Fraser Forum - April 2010

Fraser Forum

April 2010 $3.95

A Fraser Institute review of public policy in Canada

RISK AND REGULATION The myth of food miles Life expectancy in Canada Regulating “greenhouse gases”

Canadian Publication Mail Sales Product Agreement Number 40069269.

Canada’s BPA bottle ban

From the editor

Fraser Forum Publisher Chief Editor Managing Editor Editorial Advisor Coordinating Editor Contributing Editors Art Direction and Cover Design Cover Photos Production and Layout Media Relations Advertising Sales

Fraser Institute Brett J. Skinner Kristin Fryer Kristin McCahon Diane Katz Amela Karabegović Charles Lammam Niels Veldhuis Bill Ray Big Stock Photo, Fotolia Kristin Fryer Dean Pelkey Advertising In Print Tel: (604) 681-1811 E-mail: info@advertising inprint.com

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Return undeliverable Canadian addresses to: Fraser Institute, 4th Floor, 1770 Burrard Street Vancouver, BC V6J 3G7 The contributors to this publication have worked independently and opinions expressed by them are, therefore, their own and do not necessarily reflect the opinions of the supporters, trustees, or other staff of the Fraser Institute. This publication in no way implies that the Fraser Institute, its trustees, or staff are in favour of, or oppose the passage of, any bill; or that they support or oppose any particular political party or candidate.

Fraser Institute Board of Trustees Hassan Khosrow-

shahi (Chairman), Edward Belzberg (Vice Chairman), Mark W. Mitchell (Vice Chairman), Gwyn Morgan (Vice Chairman), Salem Ben Nasser Al Ismaily, Louis-Philippe Amiot, Gordon Arnell, Charles Barlow, Everett Berg, T. Patrick Boyle, Peter Brown, Joseph Canavan, Alex Chafuen, Elizabeth Chaplin, Derwood Chase, Jr., James Davidson, John Dielwart, Stuart Elman, Greg Fleck, Shaun Francis, Ned Goodman, Arthur Grunder, John Hagg, Paul Hill, Stephen Hynes, David Laidley, Robert Lee, Brandt Louie, David MacKenzie, Hubert Marleau, James McGovern, Eleanor Nicholls, Roger Phillips, Herb Pinder, Jr., R. Jack Pirie, Conrad Riley, Gavin Semple, Roderick R. Senft, Anthony Sessions, William Siebens, Anna Stylianides, Arni Thorsteinson, Michael Walker, Catherine Windels, Brett J. Skinner (President), Peter Cowley (Senior Vice President, Operations), Michael Perri (Secretary-Treasurer)

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very so often, I come across a story that makes me shake my head in disbelief. Our cover leader, “Repeal the bottle ban” (pg.

16), is one of those stories.

In 2008, Canada became the only federal government in the world to restrict the use of Bisphenol A in baby bottles. (Bisphenol A, or BPA, is a chemical intermediary used in the manufacture of some plastics and resins.) At first glance, this decision may not seem shocking. It’s not unusual for governments to ban dangerous substances.

Except BPA is not dangerous. As Angela Logomasini writes in this issue of Fraser Forum, the government banned BPA even though a Health Canada review found no risks associated with consumer exposures, noting that “Bisphenol A exposure to newborns and infants is below levels that cause effects.”

Given the evidence, the government’s actions seem completely irrational.

Thankfully, no other food or beverage containers were affected, but the media hype surrounding the ban, coupled with a healthy dose of misinformation, had many consumers in a panic. Several major retailers pulled plastic products containing BPA off their shelves, and Canadians hurriedly abandoned their Nalgene bottles in favour of “eco-friendly” options, such as the aluminum Sigg bottles.

To be clear, I don’t have anything against Sigg bottles—or any other kind of bottle, for that matter. Canadians should be free to buy whichever bottle they wish. But when our government passes restrictive regulations that contradict scientific evidence, all Canadians should be concerned.

I had a similar reaction to the US Environmental Protection Agency’s (EPA) recent “finding” that carbon dioxide in the atmosphere “threaten[s] the public health and welfare of current and future generations” and should be classified as an “air pollutant.” The agency is now attempting to impose emissions regulations under the Clean Air Act, a move that is challenged as illegal by various states, governmental entities, and other groups (“Regulating ‘greenhouse gases,’” pg. 12).

The EPA’s finding is troubling for two reasons. First, as George T. Wolff and Diane Katz argue in this issue of Forum, scientific evidence suggests that such regulations are unnecessary (“Regulating ‘greenhouse gases’”). Second, though the EPA’s regulations would apply specifically to people and businesses in the United States, they could have far-reaching implications for Canada. Prime Minister Stephen Harper has said that Canada will “harmonize” its greenhouse gas regulations with those in the United States. If the EPA’s regulations are adopted, Canadians and Americans will both feel the sting. As Wolff and Katz note, the proposed regulations would affect small farms, restaurants, hotels, hospitals, schools, houses of worship, and small businesses.

These two stories underscore the need for reason and scientific evidence in policy-making. When governments pass ill-considered regulations, it’s ordinary citizens who suffer.

Reason and regulation

Kristin Fryer (kristin.fryer@fraserinstitute.org)

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Fraser Forum

Contents 5

Government spending

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From the editor

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Forum authors

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An age of austerity?

Niels Veldhuis, Charles Lammam, and Milagros Palacios The federal government’s unwillingness to control spending will make the economy weaker, not stronger.

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The case for a GST hike Niels Veldhuis, Charles Lammam, and Milagros Palacios A GST increase would allow the government to replace harmful income-based taxes with less harmful consumption taxes.

Emissions regulations

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Key Concepts: Property rights Peter Leeson While there are many ways to live, there is only one way to live free and prosperously: through a system of well-protected property rights.

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21 2

The myth of food miles

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A weak foundation Charles Lammam, Niels Veldhuis, and Milagros Palacios Yearly deficits coupled with significant increases in capital spending will increase British Columbia’s debt by an alarming $14.5 billion or 35% over the next three years.

“Regulatory measures to ban or limit BPA use will simply raise prices for consumers and could have unintended adverse health and safety consequences.”

RISK AND REGULATION 12

Regulating “greenhouse gases” George T. Wolff and Diane Katz The US Environmental Protection Agency’s proposed emissions regulations could have farreaching implications for both Americans and Canadians.

—Repeal the bottle ban, pg. 16 16

Repeal the bottle ban Angela Logomasini Scientific research has failed to find a meaningful relationship between consumer exposures to Bisphenol A (BPA) and negative health effects. It’s time for Canada to rescind its BPA ban.

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The myth of food miles Diane Katz Consumers are often told that locally grown foods are always more “environmentally friendly” than foods grown farther away. But research suggests that this is not the case.

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Canadians now live longer than ever Diane Katz The average life expectancy for a Canadian is now 80.7 years, thanks to improved technology and economic growth, both of which are fuelled by free minds and free markets.

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Forum Authors

Featured Authors

Diane K atz (diane.katz@fra​serinstitute.org) is the Director of Risk, Environment, and Energy Policy Studies at the Fraser Institute. She has an M.A. from the University of Michigan.

Angela Logomasini is the Director of Risk and Environmental Policy at the Competitive Enterprise Institute (CEI). At CEI, she conducts research and analysis on environmental regulatory issues.

George T. Wolff is a Principal Scientist with Air Improvement Resource, Inc. in Novi, MI. He holds a M.S. in meteorology from New York University and a Ph.D. in environmental sciences from Rutgers University. Dr. Wolff is a former chair of the US Environmental Protection Agency’s Clean Air Scientific Advisory Committee.

Contributors Charles Lammam (charles.lam​

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Peter Leeson is BB&T Profes-

mam@fraserinstitute.org) is a Policy Analyst in the Fiscal Studies Department at the Fraser Institute. He is completing an M.A. in public policy at Simon Fraser University.

sor for the Study of Capitalism at the Mercatus Center, George Mason University, and author of The Invisible Hook: The Hidden Economics of Pirates.

Milagros Palacios (milagros. palacios@fraserinstitute.org) is a Senior Economist with the Fraser Institute’s Fiscal Studies Department. She holds an M.Sc. in economics from the University of Concepcion in Chile.

Niels Veldhuis (niels.veldhuis@ fraserinstitute.org) is the Director of Fiscal Studies and Vice President, Canadian Policy Research, at the Fraser Institute. He has an M.A. in economics from Simon Fraser University.

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An age of austerity?

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Long-term deficits will make the Canadian economy weaker Niels Veldhuis, Charles Lammam, and Milagros Palacios

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hen the federal government released its five-year budget plan last month, some of the media were quick to endorse it.

“Tories launch age of austerity” declared the Globe and Mail, while the National Post applauded the plan as a “genuine effort to restore balance to the nation’s books” (2010, Mar. 5).

Perhaps they were reading a different budget than the one we found on the Department of Finance’s website.

The budget we read could hardly fit either of those descriptions.

Consider the government’s spending plan. In the coming fiscal year (2010/2011), spending is set to increase by $12.8 billion or 4.8%, following a $28.9 billion or 12.1% increase this year (2009/2010) (table 1, figure 1). Some of this has been categorized as “stimulus” spending.

But what does the government plan to do after its stimulus plan finishes in 2011? Spending will decrease by 1.4% in 2011/2012 before it is ramped up again over the final three years of the government’s budget plan (2012/2013 to 2014/2015). By 2014/2015, spending will be $30.6 billion or 11.4% higher than it is today. How could this be considered an austere spending plan?

Rather than decrease spending, the Conservative government is planning to control the increase in spending, something they have not managed to do during the past four years that they have been in office.

To constrain the growth in spending, the government says it plans to find $17.6 billion in “savings” over the next five years.

These “savings” will come largely from reducing the growth in military spending and international assistance and from attempts to constrain administrative costs (by freezing the salaries of Ministers and MPs and spending on travel, hospitality, etc.). The government’s planned “strategic reviews” of departmental spending, aimed at trimming fat from the public sector, will only save $1.3 billion over five years.

Over the five-year period (2010/2011 to 2014/2015), the federal government plans to spend over $1.4 trillion. Their “savings” plan will shave only 1% off total government spending. So how could this plan be seen as a “genuine effort to restore balance to the nation’s books”?

