghanistan. However, I thought Layton had a good point that it is outrageous that he is going to the voters without any program at all. I worry about rewarding that kind of behaviour.

One commitment he made struck me as just as foolish as never taxing income trusts. He seemed to say that the federal government would run a surplus no matter what happens with the financial crisis. Herbert Hoover lives. Fortunately, Harper's past record means we can rely on the fact he will break this commitment in a minute when it becomes necessary.

Deep Thought

I never thought Helicopter Ben would need such a big helicopter.

The economics profession is totally in the tank to the financial industry. You should know that, American taxpayer.

Update: In fairness to the profession, here is a letter from economists opposing the bailout.

On this ROC we have built... (Bibilical themes in contemporary English Canadian nationalism)

I'm not sure that the rhetoric of national covenant (based on the original precedent at Sinai) played a huge role in the development of English Canadian identity. Sure, Protestants everywhere talk like that when they are being irritable, and we all know how irritable the original Canadian Protestants could be. But the over-arching original conception was of Britishness expressing itself in a non-British space. It probably owed more to Rome than to Jerusalem.

If we then look at the post-WWII need to reconceive Canadianism (provoked by the termination of the British Empire, the extreme power of the US, and the threat of Quebec nationalism), the key biblical rhetoric comes from the Babylonian captivity, not the establishment of the covenant. Grant laments for an ideal that he insists was impossible from the outset.

Our lamentation, unlike Jeremiah's, is not caused by disaster and ruin, but by uncertainty and loss of purpose. It is more comfortable, and therefore harder to take seriously. But with an ironic inflection, we arrive at a deutero-Isiahian synthesis. Our god, like Israel's in the captivity, can no longer be located in his home. But, as with Israel in the captivity, this homelessness makes our god all the more powerful. Our uncertainty becomes our weapon against the Americans and against the Quebec nationalists: they can never truly be liberals because they have identified themselves with too concrete a substantial liberalism. We can be faithful to liberal modernity because our loyalties are negative (not-American not-Quebec).

Of course, our anxiety does not solve the fact that someone (albeit someone invisible) must continue to negotiate an accommodation with all the substantial nationalisms -- American, Quebecois, aboriginal and new Canadian. Just as a corporation is a placeholder for all the contracts it negotiates with others, so too the ROC ("Rest of Canada").

Upon this ROC, though, someone built something. We will have to explore what at a future time.

Whither Socialism?

In his first term, George Woodrow Bush made the world safe for democracy. As a lame duck (and to bipartisan support, again), Clement W. Attlee has nationalized the commanding heights of the economy.

Big financial firms going bankrupt isn't scary. Somebody can pick up those assets and do better with them -- and greed must be leavened occasionally with fear.

Big financial firms not being allowed go bankrupt -- that should induce fear.

While McCain is still more sensible on economics than Obama, his response of supporting the ban on short selling is troubling.

There's a lot of ruin in a nation, and no nation has more ruin in it than the United States. The financial crisis itself will be no big deal. But the response is disturbing.

Derivatives Exempted from Bankruptcy Laws

Well, that was a bad idea.

Who Should Win the Election?

I am a bit on the fence. (My actual voting behaviour is already determined, since I think my local MP, who is a Liberal, is a mensch and ought to be re-elected.)

Harper is right on Afghanistan. He probably ultimately has good impulses on economics, although I have seen scant evidence of it in the last 3 years. Arguably, the Liberals would grow government more. Certainly, there is a risk of a unionized, one-size-fits-all universal daycare program, which is immeasurably worse than Harper's baby bonus. Harper should also get credit for selling a symetrically decentralized federation to the soft nationalists in Quebec.

On the other hand, Dion's plans are actually broadly economically sound. He wants to shift taxation to negative externalities which is good both for Pigovian reasons and because the long-run elasticity of demand means it will shrink the tax take. Harper's GST cut was unwise.

Finally, the election call itself is such a cynical breach-of-promise that I can't help but hope it backfires.

But while I hope that the Liberals win a plurality, I don't expect it. My prediction is the Conservatives back with an increased plurality, based primarily on gains in Quebec, but no majority. The Liberals will collapse in Quebec, and lose some ground to the NDP in their urban Anglo strongholds.

Was Justice Cromwell Appointed to the SCC or Not?

