Election 2015: How Bad Is the NDP?

In this series CMR will examine the policy proposals set forth by the top three parties in Canada’s 2015 federal election.

Obviously these parties are all terrible. So the question is simply this: which party will beat you with the biggest stick?

We will refer to the helpful National Post article “Everything you need to know about the parties’ platforms, from taxes to terrorism to the environment.”

In Part I, we will look at the NDP.

We know all the platforms are going to be bad, but intuitively any free market supporter will expect this one to be the worst. We shall see.

Economy

– Balance the budget in 2016.

This is meaningless unless we know how they will balance the budget. Cut spending? This would be good, but unlikely. Raise revenue by increasing taxation, fees, and other forms of plunder? This would be bad. Since it’s the NDP, we can safely assume the latter is more likely.

– Not raise personal income-tax rates.

Well that’s ‘nice’, but a personal income tax cut be better. Still, it’s a pleasant surprise that they don’t want to hike taxes on “the rich.”

– Cancel government’s income-splitting policy for families; says it helps only wealthiest 15 per cent.

This would increase the tax burden on any family to which it applies, and is therefore bad. That it applies mostly to the “wealthiest” is true depending on how you define “wealthy,” but it also applies only to those who have someone with whom they can split their income. So it is rather selective and narrow in its tax relief. This is an interesting matter on its own, and of course tax relief for everyone would be better. But regardless of the fairness issue, added tax relief for some is better than added tax relief for none.

– Reverse changes to TFSA contribution limits; says higher amount helps the wealthy and does little for middle-class Canadians.

The TFSA is one of the only good things the Harper Conservatives have ever done. Reducing the contribution limits means more taxable income and therefore this is an evil NDP policy.

– Increase income-tax rates on Canada’s largest corporations to about the levels that existed before the Conservatives took office.

After the income tax, the corporate tax is probably the dumbest tax possible. It should be eliminated, not raised. Shareholders own corporations. Shareholders are paying the tax. The NDP wants to increase taxes on shareholders of Canada’s largest corporations. Due to the way many people and pension plans invest, this applies to a huge portion of Canadians.

– Cut small-business tax rate to nine per cent from current 11 per cent.

Tax cuts are good. But let’s be serious here: going from 11 to 9 percent is extremely ungenerous. Why don’t they just say “no more corporate income tax on small businesses”? That would significantly change economic behavior and the economy would get a large boost of productivity and job growth.

This NDP proposal reveals a certain cluelessness about how the business world works, which is unsurprising when it comes to the NDP. Most small businesses (less than $500,000 income) having earnings less than $100,000 per year. Most have less than $100,000 in revenues each year. This tax cut amounts to peanuts for a lot of businesses and will rarely make or break hiring decisions.

Furthermore, accountants prepare tax returns with the objective of minimizing the tax of the corporation. Most small businesses companies are “flow-through entities”, meaning it is well understood by tax professionals and the tax collectors that the corporation will minimize its tax, and earnings will “flow through” to the private owner, who is taxed for personal income. So the businesses targeted by this tax cut don’t pay much tax anyway and it really wouldn’t make a whole lot of difference.

But a tax cut is a tax cut, so this is actually good.

– Honour the expanded Universal Child Care Benefit.

This benefit is a mixed bag. For families that are net taxpayers, it amounts to a reduction of tax burden and is therefore good. For families that are net taxconsumers, it amounts to a form of welfare where people with no children are forced to subsidize people with children. This is unfair.

– Create $15-a-day national child care program, and create or maintain one million affordable child care spaces across Canada.

This is really bad. This is a huge tax on people with no children and a huge subsidy to people with children. That is unfair. It is also a huge boon to the the crony capitalists of the child care industry.

A better way to deal with the high prices of child care services would be to remove all associated regulations, licensing, and taxation. Quality and supply of child care would soar.

And what exactly should this national child care program consist of? Because it’s a government program, this will be decided by those with the most political influence — and that will never be the average parent.

– Cancel Conservative decision to increase OAS eligibility age to 67.

Evaluating this is a little more complicated than most proposals. On the one hand, OAS is welfare for old folks. This involves subsidizing old folks (who tend to have more accumulated wealth) by taxing younger people (who tend to have less accumulated wealth). Taking money from poorer people and giving it to wealthier people is a weird policy. On the other hand, old folks who are/were net taxpayers deserve to get all their money back, so the OAS could be considered on the same terms as taking a tax credit. Overall, the OAS is bad and should just be eliminated, and with that in mind increasing the age limit is probably better because the best result would be increasing the age limit to 1000 so no one could get it.

– Increase Canada Pension Plan contributions and benefits for Canadians.

The NDP makes these increased contributions sound compulsory, so that is bad. People should be able to opt out of CPP if they want.

