statism watch

Isn’t that what the Americans just did? That honeymoon’s going to be over really quick once people figure out they’ve been had.

Terence Corcoran, Financial Post
February 18, 2009

Ottawa’s massive budget bill, loaded with new laws, is being rammed through Parliament

Once Ottawa gets over the cheap thrills provided by the Barack Obama visit, maybe somebody in town could get back to some real work, such as raising a little hell over the Harper government’s 547-page budget gorilla. Bill C-10, a sweeping omnibus package, represents one of the greatest legislative railroad jobs in recent history.

Budget bills are usually limited to tax code changes and legislation authorizing spending. But the giant wad of paper Finance Minister Jim Flaherty dropped on Parliament during a recent Friday afternoon media dead zone came packed with major changes to competition law and financial regulations, including the fine print on parts of Ottawa’s various bank and auto company bailouts.

New powers and billions in cash have been assigned to agencies and programs. The Export Development Corp. and Business Development Corp. — two Crowns whose role as subsidizers of business activity have long been questioned — get fat new mandates under the Tories. The Minister of Finance is set to receive a book of blank cheques to “promote the stability or maintain the efficiency of the financial system, including financial markets, in Canada.”

Whatever that means, and whether any of the changes are necessary or desirable, is beside the point. The fact is we will never know until it’s too late, since Bill C-10 is subject to a confidence vote. As things now stand, the budget bill will get two days of cursory committee review next week, before it rolls down the track for instant ratification, with hardly a word of the massive text coming under review. Most of the words, in any case, are unreadable and incomprehensible without a team of lawyers.

So much for Stephen Harper’s enthusiasm for greater democratic scrutiny and MP responsibility. So much, too, for Michael Ignatieff’s highly publicized bid to force the government to submit the Harper fiscal stimulus regime to periodic review. The Liberals are willing to waste time in mock sword fights over macroeconomic mumbo-jumbo, but will spend no time on the substance of a budget bill that contains major changes to the corporate and financial legal system.

If the Liberals want an opportunity to call the government’s bluff on a confidence vote, this is it. Then watch the government back down.

The most obvious affront to process is the major reforms of Canada’s competition laws, jammed into the budget bill without warning or advance discussion. The competition bar of the Canadian legal community, a highly specialized field filled with experts, has already come out swinging against Bill C-10. Below this column, in the third piece in a series on the competition changes, Shawn Neylan of Stikeman Elliott outlines the likely impact of bringing in monetary penalties of up to $15-million against companies that abuse their dominant position in a market.

Abuse of dominance provisions are the type of law that Liberal competition watchdog Dan McTeague likes, even though they serve only to bring criminal-like punishment to companies that are engaging in healthy competitive activity. For others in Mr. Neylan’s series, see www.financial post.com/fpcomment.

Of much greater concern are major alterations to the federal merger review process, new conspiracy and bid-rigging rules, misleading advertising rules, and reform of price discrimination and other sections of the competition act. The Investment Canada Act also gets a revamp.

Most of the Competition Act changes are controversial, either as economic theory or in business practice. Normally, changes of this magnitude are made after draft papers are published and detailed clause-by-clause reviews conducted. But the politicians in the Harper Conservative government appear to have fallen under the spell of Industry Canada and Competition Bureau bureaucrats.

Not one of the competition policy reforms has any true relationship with Mr. Flaherty’s budget. The competition policy package was just stuffed into Bill C-10, turning the budget implementation bill into a Trojan horse for policy that may not be what Canadians want or need. Some reforms might be useful and appropriate, but without a proper advance examination, nobody knows. It all needs to go back to the shop for systematic release through proper channels.

Removing the competition policy reform from Bill C-10 would be a good start, but that would still leave 500 other pages. Many of those pages are aimed at providing legal cover for Ottawa’s ballooning $200-billion-plus financial industry bailout program, euphemistically known as the Extraordinary Financing Framework (EFF).

At least competition policy has been the subject of decades of work, and experts can detect dangerous meddles when the see them. The financial tinkering in EFF is all new stuff, thrown together by politicians and bureaucrats who didn’t even have time to try things out on the back of an envelope. They are literally making this up as they go along, damn the unforeseen consequences.

The EFF rationale is itself a tiny bit of policy-making fluff. The budget documents endlessly repeat the need to provide the “tools” to maintain “financial stability” and “enhance efficiency” of the Canadian financial system. Ottawa will run up new debt worth more than $250-billion over the next two years, to support deficit spending and invest in the financial system.

The legal support for all that borrowing is in the fine print of the bill that’s now about to be rammed through Parliament.

The role of the Export Development Corp. (EDC) is to be expanded. Until now legally focused on boosting the foreign trade of Canadian business, it will have its mandate temporarily extended to include supporting “domestic trade and Canadian capacity to engage in that trade and to respond to domestic business opportunities.” With a new $1.5-billion infusion of government money, it will leverage its balance sheet by another $5-billion. The EDC’s infamous “Canada Account,” a sort of off-balance sheet slush fund run by the Minister of Finance, will be given another $7-billion, raising the total to $20-billion. The EDC, effectively, becomes another Canadian banking institution, under government control.

The Business Development Corp., Ottawa’s bank-like lender to small business, will have another $5-billion to work out new deals with the chartered banks, acting as a back-door subsidy to higher-risk Canadian bank lending.

Then there’s the $12-billion lending facility Ottawa is setting up to backstop vehicle and equipment leasing packages. Here the government is single-handedly trying to revive the asset-backed securities market.

Insurance companies and other lenders are also in line for government guarantees worth billions. The Minister of Finance, the Canada Deposit Insurance Corp. and other agencies are also to get authority to purchase, acquire, hold, lend or sell or invest directly in financial institutions.

What consequences flow from these and many other of Bill C-10’s sweeping expansions of government power in the financial system is unknown, unexamined, untested and uncertain. And all of it is now being railroaded through Parliament by the Harper government.

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This entry was posted on Wednesday, February 18th, 2009 at 7:03 pm and is filed under accountability, appropriation, economics, taxation. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.