Electricity reform: Ontario conservatives return to the fight

Ontario Hydro—when all its public assets were working—rivaled the Tennessee Valley Authority, Quebec Hydro, and Electricity de France. After more than 100 years of electrifying Ontario, the Ontario government is still its principal shareholder. Dalton McGuinty, the teacher premier of a service economy, is the principal operator of a gigantic, sprawling, technically proud, and politically powerful electricity industry.

Under his enthusiastic leadership, Ontario’s electricity industry has become only more complicated and, again, more expensive. In the name of innovation, he has bought the spin of mature public corporations worldwide: government leaders can be rigorously commercial as well as businesslike; government can secure more for the taxpayer, the consumer, and the environment by running the whole show as the sole proprietor.

This embrace of inertia over experience has guided his policies and stimulated numerous initiatives.

Conservatives who nearly broke the status quo a decade ago have been silent for a long time. Their reluctance to breathe another word about the alternative—privatization, with public regulation—has not been rewarded.

Timidity can work for a government, but isn’t much use in opposition.

Despite the predictable risks of offering significant policy ideas in a minority legislature, the leader of the Ontario Progressive Conservatives, Tim Hudak, has reopened the issue. In a white paper called "Paths to Prosperity, Affordable Energy,” Hudak insists that government is too involved in the energy business and that in order to be able to be less involved, it should, in steps, sell its operating assets to the private sector.

Click on: www.ontariopc.com/paths-to-prosperity/affordable-energy/

When conservatives stop thinking intelligently about economics, they’re usually branded as bigots. However, when they do start thinking out loud, they’re as freely labeled as “ideologues.”

The reactions to Hudak’s paper by the Liberal government and the New Democrats were identical.

McGuinty's latest Minister of Energy Chris Bentley scoffed: 

“Who has brought these ideas that didn’t work in 2002 … when the Tories tried them then? Who brought them back? Are the same people in charge? I guess the answer might be yes.”

New Democrat leader Andrea Horwath complained:

“But rehashing or bringing back the same old ideas that haven’t gotten us anywhere already is really not very helpful.”

Click on: www.thestar.com/news/canada/politics/article/1178232--ontario-power-tim-hudak-s-plan-to-sell-off-parts-of-hydro-one-ontario-power-generation-panned?bn=1

If anything in this exchange could be called “ideological”—in the most pejorative sense of being a mental invention—it’s the characterization of what Hudak is proposing as a failed experiment.

Ontario came no closer to privatizing its electricity sector in 2002 than North Korea came this year to successfully launching a nuclear missile.

What is truly ideological is Ontario liberalism’s reluctance to question a proposition that is neither liberal nor progressive: that once in public hands, giant state energy enterprises must remain in public hands.

The status quo in Ontario clings to a fixed idea: public ownership can beat the market in generating innovation, economic growth, and revenues to government. And it calls those who wonder whether that’s true “ideologues.”

The Ontario government promises growth and austerity. Hudak has put his political capital behind an idea that would both reduce the burden of government and help revive business activity in Ontario.

It is controversial, but he should persist. It’s big idea and it makes his opponents look small.

Taxing the worst of the One Percenters

The far right’s brain eventually produced the idea that America’s biggest problem is a Kenyan-born Hawaiian racist. That message was eventually replaced by a more subtle notion: the Hawaiian is destroying job creators.  

The political divide now may be less personal and more about the idea of having ideas. However, the suggestions in circulation are not much better than the crudest slogans of the Occupy Movement and the Tea Partiers.

Conservatives now are not only political optimists—an historical perversion—they believe you can bake into the US constitution a no-tax increase amendment and still finance the greatest country, with the biggest government, with the biggest military in the world, for decades into a tumultuous future.

Social democrats, who lead in the polls in France, hold the balance of power in Ontario and are pushing Obama in the Democrat Party and are convinced the ticket to power is to raise new taxes on millionaires.

They reminisce about the tax rates of the 1950s. Social democrats and liberals—the champions of the mandatory social safety net and the students on the Freedom Buses who knew that fellow white Americans were itching to beat them up at the next stop—now see America’s problems in the vaults of the worst of the One Percent.

A 75% levy on millionaires in France and a 2% surcharge on those making incomes over half a million in Ontario will not violate Charter rights on either continent, immediately enrich real estate markets in London and New York, or kill human ingenuity.

