Double Blind

I’ve been spending the last couple weeks working up the scenario design for the BC edition of Premier Forever. Inside the 80soft.com developer diary, there is an interview with me (in the forums, Developer’s Log #5):

80soft.com: What is the basic picture of B.C.’s political landscape leading up to the May 17th, 2005 election?

Sacha Peter: Gordon Campbell’s BC Liberal party was elected in a landslide – 77 seats to the NDP’s 2 – in 2001, after several NDP scandals and perceived mismanagement. The first thing that Campbell did while in office was reduce income tax rates by 25% across the board. This was significantly more than anyone had expected, and this plus subsequent cuts to government programs (other than healthcare and education) made the NDP livid. Campbell was also hostile with the unions, and legislated some settlements that were on quite unfriendly terms. The more prominent labour disputes involved the B.C. Nurses and the B.C. Ferries unions, both of which Campbell managed to fend off while still maintaining significant public support.

The NDP is still mad about the cuts to government spending and the decrease in taxation for all taxpayers. The public to an extent also has the impression that having nearly no opposition in the Legislature has resulted in a government that has been complacent. As a result, this has allowed the NDP to catch up in the polls, despite the fact that the NDP’s leadership had been maintaining a low profile – this low profile appears to have backfired recently as the Liberals have made moves to increase their rapport with the public.
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It’s been about a week since I’ve last posted, but there have been surprisingly little (publicly known) developments in the provincial political scene – the sponsorship scandal has taken most of the political press time. Provincially, certain people have been nominated (including Campbell himself), but the most significant event is that the NDP released their political platform a few days ago. Please note that if the link is dead, I will be archiving the platforms locally on this server and will post the locations on a future weblog entry.

The simple strategic analysis is that the NDP took the bait – Campbell was goading the NDP about their lack of platform, so the NDP finally released theirs. This was a tactical error by the NDP. If the NDP knew what was right for them, they would be the ones to release their platform after the BC Liberals, even if it was as late as a day before the May 3, 2005 political debate. Instead, the BC Liberals are now going to have a good chance to hack and slash the NDP document with their own platform which will probably arrive around April 21st.

Suffice to say, since the BC Liberals now know that there’s very little that will stop them from winning this election, thus they will play it safe and will release a platform that is two nanometers to the political right of the NDP’s platform, which is to say centre-left. It will be very spend-happy on healthcare, education, senior citizens’ security and the other usual suspects. There will be no mention of tax cuts (except for low income earners), which is exactly how the NDP platform sounds. If anybody is seriously expecting a radical motion to come out of the BC Liberals’ platform, they will have to be waiting for a very long time – there will be no proposals for a flat tax, no proposals for reduced business taxes, no proposals for expanding the province’s road network, or anything remotely on the right side of the political spectrum since the BC Liberals know that they already have the vote of all the centre-right people in the province. The swing vote this election is the centre-left and this is exactly the political spectrum where the campaign is going to be fought. In 2001, the BC Liberals could have said anything and still get elected. This time around, they have to be somewhat more cautious.

I’ve had a chance to gloss over the NDP platform and it’s clear the NDP aren’t planning on winning this election – they’re playing for 25 seats. The platform is not as wildly socialist as I expected it would be (for example, the union rhetoric is considerably less than one would expect out of an NDP platform), which is a smart long-term decision. What was not particularily smart is that their stance on the environment began on page 48 out of 82 in the document – the NDP has to kill the Green party in this election if they are to stand any chance of getting a majority in 2009, and I don’t think they’re effectively targetting them.

For now, I have two miscellaneous comments about the document and the NDP’s campaign in general. I’ll have more to talk about the BC Liberals’ strategy in a future post.

One is that it has a lot of pictures of Carole James. In fact, when you open up the NDP’s provincial website, you get this big picture of Carole James’ face at 322×422 resolution. Whoever put that picture there needs to learn that you need to make sure the entire face is lit, since the shadows on the left hand side make her seem ominous and scary. When you put a lot of pictures of the party leader in publications and the media, you want them to seem friendly and personable. The NDP are not doing a good job with this. The second mistake they did is that whenever you have pictures of your leader in your political platform, you should have them smiling. This means teeth.