On the other hand, revenues are expected to rebound by $17.4 billion (8.1%) to $231.3 billion in the coming year (2010/2011) and

continue to grow at a robust average rate of 6.4% until 2014/2015 (table 1). Clearly, it is the government’s unwillingness to address its overspending—and not a lack of revenue—that is the real culprit behind the $105 billion in deficits over the next five years. These deficits, combined with previous ones, will cause the federal debt to swell from $463.7 billion in 2008/2009 to $622.1 billion by 2014/2015 (figure 2).

Had Prime Minister Harper and Finance Minister Flaherty taken the deficits seriously and actually delivered an austere budget, they could have easily balanced the books by 2011/2012. Doing so simply would have required them to eliminate the stimulus spending for 2010/2011 and 2011/2012 and reduce program spending by an additional 2.8% each year.

But Finance Minister Flaherty was not willing to choose that path.

Instead he chose to “stay the course” and add another $19.2 billion in stimulus for 2010/2011, including an additional $7.7 billion in infrastructure spending.

The budget also introduced a smattering of new initiatives: $362 million for “greening” the economy; $194 million for additional subsidies

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Table 1: Federal fiscal outlook, 2008/2009 to 2014/2015, in billions of dollars 2008/2009

2009/2010

2010/2011

2011/2012

2012/2013

2013/2014

2014/2015

Revenues

233.1

213.9

231.3

249.0

266.5

282.7

296.5

Total spending

238.8

267.7

280.5

276.7

284.0

291.2

298.3

-5.8

-53.8

-49.2

-27.6

-17.5

-8.5

-1.8

Deficit

Source: Canada, Department of Finance, 2010.

Figure 1: Federal revenues and spending, 2008/2009 to 2014/2015, in billions of dollars 300 Total spending

Billions of $

275

250

225 Revenues 200

2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15

Source: Canada, Department of Finance, 2010.

Figure 2: Federal debt, 2008/2009 to 2014/2015, in billions of dollars 700

611.9

620.3

622.1

594.3

600 Billions of $

566.7 517.5

500 463.7

400

2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15

Source: Canada, Department of Finance, 2010.

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to the mining, agricultural, and fishing sectors; $108 million for young workers; $62 million to “encourage” participation in sports; $56 million to “protect” families and communities; $53 million for First Nations children and family services; $48 million annually for new regional development program spending.

And the list goes on.

The government claims that the stimulus spending and other new initiatives are needed to “sustain Canada’s economic advantage now and for the future,” but nothing could be further from the truth.

Additional government stimulus spending—especially on infrastructure—will harm, not help, the economic recovery (Veldhuis, 2009). Since infrastructure projects take time, that money will be spent as private sector activity picks up and the economy naturally moves out of recession. As a result, the government will end up competing with the private sector for resources and increasing costs in the private sector.

If the government’s goal was to strengthen the Canadian economy, then it should have delivered a budget aimed at quickly moving out of the red and reducing taxes thereafter. Academic research shows that stimulus plans containing incentiveimproving tax relief encourage economic activity, whereas those heavy on government spending do not (Lammam et al., 2010).

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continued on page 23

The case for a GST hike Niels Veldhuis, Charles Lammam, and Milagros Palacios

rate of 6.4% until 2014/2015. While it is clear that the economic recession is having an adverse effect on federal revenues, that impact is expected to be very short-lived.

Government spending is another story altogether. In 2009/2010, federal spending increased by $33.7 billion, mainly as a result of the federal government’s “temporary” stimulus plan. As the federal government’s own projections show, the ramp-up in spending will be anything but temporary. Rather than decreasing in 2011/2012 as the stimulus plan comes to an end, spending will actually remain constant. Worse, however, is that from 2011/2012 to 2014/2015, spending will increase at an average rate of 2.9% (Canada, Department of Finance, 2009a; calculations by authors). There is simply nothing temporary about the current stimulus spending.

The federal government’s unwillingness to reduce what it originally labelled as “temporary” spending is the reason that we can expect federal deficits amounting to $108.5 billion over

the next five years (2010/2011 to 2014/2015) (Canada, Department of Finance, 2009a: 9).

So, Mr. Clark, the federal government has a spending problem, not a revenue problem.

In fact, the federal government could realistically balance the budget by 2011/2012 with modest spending cuts. This strategy would not require any tax increases for Canadians.

That said, it will take at least two years to balance the federal budget and several more before the government has enough fiscal room to significantly reduce taxes and improve Canada’s ability to attract investment and create jobs.

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hen Ed Clark, TD Bank CEO, recently said that nearly all of the members of the Canadian Council of Chief Executives (a group composed of 150 of Canada’s top CEOs) want the federal government to hike the GST to combat the deficit, he earned a quick rebuke from the Conservatives, who rejected his suggestion and referred to him in an e-mail as the millionaire economic czar to the Liberals (Corcoran, 2010, Feb. 13).

This in turn provoked responses from Liberal heavyweights, including federal Liberal Party leader Michael Ignatieff and former Prime Minister Jean Chretien.

But while Mr. Clark’s call for a GST hike to balance the budget shows a surprising lack of understanding about the source of the federal deficit, the idea should not be dismissed out of hand.

For the next several years, Canada will be hamstrung by deficits that will hinder any improvement in Canada’s competitiveness, especially on the tax front. However, increasing the GST would create the revenue needed to reduce other more damaging taxes (i.e., on income and capital gains) and dramatically improve Canada’s competitiveness.

But before we discuss the merits of increasing the GST, let’s clear up any confusion regarding the source of the federal deficit.1 Primarily as a result of the economic downturn, federal revenues are expected to decrease by $16.5 billion this year (2009/2010). In the upcoming 2010/2011 fiscal year, however, revenues are expected to rebound and then continue to grow at an average

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Herein lies the rationale for increasing the GST. Increasing this consumption tax will provide the revenue to reduce other more damaging taxes. While all taxes are economically damaging, economic research is clear that consumption taxes like the GST are among the least damaging.2 To improve Canada’s competitiveness, the government should either reduce damaging types of taxes or change the tax mix to rely less on damaging taxes.

Of particular concern in Canada are our high marginal personal income tax rates on middle and upper income Canadians, which apply at relatively low levels of income.

Specifically, Canada maintains among the highest marginal personal income tax rates on middle and upper income earners among the G7 countries (Canada, Department of Finance, 2006, 2007).3 Income taxes have proven to be much more economically damaging than the GST because they act as a penalty on productive activities such

as work effort, savings, investment, risk-taking, and entrepreneurship.4 Interestingly, the destructive impact of Canada’s graduated personal income tax rates has been identified by consecutive federal governments, both Liberal and Conservative. In 2005, then-Prime Minister Paul Martin’s economic plan, A Plan for Growth and Prosperity, stated, “Lower personal taxes would also provide greater rewards and incentives for middle- and high-income Canadians to work, save and invest” (Canada, Department of Finance, 2005: 131). And in 2007, current Liberal finance critic John McCallum mused about increasing the GST back to 7% to pay for income tax cuts (National Post, 2007, May 18).

Prime Minister Stephen Harper’s economic plan, Advantage Canada, also stresses that “Canada’s tax burden on highly skilled workers is too high relative to other countries … Canada needs lower personal income tax rates to encourage more Canadians to realize their full potential” (Canada, Department of Finance, 2006: 46).

By increasing the GST from 5% to 7%, the federal government would have approximately $12 billion in revenue to reduce income taxes (Canada, Department of Finance, 2009b). With that $12 billion, the federal government could eliminate

the two top personal income tax rates (26% and 29%) and increase the threshold of the 22% income tax rate from $41,472 to $45,000. In addition, the government could completely eliminate the capital gains tax (and make good on one of its original election promises).5 While increasing the GST is definitely the wrong way to balance the books, it would give the government a great opportunity to replace more harmful income-based taxes with consumption taxes and improve Canada’s long-term competitiveness.

Notes 1 The fiscal data referenced in this article are from the federal government’s 2009 Update of Economic and Fiscal Projections (see Canada, Department of Finance, 2009a), which were the most up-to-date data available at the time of writing.

2 For a thorough literature review of the economic efficiency of taxes, see Clemens et al. (2007).

3 Overall, Canada raises more of its revenue as a share of GDP from personal and corporate income taxes than any other G7 country (OECD, 2008).

4 For a comprehensive literature review of the impact of taxes on economic behaviour, see Palacios and Harischandra (2008).

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5 Income tax revenue loss estimates were calculated using Statistics Canada’s Social Policy Simulation Database and Model (SPSD/M). The assumptions and calculations underlying the SPSD/M simulation results were prepared by the Fraser Institute and the responsibility for the use and interpretation of these data is entirely that of the authors.

References Canada, Department of Finance (2005).

A Plan for Growth and Prosperity.

Government of Canada. <http://

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www.fin.gc.ca/ec2005/agenda/agc 2005e.pdf>.

Canada, Department of Finance (2006). Advantage Canada: Building a Strong Economy for Canadians.

Government of Canada. <http:// www.fin.gc.ca/ec2006/pdf/plane. pdf>.

Canada, Department of Finance (2007).

Personal Income Tax Rates at 75K Select OECD Countries (2005). Special data request, received December 7, 2007. Government of Canada.

Canada, Department of Finance (2009a). Update of Economic and Fiscal Projections. Government of Canada. <http://www.fin.gc.ca/ec 2009/ec-eng.asp>.

Call for

out-of-print Fraser Institute

BOOKS If you have been a Fraser Institute supporter for some years, you may have some of our books tucked away in your library. The following volumes are out of print, and we are on the hunt for a few copies for our archive.

Canada, Department of Finance (2009b). Canada’s Economic Action Plan: Budget 2009. Government of Canada. <http://www.budget. gc.ca/2009/pdf/budget-planbuget aire-eng.pdf>.

Income and Taxation in Canada 1961-1975: Fraser Institute Technical Report 76-01 (1976)

Clemens, Jason, Niels Veldhuis, and Milagros Palacios (2007). Tax Efficiency: Not All Taxes Are Created Equal. Fraser Institute.

The Health Care Business: International Evidence on Private versus Public Health Care Systems (1979)

Corcoran, Terence (2010, February 13).

CEOs Unite for GST Hike. National Post: FP19.