Click on: www.theglobeandmail.com/report-on-business/commentary/barrie-mckenna/taxing-the-rich-akin-to-ethnic-cleansing-seriously/article2402977/

However, along with risking economic growth, these proposals also trivialize the message of social democracy in society as a whole. Relations below the one percent—between public and private workers, pensioners and young people, the poor and the middle classes, union workers and service workers, interns and permanent employees, for instance—are not perfect. The just society isn’t waiting just one further grand bargain with the rich.

Of course, the more affluent can pay a little more, including those affluent who benefit most from public services. That perspective is central to Obama’s proposals thus far and will be articulated in any deal he reaches with the Republicans after the November elections.

However, it’s escapist pandering to suggest that tax reform is only about the rich or that the vast lobby industry of the 20th century didn’t carve out privileges for groups across society that society as a whole not now afford.

You’d have thought the slogan “We’re the 99Percenters” was too smug to be taken seriously. Yet, it seems to be excusing equally smug policy.

Nevertheless, it is a slogan nice people could have waved in the 1930s, people with leaders selling the idea that others—in some other sinful city—were the source of their misfortune and salvation.

Ontario’s election: who do you fear most?

Ontario’s October 6th election will reinforce—or undermine—the impact of the spring Federal election on the future of Canadian politics. Canada’s largest province will confirm whether the Conservatives will hold the upper hand, whether the left will unite, or whether the Liberals will survive  as a viable centrist alternative in English-Speaking Canada.

The stakes are high though the election is boring, even by Ontario standards. 

(It may not be fair that Ontarians have so much political power and can’t talk politics with either the passion or clarity of Quebecers or British Columbians. Nevertheless, big change in Canada doesn’t happen without Ontario’s permission.)

The circumstances are different this fall, but only slightly so. The incumbent Dalton McGuinty is a Liberal. However, from day one, the polls put the Conservative leader Tim Hudak ahead, with New Democrat leader Andrea Horvath in a strong third position. The Ontario economy is every bit as vulnerable to events in the US and Europe and fear of a second recession is widespread. Ontarians voted consciously for a “strong stable” government this spring and are being urged to do so with equal urgency by Dalton McGuinty this fall.

 The economic platforms of all three parties are ridiculously optimistic, but fear is the dominant force behind both front runners. McGuinty insists he can reduce the deficit without hurting anyone. Hudak claims he alone won’t raise taxes. Horvath, the ingénue, is the only serious gambler in the race: she’s unafraid to promise generous tax relief to voters, tax increases for business, and numerous new spending and subsidy programs for health, education and social services, and Ontario job-creation.

Horvath is growing in the polls and could become the election issue. She’s not Jack Layton. Indeed, in Ontario, she could be more successful. There’s something unqualified, homespun, and constructive about her message.

She may be an economic illiterate. However, her opponents haven’t demonstrated over their careers, in their platforms, or in their rhetoric abiding respect for economics or fiscal probity. Nothing in the NDP platform is more extravagant than McGuinty’s green energy subsidies. And her biggest difference with Hudak on tax policy is that she proposes to raise new taxes to help pay for her cuts.

As her polling numbers improve, Tim Hudak will have to make a fateful decision: does he take Stephen Harper’s “strong stable” message away from Dalton McGuinty and talk about the dangers of another Liberal-NDP coalition? Does he set aside his palpable fear of appearing too conservative and make a serious conservative case against both McGuinty and Horvath?

Certainly, if the NDP gains the balance of power there is no likelihood that Ontario will regain control of its finances or be able to back further measures by the federal government to stimulate private investment and restrain public spending.

By the way, on Monday, The Globe and Mail reported that if Ontario was an independent country its accumulated public sector debt-to-GDP ratio would be over 80%, slightly higher than Spain’s and slightly less than Portugal’s.

Click on: www.theglobeandmail.com/globe-investor/investment-ideas/features/at-the-bell/three-charts-to-start-your-week/article2170968/

Friday wrap-up: Liberal Party’s stake in Ontario

Jack Layton’s state funeral honored a gentleman and, as likely, excited in New Democrats and Liberals a fresh interest in trench politics—in beating one another in order to secure a better position in the race for political power.

