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Harper’s Secrecy-First Defence Policy: A reader writes


 

If the Prime Minister is to be discouraged from dumping major policy documents onto the Internet in the middle of the night at the end of the session six weeks after they should have been ready, the only thing that will do the trick is the knowledge that such clandestine behaviour will not spare him the journalistic scrutiny he is clearly trying to avoid. My own poor effort was not going to do do it. And I am sad to say that after a spate of early stories simply recording the fact of the late-night document dump, Harper’s instinct has been confirmed by a near-total lack of journalistic scrutiny. (The Ottawa Citizen‘s David Pugliese, as is almost always the case, remains the honourable exception. Here is his blog post on the defence plan. I suspect more is on the way.)

So I was really grateful to get an email this morning from Inkless comment-board regular MikeG, who — puttering in his spare time on a sunny weekend — has produced the most detailed analysis of the Harper defence plan’s spending projections that I have seen. He even made charts and graphs. And what they show is curious: while $490 billion sure looks like a heck of a number, it amounts to a gentle budgeted decline in Canada’s defence effort, compared against major allies, over time.

That may be appropriate. It certainly clashes with the brassy rhetoric of the policy document. It’s the sort of thing we could reasonably stand to talk about, among ourselves, as Canadians concerned with the nation’s public business. But the prime minister would rather that conversation didn’t take place. Too many of us reporters, while tut-tutting his manner, have helped him achieve his end. I’m grateful to MikeG for the work he’s done. Here’s MikeG’s email:

I was going to make a comment yesterday about the new defence budget/plan, but I realized I’d like some numbers to back it up. One thing led to another, and now I not only have numbers, but charts and graphs.

Long story short:
“Defence First” annual, nominal raise in budget: 2.7% (4.2%, 11%, then 2% for 18 years)
Annual Increase in Real GDP: 1.8 – 2.5%, depending on the forecast scenario
+ Annual Inflation (Using the CPI): no less than 2.0%
= Annual Increase in Nominal GDP: no less than 3.8 – 4.6%

… which means for every year we’re on this plan, aside from the boost years (conveniently, the next two), the military budget, as a % of GDP, goes down. Every year (aside from the first two) that inflation is above 2.0%, the spending power of the military goes down. % of GDP as a measure of military spending is not necessarily the end-all be-all of policy-making (Andrew Coyne, for instance, might point out that it sucks), but it’s used in a lot of decision making (at NATO, for instance), and makes headlines.

You could just go look at the graph now, but just so the methodology is clear, here is a hopefully-comprehensible overview of what I did.

The defence budget, as it is, is raised automatically at 1.5% per year. The Defence First plan, in whole, seems to consist of the following:
– An extra $1.8 billion in FY2010-11, and
– the 1.5% automatic raise is changed to 2.0% in FY2011-12.

We already know (from the numbers in the government’s Main Estimates) that FY2007-08 spending for Defence is $16.9 billion, and FY2008-09 is $18.3 billion. Putting together today’s numbers, together with the above boost and raises-as-usual, gets us to 2027, and a budget of $28.9 billion, a total 20-year spend of $479 billion. A little bit short of $30 million / $480 billion.

But, the plan mentions, “the Government increased defence funding through Budget 2006 by $5.3 billion over five years, including [the] baseline increase of $1.8 billion starting in 2010–11.” Despite going through a number of old budgets and main estimates documents, I can’t find what the FY2009-10 spending is supposed to be, or the specific details of that $5.3 billion.

However, if you add a $485 million boost to FY2009-10, everything lines up – final budget for the 2027-28 year is $29.6 million, and the total 20-year spend is $489.981 billion. Definitely close enough for government work.

Armed with those numbers, we can determine the real estimated budget numbers for defence through each of the 20 years. Then, using recently-released long-term economic forecasts (there have been a few done recently, primarily to help figure out how Canada will do with future energy issues) we do a little math and find out what, in then-current dollars, the national GDP should look like.

Even if the forecasts are off a bit here, it’s okay — we’re being conservative. We lowball inflation (2.0%, per Bank of Canada targets) so we can lowball the nominal GDP, which means we’re overestimating the % of GDP that would be spent on the military. Even if CPI is not the best measure for military buying power, that’s okay too, the important thing is having some sort of number that we pop up by 2% a year.