National Post (2007, May 18). Liberals Consider Pledge to Hike GST. <http://www.canada.com/national post/news/story.html?id=f23347f25e0f-49f0-98bd-77fa6004fc86>.

Organisation for Economic Co-operation and Development [OECD] (2008). Revenue Statistics—1965– 2007. OECD. Palacios, Milagros, and Kumi Harischandra (2008). The Impact of Taxes on Economic Behavior. In Jason Clemens (ed.), The Impact and Cost of Taxation in Canada: The Case for Flat Tax Reform (Fraser Institute): 3–31.

An abridged version of this article first appeared in the Financial Post on February 23, 2010.

Wage and Price Controls: Panacea for Inflation or Prescription for Disaster (1976)

Zoning: Its Costs and Relevance for the 1980s (1980) Rent Control: Myths and Realities (1981) Focus: On Economics and the Canadian Bishops (Focus No. 3, February 1983) Industrial Innovation: Its Place in the Public Policy Agenda (1984) Focus: On Employment Equity (Focus No. 17, 1985) Inside the Bank of Canada’s Weekly Financial Statistics: A Technical Guide (1985) Higher Education in Canada: An Analysis (1988) Education in Canada: An Analysis of Elementary, Secondary, and Vocational Schooling (1988)

The Market for Legal Services (1988) Economics and the Environment: A Reconciliation (1990) The Law and Economics of Competition Policy (1990) Continental Accord: North American Economic Integration (1991) Economic Freedom: Toward a Theory of Measurement: Proceedings of an International Symposium (1991) Poverty in Canada, 1st edition (1992) Healthy Incentives: Canadian Health Reform in an International Context (1996) Welfare—No Fair: A Critical Analysis of Ontario’s Welfare System (1985-1994) (1996) Economic Freedom of the World, 1997 Annual Report (1997) Global Warming: The Science and the Politics (1997) Beyond the Nass Valley: National Implications of the Supreme Court’s Delgamuukw Decision (2000)

If you have any of these books and are willing to part with them, please contact Kristin McCahon at the Fraser Institute at 604-688-0221 ext. 583, or e-mail kristin.mccahon@fraserinstitute.org and we can discuss the best way to get them to the Vancouver office. We appreciate any help you can give.

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The foundation of our freedoms

Big Stock Photo

PROPERTY RIGHTS Peter Leeson

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he most important rights in any society are property rights. Property rights define “mine and thine.”

They describe the privileges and obligations of ownership and thus the rights of resource owners. Most importantly, these rights include: 1. A resource owner’s right to use her resource any way she wants, including not at all, provided that in doing so she does not infringe on someone else’s property rights.

2. A resource owner’s right to allow others to use her resource, for free or for a price, and to exclude others from its use.

3. A resource owner’s right to transfer ownership of her resource to someone else for free or for a price.

4. A resource owner’s right to the earnings her use or sale of the resource creates.

Property rights are indispensable for prosperity for three reasons.

First, they make it possible for individuals to discover the information they need to use resources productively. Property rights permit market exchange and market exchanges permit market prices. As the great Austrian economist and Nobel Laureate F.A. Hayek pointed out, market prices are like signals that direct economic traffic. If, for example, a storm in the Prairies destroyed some of Saskatchewan’s wheat crop, then the price of wheat in Saskatchewan would rise, encouraging wheat farmers in other provinces to send more of their wheat to Saskatchewan’s needy market and prompting buyers in Saskatchewan to curtail their consumption. The changing price of wheat—a price made possible by property

rights—coordinates suppliers and demanders in light of changing market conditions.

Imagine how things would be different without property rights. Individuals cannot trade what they do not own.

Thus, without property rights there would be no market exchange. And without market exchange there would be no market prices. And without market prices the information these prices provide about how resources should be used could not be discovered. If a storm destroyed some of Saskatchewan’s wheat crop, wheat from other provinces would not flow into Saskatchewan’s needy market and Saskatchewan’s consumers would not know to curtail their consumption. The result would be economic chaos. Without property rights, economic actors would be groping in the dark.

KEY CONCEPTS

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The second reason why property rights are indispensable for prosperity is that they create incentives for individuals to act on information about how to use resources productively. When their property rights are secure, individuals benefit directly—in the form of profit—from employing their resources productively. For example, the Alberta wheat farmers who, after observing the higher price of wheat in Saskatchewan following the storm, sent some of their wheat to Saskatchewan’s market would get to keep the money they made by acting on this information.

Similarly, individuals lose directly—in the form of losses—when they employ their resources unproductively.

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The Alberta wheat farmers who, after observing the higher price of wheat in Saskatchewan following the storm, made hats out of their wheat instead of sending it in Saskatchewan would lose money because they responded to this information inappropriately. In this way, property rights encourage resource owners to use their resources in ways that create value and avoid using them in ways that destroy value.

The final reason why property rights are indispensable for prosperity is that they make liberty possible. Besides material well-being, our overall prosperity also depends on our freedom. And as Milton Friedman, another Nobel Laureate in economics, famously pointed out, to enjoy the civil freedoms we cherish, we must have property rights. The Soviet Union’s constitution officially guaranteed its citizens freedom of speech and freedom of assembly. But these guarantees were meaningless because the Soviet Union’s socialist economy abolished citizens’ property rights. Citizens could not own printing presses. Nor could they own assembly halls. How, then, could they exercise their supposed freedoms?

Property rights are equally indispensable for other liberties. How can there be freedom of religion where citizens cannot own places of worship? How can there be a right to privacy where citizens cannot own homes? And how can there be freedom of thought where citizens cannot own publishing companies? There can’t be. If citizens do not have property rights, then even the most basic civil freedoms are impossible.

There are two threats to individuals’ property rights: thieves and government. Ostensibly, the very reason for the latter is to protect us against the former. Laws, police, and courts are supposed to protect our rights of

ownership from those who would not respect them otherwise. In much of the world, however, politicians behave much like thieves—only they plunder much more. Such governments use taxes, inflation, and, in some cases, outright expropriation to steal from their citizens.

The means that thieves and predatory governments use to violate individuals’ property rights may differ, but their effect is the same. If you expect to regularly lose your earnings to a mugger, your right to your income—and thus your ability and incentive to generate income—is greatly weakened. Similarly, if you expect your government to take a large portion of your income each year through taxes or some other form of expropriation, your right to your income—and thus your ability and incentive to generate income—is weakened as well.

A society plagued by predatory governments winds up in the same situation as one plagued by thieves, and for the same reason. In both societies the citizens’ property rights are insecure, undermining individuals’ ability and incentive to create wealth. It is, therefore, critical to prevent thieves and governments from undermining individuals’ property rights.

While there are many ways to live, there is only one way to live free and prosperously: through a system of wellprotected property rights. Property rights are the foundation of a free society. They make the price system possible, provide individuals with incentives to create wealth, and are the linchpin of our liberty. By protecting individuals’ property rights, we can ensure the growth of civilization.

By failing to do so, we ensure civilization’s demise.

Suggestions for further reading Friedman, Milton (1962). Capitalism and Freedom. University of Chicago Press.

Rosenberg, Nathan, and L.E. Bridzell, Jr. (1986). How the West Grew Rich: The Economic Transformation of the Industrial World. Basic Books. von Mises, Ludwig (1996). Liberalism: The Classical Tradition.

Foundation for Economic Education.

*Key Concepts is a series of essays on the fundamentals of economics and markets. In addition to appearing in Fraser Forum, these essays will form the basis of a live Ask the Professor discussion, held at www.fraserinstitute.org each month. This essay concludes the Key Concepts series.

Please join us on April 29 at 11:00 am Pacific time for an online discussion of this essay with Professor Christopher Coyne.

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RISK AND REGULATION Fotolia

Forum Focus

Regulating “greenhouse gases” Canada should beware harmonization with the United States George T. Wolff and Diane K atz

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he Harper government has made plain its intention to “harmonize” Canada’s global warming regulations with those promulgated in the United States (Woods, 2010, Feb. 1). From a scientific standpoint, there is a powerful case to be made that such regulations are wholly unnecessary (McKitrick, 2007). From a practical standpoint, Canada should steer clear of the legal and legislative chaos into which US policy has descended.1 The prime minister and his advisors contend that a regulatory alignment is necessary to protect cross-border trade and the competitiveness of Canadian products.

Indeed, organized labour in the US will likely demand higher tariffs or other “border adjustments”2 in the event that additional regulatory costs related to global warming place domestic products at a competitive disadvantage.

As the following chronicle reveals, the US is in no position to negotiate regulatory harmony; at present, policy discord reigns in Washington. Convoluted though it may be, the status of global warming regulation in the United States demands scrutiny so that Canada can protect itself against forging an agreement that could easily collapse under political pressure or be dissolved by judicial decree.

In the wake of the Copenhagen Conference held in December 2009, both Canada and the United States pledged to reduce greenhouse gas (GHG)3 emissions by 17% below 2005 levels by 2020 (Environment News Service, 2010, Feb. 8). No binding accord was actually adopted by the conferees, but developed countries agreed to submit voluntary emissions reduction targets to the United Nations (UNFCCC, 2010).

Just how the reductions will come about remains unresolved. As previously noted, Ottawa plans to harmonize

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its regulations with the United States. But it is unlikely that the US Congress will impose regulatory controls on fossil fuel emissions any time soon. Legislation authorizing a “cap-and-trade” scheme was approved by the US House of Representatives, but has stalled in the Senate.

With mid-term elections looming—and growing public opposition to yet another costly, job-killing government program (Rasmussen Reports, 2010)—most observers believe the measure will not move forward.

Congress’ inaction cedes the regulatory hammer to officials of the US Environmental Protection Agency (EPA), who display no apparent regard for the dire economic consequences of their regulatory actions. Indeed, a review of the EPA’s global warming-related exploits reveals improper rule-making and abuses of power4 (US Chamber of Commerce, 2010). Thus, it would be irresponsible for Canada to base its regulatory regime on EPA actions that now face substantial legal challenges.

Regulations under the Clean Air Act The basis for the EPA’s proposed emissions regulations5 is the agency’s “finding” that carbon dioxide (CO2) and five other “greenhouse gases” are “air pollutants” actionable under the Clean Air Act (CAA) (US EPA, 2008).