The second comment is that there are plenty of estimates (the terminology was “fully costed”), but it’s important to know that they are all bullshit. The problem is that once the NDP got another majority government, they would not stick to the platform and spend the province to death, just like what happened in the 1990’s. This credibility issue is something that isn’t going to go away until the BC Liberals have their equivalent of the sponsorship scandal. Since Gordon Campbell isn’t trying to sell Fantasy Gardens, there’s little the NDP can do other than hope that Campbell screws up in the next four years as premier.

Yesterday, I was monitoring the trading action on a thinly traded stock of a company called Cambridge Display Technology (ticker OLED on the Nasdaq). I noticed that the bid periodically went up a few pennies at a time every 10 seconds and then when it reached the asking price, a hundred shares were picked off at the asking price and then the bid settled down. This motion repeated itself for the entire day.

You can see the graph here – the asking price is the blue line, while the bidding price is the yellow line. The graph horizontally is a time over one hour.

This is a pretty important demonstration that trading is all performed by computers. Mutual funds and pension funds don’t have the time to sit in front of their trading screens and enter in orders all day – instead they get computers to do the dirty work for them. In this case, some fund wanted to buy shares of Cambridge. Because the average trading volume of the stock over the past couple of weeks was about 15,000 shares a day, such a fund cannot accumulate a material amount of shares in a short period of time. They have to break up their orders into very small bits, and nibble away at the stock until they’ve reached their position. Some fund manager probably set a computer to run this sort of algorithm and let the computer do the trading.

This type of trading is really obvious when you deal with companies that don’t trade many shares a day. It’s a reminder that the markets are mostly electronic, and that the computer algorithm used to accumulate shares of this company probably did it in such a way to get the shares for the cheapest price possible. I’ll let the reader figure out why this type of accumulation strategy was optimal (if it was at all).

The last three tracks in Robert Miles’ Organik CD are called “Improvisations” (part 1 and 2) and “Endless”. I now associate those three tracks with driving along roads in the deserted countryside, as it makes for good ambient driving music. I find it rather interesting that I can associate locations on a map that I’ve driven across with tracks from songs. It helps me remember where I’ve driven and also what I saw when I drove by.

I have also listened to Delerium, which is pretty good for interstate roads. One CD lasts about 70 minutes, and since you can drive about 90 miles in that time, there is enough resolution per track to allow for some interesting spatial-audio associations.

So given these two artists, is there anything else that would make for good driving music? I am running out of CDs to burn and could use some suggestions to help reinforce my memory.

With all the news about the sponsorship scandal coming out, I would give odds of about 50/50 that we’ll see a Federal election called by the end of May. There is a critical vote coming up in the House of Commons (Bill C-43), and Paul Martin is far away from running “home free”, as Parliament is nowhere close to finishing the Spring session. Paul Martin probably wanted to survive until June 9th (then Parliament is adjourned until September 19th, giving Paul Martin and the Liberal party a break to do some well thought-out damage control), but it appears he is not going to have this luxury.

The latest catalyst to this analysis is the fact that real news is coming out of the sponsorship scandal (Gomery Commission) inquiry. A good history of the scandal can be found on Wikipedia – note that if you are Canadian, you cannot link or publish any testimony of the key witnesses or you will be in contempt of court, so I will leave out names and just include generalities. Thankfully, it’s not illegal to read such information.

My interpretation of what is going to get released is that there are allegations that key members of the Liberal Party of Canada have been tinkering around with the Mafia – what happened is that the government (then under control of Jean Chertien) awarded zero-work contracts for large sums of money, an aggregate of over $250M, to these firms controlled by mafia bosses. These mafia bosses gave back significant sums of money back to the Liberal party and kept the rest for themselves. The initial release of funds was controlled by the Prime Minister’s Office. It was only until last year where the excrement starting hitting the fan, and right now it’s getting splattered all over the place, including Paul Martin’s lap.