Terrorism, War, and National Security

– End the bombing campaign and pull out all military personnel from Iraq and Syria; boost humanitarian aid to help refugees affected by ISIL as well as investigate and prosecute war crimes.

This is mostly good, as Canada’s role in the war against the Islamic State / ISIL / ISIS should end at immediately. No bombs, no troops, no military support for other countries participating in the conflict. It is a regional conflict between bitter enemies and all outside intervention is merely aggrandizing the situation. ISIS is no threat to our national security. It is certainly no “existential threat” as Harper says, and it is just delusional paranoia to think otherwise. ISIS is a small ragtag army with a few hardcore jihadi veterans and the rest is a bunch of losers. They have no navy, no air force, and they probably can’t even fix their sweet new Toyotas if they break down. This isn’t Nazi Germany or Soviet Russia, people.

However, the federal government should not provide humanitarian aid or help refugees or prosecute war crimes in other countries. It should not prevent Canadians from aiding in any way they see fit, whether that means letting refugees into their homes, sending aid overseas, or traveling to conflict zones to help directly. The government has no business bringing foreigners into the country and giving them welfare.

– Repeal Bill C-51, the anti-terrorism act.

This is a good policy. Bill C-51 is a dangerous law representing an aggressive attack on free speech, habeas corpus, privacy, and other features of the rule of law and civil liberties. All in the name of “security”, of course. It is premised on the bogus “War on Terror” so that automatically makes it awful. Realistically, the government doesn’t need more laws to catch bad guys, and C-51 just removes restrictions that make it harder for the government to punish innocent people.

– Provide more independent review of Canada’s national security agencies.

Independent review is meaningless, because anything in which the government is involved is political. The only way to limit the power of national security agencies is to cut their budgets or simply eliminate them. These proposals about having “better oversight” are useless.

– Support a counter-radicalization program.

I have been unable to find any clarity about that this means, but it is probably something stupid. Does it mean the government interfering with certain religious institutions, or institutions with unsavory political views, or crazy websites?

Actually, it probably involves more welfare to certain people, because there is a silly leftist-liberal notion that if you give people enough money and help from the government they won’t want to become terrorists.

Despite lack of details, it seems impossible that this policy wouldn’t be dumb,

The Environment

– Continue opposing the Northern Gateway pipeline; it initially supported concept of west-east pipeline, but says Energy East can’t be approved without more stringent environmental review process; opposes Keystone XL pipeline.

Why does the NDP have to be so full of jerks? The Northern Gateway pipeline issue can be settled entirely between BC and Alberta — you know, the provinces actually touched by the pipeline route. There is no reason for Ottawa to have a say in the process at all.

Likewise for Energy East. The route touches six provinces and it can be sorted out between those provinces. There is no justification for Ottawa to impose more stringent environmental regulations when the provinces affected can handle that themselves.

One might contend that the Keystone XL pipeline is different because it goes to another country, but international borders are economically arbitrary and there is no justification for Ottawa to interfere here either. The Keystone XL pipeline really has nothing to do with Ottawa at all. It’s Alberta’s oil and the route only touches Alberta and a handful of American states. It should be an issue settled between Albertan and American property owners and the pipeline company.

Ottawa has no business either supporting or opposing any of these pipeline projects. The right choice is simply to decentralize the whole issue. The NDP is terrible on this issue.

– Create a cap-and-trade system with a market price on carbon emissions; revenue from cap-and-trade would be invested in a greener energy sector in regions where dollars are generated.

Horrible. Tax industries the NDP doesn’t like and subsidize politically-connected cronies in industries that the NDP does like. It would encourage people to shift resources out of productive sectors that are being taxed into nonproductive sectors that are being subsidized. This is one of the NDP’s worst policies so far.

– Work with provinces to create a new fund to help Canadians retrofit their homes and offices to save energy and money.

This is a subsidy to people who own homes and office buildings, which tend to be wealthier people. This would be paid for by people who don’t own homes or office buildings. This is a pathetic transfer of wealth from poorer people to wealthier people. Stupid and evil.

– Redirect $1 billion a year from fossil fuel subsidies to investment in the clean energy sector.

The government should not subsidize fossil fuels and it should not subsidize the clean energy sector. The government should simply eliminate the subsidies and let different forms of energy production be determined on their own merits.

– Invest in Sustainable Development Technology Canada – including wind, hydro, solar and geothermal technologies – to create thousands of new jobs for Canadians.

This is truly awful. What does “invest in Sustainable Development Technology Canada” mean? It means subsidizing what the government considers be worthy, so crony capitalism.

