Neil Macdonald on Trudeau's Betrayal of the Canadian People

Political cowardice is something we're getting used to from our federal Liberal government.  Justin Trudeau may have a lovely smile but very, very weak knees. When it comes to taking bold steps demanded of true vision, he's usually a no-show. Can you say "electoral reform"? I know Justin cannot.

Then there's the problem of Canada's decaying, sometimes derelict infrastructure. That's everything from the electrical grid to sewer and water lines, roads and highways, air and sea ports, railway lines. Those are essential services. Without them our society would probably collapse within a week after the grocery store shelves fell empty.

We're now at that point where successive governments, federal and provincial, have kicked the problem down the road so long and so far that we've run out of road.  Governments have to dig deep to come up with the money to fix what can no longer be ignored but this is the age of "Everyday Low Taxes." Absent real leadership, tax increases can destroy political futures.

I recall Richard Nixon telling David Frost that the true test of political leadership was the ability of a leader to persuade the public to support a measure that was either painful or unpleasant. If you can't get them to swallow the bitter medicine, you're shite as a leader.  Which brings us back to Trudeau, the Liberal government and our major infrastructure problem. That problem, in four words, is "somebody has to pay."

The Trudeau government, in an act that marries cowardice with betrayal, has decided to let the public sector take over the government's own responsibilities. They call it PPP or Public-Private Participation. The private contractor builds, and essentially owns, the highway recovering its costs and a hefty profit directly from the public.

One of the grand lies that's endlessly told by the politicians perpetrating this cowardly dodge is that the private sector carries all the risk. That's why they get to lard their pockets with that extra profit. It's a nice story but history, especially recent history, reminds us that it's bullshit.

By recent history I mean last month's failure of British construction giant, Carillion. The Tories had done all sorts of PPP deals with Carillion - roads, hospitals, schools, prisons, you name it. It was all great until it wasn't. When Carillion went down, all that risk bounced straight back into the laps of the public - and the public purse. After all, someone has to pick up where the outsourcing contractor left off.

But Carillion, huge as it was, still was just a fluke, right? These things happen. They sure do, a lot. Since Carillion went down two more outsourcing contractors, Interserve and Capita,  hit the skids.



The recent collapse of Carillion, which had contracts with the government to provide services such as NHS cleaning, school dinners and prison maintenance, has intensified the spotlight on the sector.

Days after Carillion plunged into liquidation, the government was forced to deny that rival outsourcer Interserve was on the same path to oblivion, after it had been reported that it was on a watchlist of troubled companies.

Serco, one of the largest outsourcing players, has been struggling to regain its financial stability since a 2013 scandal when it overcharged the Home Office for electronic tagging of criminals.

Now Capita has become the latest in the sector to suffer a major setback as its new chief executive, Jon Lewis, “kitchen-sinked” an array of bad news by releasing it all at the same time. Shares in the firm tumbled 47.5% to a 15-year low after Lewis slashed profit forecasts, announced plans to tap the market for £700m of investment and suspended a dividend that was worth more than £200m to shareholders last year.

Some industry observers saw the writing on the wall for the outsourcing sector long ago. Tim Wainwright, an expert on outsourcing at global accountancy firm EY, said outsourcers have been squeezed by the need to provide services ever more cheaply, even as their costs have risen.

So now prime minister What, Me Worry? and his finance minister Bill Churn Baby, Churn Morneau want to drag Canada - and the Canadian public - down the same road traveled by Carillion, Interserve, Serco and Capita. There you go, problem solved.

The CBC's Neil Macdonald has apparently had enough of this PPP bullshit.

Bill Morneau, our federal finance minister, tells us the government's dodgy-sounding scheme to let private investors build and manage public infrastructure is a "win-win-win," as though such a thing exists.
...

Anyway, he must feel a bit of a fool. He's from Bay Street, and must know that in business, somebody usually gets the better end of a deal, and generally, the great white sharks of the business world — the huge institutional investors he's hoping will relieve the government of a traditional responsibility — eat very well indeed.

Trudeau is even promising the private sector zero or little risk.

According to information in documents obtained by the Canadian Press, the government is promising a healthy, guaranteed "revenue stream" for years. The exact return is not specified, but such investors tend to demand between 10 and 20 per cent – "equity-like return and bond-like risk," as the Wall Street aphorism so neatly puts it.

Best of all for the investors, according to the documents, the government is suggesting it might even chip in some extra cash to pad investors' returns. It's a path to heaven with no alternate route to hell.

And guess who will pay for all this? The cheery fog exhaled by Morneau and his fellow cabinet ministers isn't very specific about that, but there is ultimately only one bill-payer, and we all know who he, or she, is.

Shooting blindfolded. Not a real confidence builder.

Government documents suggest that the goal is to raise about $240 billion from investors over the next 12 years, for a total of $300 billion in spending.

But how the government arrived at that figure is a mystery. There has been no methodical assessment of what we need. Other countries have done that sort of homework. We haven't.

The government's own Economic Advisory Council complained about this lack of data, and finally just resorted to citing estimates between $150 billion and $1 trillion. That's quite a margin. Another authoritative study, the McKinsey Report, has said there's no need at all for additional infrastructure spending in Canada.

"Meaning we don't have a clue," says an assessment by Azfar Ali Khan and Randall Bartlett, economists at the University of Ottawa's Institute for Fiscal Studies and Democracy. "We don't even know what and where the investment needs are."

