Time for a Break

Well it has been a busy time for Northern Economist and getting busier all the time.  March always marks the onset of my busiest time of the year and this year along with finishing up supervising two honour's theses, teaching my courses, and being Department Chair, I am also involved in an undergraduate program evaluation for the Department of Economics at Lakehead and helping to draft our new Department academic plan.  I'm also on the university Promotion, Tenure and Renewal committee again in the spring.  In addition, I'm also committed to conference papers to present my research in April, May, June, July and September so as much as I enjoy blogging about northern Ontario's economy, I'm out of time. 

As my colleague Steve Gordon at Worthwhile Canadian Initiative has remarked, blogging is a lot like giving out free pizza.  However, the pizza is free only for those who choose to consume the product - I still have to do the baking.  We blog to contribute to debate and policy formation, to try and help make a difference, but in the end there is only so much time to go around.  This break may last a while as I'm also heading into a sabbatical and for academics, sabbaticals are generally breaks from your usual routine and investment of your time in professional development.  I will be spending mine on wealth research and analysis of health expenditure and health system sustainability along with some deepening on my econometric skills.  Sorry, but baking lots of free pizza is not the way I was planning to spend my sabbatical.

For those of you who like my stuff on northern Ontario, you can continue to access the past posts I've done both here and at at my original Northern Economist 1.0 site where there is a wealth of material dealing with the region's economy from a descriptive and analytical perspective.  Enjoy.  You can also check in at this site from time to time just in case an important topic grabs my attention.  As well, I will continue to post occasionally on more general economic topics as part of the team on Worthwhile Canadian Initiative, Canada's premier economics blog.  You can access all of my posts on Worthwhile Canadian Initiative in a convenient listing at Ufollow.

All the best and cheers! Livio.

Thunder Bay's Fiscal Follies

The Thunder Bay City Council budget situation grows more and more curious.  A media report yesterday contained what can only be termed contradictory information.  On the one hand, the story in the Chronicle-Journal stated that: “The proposed budget includes a 2.67 per-cent property tax increase on top of a 1.5 percent hike for the enhanced infrastructure renewal program.”  This means that the combined property tax increase for this budget year is actually 4.2 percent.  Yet, a little later in the story, Councilor Linda Rydholm is quoted as saying she was willing to support the budget because: “At ward meetings and other places, it seems like people are expecting the 2.67 per cent increase, particularly knowing that 1.5 percent is for infrastructure, roads and buildings.”  In other words, the tax increase is 2.67 percent but the 1.5 percent is included. 

It would appear that we are still sorting out the size of the actual increase in Thunder Bay’s 2012 municipal taxes.  Moreover, it would appear that even city councilors are confused as to whether the total increase is 2.67 percent or 4.2 percent.  Add to this the fact that seven million dollars was inadvertently left out of this year’s municipal budget and now will be funded out of the reserve fund, one has to wonder what exactly is going on?  Is there some confusion on the part of the media in understanding council's message?  Are city councilors unable to grasp the details and complexity of the budget process?  Are city administrators and councilors engaged in a strategy of sowing confusion to obscure the true size of the increase? Or is this simply some giant comedy of errors at taxpayer expense?

If the total municipal tax increase is indeed 4.2 percent, it means that total payments to the city by municipal ratepayers will rise nearly 5 percent this year once the rise in water rates of 6.7 percent is included.   In 2011, the water bill for the average household was 714 dollars while the average property tax bill was 2,501 dollars.  Using these figures to compute a weighted average results in an increase of 4.8 percent in total payments by ratepayers to the city in 2012 (4.8=0.22*6.7+0.78*4.2).  Breaking up a 4.8 percent increase into three separate numbers may fool some of the taxpayers some of the time but it cannot fool all of them.  If City Council wants to remain at all credible, it will need to come clean and address this confusion and very quickly.  This credibility is all the more important given the cost overruns for operating the new waterfront park and the desire to build a new multiplex that will also require a large public operating subsidy.

Does Ontario Need Another Growth Plan?

Last Saturday’s Globe and Mail (February 18, B6) ran an article titled “Rebuilding Ontario: A Plan for the Way Forward” which laid out a discussion of Ontario's economic future. For Northerners, all the talk of decline and the need for diversification was strangely familiar.  Indeed, one can best describe what is happening as the “Northern Ontarioization” of Ontario’s economic discourse as Ontario tries to decide how to grow its future economy in the wake of the Drummond Report, which seems to have finally crystallized the fact that Empire Ontario has slipped into decline.  Of course, some of us saw the eclipse of Ontario a bit earlier than that (check out End of Empire, National Post, February 19, 2005, FP19) but better late than never.

The Globe and Mail described four options for the province to get its “mojo back”. They were financial services, technology, health care and natural resources. Missing was that perennial Northern Ontario favorite - tourism.  Despite the talk of putting a casino in Toronto, it is unlikely to see Ontario reinventing itself as Vegas North. Vegas style tourism requires a degree of individual and entrepreneurial freedom that regulatory Ontario is unlikely to acquire anytime soon.

