The NDP's misdiagnosis

A couple of weeks ago, the NDP suggested removing the GST from heating bills, and I bemoaned the idea as just another example of a policy designed to fit a communications strategy instead of the other way around. I was hoping that the proposal would do the decent thing and go away quietly, but the NDP has apparently given it a budget generous enough to air some ads. If you judge policies by how effective its communications strategy is, the initial reviews are positive.

The rest of this post is for the dwindling band of citizens who adhere to the quaint notion that politics should be about policies.

Much of what follows is based on points raised and developed by UBC's Kevin Milligan here on WCI, on twitter and elsewhere on the internet. He characterises the proposal as a misdiagnosis: the NDP is prescribing a price solution for an income problem. The notion of affordability only makes sense as an income problem: no-one seems to be worried about the ability of high earners to pay their heating bills.

When you see the problem as one of incomes, the remedy is clear: give money to low-income households. Happily, there is already a mechanism in place for alleviating income problems: the GST/HST rebates. If, in the view of the NDP, these payments are too small, then the solution is to make them more generous.

If heating costs were something that were incurred mainly by low-income households, then the gains would be concentrated mainly among this group. But that's not the case. As Kevin notes, expenditures on heating increase with income:

 

 

Since expenditures on home heating increase with income, most of the revenues sacrificed by the NDP tax cut will go to those with higher incomes.

It could be argued that the gains for low-income households are proportionately greater, because the inequality in income is greater than the inequality in benefits. But using proportional gains as a criterion strikes me as setting the bar too low: even George W. Bush's tax cuts manage to make it over this hurdle.

Applying a price solution only makes sense if there's a price problem, and a convincing case can be made that markets are mis-pricing heating. Unfortunately, the case is based on negative externalities in the form of greenhouse gas emissions (remember them?). Environmentalists have spent the past couple of decades trying to persuade policy-makers of the merits of increasing the cost of GHG-emitting activities, without much apparent success.

If we're concerned about the income problems associated with home heating costs - the affordability issue - the proper remedy is an income solution: give more money to low-income households. If we're concerned about whatever price problems there may be, the proper remedy involves increasing the cost of GHG-emitting home heating. And if we're concerned with both, we can implement both remedies simultaneously: increase the cost of home heating and give more money to low-income households.

Comments

[Robert McClelland]

You obviously learned nothing when your posts on this subject were posted over at the National Post. Regardless of which is the better idea, a tax cut can be sold to the public while giving money to the poor cannot. Therefore your solution amounts to doing nothing.

[Stephen Gordon]

People keep saying this, and it never makes sense to me. How exactly does 'giving money to poor people' = 'doing nothing'?

[Frances Woolley]

Stephen "Since expenditures on home heating increase with income, most of the revenues sacrificed by the NDP tax cut will go to those with higher incomes."

Not necessarily. It depends upon the the number of "lower income" and "higher income" households in the population.

Note that heating expenditures as a percentage of income are much higher for low income households so the tax cut would be progressive in the sense that the $ gains as a % of income would be highest for low income households.

There are alternative policies that might be more progressive, e.g. increased cash transfers. But those have other effects e.g. disincentives for labour force participation (what the government giveth, eventually the government also taketh away).

[Just visiting from Macleans]

The issue that Jack Layton is trying to address - high heating costs in the winter- can more appropriately be addressed at the prov level. And in some ways, it already is.

Local utilities that deliver electricity and gas to the household apply to their regulators to get approval for the rates charged to its different classes of customers (residential, commercial, industrial). Overall returns to the utility are based upon Return on Equity. Costs flow through and are recovered from the customers.

Utilities often have a stepped rate schedule - say the average residential electricity bill is 1,000 kWh per month. For example - first 500 kWh is at rate x. Next 500 kWh is at 1.5 x. Over 1,000 kWh is at 2x. So, there is some cross subsidy going in this example from high consumers to low consumers- as well as financial penalties for being a high energy consumer/GHG emitter. All else being equal (amount of insulation for example), the amount of energy consumed is proportional to the size of the residential unit.

In addition, utilities often will allow its customers to spread their annual bills out over the year to avoid cash shortfalls in high energy periods. So, if your annual heating bill was $2,400, you could make 12 monthly payments of $200, rather than a few very high ones in the dead of the winter - making matching quarterly GST rebates closer to when they are needed.