The attached Excel file contains a list of sources, with URLs. I don’t know if it’ll be useful for anything, but, hey, pretty graphs.

I’ll spare you the Excel file, which is an extraordinary thing, but here’s MikeG’s graph. Please note that it would get MikeG kicked out of Graphing U, because it plots a time series — the Harper spending plan, under three different economic-growth assumptions — against a static data set, which is how much France and Poland and Australia and the others are spending on defence now. But I don’t think anyone will have any trouble decoding it. And it sums up the reasons for the Harper government’s late-night, end-of-session, no-comment, weeks-after-the-event document dump rather eloquently:

Hmm. I’m having trouble embedding the pretty image. Here’s a link to MikeG’s graph.

Now, this is an easy plan to defend against opposition parties: Does anyone expect Liberals or the NDP to spend more than Conservatives on defence? It may even be a defensible policy on its own terms: why does a growing society need to grow its armies as fast as it grows, say, its universities or its fleet of WalMarts? But it clashes rather starkly with this government’s bellicose rhetoric. So it embarrasses the prime minister.

I’ll close by pointing out that a defence policy isn’t only a policy for spending. It’s a set of choices about what that money will buy. Since we’re all planning to snooze on that set of choices in the Parliamentary Press Gallery, perhaps Inkless readers will care to read the policy themselves and discuss the choices the Harper government has made.

Democracy: not only can you do it yourself, I’m afraid you’re pretty much going to have to. Thanks once again to MikeG.


 

Harper’s Secrecy-First Defence Policy: A reader writes

  1. I like ‘Youngstown’ better than ‘Ghost,’ but thanks for the point to Hiatt.

  2. Other songs you should consider for your iPod (if you haven’t already):

    1. Can’t You Hear Me Knockin’ – The Rolling Stones

    2. Grey Street (Dave Matthews Band)

    3. Catfish Blues (Paul Rodgers and Jeff Beck version)

    4. Sister Sally (Wide Mouth Mason)

    5. Emporer Penguin (The Tragically Hip)

  3. I think Vampire Weekend deserves respect although that song’s one of the worst on the album, IMHO. Ivy League kids re-inventing African pop, dig it.

    I know you’re a fan, have you checked out the comes out tomorrow (officially) new Hold Steady? It’s great stuff.

  4. I streamed some of the tunes. Sounds good. Hope they come back to Zaphod.

  5. Methinks they’re a little big for a Zaphod’s show now (and I curse myself every day for not having been at the previous one!), but I hope a trip to the Capital Music Hall is in their future.

  6. Paul,

    Any thoughts on the “20-year” aspect of this plan? How realistic is that?

    If Dion becomes PM next year, couldn’t the Liberals scrap the whole plan? Or if in 5 years the Tories are in power, have a change of heart, and decide to increase the amount?

    I’m sure it wouldn’t be the first time that a gov’t’s long-term strategy was scrapped by a subsequent gov’t. And surely Harper can’t stay in power for the next 20 years. Although at this rate…

  7. I haven’t crunched any numbers (:blush:), but one thing to bear in mind is that inflation in military hardware costs is far greater than nominal inflation. At least two major expenditures may run into trouble: the F35 Joint Strike Fighter (JSF), which is the CF18 replacement, and new destroyers, which if we build them ourselves will be enormously expensive. The number of JSFs can be cut if necessary, but I wonder if new destroyers (which in modern navy parlance are air-defence ships with expanded command facilities over the frigates) will ever see the light of day. If they don’t, Canada’s ability to operate outside of coastal waters will be seriously limited, since the frigates are designed to defend only themselves against air attack, not other ships.

  8. A 20-year military plan that includes hardware purchases/upgrades is about as useful as a 5-day weather forecast. Also consider this: the government has run into all of its announced purchases, including I believe diesel trucks. With raw material prices where they are, and with the trajectory they are on, I wouldn’t put much faith in a 2-year defence budget, let alone a 20-year one.

    Besides, Peter MacKay can’t count to 20 :-)

  9. Mike514, the defence plan also includes a provision for abolishing elections. It’s in the chart on page 14.

    Just kidding. The government argues that the 20-year thing is the plan’s best feature. Governments have tended to allocate the defence budget ad hoc, as a byproduct of other budget decisions. Now the defence department, and the rest of the public service, has this 20-year thing as a planning assumption.