And here is a critical point: this doesn’t create jobs! The government has no resources of its own. To spend money to generate jobs in one sector, the government must take money from another sector, thus destroying jobs. This policy would actually leave the country poorer, giving us fewer real productive jobs, and more unproductive jobs. Again, this would encourage people to shift resources out of productive sectors that are being taxed into nonproductive sectors that are being subsidized. Just awful.

Infrastructure and Transport

– Dedicate an additional one cent of the existing 10-cents-per-litre federal gas tax to roads, bridges and other core infrastructure, reaching an additional $1.5-billion annually by the end of an NDP government’s first mandate, on top of almost $2.2 billion in existing annual gas tax transfers to municipalities.

This is a slight improvement all in all. It is better for the province to keep a bit of the money rather than having it all go to Ottawa. If the NDP were serious about their desire to help communities fix their infrastructure, they would just eliminate the federal gas tax completely and have that money stay in those communities. There is no reason why drivers in Nova Scotia should subsidize bridges in British Columbia or vice versa.

– Develop a better transit plan with the provinces and territories and invest $1.3 billion annually over next 20 years for predictable and stable public transit funding for municipalities.

A subsidy to public transit, which only benefits places with public transit. Why should people in rural Saskatchewan subsidize Toronto’s subway system, with Ottawa taking a big cut? Only a real jerk would support this.

Foreign Affairs and Defense

– Increase Canada’s foreign aid to 0.7 per cent of gross national income, or GNI (Canada currently spends 0.24 per cent of GNI on foreign aid).

Foreign aid? FOREIGN AID!? This tends to be the most unpopular form of government spending across the political spectrum, and the NDP wants to increase it? Nay, nearly triple it! Let’s not forget that foreign aid takes money from people in this country, and gives it to corrupt foreign governments that use the money to enrich themselves and their friends. Maybe the lowly people who need help will get a few pennies on the dollar, if they’re lucky. Also, foreign aid frequently comes with the stipulation it be spent on Canadian products, which amounts to a roundabout subsidy to certain politically favored big business.

This proposal is unbelievably stupid. The NDP should be embarrassed over how stupid this policy is.

– Reopen the nine Veterans Affairs regional offices closed by the Conservative government.

The Cons merely shifted resources around. It’s six of one thing or half a dozen of another. This is a non-issue. Veteran Affairs Canada should just be closed down completely, and veterans should automatically be exempt from all forms of taxation.

Social Issues

– Restore the six-per-cent annual increase to health-care transfers to the provinces.

The health care budget should be reduced every year, so this is a step in the wrong direction.

– Restore door-to-door home mail delivery by Canada Post for households that lost it under Conservative government.

This is a social issue? But no, the government should not decide how mail should be delivered. Canada Post should be privatized, all legal restrictions for private mail carriers should be eliminated, and the market should decide how mail will be delivered.

– Reinstate the mandatory long-form census, which the government replaced with the voluntary National Household Survey.

In other words, the government should force people to waste their time providing information that helps the government control their lives better — at gunpoint, if necessary. The long-form census is a disgrace to humanity and should never be reinstated. The short-form census should be completely voluntary.

Democratic Reform and Governance

– Replace the current first-past-the-post electoral system with a mixed member proportional system, which combines proportional representation of parties in House of Commons with direct election of MP in each riding.

Pointless fiddling with the broken system called democracy, and arguably this makes things worse by rewarding more populous provinces with more political influences.

– Abolish the Senate (which requires constitutional talks with the provinces).

Sure, everyone wants to abolish the Senate (except the senators). I don’t think this is a serious proposal, however.

– Strengthen the mandate and independence of the Parliamentary Budget Officer and make the position an Officer of Parliament.

This is pointless and no one cares.

Justice

– Immediately decriminalize marijuana, where users aren’t criminally prosecuted so nobody goes to jail for smoking a joint; party is open to considering legalization, but is calling for a commission to consult Canadians and instruct Parliament on how to carefully regulate non-medical use.

Decriminalizing drug use is an improvement, but it preserves the black market and seemingly all laws about selling drugs. The war on drugs is a stupid failure and there is no reason to continue it.

Setting up a commission is a waste of time that will produce a giant report that no one will ever read. Marijuana should just be legalized without a fuss, along with every other drug, and no regulation or taxation at all.

– Introduce legislation demanding Supreme Court of Canada justices be bilingual.

Bilingualism is a bad government policy and this is a dumb proposal. Basically they are saying all the Supreme Court of Canada justices should be from Eastern Canada.

– Strengthen laws to keep drunk drivers off of streets.

They actually don’t need to strengthen any laws or create any new laws for this. They just need to enforce laws about injuring people or killing people or destroying property. As any drunk driving lawyer will tell you, the current system entails a perverse situation where the best way to kill someone and get a light punishment is to get drunk and hit them with your car.  Therefore, this is a bad proposal.

