Time for Cuts! - Department of Canadian Heritage

To restore fiscal sanity to the Government of Canada big cuts are required. Whole Agencies need to have their government funding removed, and if they have the potential to be a going concern, they should be privatized. Up first on my list of cuts are many agencies tied to the Department of Canadian Heritage.

Background for the Department of Canadian Heritage

Mission: "Canadian Heritage is responsible for national policies and programs that promote Canadian content, foster cultural participation, active citizenship and participation in Canada's civic life, and strengthen connections among Canadians."

Source: http://www.pch.gc.ca/index_e.cfm

Minister: James Moore

Annual Budget: (Sorry can't find it)

Likely Opposition to Cuts: STRONG/VERY STRONG

Agencies to Have Funding Removed:

• Canada Council for the Arts
• Canadian Broadcasting Corporation/Radio-Canada
• Canadian Artists and Producers Professional Relations Tribunal (are you kidding me??)
• National Film Board of Canada
• Telefilm Canada

The mission of this department is flat out ridiculous, for the following reasons:

1. "Promote Canadian content": Making us listen to Nickelback every hour on the radio doesn't make us better Canadians. It makes me want to buy satellite radio or listen to internet radio (until that gets regulated).
2. "Foster cultural participation": Funding every possible ethnic festival/parade/party across Canada, will only further divide us along racial/religious lines.
3. "Strengthen connections among Canadians": Not sure how bureaucrats sitting in Ottawa will get me to talk to other Canadians.

Not only does this department have an impossible mission, but it redistributes taxpayers money to a lunatic fringe of artists and organizations that does not represent most Canadians. What are the CBC's ratings in Canada? How often do we watch Canadian films? Has all the money funneled to these organizations improved the quality or relevance of Canadian 'artists'?

When the conservatives introduces cuts to some of these programs the vested interests who rely on government subsidies to survive were protesting loudly, and it possibly cost the Harper government a majority. This is what happens when an agency like the ones listed above are created. Even minor cuts lead to special interests groups to blow it out of proportion. Opposition parties will ally with these groups to make a mountain out of a mole hill. This incrementalist approach to cuts by the Conservatives is quite possibly nearly as painful politically as ending these programs. When these programs are totally cut, the dependents will, after a few months of venting their spleens, have to move on and get real jobs, jobs where they actually contribute value to the economy, not suck resources from it.

Of course, if these programs are fully cut, and the opposition Liberals convince the electorate that these programs are somehow useful, then get elected, they might increase funding to these groups or create even stupider agencies/programs. Then taxpayers will be worse off in the long run. I don't envy Minister James Moore who has to continue funding these ridiculous agencies.

The CBC is the only organization in this group that could continue as a going concern after its funding is cut. It would require massive cuts to different language programming, regional offices would have to be closed, and probably all their radio stations would have to be shut down (does anyone listen to them?). After difficult cuts the organization could actually function maybe as profitably/unprofitably as Global or CTV. Although it would have to compete for the leftist viewing base with Aljazeera Canada. A good way to transfer ownership of this company from the Canadian Government to individual Canadians would be to give each Canadian holding a Social Insurance Number (SIN) one share in the CBC, with the help of TMX Group (Toronto Stock Exchange) we could register online for ownership of our share and begin to trade on the TMX. If this method were indeed a successful way to privatize companies, we could use the same method for privatizing other government agencies as well.

Exports of Goods and Services

Source: Statistics Canada, CANSIM using CHASS, v498728 Canada; Current prices (Dollars); Seasonally adjusted at annual rates; Exports of goods and services.

This recession was a major shock to the Canadian economy, and we can see that quarterly exports of goods and services dropped nearly $200 Billion. The constant annual growth rate of exports from the end of 1971 to the end of 2009 increased by 8.58% (including the huge drop in exports during the recession). If we exclude the recession the constant annual growth rate of exports from the end of 1971 to the end of 2006 grew at a rate of 9.9%. We can also notice the effect of the Free Trade Agreement (FTA of 1989) after a couple years of lag time where businesses realigned to compete in a bigger market, exports took off at a faster pace. We can also notice the increased volatility of quarterly exports starting around the beginning of 2000 until today.

Imports of Goods and Services

Source: Statistics Canada, CANSIM using CHASS, v498745 Canada; Current prices (Dollars); Seasonally adjusted at annual rates; Imports of goods and services.

Canada's dollar value of imports of goods and services grew from $20.88 Billion at the end of 1971 to $470.628 Billion at the end of 2009, a constant annual growth rate of 8.78%. This growth rate of imports would have been higher if Canada was not in a recession at the end of 2009.

Unemployment Rate

Source: Statistics Canada, CANSIM using CHASS, v2064894 Canada; Unemployment rate (Rate); Both sexes; 15 years and over; Unadjusted.

The unemployment rate ranged from a high of 14.1% in March 1983 and a low of 5.3 in October 2007. It is important to note that the unemployment rate does not include discouraged workers, who do not work and who are no longer actively searching for work.

Unemployed Persons

Source: Statistics Canada, CANSIM using CHASS, v2064839 Canada; Unemployment (Persons); Both sexes; 15 years and over; Unadjusted.

