Double Blind

The February 28th edition of the Vancouver Sun, in the business section is a story about this couple called Sean and Christie Alger and their RRSP investment strategy. Some choice quotes include:

“Their all-or-nothing strategy involves putting every spare dollar into shares of the small Vancouver high-tech firm where Sean works as vice-president of finance.”
…
“‘My goal is to make a killing. I am confident I will make money, no matter what. It is just a question of how much.’”
…
“Christie, 29, also holds all of her RRSP in shares of Sean’s {her husband} employer, Contec Innovations Inc., a 20-person firm that develops mobile service delivery platforms for the Internet.”

So it turns out that Contec Innovations trades on the TSX Venture exchange and is at around 15 cents a share, trading down from 40 cents in the middle of 2002 when they went public (through a reverse merger). Just skimming their quarterly report, we can see that the company has very little in revenues and is currently burning about $400,000 a quarter while trying to develop this mobile data service called Hornet. What’s relevant is that the technology is not shielded from competition – there’s quite a few companies jumping into the very same space. The company recently raised about $600,000 which should keep it going until the middle of 2005 before they’ll have to raise more money again.

If this guy is the VP of finance, I’d start worrying if I held shares in the company since he clearly has no concept of risk management. It is absolutely insane to put 100% of your RRSP assets in an illiquid stock of a company with zero revenues, especially one planning to do the majority of their business in China. The only killing he is going to make is falling on his own sword. However, it’s his right to do so.

Right now there are a few grassroots movements out there (just google for it), although I’m sure that some are ‘grassier’ than others. The fact of the matter is that a lot more people out there stand to gain than lose, and they recognize that this is a once in a lifetime opportunity to reshape the electoral process in British Columbia. This is probably one of those rare moments where the political left and right can align on a particular issue.

When googling for the powers against STV, you have people like David Schreck and Norman Spector. Since the BC Liberals and NDP are keeping their mouths shut (ironically if they supported it they probably would be doing the ‘no’ side a favour), it’s obvious that the ‘yes’ side is winning round one of the battle that will continue with more mud slinging. The ‘no’ side will continue to make convoluted arguments dealing with the process of counting votes, while the ‘yes’ side will say “it’s time for a change”.

The yes side should be advertising the best benefit of STV, which is that it reduces the power of political parties, and increases the power of the individuals who run. You can be sure that people like John Nunziata, who voted against a federal budget because of their failed promises to scrap the GST and subsequently got kicked out of the Liberal party, would probably be still be in the House of Commons as independents. As they know they could more easily break away from the party since their probability of getting re-elected is higher, they would be more inclined to voice the opinions of the people that really mattered to them – their constituents, not the political party they’re running with! Indeed, when you look at the Irish Parliament (Dail) results in 2002 (.PDF file), 13 out of 166 seats were won by independent candidates.

How many politicians in our present system vote against their party policies because the people in their ridings have a contrary view to the party? Zero. It’s because of the voting system, and the strength of political parties. BC-STV changes the whole dynamic of the game – these people that believe their views are closer in line with the people in their ridings can vote against their party’s position and know that they will not be deeply compromising their chances for re-election.

The establishment is going to try to convince the public that their ‘experience in BC politics’ tells them that BC-STV is a “bad thing”. They will also say that only people with a PhD in mathematics are ‘capable’ of counting the votes, so the system is garbage (which is both untrue and a fallacious argument). Thus you, the clueless common folk, should vote no along with the elite. This smug argument is not going to win the “no” side any more votes. My guess is that British Columbians will see through these phony arguments and vote yes for STV, just like how the Irish and Australians have for the past 60 years.

A special interest group called the Centre for Science in the Public Interest is calling for the regulation of added salt in foods.

So there has been an all-out assault on fatty foods, sugar foods, genetically modified foods, partially hydrogenated foods, and now salty foods are high on the list. What’s left?