Aboriginal Issues

– Call a national inquiry into murdered and missing aboriginal women, and act on other recommendations from the Truth and Reconciliation Commission.

The high rate of homicide against Aboriginal women is awful (4.5x higher than other Canadian women), but a national inquiry doesn’t help the situation at all. It’s just a big waste of time and money.

Crimes should be investigated and evildoers should be prosecuted and punished. That’s it. The problem is that the RCMP apparently does a lousy job investigating crimes. What else is new? A national inquiry into the “social context”of murdered Aboriginal women doesn’t help that situation at all, because the RCMP is inherently inefficient.

If you really want “social context” regarding Aboriginal women and homicide, consider this: the government has done incredible damage to the indigenous people of Canada with its bureaucratic, Soviet-style rulership of this political sub-class. Aboriginals are subject to the most socialistic treatment of any Canadians, and unsurprisingly the consequences have been social dysfunction. We actually saw the same pattern in Soviet Russia. When you deny people their most basic, fundamental rights to property and make the state in charge of taking of them, the result tends to be greater levels of dysfunction such as alcoholism and drug abuse, vagrancy, idleness, illegitimacy, promiscuity, criminal behavior, suicide, and wife-murdering or girlfriend-murdering. Maybe if the government gave some respect to aboriginal property rights their situation would start to turn around. Instead, it is content to maintain the status quo where the Crown owns all native land, and it is administered through a huge, inept bureaucracy and Soviet-like band councils.

– Reduce poverty, improve educational outcomes and increase opportunities for First Nations, Inuit and Métis communities across Canada.

If the NDP really wanted to do this they would abolish the Department of Aboriginal Affairs and Northern Development. We know they aren’t going to do that. Instead, this implies spending more money on a failed system and hurting First Nations, Inuit, and Métis even more. Hasn’t the government done enough to these people? Why does the NDP hate them so much?

– Create a cabinet committee, chaired by the prime minister, to ensure federal government decisions respect treaty rights and Canada’s international obligations.

No. Just… no. Abolish Aboriginal Affairs and Northern Development.  Let aboriginals actually own their land and homestead land currently owned by the Canadian state. Recognize the property rights of aboriginals. Anything else is a waste of time.

One can only infer that the NDP hates the aboriginal people of Canada.

Conclusion

The NDP platform is mostly full of dreadful policies that will make Canada worse. However, to their credit, they have a few policies that are relatively good.

Overal score:

D-

Next time: CMR will look at the Liberal Party’s platform. 

Which Science Can We Trust?

Since the science of global warming is a sham, it makes you wonder what other scientific shams are out there making our lives worse.

For 50 years, we’ve been told that fats are bad and you will get fat if you eat fat and you will die.

Well, maybe that’s not actually true.

The saturated fats found in meat and dairy produce are not as bad for health as previously believed, a study has found. However, the scientists who conducted the research have warned against reaching for the butter dish.

A major study into the health implications of dietary fats has failed to find a link between food containing saturated fats, such as eggs, chocolate and cream, and an increased risk of dying from heart disease, stroke or type-2 diabetes.

The study nevertheless did find that industrially-produced “trans-fats” made from hydrogenated oils, and once used in margarine, snack foods and packaged baked foods such as some cakes and crisps, are linked with a greater risk of death from coronary heart disease.

The latest findings, published in the British Medical Journal, appear to confirm the growing realisation that the prevailing health advice for the past half century to cut down on foods that are rich in saturated fats such as butter and cheese may have been misguided.

Oops. Yet another example of arrogant scientists being so sure they were right, then it turns out they were wrong.

Scary NDP Climate Change Survey Reveals Their Desired Policies

Members of Notley’s NDP government are global warming radicals. Remember that the global warming movement is not actually about science and global warming, which is why global warming fanatics disregard the mountain of evidence that refutes them. Global warming activists slavishly cling to junk science because they yearn for power where lawmakers, bureaucrats, and crony capitalists who favor socialism can gain control over the economy.

With that in mind, the government has released a fake survey regarding Alberta’s policies on climate change. It is fake because they really don’t care what anyone thinks. It’s like “you can choose any color you like as long as it’s red.”

(By the way, you don’t need to be an Albertan to take the survey.)

Basically, it is a rather unfair survey. It doesn’t really give you the option to reject all the proposals. Sure, it asks you whether you support more “government action” on climate change, but after that you only get loaded questions and the option to rank various dumb policies from most awesome to least awesome. So obviously the plan is to disregard any opinion where the respondent says they want no further government action on climate change, and just tally up results the rest of the survey and say “Such and such are the policies Albertans support the most!”