[Joseph Heath]

The elephant in room, which needs to be discussed more frankly, is the issue of paternalism toward the poor. Assume for the moment that everyone understands and accepts Stephen's argument (and why not? he's completely right). There is still one crucial difference between cutting the GST on heating and giving people a rebate -- with the GST cut, you can guarantee that it will be spent on heating, and not, say, "beer and popcorn". Having to give $2 to a rich person for every $1 given to a poor person can be regarded as the price that must be paid, in order to avoid having to admit that a policy, adopted for paternalistic reasons, is actually being adopted for paternalistic reasons. The way to tackle that, it seems to me, is to be upfront about the paternalism and introduce a voucher scheme -- not as efficient as cash (in theory), but certainly a lot more efficient than a GST exemption. Why not offer a "home heating rebate" -- on the model of Klein-bucks -- that can only be spent on gas/oil/electricity? That would be good "chicken-in-every-pot" politics. You wouldn't even have to make it means-tested, just sending $200 to every family in the country would be more progressive than a GST cut (which, as Stephen points out, benefits the wealthy much more than the poor). Furthermore, since it's flat and capped, it wouldn't have the same perverse effects on consumption. No?

[Mike Moffatt]

"The elephant in room, which needs to be discussed more frankly, is the issue of paternalism toward the poor. Assume for the moment that everyone understands and accepts Stephen's argument (and why not? he's completely right). There is still one crucial difference between cutting the GST on heating and giving people a rebate -- with the GST cut, you can guarantee that it will be spent on heating, and not, say, "beer and popcorn". "

But do we necessarily want the money to be spent on heating rather than on beer and popcorn?

[Nick Rowe]

Joseph: echoing Mike, but making it stronger: we specifically don't want them to spend it on heating oil. If we wanted people to spend more on heating oil, we would cut the price of heating oil. We want them to spend on something else. Beer, popcorn, insulation, whatever, but not heating oil.

[Stephen Gordon]

Frances: In my head, I had the purely mathematical point that if expenditures are an increasing function of income, most of the benefits must be going to those with above-median incomes. Whether or not the median is the proper place to draw the line is another question.

And your point about effective marginal tax rates is well-taken, of course. Kevin recently wrote about the Guaranteed Annual Income proposal in the Globe's Economy Lab, and it's something I used to blog about fairly regularly. Maybe I should recycle some of those posts.

[Robert McClelland]

It equates to doing nothing, Stephen, because such a policy cannot possibly be enacted under the current political climate; giving money to the poor is seen as nothing more than welfare for bums who don`t want to work whereas tax cuts of any kind are seen as manna from heaven. You should go back to your articles on this subject in the Post and read the comments. If I recall correctly, the nicest thing you were called was a socialist.

[Just visiting from Macleans]

It equates to doing nothing, Stephen, because such a policy cannot possibly be enacted under the current political climate;

So, how did the GST rebate come about to begin with, and has its level at all changed over the past 20 + yrs?

[Mike Moffatt]

"giving money to the poor is seen as nothing more than welfare for bums "

Even if this were true, and I don't believe it is, there's always a third option. Give a cheque to *everybody* for the same amount. More progressive than NDP plan (where richer people get more) *and* weren't not subsidizing GHG emissions.

[Kevin milligan]

A few points:

1) As Michael Smart pointed out last time this was discussed on WCI, if your tool is a set of differential commodity taxes, taxing less heavily goods consumed in heavier proportion by the poor is good. But, note that we have more tools (e.g. GST credit) available.

2) Frances is right that the proper way to assess policy is through proportional burdens. My beef with this policy is that it is a clumsy way to help lower income families--especially compared to something like the GST/HST credit which can be more or less laser-targeted at lower income groups. If the NDP is making a political calculation here that the only way that you can transfer to low incomes is to shovel money at high incomes too, then that makes his point--even the NDP is afraid of truly redistributive policies.