I say that we regulate the sale of all food, including meats. Meat should only be obtained through permits once a month since killing animals is unethical and their meat contains a high portion of fat, so people shouldn’t do this too often. All foods will have to be organically grown, blended into a liquid suspension and consumed through a thin straw. Solid food should be regulated since studies show that 125 people a year die from choking on the food they eat, so governments should assign permits to people to allow them to eat solid food. The same studies also show that nobody has drowned while eating food, so this is an acceptably safe way for the public to consume food without needing a permit. You will, however, need a permit to cook your food – it’s proven that cooking food actually decomposes certain vitamins that are essential to your health. In fact, it’s also been shown that 100% of all people that eat food eventually die. It’s clear that we should get the government to regulate the true danger out there – not fatty foods, salty foods, or sugary foods. We should just be regulating all food!

On the opinion page of the February 23 edition of the Vancouver Sun, there is an article by William Rayner titled “The STV con job” that is prefaced with “Final report on electoral reform consists of platitudes, half-truths and a provision that is unethical if not illegal”. It’s a catchy phrase, but unfortunately the rest of the article fails to live up to any truth at all. I wish I had a link to the entire article, but I will have to make do with snippets.

Paragraphs 1 to 4 deal with Rayner buttering up the audience with some hyperbole about the evils of BC-STV.

First of all, Rayner tries to appeal to authority with paragraph 5:

Perhaps I should explain here that I am a veteran observer of the electoral process. As a former member of the press gallery in Victoria and the author of three books about British Columbia history, I have a deeper knowledge about voting patterns than the average bloke.

You can see him presenting the argument – because I am an authority on the issue makes the following correct. I think most British Columbians are veterans to the political process (1.59M of us voted in the 2001 election) and one certainly doesn’t have to be present in the legislature in order to know what’s going on (which is mostly theatre – most policy decisions are made in the Office of the Premier, not the legislature). Rayner’s article will have to stand on its merits, not due to what he has written in his past.

Paragraph 7 is Rayner’s first attack on STV, accusing it of “being illegal”:

“Transferring the excess votes from a winning candidate is effectively counting those votes twice. Surely that is illegal under existing electoral legislation.”

The entire purpose of the 2005 referedum is to change the existing legislation to support counting votes via BC-STV. So the existing legislation would obviously be illegal, since existing legislation uses the first-past-the-post system. But if BC-STV passes, then the legislation would change and STV would be legal.

Paragraph 8 is Rayner’s “confusion” attack on STV, exactly what I predicted opponents of STV using:

“I would also like to know who decides which votes are deemed excessive – and how. Will there be a ballot cop at each polling station keeping track? When a winning candidate gets 50 per cent plus one (presumably) of first-choice votes, are the rest tossed back in the hopper to be doled out randomly or recycled in some predetermined order? Does it mean that, if I vote early, I elect my first-choice candidate, but if I vote late, my No. 1 automatically becomes No. 2?”

This was clearly an attempt by Rayner to try to present to the reader that BC-STV is a confusing way to count votes. It also appears that Rayner skimmed the STV material since the answers were in front of him.

To answer his questions, votes are considered excessive when you have more than the necessary votes to get elected. For example, if there are 4 candidates to be elected in a riding, you need approximately 25% of the vote in order to be elected. If one or more candidates have more than 25% of the vote, the weighted sum of second place votes gets transferred to the respective candidates that were voted second. There is no “hopper” or anything that is random about the process – the results will be identical in a recount if one is necessary. It does not matter whether you vote in the morning, afternoon or two seconds before the polls close – your vote will have as much power as any other voter’s will.

This does illustrate a legitimate problem, however. The problem with explaining STV is that it requires some simple statistics (specifically the weighted mean). Fortunately, it can be graphically illustrated with the results of the 2002 Irish Dail election (just have Java turned on) which is much more intuitive. BC-STV will work very similar to their system. A good example is in the Wicklow riding, where Mildred Fox (independent), despite ranking 6th in 1st place votes, gets elected in a riding with five seats.