Employment Rate

Source: Statistics Canada, CANSIM using CHASS, v2064896 Canada; Employment rate (Rate); Both sexes; 15 years and over; Unadjusted.

Definition: The percentage of employed persons to the working-age population.

The employment rate has been in a range from roughly 55-65% since 1976.

This number could be raised if there were increased incentives to work (less welfare) and lower barriers to entry (less unionization). An increase in the employment rate in the private sector will be necessary if we are to begin paying of our federal debt in a big way.

Employed Persons

Source: Statistics Canada, CANSIM using CHASS, v2064890 Canada; Employment (Persons); Both sexes; 15 years and over; Unadjusted.

The seasonality of employment in Canada is very evident. The impact of recessions are also visible in the decreases in employment (early 1980's, early 1990's, and 2008). The quality of the employment must be looked at specifically the percentage that is employed by the public sector which is supported by the private sector.

This increase in employed persons (taxpayers) is needed to fund the massive federal debt. The federal debt per employed person will need to be examined, preferably the federal debt per private sector worker.

Participation Rate

Source: Statistics Canada, CANSIM using CHASS, v2064895 Canada; Participation rate (Rate); Both sexes; 15 years and over; Unadjusted.

The seasonal variation in the monthly participation rate data is visible with a volatility of nearly 4%. The participation rate has varied from 60% to 69% since 1976. We can expect to see the participation rate decrease as the population ages.

Persons in Labour Force

Source: Statistics Canada, CANSIM using CHASS, v2064889 Canada; Labour force (Persons); Both sexes; 15 years and over; Unadjusted.

Despite Canada's growing labour force from 1976 until 2009 the federal debt has been increasing at a much faster rate (to be shown later). Every potential worker must eventually pay for an increased debt burden, including interest payments, and all the future unfunded liabilities, such as defined benefit plans for the public service.

We also can see that Canada has a very seasonal economy relying on seasonal workers. This is due to industries such as tourism, fishing etc.

Deutsche Mark per Canadian Dollar

Source: Statistics Canada, CANSIM using CHASS, v37454 Canada; German mark, noon spot rate average *Terminated*

The global fixed exchange rates until the early 1970's explain the lack of volatility between the Deutsche Mark and the Canadian dollar. After allowing the free-floating of currencies, the German mark rose fairly consistently relative to the Canadian dollar. This reflects the German export economy. Although not rich in natural resources Germany focused on high value-added products and until recently Germany was the largest exporter in the world based on market value. The transition to the Euro terminated the use of the German mark in 2001. This is a potentially disastrous policy move, as can be demonstrated by recent events. The Euro covers a huge area that does not have very strong labour mobility. This can be attributed for instance to language barriers. Unemployed Greek speakers cannot easily move to France for work, in the way Newfoundlanders or even Quebecers can move to Alberta. Troubled national economies in Europe, like the entire south of the continent (Ireland, Portugal, Spain, Italy and Greece) with terrible employment rates, will slowly disintegrate under the pressure brought on from the "generous welfare benefits" and the low revenues from huge unemployment and demographic decline. These nations cannot simply rely on their currency devaluing as the economic problems become obvious to the world, which would in turn boost exports (from lower costs for international buyers) and lower imports (due to higher costs for citizens). This market mechanism cannot work under the Euro. Instead we have the relatively better off national economies like Germany providing loans below market rates to Greece only to allow them to continue to run massive deficits. We'll see if the 'austerity measures' that are required as condition for the loans are implemented. This will only burden the slightly better off European economies with more liabilities, thereby bringing the entire continent closer to a much more massive economic collapse.

Canada's Economic Position Relative to Japan as Illustrated by the Monthly Average Noon Spot Rate

Source: Statistics Canada, CANSIM using CHASS, v37456 Canada; Japanese yen, noon spot rate, average

This graph truly illustrates three distinct phases. The first phase, shows when the yen and all other currencies (including the Canadian dollar) were pegged to the US dollar until the 1970s. As expected we see not much fluctuation in the spot rate between yen and Canadian dollar. The second phase demonstrates the "Japanese Economic Miracle" until the early 1990's. The relative strength of the yen took off from the Canadian dollar as foreign nations were selling their currencies to buy yen in order to import japanese products, such as cars and electronics. During this phase the high value of the yen enabled the Japanese to purchase assets globally. The third phase illustrates "the lost decade" where the Japanese economy has largely stalled (nearing two full lost decades). The economic fundamentals of the Japanese economy show many threats and weaknesses and also many opportunities and strengths. On the negative side, the demographic position of Japan is terrible. The population is aging and the social safety net that Japan made famous will need to support a huge percentage of elderly. Yet the working age population is tiny due to a persistent low birth rate. The country is also closed to immigration. The country has amassed a massive debt to GDP ratio over 200% that appears it can never pay off. Also, the region has not gotten over the atrocities the Imperial military committed against China, Korea and others. This may make Japanese products less attractive in these markets.

On the positive note, Japan is in the fastest growing region in the world economically, which will help it's exports. It is also an economy that has tremendous technological knowledge and innovation potential which can be sold abroad.