    Finance and PCO will now produce first-draft federal budgets — drafts that incorporate everything that was going to happen anyway, absent new government decisions — that build in the spending increases in this policy. And DND will be able to make allocative and procurement choices based on an assumption that, for instance, in 2014 they’ll have an envelope of X dollars to play with.

    Governments will be able to diverge from this plan at whim, but now they’ll be diverging from a plan and not merely improvising. It’s a subtle but non-trivial change.

  10. Kind of like when Martin promised to lower bottom rung income tax by 0.5% and then the PC’s got elected and didn’t.

    Was it a tax hike, or just a change of plans? Again, a subtle but non-trivial change.

    Ultimately though, we can see that such differences don’t mean anything except to those of us with our noses so far in this stuff that we’re not part of Harper’s chosen demographics anyway. (ie, those paying attention)

  11. I think one thing in the 6 priorities is that Peacekeeping/UN support is not explicitly mentioned. The major purchase items (destroyers/frigates, JSF Fighters, replacements for the Auroras) would all be items that are for either Canadian defence/coast guard or support of Afghanistan style missions. A boots on teh ground operation like Peacekeeping seems to require different sets of equipment.

    Also, the debate going on in the US right now where the Chiefs of STaff are fighting internally with the Air Force seems relevant to me – the Air Force trying to stay relevant and justify their funding, with the otehr two servces arguing that the major roles of the USAF are – a best – complementary in counter-terrorism. With this military debate in mind, one asks how much we need 65 JSF fighters, at $70 Million each (April 2008 US DoD est.) That is approximately 10 – 15% of the new equipment budget for the period.

    I am not saying we DON’T need the JSF – I just think it is a debate worth having.

  12. Chris B: Not really, we’re a part of NORAD and NATO, which means we have to have an air force that can fly in 20 years.

    Besides, it wasn’t that long ago that we had the air force protecting our cities. Yes, I went there, but it’s actually relevant. Do you want an American JSF deciding to shoot down AC3465 Toronto-Vancouver because it deviated from it’s flight plan? I’d much rather have a Maple Leaf on the tail of both planes.

    So, really, we need the aircraft, we need the destroyers and we do indeed need more equipment for our Peacemakers. So let’s get all of it rather than screw our people at home or our people overseas.

  13. Wow, the whole damn e-mail. Maybe I should have chopped down the verbiage. Thanks for the 15 seconds of fame!

    Please note that it would get MikeG kicked out of Graphing U, because it plots a time series — the Harper spending plan, under three different economic-growth assumptions — against a static data set, which is how much France and Poland and Australia and the others are spending on defence now.

    Those hacks at the university said I’d never make it, but I showed them!

    Which is to say… I know it’s unorthodox, but it was deliberate. I wanted to demonstrate how, by the %-of-GDP measure, we would be slowly slipping down the ranks, all other things being equal.

    Though, primarily, I just get tired of disingenuous numbers from Canada’s Warranty-Soon-Expiring Government.

  14. So Mike G: where can we get a copy of this excel spreadsheet?

  15. I’ll post it tonight or tomorrow if I can figure out how.

  16. Using “percentage of GDP” is a tried and true method for obscuring the costs of any long-term government program. Most economies expand over time through population growth, prosperity, inflation, etc. So federal spending increases are muted by the fact that the economy in which they occur has also grown.

    A better measure of spending is as a percentage of Total Government Expenditures — how much of the a country’s budget (national, state, municipal, etc.) is going to airplanes vs. pensions vs. dairy farmers, etc. While some argue that GDP allows for comparisons between countries, the reality is that those countries all have different governmental spending structures and priorities. At best, this analysis should come after looking at the impact of spending within ones own government’s fiscal reality.

    Before debating the technical and strategic merits of the Haper plan, which are suspect in their assumptions, one should be focusing on what is the main issue of the day: How and WHY did a $30 billion announcement by the PM turn, within hours, into a $45-50 billion clarification by DND, and only weeks later morph into a $490 billion announcement by Harper’s Team?

  17. With respect to some of the econmic principles I agree with Skeptaculous.

    I think that the comparison vis a vis GDP is one data point and can be used as a mesure to compare levels of defence spenging given output and prodcutivity in the economy. It can also be used as a point of comparison between nations to indicate the level of aggregate investment as compared to economic output.