Paragraph 9 illustrates that Rayner has a fundamental misunderstanding of STV:

“And what if the first and second preferences are for different parties? This means Party B could win seats based on votes cast for Party A – surely a contradiction if not an outright travesty.”

This is because STV emphasizes individuals getting elected, not parties. A person can vote 1st for a BC Liberal candidate and 2nd for an NDP candidate if they like the individual more than the other people in the party. This is the most attractive feature of STV, not a “travesty” as Rayner puts it. If the voter wanted to vote in all NDP or BC Liberal candidates, they can also choose to do that.

Paragraph 10 to 12 complain how the geographical distribution of seats would be skewed by the heavy population centres of Vancouver and Victoria. This is something that is present in our existing system and will continue to exist if STV is implemented. One should be asking whether there is a difference in “character” of the ridings in Richmond, for example Richmond-Centre and Richmond-Steveston?

Paragraph 13 and 14 refer to Rayner complaining how he could not find a “Technical Report” that the BC-STV guide said would be available in the libraries – apparently he failed to check the internet.

All in all, the arguments provided by Rayner against STV are very weak. Nothing he has presented has merit.

As I have said before, the only people that are advantaged by voting NO to the 2005 referendum are entrenched NDP and BC Liberal party hacks – everybody else is better off by voting yes to BC-STV. Implementing BC-STV ensures more competition by individuals, rather than the parties that sponsor them.

I was reading a February 15, 2005 article in the Vancouver Province, an article titled “Traffic jams spur change” (audio link). The article was written without much depth and the basis of the article seems to be on an interview they had from Ray Straatsma who represented a group called Better Environmentally Sound Transportation (BEST). The group blew all their credibility when they advocated a pro-public transit platform, but ended up opposing RAV. They also oppose all types of road transportation, including the expansion of the sea to sky highway. Right now the group’s big concern is opposing the expansion of Highway 1 and the Port Mann Bridge. I haven’t written specifically about this issue and I won’t today, but I will write about how special interest groups such as BEST use traffic as an excuse to push their political agenda.

In this article, I will use BEST as a typical example of a special interest group that tries to control how we live, but in the grand scheme of things, other groups like the Society Promoting Environmental Conservation are more radical and less rational with the unintended consequences of their policies.

Groups likes BEST tell us how we should live our lives – for example, they try to make us feel guilty for taking a car to work. They believe that it is better for us to spend 50 minutes on a bus instead of 20 minutes in a vehicle.

This is of course garbage. The fact that a person can commute from their single detached house to work in the most cost efficient manner (i.e. their automobile) is a good thing. That same person has a choice whether to take the bus to work, and most do not. I made the same decision using some elementary calculations. Most people with families wants to live in their own detached house, and I don’t think people should feel guilty for wanting this. Because single homes are have to be spread out over relatively large areas, the population density is too low to support mass transit infrastructure. As a result, you need to build roads to get people to and from locations of interest.

In order to support a population of single family homes, you need road infrastructure. A lot of it. Wide freeways so that way people can get all over the place. Mass transit solutions are perfectly fine providing it is more efficient than the roads that you would otherwise take to get there – otherwise it’s next to useless. This is why the majority of commuters will never take the bus to work – they clog the same streets as cars do. At least with rapid transit you can travel independently of road conditions and this is probably the only point that I will agree with BEST.

People that say you shouldn’t build roads are effectively saying that the only way you’re allowed to live is to live downtown, in a high-density complex and without a car, since of course a car is environmentally bad.

I really hate people that tell me how I should live. They’re called communists. People in communist countries work in high density cities because they’re told to do so by their governments.

What also happens when you don’t build enough capacity on the roads is that eventually some form of congestion pricing comes into play (a good example would be the 91 Express Lanes in Southern California) – and only the rich get to drive.

This is exactly what I think the ultimate purpose of groups like BEST are – because they’re “elite”, they’re trying to make policies where only the rich benefit, because us “common folk” are too
ignorant or stupid to use the roads for ourselves. After all, only rich people should use roads. That’s the next step for these idiot institutions that try to tell us how we should live.