First it asks you whether you are worried about climate change. Well, despite all the chatter about it, no one really seems to be all that concerned about climate change to be honest. They care about it less and less with each year, and it’s at the bottom of their list when it comes to environmental issues.

global warming gallup poll

worriedagreatdeal

From there, each section starts with a preamble of deceptive, shallow propaganda. A large section of deception precedes the bulk of the survey:

The world’s climate has changed at an unprecedented rate since the 1950s. Increasing concentration of greenhouse gases have warmed the atmosphere, diminishing snow and ice, warming oceans, raising sea levels, and causing more extreme weather, such as floods and droughts. We can also see its effects locally through impacts such as the spread of the mountain pine beetle.

Scientific evidence tells us that – without significant action on a global scale – the consequences of climate change will be severe.

Even if all of this were true (it isn’t; global warming exists only in the minds of charlatans and cranks), it doesn’t follow that we can or should use the government to do anything about it. So the survey basically starts off with a big non sequitur and by lying to the respondent .

Then comes the craziness:

In advance of the conference, the Government of Canada has proposed a commitment to reduce greenhouse gas emissions to 30 per cent below 2005 levels by 2030. While Alberta’s energy-based economy helps fuel economic growth across Canada, we also account for approximately 37 per cent of Canada’s total emissions. The reputational impact of Canada’s action on climate change is likely to fall heavily on our province, which has already drawn domestic and international criticism.

This is really awful. The NDP is telling us that we should ravage the economy for the sake of our reputation among contemptuous and ignorant people — within and without Canada — who might not like us because we burn a lot of fossil fuels while we recover even more fossil fuels, supporting humanity with cheap energy which makes the modern world’s economy possible at all. At the same time, some people seeking power in the next federal election want to prevent Alberta from mining tar sands and burning fossil fuels in the process.

Slight detour: Regardless of any commitment Ottawa makes, there is no real constitutional authority for the federal government to interfere with a province’s resource development. The 1982 Amendments to the Constitution Act explicitly state the that the provinces have exclusive jurisdiction over their non-renewable natural resources. Of course, as always with these matters, there are some loopholes. The federal government has jurisdiction over  “local Works and Undertakings declared by the Parliament of Canada to be for the Advantage of two or more of the Provinces.” That’s a problem. Plus, we had the National Energy Program regardless of any constitutional division of powers. So the Constitution Act doesn’t seem to be worth a damn. On the other hand, provincial governments have the constitutional right to do anything they want regarding the resources in their territories.

But anyway…

Then the propaganda tries to make us care about another climate change conference and fairy tale treaties:

In December 2015, the United Nations is hosting the Conference of Parties in Paris. The desired outcome is to create a binding treaty that will commit all nations to significantly reduce their greenhouse gas emissions.

This is completely Irrelevant. These treaties never go anywhere. No one cares about them. There are no sanctions. The governments of the world never bothered to implement the Kyoto treaty of 1992 or its update in 1997. It lapsed on with the end of 2012. Game over. No one cares.

Then comes this nonsense:

Alberta’s energy economy depends on its ability to reach – and sell – our resources in markets throughout North America and around the world. These markets are increasingly demanding cleaner forms of energy. If we don’t take action on climate change locally, Alberta will find itself increasingly isolated and shut out of markets.

This is just wrong and sneakily misleading. When it comes to the environmental issue, opposition to the pipeline infrastructure stems from people, rightly or wrongly, being afraid of toxic substances flowing through the country in pipelines with the potential to leak out or spill and poison everything around them and kill everybody. It has nothing to do with climate change! Alberta can implement all the climate change policies it wants, but people will still have rational and irrational concerns about pipelines. Alberta’s efforts to access new markets for its products will not at all be helped by its abusive government’s bigger, badder climate change policies.

From there, the various agree/disagree questions reveal all the dream policies of the NDP. Question #14 is where it becomes obvious that they don’t care about your opinion. These are the things the NDP wants and it’s going to do them.

Now, thinking about the options discussed above, please rank them by priority with the highest being the action you would most like to see taken. Drag the choices into your preferred order, or use the arrow buttons to move the options up or down.

choices

So it asks you to rank a bunch of terrible policies that all belong in the “evil and uneconomical” category: an exploitative interprovincial cap n’ trade system, increasing taxes on industrial companies that burn fossil fuels, increasing subsidies to companies with political connections, increasing taxes on everyone, and subsidizing middle and upper class people who own buildings and houses.

You’ll notice it fails to include the option of “no further government intervention, thanks.”