The CAA was designed to control substances that are emitted in trace amounts but which, under certain circumstances, accumulate in high concentrations on local or regional scales. It was never the intent of Congress to regulate CO2­or any greenhouse gas under the CAA (US EPA, 2003). The term “greenhouse gas” does not even

appear in the statute, and CO2 is mentioned only once in a non-regulatory context.6 In the past, the CAA has been used to regulate air pollutants that have direct human health or ecological effects documented in clinical and toxicological studies. In the case of greenhouse gases, however, the EPA is acting on the supposed effects of emissions on climate.

Previous administrations have declined to regulate greenhouse gases under the CAA. In 1999, for example, a coalition of 19 environmental organizations7 petitioned the EPA to set greenhouse gas emissions standards for new motor vehicles under Section 202 of the CAA. After a notice and comment period, however, the agency resolved that the CAA did not apply to the regulation of CO2 (US EPA, 2003). The EPA officials concluded that Congress would have been far more specific if it had wanted the agency to undertake regulations of such enormous economic and political consequences (US EPA, 2003).

Shortly thereafter, the International Center for Technology Assessment, 12 other groups, the State of Massachusetts, 11 other states, and four other governmental entities8 petitioned the US Court of Appeals for the District of Columbia to review the EPA’s petition denial. In a 2-to-1 decision, the Appeals Court held for the agency, finding that the EPA administrator had discretion to consider both scientific evidence and policy judgments in deciding whether to promulgate regulations under the Clean Air Act (US EPA, 2008). The court did not address whether the CAA could actually authorize greenhouse gas regulation.

Massachusetts and the other claimants appealed to the US Supreme Court. On April 2, 2007, in a 5-to-4 decision, the court ruled that the EPA did have the authority under the Clean Air Act to determine whether CO2 emissions constitute a danger to public health and, if so, to regulate greenhouse gases as “air pollutants” (see Massachusetts v. EPA). The court instructed the agency either to determine whether greenhouse gas emissions from new vehicles cause or contribute to the “endangerment” of public health or welfare,9 or to justify why the EPA could not determine this.10 Contrary to the claims of some environmental alarmists (Jackson, 2010), the ruling does not force the EPA to regulate fossil fuel emissions.

In July 2008, the Bush administration solicited public comments on how the EPA should respond to the Supreme Court ruling in Massachusetts v. EPA, and the potential ramifications of regulating CO2 under the Clean Air Act (US EPA 2008). However, the solicitation for comments was prefaced by a statement of opposition

from then-EPA Administrator Stephen Johnson, who noted that “the Clean Air Act, an outdated law originally enacted to control regional pollutants that cause direct health effects, is ill-suited for the task of regulating global greenhouse gases.”

His remarks were echoed by a number of other federal agencies that were also highly critical of using the Clean Air Act to regulate CO2. Officials with the US Department of Energy, for example, characterized such an approach as “an enormously elaborate, complex, burdensome and expensive regulatory regime that would not be assured of significantly mitigating global atmospheric GHG concentrations and global climate change” (US EPA, 2008).

After the July 2008 solicitation of comments, no further regulatory action was taken by Washington until Barack Obama took office and appointed a new EPA administrator, who subsequently declared greenhouse gases to be a danger to public health and welfare (US EPA, 2009). Despite the enormous consequences CO2 regulation would unleash, the EPA did not hold formal hearings on the proposed regulations, as required under the federal Administrative Procedures Act (US Chamber of Commerce, 2010).

By proceeding with regulations under the Clean Air Act, the EPA is legally obligated to select between two emissions thresholds prescribed in the statute at which permit requirements would be imposed—either 100 tons/ year or 250 tons/year. Either of those statutory thresholds would corral millions of facilities into the permitting process,11 including offices and apartment buildings, shopping malls, restaurants, hotels, hospitals, schools, houses of worship, theatres, and sports arenas (Lewis, 2008). In an effort to soften political outrage over such sweeping regulations, EPA Administrator Lisa Jackson has proposed setting a higher threshold—100,000 tons/year—at which the regulation of stationary sources of emissions would apply. However, only Congress has the power to modify a federal statute; thus, Jackson’s proposed change would be a clear violation of law.

Officials with the US Department of Agriculture have expressed concern that the EPA regulations, if enacted, may drive up the cost of food and reduce the supply (US EPA, 2008). For example, should the EPA opt for a 100 tons of CO2 emissions/year regulatory threshold, even very small farm operations would need operating permits. But, as federal agriculture officials have stated, smaller farm operations are “ill-equipped to bear the

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EPA regulations would affect small farms, restaurants, hotels, hospitals, schools, houses of worship, and small businesses. costly burdens of compliance, and many would likely cease farming altogether” (US EPA, 2008).

In addition to creating onerous permit costs for businesses, critics of the EPA warn that costly regulations would likely drive domestic businesses abroad to countries with less stringent requirements. The ensuing shift in the manufacturing base, they argue, would result in no net reduction in global emissions of greenhouse gases.

Indeed, economist Stephen Moore characterizes North American regulations of greenhouse gas emissions as the “China and India Full Employment Act” (Moore, 2009).

Absent proof of a link between human-made emissions from fossil fuels and global warming, the most rational policy course is to ignore the alarmists and focus instead on actual threats to human health and the environment. This course of action is all the more justified given recent revelations of scientific deceit among the research institutions tasked with guiding the international response to global warming (see Katz, 2010). Unfortunately, Stephen Harper and his advisors have concluded that green politics demand action. But while regulatory harmonization with the United States is preferable to discord, the government should insulate Canada from America’s legal and legislative confusion.

Notes 1 The US Chamber of Commerce, the Competitive Enterprise Institute, the State of Texas, and many other organizations and political entities have filed lawsuits challenging the legality of the EPA’s regulatory actions. Meanwhile, Alaskan Republican Senator Lisa Murkowski has proposed a resolution to prohibit the agency from taking regulatory action by overturning its finding that greenhouse gases endanger public health and welfare.

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2 Congress has considered imposing “border adjustments” that would require foreign companies to purchase “allowances” representing the excess carbon emissions related to the manufacture of imports from countries with less stringent global warming regulations.

3 The term “greenhouse gas” is a misnomer. It implies that greenhouse gases trap heat like a glass greenhouse, but that is erroneous. In a greenhouse, sunlight warms the interior surfaces of the building. That heat is then transferred to the trapped air by conduction. In the atmosphere, the sun heats the Earth’s surface, which transfers heat (energy) to surface air via conduction. But the heat is also distributed throughout the atmosphere by convection, evaporation, and condensation.

4 The US Chamber of Commerce and more than a dozen other groups have filed lawsuits in an effort to force the EPA to follow the rule-making procedures mandated by the Administrative Procedures Act. 5 The EPA released for comment its proposed emissions standards for new vehicles on September 15, 2009, and emissions standards for large stationary sources on September 30, 2009.

6 Section 103 of the Clean Air Act authorizes the EPA to conduct research on CO2 control technologies for stationary sources.

7 Petitioners included International Center for Technology Assessment; Alliance for Sustainable Communities; Applied Power Technologies, Inc; Bio Fuels America; California Solar Energy Industries Association; Clements Environmental Corp.; Earth Day Network; Environmental Advocates; Environmental and Energy Study Institute; Friends of the Earth; Full Circle Energy Project, Inc.; Green Party of RI; Greenpeace USA; National Environmental Trust; Network for Environmental and Economic Responsibility of the United Church of Christ; NJ Environmental Watch; NM Solar Energy Association; Public Citizen; Solar Energy Industries Association; and SUN DAY Campaign.

Lewis, M. (2008). Will Litigants and Courts Enact Two, Three, Many Kyotos? Unpublished speech, given at the International Conference on Climate Change, New York, NY, March 2-4, 2008.

Massachusetts v. EPA, 549 U.S. 497 (2007).

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McKitrick, Ross (ed.) (2007). Independent Summary for Policymakers: IPCC Fourth Assessment Report. Fraser Institute.

8 Petitioners included Massachusetts; California; Connecticut; Illinois; Maine; New Jersey; New Mexico; New York; Oregon; Rhode Island; Vermont; Washington; the District of Columbia; American Samoa Government; New York City; the Mayor and City Council of Baltimore; Center for Biological Diversity; Center for Food Safety; Conservation Law Foundation; Environmental Advocates; Environmental Defense; Friends of the Earth; Greenpeace; International Center for Technology Assessment; National Environmental Trust; Natural Resources Defense Council; Sierra Club; Union of Concerned Scientists; and the US Public Interest Research Group.

9 If the EPA finds that there is endangerment, then Section 202 requires them to set new vehicle emission standards.

10 Although the Supreme Court decision only involved new vehicle standards, an endangerment finding would invoke other provisions of the Clean Air Act that would require regulations for stationary sources of emissions.

11 Lewis (2008) estimates that any source of emissions with CO2 volumes equal to the central heating systems of a dozen medium houses—about 50,000 ft 2—would require a permit.

References Environment News Service (2010, February 8). Governments Confirm Climate Accord Pledges, No New Commitments. <http://www.ens-newswire.com/ens/feb2010/2010-02-0801.html> as of March 1, 2010.

Jackson, Lisa P. (2010). Letter to United States Senator Jay Rockefeller. Dated April 22, 2010. Scribd. <http://www. scribd.com/doc/27340827/EPA-Administrator-LisaJackson-s-letter-to-Senator-Jay-Rockefeller>, as of March 17, 2010.

Katz, Diane (2010). Global Warming on Trial. Fraser Forum (March): 6–9.

Moore, Stephen (2009). The Green Dream of Cap and Trade: A Red Ink Nightmare. Unpublished speech, given at a Fraser Institute Influential Speaker Program event, Calgary, AB, September 9, 2009.

Rasmussen Reports (2010). Energy Update: Voters Take Global Warming Less Seriously. Rasmussen Reports. <http:// www.rasmussenreports.com/public_content/politics/ current_events/environment_energy/energy_update>, as of March 17, 2010.

United Nations Framework Convention on Climate Change [UNFCCC] (2010). Notification to Parties: Clarification Relating to the Notification of 18 January 2010. UNFCCC. <http://unfccc.int/files/parties_and_observers/ notifications/application/pdf/100125_noti_clarification. pdf>, as of January 27, 2010.