Roads and automobiles are like veins and red blood cells inside a human body – the more roads you have, the more automobiles you have, the more efficient and healthy the society is. Increasing traffic is a natural consequence of a healthy economy – why do the people come to the area? The only way you can treat capacity issues it is to expand the network. Once you stop expanding the network, the only direction you can head is up – in skyscrapers, such as what you see in cities as London and Hong Kong, where nobody can afford their single house dwelling except the very rich.

Proposing a stop to freeway expansion is akin to saying that people shouldn’t be living in houses. This is the real political agenda of groups like BEST, they prefer to see us living in a high density urban environment, devoid of any capability of moving ourselves other than where they dictate it should be with public transit.

While making some comparisons between wired and wireless phone plans, I wrote a few notes. In general, for a land-line I don’t need anything other than the line itself – an answering machine takes care of the voicemail.

Telus basic phone line (land-line): $29.41/month plus $0.14/month 911 access fee = $29.55/month. The basic phone line service is PST-exempt, so that leaves the monthly bill for a phone at roughly $31.50/month after-tax. The only disadvantage to a land line is that you can’t be reached anywhere other than when you’re home. The advantage is that you can’t be reached anywhere other than when you’re home, in addition to being able to talk for however long you want, whenever you want.

For wireless, I’m looking for the following:

100 minutes anytime

1000 minutes during a ‘reasonable’ evenings and weekend period

Voice mail

Caller Display

A cell phone included for a cheap price

I do NOT care about call waiting, text messaging, internet, picture taking, etc. Those are all useless features, I never intend to use them. In fact, if I’m already on the phone, I want incoming callers sent to my voicemail instead of using call waiting. The following plans are what comes closest to meeting my requirements. All costs are pre-tax unless otherwise noted.

Telus mobility (wireless): $25/month + $7.45/month system and 911 access fees + $5 for call display = $42.70/month after-tax. This is for 100 minutes, plus 1000 minutes on evenings/weekends (defined as 9pm to 7am), plus voice mail (3 messages). Extra minutes $0.25. Redefining evenings/weekends to 6pm to 7am costs $5.70/month extra. You have to lock in for at least a 1 year contract, or up to 3 years. Each year gives you a $50 credit for the purchase of a phone. Analysis here is that the 9pm start of the evening is practically useless. The full package would cost $48.40/month. Initial activation fee is $35 and the cost of a phone with a 3-year contract starts at $30.

Rogers Wireless: $30/month + $7.45/month system and 911 access fees + $9/month for voicemail and call display = $52.95/month after-tax. This is for 100 minutes of regular time, plus 1000 minutes of evenings/weekends (defined as 6pm to 8am). Extra minutes are $0.25. To get a $50 phone you need to sign up for a 3-year contract. If you sign up on the internet, the activation fee is waived and you get a $10 credit plus a $50 gift certificate to some restaurant. Analysis of this package is that Telus is actually cheaper than Rogers.

Fido: $25/month + $7.45/month system and 911 access fees + $6/month for voicemail and call display = $43.83/month after taxes. This is for 100 minutes of regular time, plus 1000 minutes of evenings/weekends (defined as 7pm to 8am) plus unlimited incoming calls. There’s also a $30/month package that has unlimited evenings and weekends (defined as 5pm to 8am) plus 100 weekday minutes, so the after-tax cost of that package would be $49.53/month. Although their website is not clear about it, if you enter in a 2-year fixed contract for wireless service, you will get a reduced price on a cell phone. The big risk with Fido was the fact that their parent company (Microcell) went bankrupt. Now that they were taken over by Rogers, they should be able to merge their networks together to provide decent coverage.