Then in goes on to ask whether you support more horrible policies, including:

  • Redistributing money to favored municipalities and spending more money on government institutions for “retrofits”
  • Subsidizing homeowners (which tend to be middle or upper class people) with ‘incentives’ and grants (theoretically, incentives could include reducing taxes and regulations on more energy efficient technology — but who are we kidding? This is the NDP).
  • Subsidizing and protecting politically favored renewable energy producers.
  • Literally killing (or “phasing out,” as the NDP likes to say) an industry that some people don’t like. Don’t you love when the government decides who will be in business and who won’t be?

This is all quite terrifying. This tells us what the NDP wants. They just want to beat us over the head with fake survey results in a pathetic attempt to justify their destructive policies.

If you want bureaucratic control over the economy, inefficiency, unemployment, and impoverishment, you should support the NDP’s climate change policy.

If you want to subsidize India and China, where they don’t care about the bureaucratic rules and regulatory systems in Alberta, then you should support the NDP’s climate change policies.

If you want to get less energy and pay more for everything, then support the NDP’s climate policies.

If you are a good person, you should oppose them.

Mises on Social Justice Warriors

Ludwig von Mises had the social justice warriors nailed 50+ years before they became a thing.

This search for a scapegoat is an attitude of people living under the social order which treats everybody according to his contribution to the well-being of his fellow men and where thus everybody is the founder of his own fortune. In such a society each member whose ambitions have not been fully satisfied resents the fortune of all those who succeeded better. The fool releases these feelings in slander and defamation. The more sophisticated do not indulge in personal calumny. They sublimate their hatred into a philosophy, the philosophy of anti-capitalism, in order to render inaudible the inner voice that tells them that their failure is entirely their own fault. Their fanaticism in defending their critique of capitalism is precisely due to the fact that they are fighting their own awareness of its falsity.

“The suffering from frustrated ambition is peculiar to people living in a society of equality under the law. It is not caused by equality under the law, but by the fact that in a society of equality under the law the inequality of men with regard to intellectual abilities, will power and application becomes visible. The gulf between what a man is and achieves and what he thinks of his own abilities and achievements is pitilessly revealed. Daydreams of a ‘fair’ world which would treat him according to his “real worth” are the refuge of all those plagued by a lack of self-knowledge.

The Anti-Capitalist Mentality, pp.14-15

NDP’s Royalty Review Czar Dave Mowat Is a Climate Change Propagandist Trained by Al Gore

I knew I smelled a rat when Notley’s NDP chose ATB President and CEO Dave Mowat to head the royalty review board.

In a process that will surely revolve around “fairness” and other uneconomic nonsense, why would the NDP pick a banker of all things to head the review?

Well, now we know.

mowatandgore

algorelies

http://www.canada.com/edmontonjournal/story.html?id=5371ac3d-3b2d-4825-a158-45fd0c3978bb&k=18066

Hmm, do you think his thinking might be a bit clouded by Algore’s lies?

Al Gore’s documentary is one of the most deceitful pieces of trash ever created. Rather than provide a thorough critique, it is sufficient to show this:

al_gore_graph

The x-axis there is supposed to be time. How does the data go backwards in time? That doesn’t make any sense!

I know Algore created the internet with his bare hands and all that, but did he invent a way to break the laws of space-time too? This is total nonsense — climate change propaganda at its worst.

Can Dave Mowat explain this magical graph? Was that part of his propaganda training with Algore?

Heck, the famous Algore graph shows CO2 increases preceding the temperature rise. You fail automatically at science if you observe that A precedes B and therefore conclude that B causes A.

Algore is a shameless liar and anyone trained to spread his lies should not be running a royalty review for Alberta’s oil industry.

It’s seems fair enough to say that Dave Mowat is biased. So he is the perfect guy to push the NDP’s agenda.

Market Lemmings Case Study: Tourmaline Oil Corp.

The fall in oil prices is starting to expose some of the waste in the energy sector, but this central bank fueled bubble is still rife with clusters of error.

The ‘boom’ phase of the business cycle — more accurately described as the malinvestment phase — is where a lot of things just stop making sense. People will shovel money into wasteful investments based on distorted credit conditions and hyped up expectations.

Today our case study is Tourmaline Oil Corp., a favorite in the independent energy growth company category. With a 52-week high of $58.73, the consensus analyst rating is “buy” while presently trading around $39 at 18x earnings. It recently issued $168 million in new shares (at $39.50/share).

CMR analyst Daniel Plainview shows why Tourmaline is an economic black hole relying on the “greater fool.” Regardless of whatever distortions manifest in the stock market, Tourmaline is its present form is a zombie company — not an investment, but just one of many ways to gamble in the stock market casino.

A Question for Tourmaline Oil Corp.: How Do You Make Money?

By Daniel Plainview

When trying to determine the proper price of a stock the conventional rule of thumb is to predict the amount of money that stock is going to make each year over the long term, and then discount those earnings to the present at an appropriate rate for the risk you are taking.