United States Environmental Protection Agency [US EPA] (2003). Notice of Denial of Petition for Rulemaking. 68 Federal Register 52, 922 (September 8, 2003).

United States Environment Protection Agency [US EPA] (2008). Regulating Greenhouse Gas Emissions under the Clean Air Act. Federal Register 73, 147 (July 30, 2008) (to be codified at 40 C.F.R. ch. 1).

United States Environmental Protection Agency [US EPA] (2009). Endangerment and Cause or Contribute Findings for Greenhouse Gases under Section 202(a) of the Clean Air Act. Federal Register 74, 239 (December 15, 2009) (to be codified at 40 C.F.R. ch. 1). <http://epa.gov/climatechange/ endangerment/downloads/Federal_Register-EPA-HQOAR-2009-0171-Dec.15-09.pdf>, as of February 16, 2010.

US Chamber of Commerce (2010). US Chamber Files Petition to Challenge EPA’s Triggering of Clean Air Act Regulation.

News release (February 12). <http://www.uschamber.com/ press/releases/2010/february/100212_petition.htm>, as of March 1, 2010.

Woods, Allan (2010, February 1). Time to Clean Up the Oilsands, Prentice Says. Toronto Star. <http://www.thestar. com/news/canada/article/758798--time-to-clean-up-theoilsands-prentice-says>, as of March 1, 2010.

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Repeal the bottle ban The benefits of bisphenol A outweigh any risks Angela Logomasini

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ver the past several years, parents have been plagued with hysteria over a chemical used to manufacture plastic baby bottles. Activist groups say Bisphenol A (BPA) will poison children and impair their development (Environmental Defense, 2008). They also claim that it disrupts our endocrine systems,1 causing everything from obesity and diabetes to sexual disorders

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in men (Environmental Defense, 2008). The latest claim about BPA, which comes from Toronto Liberal MP Carolyn Bennett, is beyond the pale. She maintains that the use of BPA in “adult toys” endangers women, explaining in a letter to Health Minister Leona Aglukkaq that “No one questions these chemicals are hazardous” (Bennett, 2009).

On the contrary.

In wide use for over 50 years, BPA has been extensively studied for potential impacts on human health. As the following summary documents, this large body of research has failed to find a meaningful relationship between consumer exposures to BPA and negative health effects.

Bennett’s chemical phobia may seem humorous or just plain silly, but it reflects a much deeper and growing disconnect between public policy and scientific fact.

Seemingly without hesitation, politicians and government regulators routinely act on misinformation and outright myth, with little concern for consequences. But the adverse consequences of banning valuable products from the marketplace can be serious; replacements can prove less effective or may introduce even greater risks.2 It is, therefore, incumbent on citizens to learn the truth and keep their elected representatives in check.

Big Stock Photo, Fotolia

What is BPA? Bisphenol A is a chemical intermediary in the manufacture of polycarbonate plastics and epoxy resins. These plastics are used in a variety of products, including baby bottles, water jugs, medical equipment, sports equipment, consumer electronics, and appliances. The resins are used for industrial flooring, adhesives, primers, coatings, and computer components.

In 2008, Canada banned the use of BPA in baby bottles—the only federal government to restrict its use.

It issued the ban even after its own scientific review found no risks associated with consumer exposures. As Health Canada (2008a) notes: The scientists concluded in this assessment that Bisphenol A exposure to newborns and infants is below levels that cause effects; however, due to the uncertainty raised in some studies relating to the potential effects of low levels of Bisphenol A, the Government of Canada is taking action to enhance the protection of infants and young children.

Evidently, the government felt the political need to regulate because media and activist hype sowed fear among parents. This was expressed by then-Environment Minister John Baird, who said, “Many Canadians, especially mothers of babies and small children in my own constituency of Ottawa West-Nepean, have expressed their concern to me about the risks of Bisphenol A in baby bottles” (Health Canada, 2008a).

Are there risks?

The best science tells us that risks associated with various substances are related to the dose and duration of exposure. Different substances will have effects at different exposure levels, but the basic rule for all substances is that risk decreases with declining exposure level.

In a study conducted during the 1990s, the US Environmental Protection Agency (EPA) determined that the exposure level for BPA in animals at which there was “no observed effect” was 50 mg/kg body weight/day. Agency officials then assumed that the risk to humans would be much higher, and estimated that a safe human dose would be 0.05 mg/kg exposures for humans per day—or 1,000 times more sensitive than the exposure level for animals (US EPA, 1993).

Fortunately, human exposure to BPA through food and other consumer products is far below that level. A peer reviewed analysis by Michael A. Kamrin, published in Medscape General Medicine, assessed the best available data on consumer exposure to BPA. His research revealed that consumers are most likely exposed to BPA at levels that are 100 to 1,000 times lower than the EPA’s estimated safe exposure levels (Kamrin, 2004). He further noted that the research on BPA also shows that the exposure levels per body weight are similar for adults and children, meaning that infant exposure is not significantly higher.

Incidentally, the risk of BPA would also be lower than the EPA estimates because humans are less sensitive to BPA than are the lab animals that were used to set the standard.

Research has failed to find a meaningful relationship between consumer exposures to BPA and negative health effects.

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Humans tolerate far higher doses than animals because the human body more easily breaks down BPA and passes it out via urination (NTP, 2008).

Most concerns about BPA are based on findings from rodent tests alleging a link between the substance and various potential health problems from obesity to cancer.3 However, regulatory bodies have found these findings unreliable for a variety of reasons, including: ■ In many studies, the animals were exposed to levels far above human exposures.

■ These studies failed to account for interspecies differences.

■ Exposure routes were different: the animals were injected with BPA, while humans ingested it.

An assessment by the European Food Safety Authority concluded that “low-dose effects of BPA in rodents have not been demonstrated in a robust and reproducible way, such that they could be used as pivotal studies for risk assessment” (EFSA, 2006). Similarly, a US National Toxicology Program study noted that there were a number of problems with the findings of these studies: These “low” dose findings in laboratory animals have proven to be controversial for a variety of reasons including concern for insufficient replication by independent investigators, questions on the suitability of various experimental approaches, relevance of the specific animal model used for evaluating potential human risks, and incomplete understanding or agreement on the potential adverse nature of reported effects. (NTP, 2008) Research does indicate that BPA, like soy, can bind to estrogen receptors in the human body (NTP, 2008).

In theory, this could produce hormone-related effects such as early sexual development in females. But effects have only been observed in rodents that were exposed to

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very high levels of BPA via injections and, in some cases, among animals that were orally fed high levels of the chemical (NTP, 2008). There are no studies or evidence showing effects in humans exposed to BPA in consumer products.

BPA is not only less toxic to humans than to animals; it is also less likely to pose endocrine-related effects (NTP, 2008). The human body quickly breaks down BPA into substances that do not bind with estrogen.

Studies have been unable to establish a significant risk of BPA to humans even when humans were exposed to relatively high levels in occupational settings. The risks to general consumers are much lower.

In September 2008, the Journal of the American Medical Association published a study alleging that heart disease and diabetes were more common among individuals who had relatively high levels of BPA in their urine (Lang et al., 2008). However, that study suffers from serious flaws that render the findings highly unreliable (Kamrin, 2008).

For example, the measurement of BPA for each individual was done just once. It is inaccurate to assume that the individuals with the highest levels at one moment had or would have high levels over time. Their BPA levels could vary depending on a variety of factors. Individuals with high rates in this study might only have had them because they had been exposed to BPA within a few minutes or hours before the test. Without any information on actual exposure levels over time, the study does not incorporate the data necessary to determine whether BPA levels are related in any way to disease.

Another recent study alleges a link between BPA and sexual dysfunction in men. Researchers interviewed 634 factory workers in China who had been exposed to relatively high levels of BPA (Li et al., 2009). The workers were questioned about sexual dysfunctions from which they might suffer. Researchers also surveyed a control group not exposed to BPA at those levels. The study found that the exposed workers were four times more likely to have sexual dysfunctions.

However, the study has limited value for a variety of reasons. The most obvious concerns exposure levels. The workers’ exposure levels were upwards of 50 times that of US consumers, and probably much higher in many cases. Accordingly, the high exposures in China do not necessarily reveal all that much about risks associated with the trace level exposures that are common in the United States.

Furthermore, much of the exposure to BPA among the Chinese workers resulted from inhalation, not consumption (Li et al., 2009). This is very important. When BPA is ingested, the human body metabolizes and passes the substance, preventing it from interfering with endocrine systems (NTP, 2008). Accordingly, dietary exposures are very different and pose a much lower risk.

Less obvious—but equally, if not more, important— are the problems associated with this type of survey research. First, there are many potential confounding factors that the study does not fully address. Indeed, the workers were exposed to many other substances in common that could have led to sexual dysfunctions.

Another problem with this study concerns the interviewing process. Workers might have expressed greater concerns about health issues because they knew that they were participating in a research study related to their work environment, in which they were exposed to a host of chemicals. Furthermore, the workers were asked to gauge some very vague, subjective, and difficult-tomeasure feelings, including “reduced sexual desire” and “reduced satisfaction with sex life” (Li et al., 2009). The test group, who worked in a plant where employees had to take measures to avoid chemicals suspected of causing reproductive problems, might have felt prompted to give certain answers. On the other hand, the men in the control group, who worked in an environment where there were no suspected chemicalrelated problems, were probably less likely to report personal, sexrelated problems.

Some activists try to indict the substance based on exposure alone. For example, the Environmental Working Group produced a paper that simply measured BPA levels in human urine, as if the mere presence of the chemical represented a health threat (Environmental Working Group, 2007). But such measurements actually support the fact that BPA passes through the body quickly.

Scientific panels around the world have reviewed, and continue to review, the complete body of evidence;

Regulatory measures to ban or limit BPA use will simply raise prices for consumers.

none of them report serious concerns about BPA. Instead, they affirm findings of a very low risk. Accordingly, regulatory bodies around the world have determined that the benefits of using BPA to protect our food and perform other functions outweigh any risks.