The process for replacing Justice Michel Bastarache for what is widely regarded as the Court’s “Atlantic” spot, has been contentious. Initially, a Supreme Court Selection Panel made up of two MPs from the government and one from each of the opposition parties was to come up with a shortlist. However, the Opposition objected to the government’s nominees being cabinet ministers and, according to the government, refused to “consider substantive business”. The Prime Minister unilaterally nominated Justice Thomas Cromwell of the Nova Scotia Court of Appeal, subject to questioning before another ad hoc committee after the federal election.

Harper’s actions are a bit constitutionally presumptuous – if the appointment is conditional on Justice Cromwell’s appearance before the ad hoc committee, then it has not been made. But if it has not been made, then Harper can only “announce” that Justice Cromwell will be the one on the assumption he will be Prime Minister after October 14 – an assumption one would think a politician facing the electorate should be cautious about.

As I write, a few days into the 2008 election campaign, it remains to be seen whether any of this will be an election issue. Newfoundland and Labrador’s Justice Minister has angrily announced that Harper treated his province with “disrespect” by not considering a judge from his province – suggesting a punitive motive arising out of Harper’s conflict with Premier Danny Williams. Ideological, as opposed to regionalist, attacks seem less likely, since Justice Cromwell is widely-respected within the liberal legal elite, and was appointed a Court of Appeal judge by Jean Chrétien.

What Should the Governor General Do?

It is now universally acknowledged that Prime Minister Harper will soon ask the Governor General for a dissolution of Parliament. Patrick Monahan argued in the Globe on Saturday that when he does, she has no choice but to give it to him. I think this is wrong. She should accept his resignation, but she should not dissolve Parliament until M. Dion has been offered a chance to form a Ministry and meet Parliament and has either (a) refused the Governor General's invitation or (b) accepted, and then lost the confidence of the House or been denied supply.


The dissolution of Parliament is a Crown prerogative, vested in the Governor General by Letters Patent of George VI in 1947 ((reproduced in R.S.C. 1985, App. II, No. 31). Legally, she can dissolve Parliament or not at her wish. This power was retained by Bill C-16, which created fixed election dates, and indeed it was confirmed that the dissolution of Parliament was 'at the Governor General's discretion."


Of course, responsible government implies the convention that -- in general -- she will only exercise her powers at the "advice" of the Prime Minister. The extensive legal powers of an appointed Governor General are only acceptable in a democracy because she almost never uses them.


However, as the King-Byng and Whitlam-Kerr crises show, and as the Supreme Court of Canada recognized in the Patriation Reference, the general rule that the Governor General must do what the Prime Minister says (whether or not she agrees) is subject to limits. Democratic legitimacy and responsible government are the basis for the rule, but they are also the basis for exceptions. It is only because the Prime Minister presumably enjoys the confidence of the House that the Governor General should listen to her, rather than to someone else.


If Mr. Harper tells Mme. Jean that Parliament is "unworkable", then that amounts to saying that he can't work it. He does not think he enjoys its confidence, at least if he wants to do what he feels he must. She has no business in going behind this statement. If the electorate think he is really motivated by a desire for a tactically-favourable election date, it is up to them to punish him.


However, by saying that he can't work with this Parliament, Harper also ceases to have the legitimacy of responsible government behind his "advice." If there is even a remote possibility that someone else can form a Ministry, then that person should be invited to do so. There are innumerable examples from before the modern party system calcified of Parliaments long outliving Ministries.


Before the fixed date amendments to the Elections Act, it could be argued that whether the failure of a Ministry implied the failure of Parliament was a matter of political judgment. Therefore, it was said, the Governor General should only disregard the Prime Minister's advice when it was clearly abusive (for instance, if it occurred very soon after the election). However, it seems to me that the fixed election date changes that. Parliaments are presumed not to fail until their time expires -- it is only if the Governor General has exhausted potential ministries that she should go to the people.


The Liberals have never had a chance to try to make this Parliament work. They could decide that it isn't in their interest to do so -- and if they did it would be harder for them to slam Harper politically for going sooner than Bill C-16 suggests is normal. Or they could bring forward a budget and legislation based on their green tax proposals and dare the (now) opposition to bring them down. But they should get the chance.

Obama's Speech

Obama's speech was competently written and delivered. No more, no less. It was also doctrinaire Democratic Party liberalism. There was nothing McGovern or Mondale could have disagreed with. It will be interesting to see if America has changed enough that an overtly social-democratic platform can win a national election.

Governor Palin seems like a good choice in theory. Whether she will be up to the rigours of national politics is not something I claim even Internet-rules expertise on. Who knows?

Offer NATO membership to Georgia - (South Ossetia + Abkhazia)

And back it up with nukes.