The inverse of this, but it is in essence the exact same methodology, is to use a Price to Earnings ratio to evaluate a stock. The higher the ratio, the more expensive the stock; the lower the ratio, the more likely you are getting a good deal, so long as the future earnings hold up.

But what if the stock you are looking at is in an industry that typically doesn’t make any money?  I’m referring to industries where the company earnings are often affected, to a large degree, by depletion expenses.

Depletion is a non-cash charge and it can ensure that a company generates plenty of cash flow but renders the conventional Price to Earnings analysis moot. Industries with high DD&A (Depletion, Depreciation & Amortization) are generally involved in resource extraction.

Because earnings are essentially meaningless for a lot of resource companies (not to mention the other accounting tricks that can affect earnings) it’s always a good idea to look at a company’s cash flows.  There are three types of cash flows:

  1. Cash flows from operations
  2. Cash flows from investing
  3. Cash flow from financing

While in any given period the cash flows in any of these buckets can be either positive or negative, over the medium to longer term (2+ years) one invariably wants to see that cash flow from operations is positive, cash flows from investing is slightly negative, and cash flows from financing is also negative; with the change in cash position from period to period being immaterial.

What a positive/negative/negative cash flow segmentation is indicative of is 1) the company is making money, 2) that it is reinvesting in the business to grow the business, and 3) it is able to return capital to the shareholder, or at least doesn’t steadily require new financing to fund its investments.

It is with this in mind that we now consider the Canadian oil and gas industry.

Recently the commodity prices that drive the cash flow from operations that Exploration and Production (E&P) companies generate took a tumble.  Both oil and gas prices fell by ~50% from their levels in the first half of 2014.

By itself a single year of lousy prices shouldn’t erode as much value in the markets as what occurred, but what changed is the market is now more pessimistic about prices for all future periods too.

Companies have responded by scaling back their investing, and cutting capital expenditures for the drilling of new wells and building of new facilities.

Generally speaking, oil and gas companies always have to be spending some money on new production in order to maintain overall production levels.  Well performance declines over time, and by how much depends a lot on the geology of the particular “play”.

A really good well might only decline at ~20% per year, but it still declines.  Newer unconventional extraction methods (drilling horizontal multi-stage frac wells into shales) can come down a lot faster: ~50% per year.

So ultimately the goal of any oil and gas company, in any environment, is to have enough cash flow from operations that it can pay for all the cash flow from investing (capital expenditures needed to keep production up), and still have enough left over to pay the shareholder.

Enter Tourmaline Oil: the oil company that has 85% of their production coming from natural gas.  Etymology aside, there are more serious issues with this company’s business model.

In their last earnings announcement in March, they happily proclaimed their 76% growth in cash flow. Sounds good… but wait! There is a footnote: “Cash flow is defined as cash provided by operations before changes in non-cash operating working capital.” So what about capital expenditures?

Here is a chart of Tourmaline’s cash flows, going back to 2009:

tourmaline

The cash flow from operations is in green, and the company’s capital expenditures (only a sub-set of cash flow from investing) are in red.  The black line represents the cumulative amount of cash flow from operations minus capital expenditures (or Free Cash Flow) up to each period.

What this shows is that Tourmaline has spent almost $4.7 billion more on drilling holes in the ground, than it has made from the hydrocarbons those holes have produced, since 2009.  Furthermore, over 25 quarters of results, they have never made more money than they spent: Free Cash Flow has never been positive.

In the company’s defense, they have grown production at an industry-leading rate.  But it really looks like they’re spending a dollar to make fifty cents, and making up for it on volume.

It has gotten to the point where if the company stopped spending money, but continued to earn cash flow from operations (and let us assume the same prices and only a 20% production annual decline), they could not make that money back.  In actuality Tourmaline’s wells probably decline a lot harder than 20%, but the story is bad enough as it is.

These harsh realities force us to ask the question: where did the company get $4.7 billion?  The answer is that they got it from new investors who bought shares in secondary offerings, and some money from raising debt.  It looks as though this external funding process will have to continue ad infinitum; another secondary offering being announced just recently for $168 million.

And investors should keep this in mind: the only reason Tourmaline is able to grow production on a per share basis is because the shares have a decent valuation, but the only reason the shares manage to eke out a decent valuation is because they are able to grow production on a per share basis.  If the shares were to fall enough in price, the amount of dilution created by external financing would make it impossible for the company to grow.

And the last point to make about the company: the management team in prior iterations at Berkeley and at Duvernay were able to successfully build up and then sell the company to a bigger fish.  Duvernay in particular made a lot of people a lot of money as it was sold at the height of the commodity boom in 2008 and Shell paid an unmatched valuation in the transaction (~27x EBITDA).