3) Thank you Stephen for pointing out the progressivity of the Bush tax cuts. Same with the Mike Harris tax cuts. Both helped lower incomes proportionately more than higher incomes. The absolute dollar values were bigger for higher incomes, of course. I hereby propose Milligan's edict for discussion of public policy: you can't pick and choose whether to be proportional or absolute in your analysis of tax/spending policies. Use one or the other. So, if the NDP's policy here is good because it is proportionately good for the poor, then so were the Bush tax cuts.

4) If you want to label a low-income transfer as a 'home heating' rebate for paternal purposes, go ahead. They do that in the UK annually with a winter fuel payment. http://www.ifs.org.uk/publications/5308 Only part of this is spent on the winter fuel, but if your goal is income for the poor, there you go. In Canada, Paul Martin as finance minister did this as a one-off back in the early 2000s. I remember Jeff Simpson lauded this but heavily chided Ralph Klein's $400 tax rebates. They were the same thing, but different labels.

[Kevin milligan]

of course, in (1) that should be **less** heavily

[I've made the change - SG]

[Patrick]

Robert: many (most?) poor people work. Start by making the transfer contingent on employment and sell it as a hand-up to the working class.

[Just visiting from Macleans]

KM,

The climate across Canada varies greatly in the winter. Heating costs in the Lower Mainland I bet are substantially different than say Ottawa. How would your HST/GST rebate address regional differences?

[Andrew F]

Better politics would be to cut every household a cheque for the amount of GST paid on the average residential energy bill. The effect on government revenues is the same as a GST exemption, and people can elect to spend it on something other than heating. Also, a nice cheque for $100 each year is likely going to be more valuable politically than a tax cut. Also it is more progressive than a tax cut, since the rich pay more HST but would get the same rebate.

[tyronen]

The NDP has had the s--- kicked out of it for years of being the party of overly generous welfare and high taxes. Canadians do not want more programs for the poor. Nor are they prepared to pay higher taxes or energy bills to fight global warming. Quite the opposite; as fuel bills rise, Canadians demand relief - for themselves, not "the poor". Policies like this indicate the NDP is going populist, rather than progressive.

[Stephen Gordon]

Don't we already have a party of populist tax-cutters?

[tyronen]

Yes, and they have won the past two elections. If the NDP called for higher taxes and higher fuel bills for all except the poor, they'd rapidly return to their single-digit results of the 1990s. Like it or not, they (and all other parties) have to pander to popular prejudices in order to get elected. If they don't, someone else will.

[Brett]

Robert McClelland writes, "it equates to doing nothing" as if that's a bad thing. Primum non nocere is a fundamental tenet of medicine. Politicians should take heed.

[slantendicular]

"Like it or not, they (and all other parties) have to pander to popular prejudices in order to get elected. If they don't, someone else will."

Then why should Jack Layton, et. al. spend the best parts of their lives heckling in the House of Commons when they could let Stephen Harper implement the same policies and all go and relax on the beach?

[Nick Rowe]

Brett: trouble is, while in medicine you can define "doing nothing", with economic policy it's not so easy. If there are taxes and transfers, etc., we are already doing something. The only way we can define "doing nothing" is "doing the same in future as we are doing right now".

[Mbpowell]

Now, if the Tories had proposed this, the NDP would have set up some snappy mockery at a site like taxcutsformansions.ca (which redirects now!).

It's a shame that neither of the other major parties is interested in such fun.

[Just visiting from Macleans]

Q: How is the current GST rebate calculated? I assume it is not unlike the CPI - a basket of goods that a lower income qualifying person would typically consume - then return the GST tax collected on the estimated amount.

I'm wondering if home heating costs are already in that basket of goods - so that, high energy costs (which Layton is attempting to address through his targeted GST cut) are already self correcting in the current GST rebate.

Btw, on another blog, one commenter in BC says that the 7% HST on electricity (which is often used for home heating there) is already rebated on her bill. Don't know if this is a temporary or permanent rebate, though.

[K]

You are, of course, exactly right, Stephen.  The problem with the proposal though, is that it has no dead weight losses (read "pork").  No money for civil servants, unions, energy producers, etc.  No money for any special interests at all.  Just the same amount of money for everyone. And therefore it's a dangerous slippery slope.  If for example we start directing, e.g. all Pigovian taxes to a citizen's dividend, the right can no longer accuse carbon taxers of raising taxes.  And if poor people start feeling direct benefits of the policy, they might turn up to vote, which could be even worse.  And if we start to think of government services and citizen's dividend as an entitlement based on our natural claim to the inherent, non-human produced, wealth of the earth rather than charity, then that would be an unmitigated disaster.