To defeat the Harper Conservatives in the next federal election, either the Liberal Party or the New Democratic Party must collapse or the two must merge. The second option will not come into play until after they’ve tried to destroy one another. The recovery of the center-left in Canada, therefore, will first be dominated by internal strife. Don’t expect to hear anything very new or telling about the Conservatives. Expect to hear a lot of fresh nasty things about socialist illusions and liberal hubris.

For the next six weeks, Question Period in Ottawa, Bob Rae’s wit, and Thomas Mulcair’s temperament will count for nothing. Rather, the Ontario provincial election on October 6th could be fatal to the national Liberal Party.

If Dalton McGuinty’s Liberal Government survives, Liberals in Ottawa will be able to put their humiliating national defeat in May behind them. They were done in, they will insist, by a perfect storm, a freakish occurrence. “We can come back as we are: after all, Ontario is our political home, McGuinty’s balanced style is ours as well, and, besides, they NDP didn’t move out of third place.” That message could get the Liberals through all the way to another federal election.

However, the Liberals will be in a terrible place nationally if the Conservatives led by Tim Hudak win and, as likely, if the New Democrat’s leader Andrea Horvath increases their popular vote. The Ontario Government is the Liberal Party’s last real claim to power in the one region they must dominate in order to beat the Conservatives nationally. Being out of office in Ontario and with far fewer seats than the NDP in the other key battlegrounds—British Columbia and Quebec—would leave them looking like spoilers; amateurs who can’t face facts.

Natural governing parties, like the Liberal Party of Canada, are not naturally optimistic.

Imagine Bob Rae going around the country for the next year and a half talking up Liberal prospects without a power base in Ontario. (Of course, that possibility will stir the hearts of every New Democrat with any free time to campaign in Ontario over the next six weeks.)

Dalton McGuinty and the federal Liberals will campaign with a passion to save Ontario from having too many Conservative governments. However, New Democrats will be content to settle for just one less Liberal one for now.

Public utilities and political donations

Approximately 80% of Ontario’s multibillion-dollar electricity sector is publicly owned. Its legal structure, however, does not clearly reflect that ownership structure. Twelve years ago, Ontario’s “power at cost” crown corporations were reconstituted as “business corporations” that just happened to be publicly owned. The legislation’s logic was unambiguous: facilitate their evolution from creatures of government to fullfledged commercial enterprises, motivated by commercial objectives and, presumably, rewarding commercial shareholders.

That logical inference proved to have frail political will. So, today, the government of Ontario and some eighty municipalities are “sole shareholders” of most of the province’s electrical utilities. Operating between two paradigms has been confusing but has not paralyzed decision-making in the industry. However, conflict about the nature of these utilities is emerging and eventually will force Ontario’s political leaders to get on with privatization or formally restore the legal and business culture of authentic, not-for-profit crown corporations.  

On Monday, the New Democratic leader, Andrea Horwath, revealed that numerous municipal electric utilities were buying tables at Liberal Party fundraising dinners. (Oakville Hydro gave the Liberals $8,500 in 2009 and $7,000 in 2008.)  She objected to the practice, while Energy Minister Brad Duguid and Progressive Conservative leader Tim Hudak demurred.  

http://www.theglobeandmail.com/news/national/ontario/public-utilities-should-not-be-donating-to-ontario-liberal-party-ndp-says/article1781414/

The real issue isn’t one of fundraising transparency or customer impacts but whether public bodies, no matter their legal conceits, should in any way be in the business of funding government and opposition political parties? Can there be a safe, fair way for public bodies to make donations to political parties?

Surely, the answer is no to both. These utilities are not like commercial natural gas companies that are regulated by an independent nonpartisan regulator. Their boards, their business plans and the tenure of their CEOs are directly influenced by the Minister of Energy, who (if he’s doing his job!) is a full-time politician. 

Of course, there are good governance and good economic arguments for selling these public utilities to the marketplace. However, if politicians want to continue to own them, then they should get back to treating them like public organizations. 

The managers of these public institutions should not be put in the position of deciding whether or not it is in their organization’s interest to give money to a political party. Citizens should be assured that organizations under the direct influence of a minister—whether, an electrical utility, a ministry of government, or a scheduled government agency—will not be approached by or allowed to support political parties.