All in all, it would be a close decision between a land line and a wireless link, but all things considered, I still think a land line is the more viable solution. Generally speaking, if one of the providers offered a $25/month plan (plus $7.45 system/911 access fee which would all be $37/month after-tax) that gave you 100 anytime minutes and 1000 evenings and weekends (from 6pm to 7am), plus call display and voicemail, I’d choose the wireless plan instead. So economically, the marginal difference of mobility is worth about $10/month extra to me. This also assumes that I don’t use the phone beyond what the time limits specify in the plans.

Another post about the BC Election Futures. I have currently extracted $4.77 out of the marketplace. Currently my account is flat. Trading has been very painful, the liquidity has been about as dry as sucking water out of basaltic rocks. So far $7615 has been invested in the marketplace by all (39) participants excluding myself, and I have so far extracted 0.063% of the money from the marketplace. As you can recall, my goal was to extract 1% of the net invested capital from the market. If liquidity picks up, I should be in a further position to captialize. Again, currently things are very painful – not what I expected currently. So far approximately $1620 worth of volume has transacted through the marketplace, so I’ve managed to extract about 0.3% of that.

Market commentary:

Seats Market (percentage of seats, followed by implied seats):
Liberals – Bid 56.6% (44.7), Ask 58.0% (45.8)
NDP – Bid 35% (27.7), Ask 43.0% (34.0)
Other: Bid 0.7% (0.6), Ask 0.9% (0.7)

Market is pretty tight, anticipating Liberals winning 45 seats in the legislature. The NDP bid-ask spread is a bit wide, there has traditionally been a bid around the 40.5 level, but that bidder went away today. Right now, there is nothing to trade here – I think the market is on equilibrium.

Popular Vote Market

Liberals – Bid 44.1%, Ask 47.5%
NDP – Bid 40.0%, Ask 41.9%
Green – Bid 9.0%, Ask 9.9%
Other – Bid 6.3%, Ask 7.7%

I have already said I will not be trading this market. The numbers look correct, however. The real question is how much of the Green vote can the NDP siphon off? As I have said earlier, they haven’t been pandering towards the enviornmental vote lately.

Majority Government Market

Liberals – Bid 76.5%, Ask 78.8%
NDP – Bid 19.1%, Ask 21.9%
Other – Bid 1.0%, Ask 3.4%

The Liberals seem to be trading a little low, given what the market thinks about the NDP’s popular vote and seat count. But buying shares of the Liberals at 2:7 odds is hardly a way you’ll make money. If the Liberals went further up (to around 85-90%), it might be a potential strategy to short the Liberals, and early through the campaign (approximately early to mid April) to wait for the Liberals to screw up and then buy the Liberals back if they do or don’t. You almost have to be thinking about the timing concerning the provincial debates already!

Referendum Market

Passes – Bid 18.1%, Ask 23.0%
Fails – Bid 76.7%, Ask 80.8%

The contract has been hovering around the 20% pass rate for the past two weeks, with little liquidity in the marketplace. If the pass rate goes down to 10-15%, it might be worth grabbing some shares as the pro-side has hardly had a chance to get the message out yet.

Here is a graph of the impact of the income tax reduction in the latest BC Budget:

The upper curves are the marginal tax rates (blue being before-budget, yellow after-budget), while the bottom curves are the net tax rate. As you can see, the tax credit kicks in at $8676 and phases out at $26000. The two areas in green are of equal area – the left area is the money that the low income tax earners no longer have to pay, while the area on the right is tax that has to be paid back from the newly created non refundable tax credit. Finally, the curves are identical after $26000 in income, as people pay the same taxes after that amount.

What are the implications of such a tax change? I can think of two changes that probably aren’t intended.

One is that there is less incentive for people that earn $16000/year to earn incrementally more money – before the budget, they were taxed at a marginal rate of 27.4%, while after the budget they are now going to be taxed at 31% between $16000 to $26000. This gives low income earners slightly less incentive to make more money! FYI, $16000/year is very close to how much one makes with a full-time minimum wage job. It’s also how much a senior citizen makes in a year with a full CPP pension and old age security.