Most of the money was awarded to people in Quebec that were in direct opposition to the Bloc Quebecois party. The Bloc have every right to be completely furious as Federal taxpayers money was being used directly by the Liberal party to campaign against them in Quebec. The conservatives never had a chance, as the Liberals were using that same money against them. Basically the Liberals used their federal sponsorship money to maintain a huge capital advantage over all other political parties, allowing them to keep their majority government in Parliament for 1997 and 2000.

This shouldn’t be surprising news – the Liberal party has been in power about 80 out of the last 100 years and that length of rule will breed some serious corruption. It’s up to the public to pick up on this and kick them out of office and make sure the key players end up in jail. Make no mistake, the conservative party are no pack of angels either, but in comparison to what we’ve seen from the Liberal party, it takes more than a single majority government to build up the filth that has formed in the Liberal government currently.

I keep reading news stories about how “the public doesn’t want another election so soon to the previous one”. I think that’s a load of bullcrap – if I had to vote every three months, I would. I don’t think the public would ever get tired of asserting what they thought about the present government – only the establishment would. Even if it results in another Liberal minority government, at least the public had their opinion measured in an objective fashion. There is a cost ($250M), but I think this is money well spent considering this is how the system is supposed to work – if the public feel that there is a need to change the government, their MPs will vote against a confidence motion and this will trigger an election.

Finally, on the headlines, the Liberal party is claiming to be “victims of fraud”. This is complete garbage – the insiders of the Liberal party who orchestrated the exchange of money are responsible for the party’s actions and are definitely not victims. This is expert spin doctoring and it remains to be seen if the public buys it or not.

Right now if an election were called, it seems probable that the Bloc will take 63 out of 75 seats in Quebec, which is an increase of 9 seats. The Conservatives would likely be able to increase their presence in Ontario and probably secure a minority government. As the conservatives can probably come to a back-room arrangement with the Bloc, they should be able to form the next government for a year while they clean house. The real question is whether Harper and Mackay are up to the task or not.

I have written on this issue before early last year and I still think the key players in this are going to get a slap on the wrist. There will be a couple ‘public hangings’, but the vast majority of kingpins (including Jean Chretien, who I think gave his blessings to the whole affair) are going to get away with it. The broader systemic issue will be present as long as Canada exists as a country – the power that Quebec and Ontario have over the rest of the country will force all political parties to pander to them. With this will come the allure of corruption that we are currently seeing uncovered in the sponsorship scandal.

Events like this do not help the country – corruption will encourage separatist groups (both Quebec and Western) when they see the tax dollars they give to the Canada Revenue Agency be forwarded to the Liberal Party of Canada.

While reading the Hansard transcript for the March 24, 2005 member’s statements, I noticed the following coming out of Mark Holland, who is the Liberal MP representing Ajax-Pickering (between Toronto and Oshawa). Note that this sort of partisan bickering happens all the time in the house, so I’m not concerned with the parties being slammed, rather what the MPs themselves say:

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Mr. Mark Holland (Ajax�Pickering, Lib.): Mr. Speaker, one week ago today Conservatives met to have their opinions silenced at their convention. As I look across the floor, I see a divided Conservative Party in disarray, out of touch with Canadians.

I see a Conservative Party that will threaten progress on social issues, while Liberals defend health care and work toward a national child care program. I see a Conservative Party that–

Some hon. members: Oh, oh!

The Speaker: Order, please. The hon. member for Ajax–Pickering has the floor and I cannot hear a word he is saying because there is so much noise. We need a little order in the House. The hon. member for Ajax–Pickering.

Mr. Mark Holland: Mr. Speaker, I see a Conservative Party that, at any cost, wants to cut taxes while the Liberals have made Canada the only G-7 nation that is debt free. Will that party do that at any cost?

I also see a Conservative Party that wants to roll back minority rights, while the Liberals move forward with a progressive and inclusive social agenda.

As I look at a divided and backward Conservative Party and I contrast it against Liberal accomplishments, I have never been more proud to be Liberal. The Conservatives can keep kicking their chairs in frustration while they still have them to kick.

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The problem is that the statement “the Liberals have made Canada the only G-7 nation that is debt free” is false. Canada is not a debt-free nation – at the end of January 2005 it still has $597 billion in interest-bearing debt. About $178 billion of that debt is in the form of pension guarantees. What Mark Holland undoubtedly wanted to say is that the nation is currently deficit free, not debt free. We are a long way away from being truly debt free, and we are one economic cycle away from going back into deficits.