[Kevin Milligan]

JVFM. The GST rebate was set back in 1991 at some levels and has since been updated by CPI inflation every year. It depends only on how many adults and children, and line 236 net income. It doesn't matter what your spending patterns are, you get the same amount. The phase out rate for income over the threshold is 5%. (There is also an extra supplement (equal to the child amount) for single people, but it is phased in with income over a smaller threshold.)

Adult Child Threshold
1991 190 100 24800
1992 193 102 25215
1993 199 105 25921
1994 199 105 25921
1995 199 105 25921
1996 199 105 25921
1997 199 105 25921
1998 199 105 25921
1999 199 105 25921
2000 205 107 26284
2001 207 109 26941
2002 213 112 27749
2003 216 114 28193
2004 224 118 29123
2005 227 120 29618
2006 232 122 30270
2007 237 125 30936
2008 242 127 31524
2009 248 130 32312
2010 250 131 32506

[Just visiting from Macleans]

The GST rebate was set back in 1991 at some levels and has since been updated by CPI inflation every year.

Thx. And if I look at the latest CPI for October from StatsCan:

Energy prices advanced 5.6% during the 12 months to September, following a 5.0% increase in August. Prices for electricity rose 7.7% in September compared with the same month a year earlier.

Excluding energy, the Consumer Price Index (CPI) was up 1.5% in September.

http://www.statcan.gc.ca/subjects-sujets/cpi-ipc/cpi-ipc-eng.htm

It's not clear, on first inspection, what weightings are applied to the various basket of goods in the StatsCan bar chart. I presume equal. So, rising energy costs are built into the GST already, to some degree.

So, the remaining q I would have is whether the CPI inflater used in the GST rebate calculation should be adjusted for those below the income threshold. ie does the mixture of goods change with income - more on basic needs, less on recreation, for example?

[Joe Heath]

Mike, Nick: That must have come out wrong. It's not me who wants to make sure that people spend the money on heating, it's those who promote and support policies like this who have that concern. They want to make sure that poor people don't get their heat cut off in the middle of winter. So when people like Stephen (or me) come along and say "better to give them cash," there isn't much uptake, precisely because cash doesn't guarantee that the specific social problem they are concerned with is going to get addressed. (Hence the reference to "beer and popcorn" -- that was a gaffe in the classic sense, when someone in politics actually tells the truth. Liberal opposition to the Conservative "childcare plan" -- sending out cheques to parents -- was based on the concern that the money would not actually get spent on childcare.) So recommending vouchers, rather than tax rebates, is likely to get a bit more traction with the relevant political constituency.

I guess my only point is that economists tend to view "giving people cash" as equivalent to "giving people more of whatever it is that they most need". Unfortunately, in the realm of politics this is not how things are perceived by many people, and in practice, this is often not how things work out.

If I may, here are some more thoughts on the issue:
http://www.bepress.com/bis/vol5/iss1/art4/ (gated but free)

[Kevin Milligan]

JVFM: Most tax parameters are set using the CPI all-items, using October over October annual rates to set the parameters for January 1st. I can't find the relevant income tax act section at the moment, but that is how most federal tax parameters are set.

The idea of using low-income specific CPI calculations is intriguing, but actually policy is much more coarse than that. We just use the same CPI for it all.

[Just visiting from Macleans]

The idea of using low-income specific CPI calculations is intriguing, but actually policy is much more coarse than that. We just use the same CPI for it all.

Well, in a way, that is my point. Maybe the methodology should change.

When intervening in some utility regulatory hearings in BC (utilities seeking rate increases), I was impressed by the arguments put forward by intervenors/advocates for low income rate payers by the BC Public Interest Advocacy Centre. I'm sure over time, the rate differences I mentioned earlier in my first comment came about as a result of their efforts. And it would not have been unusual to see economists supporting their arguments with studies on issues such as the effect of increasing energy costs on people with low incomes. Why I think local (prov)regulation (allowing for regional differences such as weather) is the preferred path for this specific issue.