The second consequence is that is completely flattens the marginal income tax curve between $16000 to $67000 at an average of 31%. The ramifications of this suggest that the government is moving towards a flat tax without actually announcing it. This also means that if you earn more than $16000 you can contribute to an RRSP and get a reasonable return of tax dollars.

The BC Budget was released at 2:30pm. Here is the actual budget compared to what I predicted in the previous article.

1. I predicted $2B in extra healthcare spending over the next four years. Instead, they delivered $1.5B of extra spending over the next three years. The NDP reaction was exactly as predicted, specifically saying “Average families have struggled for four years under Mr. Campbell’s policies of fiscal restraint. He’s hit British Columbians with program cuts, downsizing and privatization, and cuts to vital services in order to pay for his high-income and corporate tax cuts.” I’d consider this prediction successful.

2. Education spending only increased moderately, when you combine post-secondary and K-12 education, the net spending increase over the next three years was $234M. Presumably they left this alone since the 2004 budget had fairly heavy spending increases to education. The NDP didn’t mention anything about teachers or schools. I’d consider this prediction failed.

3. There was a tax reduction, but strictly to low-income earners. The legislation (Bill 7) will give a $360 non-refundable tax credit which slowly gets phased out between $16000 to $26000 in income. The net effect is that people that earn $16000/year will pay no provincial income tax (they will still pay about $1100 in Federal income taxes). People that earn more than $26000/year will continue paying the same rate. I thought that the government would raise the basic exemption instead of targeting it towards lower income earners. This prediction was partially successful.

4. There was an announcement that $1.7B of debt would be paid off compared to the previous year. This was larger than I expected, but I was kind of expecting them to blow off about another $1.2B of it. I guess they decided that they spent enough and wanted to please the fiscal conservatives. BC still has no formal plan to amortize the debt. The NDP didn’t mention anything about the debt either. Oddly enough, the Green Party agreed with paying down the debt. I’d consider this prediction unsuccessful.

My impression on this budget is that it’s an election document – the BC Liberals are spending yet more money on healthcare and will be taking that to the polls, having removed one of the NDP’s issues for the election. It’s pretty obvious that the tax cuts were structured to get the senior citizen’s vote – typically a senior couple would be paying extra MSP and income taxes on their retirement funds, but with this tax reduction, my paper napkin calculations suggest that a senior couple will save approximately $800/year with this budget. My grandparents will be happy and probably vote for the NDP anyway.

Saving $1.7B of the budget for debt reduction is a smart idea – money applied to the debt is money that you won’t have to pay in the future. If you really needed the money, you could borrow it again. But the government is spending a massive amount of money on capital spending – $3.8B in various projects. Capital expenses are not considered ‘expenses’ – the only expense associated with capital spending is depreciation and amortization. So if you build a road for a billion dollars, and expect it to last for 20 years, your only expense is $50M/year. These capital expenditures have to be financed with debt, so even though the province is projected to accumulate surpluses over the next few years, their net debt is going to increase.

I was surprised that the only tax cuts went to the low income earners – middle income earners got absolutely nothing in this budget. My guess is that the BC Liberals think that they already have the vote of the fiscal right wing, so there’s no point in attempting to please them. They’ll probably pick up a few votes from the lower income earners, providing that they’re perceptive enough to realize that the Liberals just sent them a cheque for $360. I suspect if the BC Liberals get re-elected, they’ll implement more wider tax cuts for businesses and the rest of the tax bracket in 2006’s budget when they don’t have to win political points.

The NDP’s response has been to the tone of “look what they did in 2001, they’re just reversing it right now”, which doesn’t have much of a basis if you look at the numbers, but people will believe them. They will have to come up with something fairly innovative in order to make the Liberals look bad on what are traditionally NDP issues (health and education). Even David Schreck couldn’t come up with anything that he hasn’t harped on about for the last few years.

So to conclude, other than the fact that the province is spending another $1.5B over the next three years on healthcare, and that they’re banking the rest of the $1.7B worth of surplus on debt reduction, this really was a do-nothing budget! I just wonder if the $11.3B that we’re expecting to spend on healthcare is worth it – that’s $2700 per British Columbian!