What is particularly sad is that member’s statements are prepared in advance – it is not like he was in question period, where there is considerable pressure to come up with on-the-spot answers. Secondly, Mark apparently has worked as a financial advisor before he went into politics (he got elected at the age of 30, which is quite young). Shouldn’t he know the difference between debt and deficit?

There is an important distinction between deficit and debt – deficit is how much more money the government spends than it collects in taxes. If the government spends more than it receives, the difference is called the deficit. If the government spends less than it receives, the difference is called the surplus. Debt, to give a rough definition, is the total sum of accumulated surpluses and deficits. The bad part about deficits is that it allows debt to accumulate. The bad part about debt is that you have to pay interest on it, year after year, until you pay it off. A small amount of debt is tolerable, but when you have nearly $600 billion to pay off like the Canadian government, that represents a huge amount of interest you have to pay each year – $34 billion right now. If interest rates rise, the interest bill will increase.

I sincerely hope for the good of the country that the politicians up in Ottawa know the difference between debt and deficit, otherwise we’re all going to be in deep trouble. It’s clear that Mark Holland doesn’t. Right now we set aside $3 billion as a contingency reserve if there are unforseen shortfalls in revenues – if this is not spent, then it is applied against the debt. At this rate, we will pay off the debt in 200 years. If our interest rates rise and we have to pay 0.5% more yield on the loans the country has taken, that’s good enough for the $3 billion right there.

The government should come up with a formal debt management plan involving the pay down of debt – they already have one, but I would like to see something that would involve the entire debt being liquidated in 25 to 30 years. There is no reason why a first world nation like Canada should have a debt as large as ours and there is also no reason why Canadians have to pay $34 billion in extra taxes each year to service this debt. At the very least we should squirrel away $10 billion a year to cut down our debt and reduce our sensitivity to rising interest rates. The worst case scenario is that if we need the money, we can always borrow it again. If we pay it off, we will never have to pay it ever again.

Unfortunately the political reality suggests otherwise – in the 1970’s Trudeau was the first to discover the wonders of deficit financing – you could buy votes with the taxpayers’ own wallets. Mulroney didn’t help throughout the 1980’s. It was only until the early 1990’s where Canadians discovered that the increasing debt was going to cause huge problems for them in the future. That same debt is still causing Canadian problems and will continue to for the next generation. We should rectify this mistake as soon as possible by eliminating the debt like Alberta has.

One of the advantages of having a huge majority in the legislature is that you can close it whenever you’re done all of your business. According to the legislature calendar, they were supposed to be open until April 18, as April 19 is when the election will formally be called. However, the BC Liberals closed business on March 10 after they passed their budgetary supply measures.

They had two reasons for this. The popular view that you hear on the media is that they didn’t want to bother debating the budget estimates with Joy McPhail and Jenny Kwan, who both would have been a pain in the ass to deal with. The second reason which the media seems to miss is that by keeping away from the Legislature, you are free to make spending announcements like crazy to buy votes for the election.

If you look at the BC Government News page, you will see no less than 26 press releases dated March 28 to March 31 announcing all sorts of things. Most of these are ways which your tax dollars are going to be spent, but unfortunately nobody ever seems to pay attention to that as long as the budget is balanced.

These spending announcements have a couple effects. One is that it will make the targeted groups happy – for example, you are going to see a lot of news releases targetted towards Kamloops and Kelowna, where the BC Liberals are soft (probable but by no means guaranteed victories) in the upcoming election. The second effect is that it keeps the BC Liberals in the news spotlight and it forces the NDP to play the role of spoiler – I can already see Carole James saying “This is yet another pre-election ploy by the Campbell Liberals”.

People will recall that Glen Clark did the same thing in 1996 when he made a significant announcement a day, while Campbell dithered. Now things are reversed as Campbell is just using the same playbook from the politicians’ handbook: when the economy is doing well, make spending announcements like crazy before an election and buy votes with people’s own money while you can.

I don’t know of any cases where such strategies have actually backfired.