In any case, there are precisely no projects under way. At least none that we know of. So far, apparently, it's been a confidential, informal courtship of big-money investors — a dance with tightfisted, powerful people, all looking for the sweetest deal possible.

So, kids, prepare yourselves and your own kids and their kids for a potential multi-generational ass raping. Sort of like British Columbia's Fast Cat ferry fiasco only times a gazillion. 

Put It On the Kids' Tab - A Cautionary Tale

We got used to it after WWII, governments borrowing money to be repaid by taxpayers in the future.  In an era of foreseeable, sustained growth that wasn't so bad.   The next generation of taxpayers would be much better off and quite capable of handling the government debt they inherited.

The problem today is that our political classes are still playing the long-term debt game even though it's becoming abundantly clear that the next generation of taxpayers not only will be less well off but will also be saddled with the social burden of a rapidly aging society.   With a deal like this - not of their making, not of their choosing - what choice do they have but to revolt, to take to the streets?

Ulrich Beck, who teaches sociology at the London School of Economics and at Harvard, says it's high time for young people to get very, very angry.

...For the first time, Europe's young people are experiencing their own "European fate." Better educated than ever and possessing high expectations, they are confronting a decline in the labor markets triggered by the threat of national bankruptcies and the economic crisis. Today one in five Europeans under 25 is unemployed.
 
In those places where they have set up their tent cities and raised their voices, they are demanding social justice. In Spain and Portugal, as well as in Tunisia, Egypt and Israel, they are voicing their demands in a way as nonviolent as it is powerful. Europe and its youth are united in their rage over politicians who are willing to spend unimaginable sums of money to rescue banks, even as they gamble away the futures of their countries' youth.

The headlines have been interchangeable for some time: Insecurity Over the Future of the Global Economy, EU Bailout Fund in Jeopardy, Merkel Attends Crisis Meeting with Sarkozy, Rating Agency Announces Downgrade of US Debt. Does the global financial crisis signal the deterioration of the old center? Ironically, it is authoritarian China that is playing the moral apostle on the financial front, with its sharp criticism of both democratic America and the EU.

There is one thing the financial crisis has undoubtedly achieved: Everyone (experts and politicians included) has been catapulted into a world that no one understands anymore. As far as the political reactions are concerned, there are two extreme scenarios that can be juxtaposed. The first is a Hegelian scenario, in which, given the threats that global risk capitalism engenders, the "ruse of reason" is afforded an historic opportunity. This is the cosmopolitan imperative: cooperate or fail, succeed together or fail individually.

At the same time, the inability to control financial risks (along with climate change and migration movements) presents a Carl Schmitt scenario, a strategic power game, which opens the door to ethnic and nationalist policy.

Ulrich Beck's article is presented in the context of challenges facing the European Union and, granted, the youth uprisings he mentions have broken out on the streets of Greece, Italy and Spain and not yet in North America, but pledging the kids' credit is not (unfortunately) limited to Europe by any means.  The United States clearly leads the pack on that one even as its hopelessly corrupt government and institutions cater to the well being of the richest of the rich at the expense of the worsening fate of the wage-earning, tax paying middle classes.   American youth haven't taken to the streets en masse - not yet anyway.   Yet theirs is a candle very much burning fiercely from both ends.

Welcome, again, to the Century of Revolution.

Sniping at the US Tax Code

Talk about looking for trouble. American actor Wesley Snipes goes on trial this week for tax evasion. From 1999 to 2004 Snipes earned $38-million for making a half dozen movies. Out of that bundle he paid zero in taxes. Why? Because, as Snipes plans to argue this week, the US tax code doesn't actually require people to pay income tax. From the New York Times:

Mr. Snipes, who is scheduled to go on trial Monday in Ocala, Fla., has become an unlikely public face for the antitax movement, whose members maintain that Americans are not obligated to pay income taxes and that the government extracts taxes from its citizens illegally.

Tax deniers maintain that the law only appears to require payment of taxes. All their theories have been rejected by the courts, including the one invoked by Mr. Snipes, which is known as the 861 position, after a section of the federal tax code.
Adherents say a regulation applying the 861 provision does not list wages as taxable, though it does say that “compensation for services” is taxable. The courts have uniformly rejected all such theories, and eight people have been sentenced to prison after not paying taxes based on the 861 argument.

Despite the court rulings, juries have acquitted some prominent tax resisters in recent years, and failed prosecutions have encouraged others to join. Even when the government has failed to obtain convictions, it succeeded in collecting the taxes through civil enforcement.

Snipes won't be standing alone at trial. In the prisoner's dock with him will be the two guys who told Snipes he didn't have to pay:

One is Douglas Rosile, who was stripped of his accounting license in 1997. The other is Eddie Kahn, who has served prison time for tax crimes. Both are under federal court order to stop promoting tax evasion, including the 861 position.

The charges Snipes faces go a fair distance beyond garden variety failure to pay taxes:

Mr. Snipes, 45, is charged with two felonies: conspiracy to defraud the government and filing a false claim for a $7 million refund (a claim for the year 1997, before he stopped paying taxes). He is also charged with failing to file tax returns for the six years starting in 1999. Prosecutors say they intend to show that Mr. Snipes moved tens of millions of untaxed dollars offshore and gave the government three worthless checks totaling $14 million to cover some taxes.

Some experts say the bad cheques aspect pretty much blows his "mistaken but honest belief" argument right out of the water.