The federal government is having their budget on February 23, 2005. As the Liberals are in a minority government, this budget is guaranteed to be an “election” document as well. More spending!

The new minister of finance, Colin Hansen, has been silent about what will be in this year’s budget. One possible reason is because he’s new in this position – he took over on December 15 after Gary Collins resigned to become CEO of Harmony Airways. Chances are that Hansen didn’t want to put too many radical thoughts in a budget with an election three months away. No doubt the premier’s office and the deputy minister had a chance to carefully comb over what would have the most effect on the electorate come this May 17, 2005.

What will we expect to see in the budget? Here are some guesses of mine.

1. Extra spending on health, probably to the tune of $2 billion over the next four years further than what we are already spending – for the mathematically disadvantaged, this means $500M/year, but you announce the cumulative sum just to get the “big spending” headlines. This will be yet more money wasted down the pipe, but it will look good on the newspapers and give the NDP (Joy McPhail, Carole James) less karma for saying “The Campbell Liberals are just spending what they took away in 2001’s tax cuts for the rich”.

2. Extra spending on education. Repeat the above, except with a slightly smaller number (let’s say $1.5B over four years) and the same response from the NDP.

3. Income tax reductions. A remote possibility is that we will see an Alberta-style flat tax implemented. More likely is a token reduction of the 6.05% tax bracket to 6%, and the 9.15% tax bracket to 9%. Possibly the 11.7% bracket will be eliminated (so it will be 9% all the way from $33061 to $75917). Another possibility is that there will be no changes to the tax rates or brackets, but the basic exemption will increase from $8676 to $10000 or higher (every thousand dollars more than the current level costs the government about $200M assuming no ‘trickle down’ effect of more people having more money to spend). My general guess is that when you add up the tax reductions in this budget, they will let people keep $800M more than they otherwise would be collecting. The response from the NDP will be the same, but they’ll concentrate on complaining either the tax bracket elimination will be benefitting “the rich”, or that the money the government gave out would be better spent in hospitals and schools.

4. A formal debt management plan. The province has $32B of debt, so they’ll most likely announce some sort of amortization scheme – maybe $300M/year, or some token amount. The NDP will reply that this is money that is better spent on hospitals and schools. See a theme here?

If you want a projected surplus for 2004/2005, my best guess will be $2.4 billion, net of the $300M forecast allowance. The surplus for 2005/2006 should be projected to be about the same, so this gives the government plenty of ‘wiggle room’ to satisfy the whole group – they can go nuts on spending and cut taxes at the same time. Of course, the actual surplus will not be $2.4B since they’ll have announced $1B worth of new spending initiatives and another $500M worth of tax reductions and $500M worth of debt repayments. So the final ‘announced’ surplus after their spending increases and tax cuts will be around $300M, with a $300M contingency.

Those are the low-lying fruit. I’m sure the government has some more items up its sleeves (specifically how to bolster the vote in the central part of the province east of the Lower Mainland), but that will have to wait until the budget is actually announced.

The NDP will probably have a difficult time fighting this budget – just like what happened in Alberta, it’s becoming clear that the strategies applied in BC after Campbell got elected have worked. If the NDP end up criticizing the fact that “Not enough money went into healthcare”, they’ll continue to sound like a broken record player and are most certainly going to lose the next election.

The Canadian Centre for Policy Alternatives will blast the budget for being too light on spending.

The Canadian Taxpayer’s Federation will blast the budget for being too heavy on spending.

I believe all of these organizations already have their press releases written even though they have little indication as to what is specifically going to be announced. If you see a press release issued 15 minutes after the budget is announced, then this is probably the case. If you see a press release a couple hours or later after the budget is announced, chances are the budget did not have what they expected and the press release actually had to be re-written! If you wish to see a sneak preview of the opposition comments, 90% of the material has already been written by David Schreck.