    As Skeptaculous there are other measures that can be used. I have not gone through all the data but what I think is important is plotting these figures, in real terms, over 20 years as compared to current levels of defence spending.

    Comparisons with GDP assume, for some reason, defence spending needs to rise with the GDP. It does not. There is no tight dependancy between the two as long as GDP rises and government income (taxes) vis a vis the GDP remains constant or increases.

    A statement that says there is no real growth in the defence budget if there is no growth greater than the rate of increase in GDP is wrong. The level of spending as compared to the GDP can go down and still have a significant increase in real defence spending.

    If we have spending increases at higher level than inflation then we will see real growth in the defence budget. The real question is at what rate is the spending in defence increasing as compared to inflation.

  18. but it’s used in a lot of decision making (at NATO, for instance), and makes headlines.

    It has done that. As Steve Staples and Bill Robinson have pointed, out, spending as a % of GDP has not infrequently been used to suggest Canada’s military spending is comparable to that of Luxembourg–a misleading comparison.

  19. The question of which measure to use when gauging defence spending is important only in the sense that the popular measures, defence spending as a percentage of GDP or GNP, are completely and wholly deceptive. That’s why they’re so popular. Politicians, journalists and economists use vulgar comparisons of defence spending to GDP/GNP because they’re easy – not because they’re even remotely accurate or informative. They’re also flattering, as economies as a whole expand at a faster rate than departmental budgets.

    Importers and exporters and manufacturers and investors and householders do not set defence budgets, though their rising (or falling) wealth does influence GDP/GNP. Taxes on that wealth form government budgets. The question at hand is how much of the BUDGET – across all levels of government – should be allocated to security and defence spending? (For a fair comparison between countries, one must factor in all levels of government spending on defence/security, not just federal spending. Does a state police unit providing security for an airport count as defence/security spending? In Germany? In Canada? In Japan?)

    I would like to return to the question of Harper’s Halifax announcement of $30 billion in “stable funding” vs. the internet document dump of $490 billion. This action demonstrates that the current federal government is no more serious about defence policy or spending than others have been over the past several decades. The current farce must lead to a more serious examination (and public debate) of Canada’s defence priorities, planning and spending.

    • What are Canada’s foreign and domestic security policies likely to be over the next 20 years – and why?
    • How can Canada improve domestic and continental security via military spending vs. other measures?
    • What proportion of Canada’s defence spending should be earmarked for foreign expeditions and joint operations?
    • How best to balance technology costs vs. human assets?
    • Will increased spending on defence lead us to raise taxes or cut programs?

    Canada can likely do more for global security by making sure no one hits the US via our air/land/water than it can by contributing 5% of the NATO forces in Afghanistan (um, yeah, that’s right, FIVE percent). Yet with ships tied up for want of diesel fuel, and fixed and rotorcraft grounded or unavailable, could our Navy stop an explosively laden ship from entering Halifax harbour as happened in 1917? Could we stop one before it reached Port Angelis, Washington? How many vulnerable US cities are on the Great Lakes, anyway?

    These are uncomfortable questions – but the job of the Federal government should be to ask them. And we should press them for more realistic answers vs. jingoism and splashy press events.

  20. Um, Skeptaculous, that “explosively laden ship …entering Halifax harbour” was supposed to be there. It was delivering explosives. And indeed, it *had* been stopped from entering the harbour the previous night. Wikipedia has more…

    That said, I guess I understand your point. (I don’t know if I agree with it, but I understand it.)

  21. Thank you, Two Hats. I’m well aware that there were actually two ships involved. I’ve even done the tour at the Maritime Museum of the Atlantic. My point was… well, I think the point was pretty clear given the hypothetical presentation. Cheers.

  22. Paul, MikeG.

    you can post the Excel file on Google Docs and then link to that. You can upload items (as long as its under 1MB) and share with anonymous readers.

  23. Sorry, the chart is blank, the data sheets are there. Probably because of the way Google renders it.

  24. Naah. Click on the “Canada” tab at bottom. All will be revealed.

  25. I just confirmed it, Google won’t show Excel charts (graphs, whatever).

    BTW, this document just appeared in my Google Docs account, shared by Paul Wells, available to everyone. It automatically added the file to my account.

    Don’t know if that’s scary or not…

  26. I seem to be a virus.

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