In 2008, the United States Food and Drug Administration released a draft risk assessment which concluded that “an adequate margin of safety exists for BPA at current levels of exposure from food contact uses” (US FDA, 2008). Similarly, the European Union Risk Assessment found no compelling evidence of BPA-related health effects at estimated human exposure levels (EFSA, 2006). In July 2008, the European Food Safety Authority reaffirmed the 2006 review (EFSA, 2008).

An extensive study by Japan’s National Institute of Advanced Industrial Science and Technology found that “the risks posed by BPA were below the levels of concern” (Nakanishi et al., 2007). Likewise, Health Canada determined that “based on the overall weight of evidence, Health Canada’s Food Directorate has concluded that the current dietary exposure to BPA through food packaging uses is not expected to pose a health risk to the general population, including newborns and young children” (Health Canada, 2008b).

Despite considerable fears raised by activist groups and the press, the science does not support regulation of BPA. Instead, it shows that human exposure is too low to have any measurable impact. As a result, regulatory measures to ban or limit BPA use will simply raise prices for consumers and could have unintended adverse health and safety consequences.

Notes 1 The endocrine system is composed of glands that release hormones into the circulatory system.

2 BPA makes polycarbonate plastics exceptionally strong and resistant to breakage and to relatively high heat. It is remarkably durable and easily sterilized, making it well suited for reuse and recycling. In contrast, glass can break easily before reaching recycling facilities and mix with other glass, ceramics, and other items. Mixed broken glass is difficult to recycle and often discarded. Glass breakage also poses obvious safety risks and increases the potential for significant food waste. The transparency of polycarbonate plastics offers unique benefits over non-transparent plastics. Transparency has value for such things as safety goggles or in settings, such as hospitals, where

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it is valuable to have a clear view of contents in various containers. In addition, it is relatively lightweight in comparison to alternatives like metal or glass, a characteristic that offers important safety attributes for individuals who must lift polycarbonate products during shipping and stocking products, as well as for consumers. The lightweight material also demands less fuel to transport, saving energy and money. BPA is also used to make resins and coatings that are suitable for application to a wide range of surfaces at a wide range of temperatures. As a result, it helps prevent corrosion and increases product durability.

3 For some commentary on the obesity claims, see Fumento (2007). With respect to cancer claims, see, for example, <http:// www.oeconline.org/our-work/smartpolicy/BPA> and <http:// www.environmentoregon.org/airwater/banbpa>.

References Bennett, Carolyn (2009). Letter to the Hon. Leona Aglukkaq, Minister of Health, December 15, 2009. <http://www. carolynbennett.ca/dev/downloads/ACF10.pdf>, as of February 25, 2010.

Environmental Defence (2008). BPA Q & A. Toxic Nation. <http://toxicnation.ca/bpaqa?zoom_highlight=bisphe nol>, as of March 17, 2010.

Environmental Working Group (2007). Bisphenol A: Toxic Plastics Chemical in Canned Food. Environmental Working Group. <http://www.ewg.org/book/export/ html/20928>.

European Food Safety Authority [EFSA] (2006). Opinion of the Scientific Panel on Food Additives, Flavourings, Processing Aids and Materials in Contact with Food (AFC) Related to 2,2-BIS(4-HYDROXYPHENYL)PROPANE, EFSA-Q-2005-100. EFSA. <http://www.efsa.europa.eu/ EFSA/efsa_locale-1178620753812_1178620772817.htm>.

European Food Safety Authority [EFSA] (2008). EFSA Updates Advice on Bisphenol. News release (July 23). <http://www.efsa.europa.eu/EFSA/efsa_locale-117862 0753812_1211902017373.htm>.

Fumento, Michael (2007). Calories, Not Chemicals, Make Us Fat. Originally published in the American Spectator Online (March 27). <http://www.fumento.com/fat/obesity2007. html>.

Health Canada (2008a). Government of Canada Protects Families with Bisphenol A Regulations. News release

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(October 17). <http://www.hc-sc.gc.ca/ahc-asc/media/nrcp/_2008/2008_167-eng.php>.

Health Canada (2008b). Health Risk Assessment of Bisphenol A from Food Packaging Applications. Health Canada. <http:// www.hc-sc.gc.ca/fn-an/securit/packag-emball/bpa/bpa_ hra-ers-eng.php>.

Kamrin, Michael A. (2004). Bisphenol A: A Scientific Evaluation. Medscape General Medicine 6, 3: 7.

Kamrin, Michael A. (2008). Critique of JAMA Article on BPA. American Council on Science and Health. <http://www. acsh.org/factsfears/newsID.1194/news_detail.asp>.

Lang, Iain A., et al. (2008). Association of Urinary Bisphenol A Concentration with Medical Disorders and Laboratory Abnormalities in Adults. Journal of the American Medical Association 300, 11 (September): 1303–10.

Li, D., et al. (2009). Occupational Exposure to Bisphenol-A (BPA) and the Risk of Self-Reported Male Sexual Dysfunction. Human Reproduction 2009: 1–9. <http://www. oxfordjournals.org/news/dep381.pdf>.

Nakanishi, Junko, Ken-ichi Miyamoto, and Hajime Kawasaki (2007). Bisphenol A Risk Assessment Document. AIST Risk Assessment Document Series No. 4. National Institute of Advanced Industrial Science and Technology. <http://unit. aist.go.jp/riss/crm/mainmenu/BPA_Summary_English. pdf>.

National Toxicology Program [NTP] (2008). NTP-CERHR Monograph on the Potential Human Reproductive and Developmental Effects of Bisphenol A. National Institutes of Health, US Department of Health and Human Services. <http://cerhr.niehs.nih.gov/chemicals/bisphenol/ bisphenol.pdf>.

United States Environmental Protection Agency [US EPA] (1993). Integrated Risk Information System: Bisphenol A. (CASRN 80-05-7). Last revised July 1, 1993. US EPA. <http://www.epa.gov/NCEA/iris/subst/0356.htm>.

United States Food and Drug Administration [US FDA] (2008). Draft Assessment of Bisphenol A for Use in Food Contact Applications. US FDA. <http://www.fda.gov/ ohrms/dockets/AC/08/briefing/2008-0038b1_01_02_ FDA%20BPA%20Draft%20Assessment.pdf>.

This article is excerpted from Angela Logomasini’s recent study, The Nanny State Attack on BPA in Baby Bottles: Oregon and Beyond, published in January by the Cascade Policy Institute. The full study is available at http://www. cascadepolicy.org/pdf/FullreportBPA-012710a.pdf.

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The myth of food miles Diane K atz

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onsumers are increasingly being told that “local” foods—typically regarded as those grown within 100 miles of the point of purchase—are environmentally superior to foods that are grown farther away.

But research suggests that this is not the case (Shimizu and Desrochers, 2008). The transport of agricultural products actually accounts for a relatively small proportion of the total energy-related emissions generated in food production (Weber and Matthews, 2008). In fact, in many instances, imports have a smaller environmental “footprint” than locally produced food.

In most cases, the emphasis on “eating local” stems from a concern that the global food chain is generating excessive emissions of the “greenhouse gases,”1 causing global warming (Bentley and Barker, 2005). However, there is no proof of any such link (McKitrick, 2007).

Moreover, this odometer approach to calculating environmental impact—commonly referred to as counting “food miles”2—is far too simplistic for assessing the environmental impacts of agricultural products; it effectively ignores all of the other “inputs” that are necessary to produce food (Hess, 2008).

As with all commodities, energy is consumed at every stage of food production, from the gasoline that fuels tractors to the electricity required for packaging. Researchers at Carnegie Mellon University have quantified

the greenhouse gas emissions for the various components of farming and food processing. This “life-cycle” analysis found that the transportation of food is responsible for only 11% of the greenhouse gas emissions related to the food supply of an average family (Weber and Matthews, 2008). In contrast, the actual production of the food generates 83% of total emissions, while wholesaling and retailing account for about 5%.

The results of life-cycle assessments for different products vary, of course, depending on a host of factors, including the environment in which the food is grown, the farming practices used to grow it, and the degree of processing it undergoes. Consequently, as a team of researchers commissioned by Britain’s Department of Environment, Food, and Rural Affairs concluded from their analysis of food’s energy intensity, “a single indicator based on total food kilometres is an inadequate indicator of sustainability” (Smith et al., 2005).

A more thorough analysis involves comparing the total emissions generated by a domestic product and its imported counterpart, as was done by researchers at New Zealand’s Lincoln University. The study compared British imports of New Zealand lamb with lamb raised in Britain. The research found that raising lamb in the United Kingdom requires four times more energy than raising lamb in New Zealand (Saunders et al., 2006). A number

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“Local” lambs sold in the United Kingdom require four times more energy than lambs imported from New Zealand.

NZ

Fotolia

UK

of differences contributed to this disparity. For example, the pastures in New Zealand feature sufficient clover for lambs to graze, while UK farmers must use processed feed, which has relatively high energy intensity. New Zealand’s use of hydro-electricity also generates fewer emissions than Britain’s coal-fired power. And, mile for mile, transatlantic shipping consumes less energy than rail or road transport.

These results held true for other products, as well (Saunders et al., 2006).

Even when accounting only for food transport, there is evidence that “eating local” does not necessarily yield environmental benefits. The dominant system of food supply involves trucking products from central distribution centers to suppliers and supermarkets across a metropolitan area. Moving groceries in volume reduces the environmental impacts per unit of food, since a single trip involves the transport of large quantities. Local farmers may travel fewer miles to deliver their goods to the market, but they do so in smaller vehicles that carry lighter loads. Thus, the lesser distance to market for locally grown products is offset by

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the smaller vehicles, lighter loads, and repeated trips (Smith et al., 2005).

Canada imports about half of the food consumed in the country and exports about half of the food it produces (Statistics Canada, 2006). Consumers obviously take advantage of the tremendous product choices that food trade permits and make purchase decisions based on a range of legitimate factors, including price, variety, and convenience, rather than product origin alone. There may be a host of reasons why consumers buy locally grown products, but the notion that “eating local” produces environmental benefits is more a myth than a reality.

Notes 1 The term “greenhouse gas” is a misnomer. It implies that greenhouse gases trap heat like a glass greenhouse, but that is erroneous. In a greenhouse, sunlight warms the interior surfaces of the building. That heat is then transferred to the trapped air by conduction. In the atmosphere, the sun heats the Earth’s surface, which transfers heat (energy) to surface air

via conduction. But the heat is also distributed throughout the atmosphere by convection, evaporation, and condensation.