Similarly, at the Fed level, short of an election, tweaking how the tax return/GST rebates are determined would appear to me to be a pretty easy exercise to accomplish - better left to the finance/tax mandarins (with appropriate academic/public/private input)rather than the politicians. And cheaper. Mind you, the advertising selling the idea might not be as cheesy.

[slantendicular]

Just to follow up on Just visiting from Macleans' comment, in the current session of Parliament the NDP has introduced Bill C-564, The Seniors CPI Act, which would direct the government to calculate a separate inflation rate for seniors. With modern technology it is perhaps possible to get more fine-grained about inflation measurements than was reasonable, say, 50 years ago.

[Nick Rowe]

Joe: OK. I read you wrong. I see your point now.

[Just visiting from Macleans]

With modern technology it is perhaps possible to get more fine-grained about inflation measurements than was reasonable, say, 50 years ago.

If the Fed gov't is capable of having regional UI benefits (number of eligible weeks to qualify/receive benefits) down to the municipal level, it seems to me they have the capability to reform/fine tune the CPI index accordingly.

This seems to me like an issue of fairness - not a political/partisan issue, notwithstanding that the NDP introduced the bill you refer to.

WCI - a challenge. A blog supporting the NDP's Seniors CPI Act? Or an arguement why it doesn't go far enough to meet the causes that you collectively seem to support.

[Declan]

"I guess my only point is that economists tend to view "giving people cash" as equivalent to "giving people more of whatever it is that they most need". Unfortunately, in the realm of politics this is not how things are perceived by many people, and in practice, this is often not how things work out."

I've lost track of how many times I (and Robert as well, to be fair) have tried to make this point on this blog. Enough that I decided to give this iteration a pass, but since someone else has done the work of typing it out more concisely than I ever would, I'll second the motion - although, nitpicking, if it is true that this is often not how things work out in practice, than its not necessarily unfortunate that people don't perceive it that way.

---
Thanks to Kevin for the GST credit info by the way, that was interesting.

--
Finally, thanks to K for the laugh, "If for example we start directing, e.g. all Pigovian taxes to a citizen's dividend, the right can no longer accuse carbon taxers of raising taxes."

Ah, that was a good one. Imagine living in a world where political accusations are based on reality in some way! For the record we had a revenue neutral carbon tax brought in here in B.C. and it was attacked on all sides as a tax grab. Our honourable Prime Minister even went so far as to straight out call B.C. Premier Gordon Campbell a liar over the issue (despite the black and white facts showing it was Harper who was lying). Read this blog post and comments on Harper's lies about the carbon tax, K and laugh at your own naivete!

(and yes, I realize you were being sarcastic)

[Stephen Gordon]

I guess my only point is that economists tend to view "giving people cash" as equivalent to "giving people more of whatever it is that they most need". Unfortunately, in the realm of politics this is not how things are perceived by many people, and in practice, this is often not how things work out.

Sure. For example, if a person's problems are largely due to things like substance abuse and/or mental illness, then giving out cash isn't a good idea. But these cases are the exception.

[Jim Rootham]

Stephen, you are still arguing as if facts dominated political calculations. It's not what the facts are, it's what people believe the facts to be. Everybody knows that in this land of opportunity the only reason you're not rich is because of substance abuse and mental illness.

[Mike Moffatt]

"WCI - a challenge. A blog supporting the NDP's Seniors CPI Act? Or an arguement why it doesn't go far enough to meet the causes that you collectively seem to support."

It's an interesting idea and one meriting an examination. Does the price level over, say, a 5 year period, rise at a significantly level than the 'regular price' level? I'd love to see data on this; I suspect the two rise at roughly the same rate - in which case we're talking about a few cents either way.

In fact, there's a reasonable chance that the price level for seniors grows *slower*. In which case, do we give them less money?

[Mike Moffatt]

Joe Heath: I think this highlights the big flaw in libertarian paternalism - the parents need to have coherent preferences when it comes to societal issues.

The 'parents' simultaneously want us to consume both more fossil fuels and less fossil fuels. We're promoting subsidizing heating costs while at the same time banning incandescent light bulbs - one of the most efficient space heaters ever created! I don't see how we can have it both ways.