Of all these options, the one most likely to kick start Ontario’s economy is the natural resource sector. The mining frontier in Ontario’s North – especially the so-called Ring of Fire- can serve as an investment frontier for the rest of the province much like mining and forestry did in the late nineteenth and early twentieth century.  However, this does require that the province embrace its North rather than treat it as a remote relic of the economic past.  Here, the contrast is made with Quebec.  According to the Globe and Mail: “Rather than shun its expansive north, Quebec is emphasizing it, hashing out an ambitious 25-year project dubbed “Plan Nord”.  Quebec is betting its future on developing mining, energy and forestry resources located far north of its major cities. Ontario could adopt a similar scheme.”

Really?  How interesting.  The fact is Ontario has also developed a Northern Growth Plan – a point the Globe and Mail article seemed to have missed but then Canada’s “national” newspaper is based in Toronto.  Part of what is wrong with Ontario’s economy is a myopic economic vision that does not look outside of Toronto.  Perhaps that is why since the Northern Growth Plan has been released, all that has resulted is more planning.  Given the dominance of Toronto vision in Ontario and its government, the chromite deposits of the Ring of Fire could only be developed quickly if they were at the corner of Yonge and Bloor.

Ontario does not need a growth plan.  Ontario needs a set of concrete actions to develop its northern resource frontier as an investment frontier for the province.  The North can be a place for infrastructure investment and value-added processing that can drive economic growth in Ontario.  The North can be a frontier for the deployment of Ontario’s labour skills and human capital.  Given the capital and technology intensive nature of modern mining, the North can also be a frontier for high technology industries.  And, the financial service industry in Toronto got its start in the financing of mining ventures in Northern Ontario.  Financing new mining ventures in the North can once again be a source of growth for Toronto’s financial sector.  What is Ontario waiting for?

Northern Economist Does Vegas!

Well, I have had the ultimate travel and tourism experience by spending a few days in Las Vegas – a place I can now best characterize as a Disneyland experience for adults.  The state of Nevada and the desert metropolis are relatively isolated and yet Las Vegas has established itself as a large and dynamic urban centre focused around gambling and entertainment on a grand industrial scale.  Nevada and Las Vegas offers an interesting example of how remote and isolated places can innovate and create economic opportunity – in this case with tourism.  While the region has the advantage of a warm climate and populous nearby states, it came as a surprise to learn that the land in the region is largely owned by the U.S. federal government – about 85 percent.  As well, nearby California also appears to be resented because of past historical actions with respect to land and water resources.  It would appear that regional alienation is not limited to Northern Ontario.  As well, recessions affect Las Vegas also.  There are a number large and impressive work sites where activity has ground to a halt due to lack of funds.

Las Vegas offers a unique experience.  Where else in the course of a single day can you visit massive reproductions of New York, Egypt, Paris, Rome and Venice?  At The Venetian, the shopping mall follows the path of an inland waterway with gondolas and singing gondoliers.  City planners in Thunder Bay take note.  What Thunder Bay needs are canals and gondolas at the Intercity Mall with a direct canal link to the new waterfront park (it can get double use for skating in the winter).  Too expensive you say?  No problem.  Thunder Bay is just as capable of creative accounting and sudden flash funds as Vegas.  City Council and administration can simply “forget” to budget for millions of dollars in expenditures and then dip into either the reserve fund or find some new leveraging partners.

Vegas is not just about gambling.  There is entertainment ranging from the amazing Cirque du Soleil to comedians and singers of all kinds.  Malls and shops abound.  There are also tours of the region to places like Hoover Dam and the Grand Canyon.  Hoover Dam was an impressive feat of engineering and full of tourists the day I went.   

And then there is the food and drink!  You know you’ve left Ontario when you see shoppers at the mall with beer and wine glass in hand walking around and chatting.  As for the food, the all you can eat buffets are astounding though you do need to pace yourself.  The high fat content of many of the buffet offerings does not always agree with your digestion and can result in what you eat in Vegas staying in Vegas.

Ah Las Vegas.  I wonder if Caesar’s Palace needs an economist?

Drummond and Health

A large number of recommendations in the Drummond Report have to do with health care.  There is a lot there - much of which we have heard before in terms of things like focusing more on home care, patient centered care and evidence based care.  Indeed, the first recommendation on health care made by the Drummond Report is the most likely to be adopted by the provincial government given its affinity for planning:

Recommendation 5-1: “Develop and publish a comprehensive plan to address health care challenges   over the next 20 years.  The plan should set objectives and drive solutions that are built around the following principles..."

Those principles include being patient centered, a fully integrated system-wide approach, more emphasis on chronic care and home care, disease prevention, etc...A plan to address health care over the next twenty years is definitely something that would appeal to the current provincial government and they would be able to apply the expertise acquired in doing the Northern Growth Plan - which also has a long-term horizon of decades and has yet to yield anything tangible.  Indeed, the propensity to embrace a planning rather than an action culture is one of the things that is wrong with Ontario today and in my opinion a key factor in its poor economic performance.  While planning frameworks are necessary, they appear to have become ends in themselves rather than a means to an end.  But I digress.  Back to health.

While much has been made of Drummond's recommendation to bring in a payment freeze for physicians and the remarks that they are among the highest paid in the country, one recommendation appears to have flown under the radar.  Here it is:

 

Recommendation 5-59: "Compensate physicians using a blended model of salary/capitation and fee-for service; the right balance is probably in the area of 70 per cent salary/capitation and 30 per cent fee-for-service."

The Drummond Report appears to advocate a big move away from fee-for-service.  It will be interesting to see what the reaction to this will be.