2 The National Sustainable Agriculture Information Service (2008) defines “food miles” as the distance food travels from farm to plate.

References Bentley, Stephen, and Ravenna Barker (2005). Fighting Global Warming at the Farmer’s Market. FoodShare Toronto. <http://www.foodshare.net/resource/files/foodmilesre port.pdf>, as of March 23, 2010.

Hess, David J. (2008). Localism and the Environment. Sociology Compass 2, 2: 625–38. <http://www.blackwell-com pass.com/subject/sociology/article_view?article_id=soco_ articles_bpl082>.

McKitrick, Ross (ed.) (2007). Independent Summary for Policymakers: IPCC Fourth Assessment Report. Fraser Institute.

National Sustainable Agriculture Information Service (2008).

Food Miles: Background and Marketing. National Center for Appropriate Technology. <http://www.attra.org/attrapub/foodmiles.html>.

An age of austerity?

Continued from page 6 Lack of austerity aside, there were a few pieces of good news in the 2010 budget, including a promise to reduce government red tape, eliminate tariffs on imported manufacturing machinery and equipment, and improve Canada’s international system of taxation. These measures, however, are minor in comparison to the government’s $1.4 trillion spending scheme.

While the media may think that the Conservative government delivered an austere budget, the reality is otherwise. The government’s inability to control spending, combined with its willingness to run at least five more years of deficits, will make the economy weaker, not stronger.

References

Saunders, Caroline, Andrew Barber, and Greg Taylor (2006).

Food Miles – Comparative Energy/Emissions Performance of New Zealand’s Agriculture Industry. Research Report No. 285. Lincoln University.

Canada, Department of Finance (2010). Budget 2010: Leading the Way on Jobs and Growth. Government of Canada. <http://www.budget.gc.ca/2010/pdf/ budget-planbudgetaire-eng.pdf>.

Shimizu, Hiroko, and Pierre Desrochers (2008). Yes We Have No Bananas: A Critique of the ‘Food Miles’ Perspective.

Policy Primer No. 8. George Mason University, Mercatus Center. <http://www.mercatus.org/PublicationDetails. aspx?id=24612>.

Globe and Mail (2010, March 5). Tories Launch Age of Austerity. A1.

Smith, Alison, Paul Watkiss, Geoff Tweddle, Alan McKinnon, Mike Browne, Alistair Hunt, Colin Treleven, Chris Nash, and Sam Cross (2005). The Validity of Food Miles as an Indicator of Sustainable Development. Government of the United Kingdom, Department of Environment, Food, and Rural Affairs. <https://statistics.defra.gov.uk/esg/reports/ foodmiles/execsumm.pdf>.

Statistics Canada (2006). Study: Canadian Agriculture Yearend Review. The Daily (June 5).

Weber, Christopher, and H. Scott Matthews (2008). FoodMiles and the Relative Climate Impacts of Food Choices in the United States. Environmental Science and Technology (April 16). <http://psufoodscience.typepad.com/ psu_food_science/files/es702969f.pdf>.

Lammam, Charles, Niels Veldhuis, and Milagros Palacios (2010). Budget Balance Should Be the Federal Government’s Focus. Fraser Alert. Fraser Institute. <http://www.fraserinstitute.org/commerce.web/ product_files/budget-balance-should-be-federalgovernment-focus.pdf>.

National Post (2010, March 5). A Budget with a Silver Lining. <http://www.nationalpost.com/story. html?id=2644183>.

Veldhuis, Niels (2009). What Is Fiscal Policy? Is Government Spending a Source of Stability or Instability? In Hassan Bougrine and Mario Seccareccia (eds.), Introducing Macroeconomic Analysis: Issues, Questions, and Competing Views (Emond Montgomery): 151–64.

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Canadians now live longer than ever Fotolia

Technology and economic growth contribute to increased life spans Diane K atz

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More broadly, we are living longer because of stunning scientific and technological progress. The advent of modern pharmaceuticals, diagnostic tools, and vaccines, as well as chlorination, insecticides, and refrigeration, has helped to reduce

the female mortality rate3 (age adjusted) by a whopping 52% since the 1950s, while the male mortality rate has dropped by 39% (Statistics Canada, 2001).

Evidence abounds that improved living standards are both a

Figure 1: Life expectancy at birth, Canada, 1900 to 2007 100

80 Age (years)

C

anadians are living longer than at any other time in historyâ&#x20AC;&#x201D;a remarkable 80.7 years on average (Statistics Canada, 2010). The dramatic gains in life expectancy1 in modern times reflect the transformative powers of human ingenuity and the resilience of nature.

In just the past half-century, the average Canadian has gained 12 years of life (figure 1).

From a statistical standpoint, this record life expectancy represents fewer infant deaths and the increased longevity of seniors. The rate of infant mortality2 has fallen by 50% in the past 25 years, from 10.9 per 1,000 live births in 1979 to 5.4 per 1,000 live births in 2005 (Statistics Canada, 2008b). In the early 1800s, fewer than 30% of the population of Canada lived to their 65th birthday (Statistics Canada, 1997). Today, the average 65 year-old woman in Canada can expect to live an additional 21.3 years, and her male counterpart can look forward to another 18.1 years (Statistics Canada, 2010).

Females Males 60

40

1900 1921 1931 1941 1951 1961 1971 1981 1991 2001 2007

Sources: Statistics Canada, 1997, 2008a.

Figure 2: Cancer incidence rate per 100,000 population, Canada, by age group, 1991 www.fraserinstitute.org 2,500

Age (years)

best—and probably the only—way “concrete jungles” enveloped by toxic to attain a decent environment in clouds—rank among the healthiest most countries is to become rich” in Canada and enjoy a life expectan(Beckerman, 2002). cy that is six months longer than the The link between wealth and national average (Statistics Canada, Figure 1: quality Life expectancy Canada, 1900 to 2007 environmental suggests thatat birth, 2002a). excessive environmental regulations, Nor is it true, as some environto the mental activists claim, that chemi100 extent that they constrain economic growth, may actually do cals in our air, water, and food are more harm than good. Further, this causing cancer rates to escalate. link lends support to the refusal of Rates of cancer are increasing, but this is because so many more developing countries such as China people are living much longer, and and 80 India to hamper economic not because of any despoiling of growth by imposing costly controls nature. As figure 2 illustrates, the on fossil fuel emissions, as sought by incidence of cancer in Canada is attendees at the recent Copenhagen greatest among those over age 80 climate change conference.

60 (Statistics Canada, 2009a). When The trends in lifespan certainly adjusted for age, the mortality rate belie the seemingly incessant asserfor cancer is actually declining betions of alarmists that Canada’s encause of advances in the detection vironment is unfit for man or beast. and treatment of the disease (StatisIn fact, 40 residents of Canada’s largest 1900 some 1921 would 1931 1941 19812009b).

1991 2001 2007 tics1971 Canada, cities—which claim1951 are 1961 Sources: Statistics Canada, 1997, 2008a.

Figure 2: Cancer incidence rate per 100,000 population, Canada, by age group, 1991 2,500

Rate per 100,000 population

cause and consequence of societal wealth (Statistics Canada, 2002a).

Higher incomes increase access to goods and services that promote robust health (Bloom and Canning, 2000). In turn, healthier people are more productive and innovative, generating even more wealth.

Indeed, researcher M. Harvey Brenner characterizes economic growth as “the single most important factor relating to length of life” (Yale University, 2002). Brenner concludes that “the lower the employment rate, the more damaging, and full employment equals lower mortality rates.”

That conclusion is certainly borne out by research in Canada which shows that the poorest Canadians have the highest mortality rates, while the richest have the lowest (Statistics Canada, 2002b). The lifespan disparity between them exceeds three years, on average. A variety of factors drive socioeconomic differences in mortality rates, including smoking prevalence, sedentary lifestyles, and obesity rates (Statistics Canada, 2002b).

Wealth is also a key factor in environmental quality, which has a direct bearing on public health and quality of life. As detailed in the World Bank’s 1992 World Development Report, “as incomes rise, the demand for improvements in environmental quality will increase, as will the resources available for investment” (World Bank, 1992). Oxford economist Wilfred Beckerman likewise identifies societal wealth as the best remedy for environmental degradation, noting that “there is clear evidence that, although economic growth usually leads to environmental degradation in the early stages of the process, in the end the

2,000

1,500

1,000

500

0

9 4 9 4 9 4 9 4 9 4 9 4 9 4 + 0-1 1-4 5-9 6-14 5-1 0-2 5-2 0-3 5-3 0-4 5-4 0-5 5-5 0-6 5-6 0-7 5-7 0-8 85 1 2 2 3 3 4 4 5 5 6 6 7 7 8 Age group

Source: Public Health Agency of Canada, 1991.

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Nor can environmental factors be blamed for personal choices that lead to a premature demise. Smoking is the single most important preventable cause of death (Statistics Canada, 2002a). Some 20% of all deaths from cancer, heart disease, and stroke—the three leading causes of death in Canada—can be attributed to cigarette smoking. Obesity is also a major risk factor (Statistics Canada, 2002a).

Taken together, the evidence is clear: the unprecedented improvements in the quality of human life over the past 200 years are a direct result of technology, industry, and economic growth, all of which are fuelled by free minds and free markets. As noted by Stephen Moore and the late Julian Simon in their book It’s Getting Better All the Time, “individual liberty and free enterprise have cultivated risk taking, experimentation, innovation, and scientific exploration on a grand scale.”

And we’re healthier for it.

Notes 1 “Life expectancy” is the number of years a person could be expected to live, starting at birth.

2 The infant mortality rate represents the number of infant deaths in the calendar year of birth per 1,000 live births in the same calendar year.

3 In this context, the mortality rate represents the number of deaths in a calendar year per 100,000 population.

References Beckerman, Wilfred (1992). Economic Growth and the Environment: Whose Growth? Whose Environ-

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ment? World Development 20, 4 (April): 481–96.

82-003-s2002007-eng.pdf>, as of March 3, 2010.

Bloom, David E., and David Canning (2000). The Health and Wealth of Nations. Science 287, 5456 (February 18). <http://www. sciencemag.org/cgi/content/sum mary/287/5456/1207>, as of March 3, 2010.