This is not an isolated case. Consider the following:

1. The simultaneous fears that consumers are living 'paycheque to paycheque' and that consumer spending is 'weak'.

2. The desire to promote both home ownership and worries about the debt levels of Canadian families.

etc. etc. And we haven't even got into the case where government accidentally introduces a larger evil by banning a smaller one. In my industry (chemical), during the 1960s government was particularly worried about flammability, so various governments (U.S. federal, California) banned a number of flammable substances and promoted the use of less flammable substances. Unfortunately the less flammable substances often had really nasty properties (ozone depleters, carcinogens, etc.) - with Tris being the most well-known example.

I'm not trying to suggest that governments are inherently bad or evil (I'll leave that to our libertarian friends) - but only that this kind of paternalism can only work when the parents are clear about what they want. I don't see that being the case here.

[K]

Declan: "Finally, thanks to K for the laugh"

You're welcome!  But as funny as it sounds, I think it may be possible if Pigovian tax revenues are directly and entirely funneled to payments to citizens.  I understand that claims of revenue neutrality might be questioned when a carbon tax is claimed to be offset by other adjustments in the general government coffers.  There is a lot of mystery in government accounting so you have to expect people to be skeptical.  They need to see the money.

Ideally I would extend LVTS to all Canadians, i.e. give everyone an account at the Bank of Canada.  Payments could be made into those accounts daily, as the government receives them.

[Brett]

Nick, in the case of "doing nothing," medicine is no different from economics. People have a current state: the food they eat, the pills they take, the activities they do, the air they breathe, the advice they heed. The big difference, as I see it, in the two is that doctors typically treat individuals where politicians usually treat groups. It's going to be easier (but still bloody hard) to avoid doing harm to an individual, but doing no harm to a group almost always means harming some members.

Still, this NDP policy seems to do harm overall. Better to leave things as they are, no? From an economic point of view at least. Clearly not from a political point of view though.

[Just visiting from Macleans]

Status quo Moffatt writes:

I suspect the two rise at roughly the same rate - in which case we're talking about a few cents either way.

In fact, there's a reasonable chance that the price level for seniors grows *slower*. In which case, do we give them less money?

OK, let's do some back of the envelope calculations. Assume one adult, senior. According the KM's numbers, in 2010, they receive $250 GST rebate. @5% this means they are getting the full GST refund only on the first $5,000 of GST qualified expenditures.

To get a difference of a "few cents" (let's be generous and say 10) on a $250 refund means the difference in CPI of $0.10/$250 = .04%

Now, in the past yr, in the CPI I quoted earlier shows a national rate of 1.9%. This varies from a low of around 0.5% in Manitoba to 2.9% in Ontario.

In addition, there is an outlier noted. NATIONALLY, Prices for electricity rose 7.7% in September compared with the same month a year earlier. So, the point being, in this example, if electricity costs constitute a larger percentage of your expenditures than someone in the middle or upper end of the income scale, then your individual CPI in all likelihood is much higher. And because CPI is compounded year to year when calculating GST refunds, it has the potential to have a significant cumulative effect.

So MM, get out your wallet. Let's pick a senior, living in Ontario, heats their residence with electricity, lower end of the income scale. Are you confident that their overall costs have not gone up more than 1.9% + 0.04% ??

I bet they have. How much?

[Mike Moffatt]

Jvfm: Did you miss the part where I said "It's an interesting idea and one meriting an examination."? Jeez.

[Just visiting from Macleans]

Yeah, I also noted in a blog comment some time ago, you mentioned you sucked at math :)

[Mike Moffatt]

Guilty as charged.

[Just visiting from Macleans]

At the same high school you attended, grade 9 math, I got 100. Not much less by the time I hit gr 13. Be forewarned :)

[Stephen Gordon]

Kevin just posted these links on twitter ([1],[2]), and I'm posting them here for posterity (twitter links become hard to find after a while):

2001 Federal rebate for housing costs: Liberal govt sends cheques of $250/household, $125/individual. Only those eligible for GST rebate receive them.

Some people complained that cheques were sent to low-income housholds that didn't have heating bills to pay. Yes, really.

[Just visiting from Macleans]

KM/SG points out, through the links above - why this policy (energy costs) is best dealt with at the provincial level, at the utilities where consumption is metered/paid. And by extension, why the NDP policy is wrongly applied at the National level.