In fact, the only way Tourmaline’s business model makes any sense is with an M&A exit strategy: ramp up production at any price, and find a sucker to buy it just before the house of cards collapses.

But if investors are assuming Tourmaline will be similarly sold I would only point out that Tourmaline is now worth about $9.2 billion and is the 8th largest E&P company by market capitalization in Canada.  It’s getting to be too big for others to swallow, and suckers like Shell might be hard to find this time around.

Then again, they did just find another 4.25 million suckers…

(Click here for supporting calculations.)

Alberta’s NDP, Unions, and the Minimum Wage

When analyzing public policy, one must typically ignore stated goals and understand the economic incentives that make groups favor certain forms of economic intervention.

Unions, as a group, tend to favor market restrictions that prop up their higher wage rates.

Alberta’s NDP, led by Rachel Notley, favors unions.

evilnotley

This an important factor in the NDP arguing for a 50% increase to Alberta’s minimum wage, despite protests from the business community and anyone with an understanding of basic economic law. NDP goal to hike minimum wage has nothing to do with helping less productive workers make more income, regardless of what their stated objectives are.

Minimum wage laws are a classic form of monopolistic grants of privilege that benefit some groups at the expense of others. Despite the proclaimed objective of minimum wage laws, which is to increase incomes of the most marginal workers, the actual effect is the exact opposite — it makes them unemployable because they are not sufficiently productive to be employed at the legal wage rates. This means that minimum wages will always cause more unemployment than otherwise — any economist who denies this is either a liar or a fool who doesn’t even understand the basic principles of price controls.

Who benefits from such laws? Certainly not the marginal workers, for it becomes illegal to hire them at the wage justified by their productivity. On the other hand, anyone employed above the minimum wage benefits because their competition is reduced. In particular, unions benefit from minimum wage laws. Unions despise cheaper labor competition. Minimum wage laws remove competition of less productive workers by forcing them to be unemployed.

And there is another reason why unions love minimum wage hikes — it is a devious way to increase their own wages. This can work in many ways depending on the labor agreement. Some agreements trigger mandatory wage hikes when statutory minimum wages increase (because wages are based on a percentage above minimum wage). Others have provisions to open wage negotiations if minimum wages go up.

I am not making this up. Economic theory informs us that we should expect nothing less. But consider also a 2004 study in the Journal of Human Resources by economists William Wascher, Mark Schweitzer and David Neumark. They clearly showed that lower-wage union workers usually see a boost in employment and earned income following a mandated wage hike. And those non-union wage workers who are now unemployed or unemployable? Who cares! The union members already have higher wages and protected jobs. So what if this cruel policy leaves in its wake desperate workers who can no longer legally work?

As for the NDP, there should be no doubt that Premier Rachel Notley is a union hack. Most of her career has been in the service of unions. Consider a few facts from her personal history:

She is married to Lou Arab, a communications and public relations staffer for the Canadian Union of Public Employees[2] and a campaign strategist for the party. She lives with him and their two children in the historic district of Old Strathcona located in south-central Edmonton.[17]

After law school, Notley articled for Edmonton labour lawyer Bob Blakely, and went on to work for the Alberta Union of Provincial Employees representing members with Workers’ Compensation cases.

She worked for a short time for the National Union of Public and General Employees (NUPGE),[20] worked at Athabasca University,[21] acted as volunteer co-ordinator for the Friends of Medicare “Romanow Now” campaign, and finally as a labour relations officer for the United Nurses of Alberta.[1]

Can there be any doubt that Notley will seek to benefit her union friends at the expense of other groups in society? Of course not.

Rachel Notley and the NDP are looking to empower unions. They don’t care if they hurt society’s least productive workers, like teenagers, people with disabilities, workers with language barriers, anyone without much experience for any reason, and ethnic or racial groups that may face discrimination.

Some will argue that forcing minimum wages higher makes employers invest in more equipment and develop new technology and this will increase productivity of labor. Therefore, this improves the economy. But this is a silly argument. Capitalists are always seeking ways to increase productivity, so to think they are just sitting around waiting for the government to force price floors on labor to do so is a joke.

But even assuming the employer doesn’t just reduce his quantity of labor demanded, his investment in new capital is limited by savings in the economy. Increasing minimum wage does not increase the total supply of capital available. If anything, capital will merely be shifted from some industries to others in an attempt to offset an artificially higher cost. Capital is not being reallocated because of a market requirement, and so this is not an economic improvement.

Don’t be fooled by anyone who says they want to increase the minimum wage to help the poorest workers. The main concern motivating the NDP to increase the minimum wage is helping unions.

Anyone advocating a higher minimum wage should be ridiculed and shamed out of public office on account of sheer ignorance.

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