Statistics Canada (2008a). Historical Statistics of Canada. Last modified October 22, 2008. <http://www. statcan.gc.ca/bsolc/olc-cel/olc-cel ?catno=11-516-XWE&lang=eng>.

Bloom, David E., David Canning, and Dean T. Jamison (2004). Health, Wealth, and Welfare. Finance and Development (March): 10–15. <http://imf.org/external/pubs/ft/ fandd/2004/03/pdf/bloom.pdf>, as of March 3, 2010.

Moore, Stephen, and Julian Simon (2000). It’s Getting Better All the Time. Cato Institute.

Public Health Agency of Canada (1991).

Cancer Incidence by Age Group.

Government of Canada. <http:// tinyurl.com/yz92uhu>, as of March 17, 2010.

Statistics Canada (1997). New Birth Cohort Life Tables for Canada and Quebec, 1801-1991. Catalogue No. 91F0015MPE. <http://www. statcan.gc.ca/pub/91f0015m/91 f0015m1997003-eng.pdf>, as of March 3, 2010.

Statistics Canada (2001). Death – Shifting Trends. Health Reports 12, 3: 41–46. <http://www.statcan. gc .c a /s t ud i e s - e t ud e s /82 - 0 03/ archive/2001/5628-eng.pdf>, as of March 3, 2010.

Statistics Canada (2002a). The Health of Canada’s Communities. Health Reports 13 (Supplement): 1–24.

Statistics Canada (2002b). Trends in Mortality by Neighbourhood Income in Urban Canada from 1971 to 1996. Health Reports 13 (Supplement): 1–27. <http://www.statcan. gc.ca/pub/82-003-s/2002001/pdf/

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Statistics Canada (2008b). Infant Mortality. CANSIM Table 102-0506. <http://www4.hrsdc.gc.ca/.3ndic.1t.

4r@-eng.jsp?iid=2>, as of March 3, 2010.

Statistics Canada (2009a). Cancer Prevalence in the Canadian Population.

Health Reports 20, 1 (March): 7–19. <http://www.statcan.gc.ca/pub/82003-x/82-003-x2009001-eng.pdf>, as of March 3, 2010.

Statistics Canada (2009b). Mortality, Summary List of Causes. Catalogue No. 84F0209X. <http://www. statcan.gc.ca/pub/84f0209x/84f 0209x2005000-eng.pdf>, as of March 3, 2010.

Statistics Canada (2010). Life Expectancy at Birth and at Age 65 by Sex, Canada. <http://www.statcan.gc.ca/ daily-quotidien/100223/t100223a1eng.htm>, as of March 3, 2010.

World Bank (1992).World Development Report 1992: Development and the Environment. Oxford University Press. <http://www-wds.worldbank. org/external/default/WDSContent Server/IW3P/IB/2000/12/13/0001 78830_9810191106175/Rendered/ PDF/multi_page.pdf>, as of March 3, 2010.

Yale University (2002). Rising Unemployment Causes Higher Death Rates, New Study by Yale Researcher Shows. News release (May 23).

Yale University Office of Public Affairs. <http://opa.yale.edu/news/ article.aspx?id=3156>, as of March 3, 2010.

A weak foundation

MORE SPENDING BUDGET INCREASES

NO

REFORM

DEBT

Charles Lammam, Niels Veldhuis, and Milagros Palacios

B

y tabling British Columbia’s 2010 budget two days Columbians to work, save, invest, and engage in entreafter the closing ceremonies, the BC government preneurial activities. was likely hoping to build off the tremendous moInstead, the government plans to increase health mentum of the Olympics Games. Unfortunately, BC’s care spending, the government’s single largest expense, yet again—by $2.2 billion or 13.8% over the next three budget missed the podium. years. This move follows a 24% increase in health spendRunning deficits for the next three years, increasing ing over the past four years (British Columbia, Ministry health care spending with no concrete plan to improve or of Finance, 2009, 2010b; calculations by authors). reform health services, providing no new tax relief, and These increases underscore the BC government’s significantly increasing government debt is simply not steadfast refusal to acknowledge that increased spend“setting the foundation for decades of renewed economic ing will not improve health services. Despite previous growth, protecting vital services, [or] adding to British spending increases on health care, wait times for mediColumbia’s competitiveness,” as the government claims cally necessary care are still 17 weeks, a delay that ranks (British Columbia, Ministry of Finance, 2010a). among the worst in the developed world (Esmail, 2009; Some aspects of the budget were relatively positive.

Esmail and Walker, 2008).

In addition, British ColumbiThe government plans to constrain annual increases in ans’ access to doctors and medical technology continues total spending to an average of 2.3% over the next three to lag behind that in most other developed nations. years (2010/2011 to 2012/2013) (table 1). With total Problems with health care and many other govrevenue expected to increase by an average of 4.9% over ernment programs have little to do with how much the that period, BC’s deficit will decrease from $2.8 billion in 2009/2010 to $1.7 billion in 2010/2011, and the budget will effectively return to balance in Table 1: British Columbia’s fiscal outlook, 2008/2009 to 2012/2013 (before accounting for the forecast 2012/2013, in millions of dollars allowance).1 While deficits will essentially be elimi2009/10 2010/11 2011/12 2012/13 Average nated by 2012/2013 through increased revgrowth enue and constrained spending, the governRevenue 37,050 39,190 40,957 42,800 ment could have easily balanced the budget in the coming year (2010/2011). The govern% growth 5.8% 4.5% 4.5% 4.9% ment only needed to reduce spending from Total spending 39,700 40,605 41,602 42,545 2009/2010 to 2010/2011 by 2.0%. % growth 2.3% 2.5% 2.3% 2.3% Had the government balanced the budDeficit* -2,775 -1,715 -945 -145 get in the coming year, it would have had the resources to undertake initiatives that would * Deficit includes the forecast allowances of $125 million in 2009/2010, $300 million in 2010/2011 and 2011/2012 and $400 million in 2012/2013. strengthen BC’s economy—namely, tax relief Source: British Columbia, Ministry of Finance, 2010b. aimed at improving the incentives for British

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iStockphoto

BC budget does little to encourage economic growth

DEFICITS

Figure 1: Total provincial debt as percentage of GDP, 2000/2001 to 2012/2013 30

Percent

25

Notes 20

15

10

00/01

02/03

04/05

06/07

08/09

10/11

12/13

Sources: British Columbia, Ministry of Finance, Provincial Budgets, 2004 to 2010.

government spends, but with how it spends those dollars.

While BC Finance Minister Colin Hansen has acknowledged the problem, noting that “we cannot continue putting ever-growing shares of the total budget into this one area … we must make health care sustainable,” his government refuses to implement best practices from other countries that have universal health care programs.2 Rather than reform the health care system, the government is moving towards dedicated funding for health care. That is, the government will “tie five specific revenue streams directly to health care funding” by introducing legislation to ensure that provincial revenues from the harmonized sales tax (HST), Medical Service Plan premiums, tobacco taxes, federal health transfers, and a portion of lottery revenues are spent exclusively on health care.

Such legislation does nothing to reduce costs and improve services; instead, it reduces the government’s flexibility and pegs the government to high levels of health spending.

However, perhaps the most concerning aspect of this year’s budget is the expected increase in government debt.

Yearly deficits coupled with significant increases in capital spending will increase government debt by an alarming $14.5 billion or 35% over the next three years. As a percentage of total economic output (GDP), the provincial debt will increase from a low of 18% in 2007/2008 to 26% in 2012/2013, approximately the same debt level that the Liberals inherited from the previous NDP government in 2001 (figure 1).

With this dramatic increase in debt, a larger portion of provincial revenues will be devoted to making interest payments instead of funding government programs or improving the competitiveness of BC’s tax regime.

This budget will not “set the foundation for renewed growth” as Finance Minister Hansen has promised. With the exception of the previously announced move to a

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harmonized sales tax, which will benefit British Columbians greatly through increased business investment and higher rates of economic growth (Veldhuis and Lammam, 2009; Mintz, 2010), BC’s 2010 budget fails to set the province back on the path to prosperity.

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1 The government is projecting a relatively small deficit of $145 million in 2012/2013. But since the forecast allowance in 2012/2013 is $400 million, the budget balance before accounting for the forecast allowance is actually a surplus of $255 million.

The forecast allowance is a budget line item that protects against unanticipated events that might impact revenue or expenditures.

2 Improving services would require two key health policy reforms: competition in the delivery of publicly funded care and cost sharing (i.e., requiring patients to share in the cost of their care). International evidence shows that these reforms would reduce costs and that patients would end up no worse off in terms of health outcomes (Esmail and Veldhuis, 2009).

References British Columbia, Ministry of Finance (2009). September Budget Update 2009/10—2011/12. Government of British Columbia. <http://www.bcbudget.gov.bc.ca/2009_Sept_ Update/bfp/Budget_and_Fiscal_Plan_Sept_2009.pdf>.

British Columbia, Ministry of Finance (2010a). Budget 2010 – Building a Prosperous British Columbia. News release (March 2). Government of British Columbia. <http://www. bcbudget.gov.bc.ca/2010/newsrelease/2010_News_Re lease.pdf>.

British Columbia, Ministry of Finance (2010b). Budget and Fiscal Plan: 2010/11 – 2012/13. Government of British Columbia. <http://www.bcbudget.gov.bc.ca/2010/bfp/2010_ Budget_Fiscal_Plan.pdf>.

Esmail, Nadeem (2009). Waiting Your Turn: Hospital Waiting Lists in Canada (19th ed.). Fraser Institute.

Esmail, Nadeem, and Niels Veldhuis (2009). Improving Health Care in BC. Fraser Forum (November): 35–36.

Esmail, Nadeem, and Michael Walker (2008). How Good Is Canadian Health Care? 2008 Report. Fraser Institute.

Mintz, Jack (2010). British Columbia’s Harmonized Sales Tax: A Giant Leap in the Province’s Competitiveness. SPP Briefing Papers 3, 4. School of Public Policy, University of Calgary. <http://www.fin.gov.bc.ca/Mintz_report.pdf>.

Veldhuis, Niels, and Charles Lammam (2009). Smart Thinking on Sales Taxes. Fraser Forum (September): 8–9.