I lived in Calgary for a consulting gig when Ralph Klein was still premier. Remember him? PC cost cutter? When gas prices were rising, this was great for Alberta - because a majority of their royalties were from nat gas. So, those in say Ont were suffering from high heating costs. Same in Alberta, but less so due to transportation costs, oversupply. But generally, high gas prices were good for the Alberta economy.

Ralph announced a $300 per household rebate on your gas bill due to the steep run-up in gas prices - it mattered not if you lived in a mansion, or a small house - $300 across the board.

So, me, renting a condo with other condos above and beside me would shut off my furnace completely every day I went to work - confident that the heat loss from their units towards my cooler unit would prevent the pipes from freezing.

I bet I made money that heating season.

Jack Layton is stealing a Ralph Klein PC policy. Both are wrong, as was Martin. Still, why should I not be singled out anymore than someone ( a rather few number I suspect) who "didn't have heating bills to pay"?

Besides KM/SG, if landlords are as efficient as you often claim, their higher utility costs would be passed through to renters through higher rents. Paying directly the rebates to the landlords I doubt would have the same result - "sticky prices" I think you call it.

My proposed sol'n still stands - reinforced, IMO by your example. Blog?

[Nick Rowe]

JVFM: "WCI - a challenge. A blog supporting the NDP's Seniors CPI Act? Or an arguement why it doesn't go far enough to meet the causes that you collectively seem to support."

Hmmm. Sounds like a sensible idea from the NDP. Not brilliant; not earth-shattering; not certain to make things better (I think I can rig up a model where it wouldn't work). But a sensible policy that would probably make things a little bit better. Not much to say about it though. Just standard optimal insurance policy.

[Just visiting from Macleans]

(I think I can rig up a model where it wouldn't work).

I was thinking of real data.

[Just visiting from Macleans]

Perhaps some of your cohorts at StatsCan could easily put this canard to rest with some quick data analysis of the info at their fingertips.

Here's what I'd suggest:

1) Compounded CPI for all of Canada from 1991 to 2010. From the data KM provided it looks like ~ 31%.

2) Compounded CPI for all provinces/territories in their surveys for the same period.

3) Compounded energy costs (electricity, natural gas, heating oil) separately for all provinces for the same period.

Post data/graphs with explanation from StatsCan, and open discussion.

If 2) and/or 3) don't depart appreciably from 1) I'd agree with NR's general assessment of the NDP proposal.

[Just visiting from Macleans]

SG writes on twitter:

After all those RTs, it should be clear that if you're interested in policy, you should be following @kevinmilligan

http://twitter.com/stephenfgordon/status/28901695578

KM is quoting from a UK study/program for giving cash to seniors during cold spells.

Let me point out, again, why this would not work as well in Canada at the Fed level.

Area of UK : 74,060 sq miles
Area of Ontario: 415,598 sq miles (5.6 UKs)
Area of Canada: 3,854,085 sq miles (52 UKs)

Canada is too large - and variation in weather too great to implement a UK system as effectively here. Better at the local level.

[Stephen Gordon]

Makes sense.

[Just visiting from Macleans]

So, how would you /KM go about designing a program to address the "heat-or-eat" problem in Canada (assuming one exists) given some of the concerns I raised earlier? You've both convinced me the NDP/Martin approaches were wrong. My initial thinking is that it could still be accomplished without much effort by tweaking how the existing GST rebate is calculated.

[Just visiting from Macleans]

Re: my earlier comment on compounding CPI over time for low income people.

I was just browsing through some of Krugman's blogs and I came across this one from just two days ago: Inflation Delusions http://krugman.blogs.nytimes.com/2010/11/09/inflation-delusions-2/

where he compares the inflation of groceries vs the general CPI. He presents two bar charts, and concludes - no big deal.

So, I searched through the comments before someone brought up the error of his analysis- he was using avg CPIs vs compounded. Not until commenters 26 and 27 did someone pick up the error and post at the same time. 26 offers this graph showing the effect of compounding: http://tinyurl.com/3y6gro8

which is graphically the point I was making. This was only over 10 yrs. The GST credit calc goes back to 1991 in Canada and potentially has a much wider compounded difference.