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Canada wants to buy 65 F-35 fighter jets. The government says the purchase price is $9 billion, including some spare parts and weapons but not including a long-term maintenance contract.

Today, Winslow Wheeler, the director of the Straus Military Reform Project at the Center For Defense Information in Washington, D.C., releases written testimony he was asked to give to the House of Commons Standing Committee on National Defence. Wheeler says he tries to answer three questions in his testimony:

1. What will Canada’s F-35As cost?

2. What will Canada obtain for that expense?

3. Is there a good reason to wait?

The short answers to those three questions: 1. Unable to know. 2. Unable to know 3. Yes.

Some quotes from the piece:

I can guarantee to you, however, that the unit cost Canada will pay for a complete, operational F-35A will be well in excess of $70 million – even taking into account whatever exclusion of American costs to develop the aircraft your government may be able to negotiate.

If and when Canada signs an actual purchase contract for F-35As in 2014, as I understand is currently planned, the real question is what multiple of CAD$70 million will Canada have to pay?  I do not believe it unreasonable to expect a multiplication factor of two.

Finally, what will be your costs to operate this aircraft?  In January 2010, the U.S. Navy estimated the cost of operating F-35C’s to be 62 percent higher than operating its current F-18A-Ds and AV-8Bs.  New operating costs for the F-35 are now being discussed inside the Pentagon; the cost is, of course, going up.  Even the lesser A model will be a very large increase in operating costs over your CF-18s.  It would not be unreasonable to expect the flying hour costs to double.

One of the tricky bits for the designer is to deliver on promises to make this a “stealth” fighter, which means it will be hard or impossible for enemy radars to pick up the F-35. Wheeler has something to say about the stealth promises:

The above assumes the stealth characteristic performs as designed, but that is usually not the case.  My work at the U.S. Government Accountability Office on stealth systems made it clear to me that not a single U.S. stealth aircraft had lived up to its original detectability promises, and the F-35 looks to be no exception.

And, in Wheeler's view, the stealth technology comes with sharp performance trade-offs:

The F-35’s stealth features build into the aircraft weight and drag so severe that a hugely powerful engine gives the F-35 less rapid acceleration than American F-18Cs or F-16Cs, according to the data I have seen. The combination of the F-35’s considerable weight and its small-ish wings means it has a “wing loading” (and as a result maneuverability) roughly equivalent to an American F-105 fighter-bomber of the Vietnam era. The F-105 “Lead Sled” was notorious for its inability to defend itself over North Vietnam during the Indochina War.

 

Across our chain today, I take a contrarian view as to the worth of new mortgage rules announced by the federal government on Monday. An excerpt:

Consider 25-year-old Sheila. She might prefer the low monthly payments that come with a long-term mortgage while she pays off her student loan. She’d have picked a 40-year amortization now thinking that, when she’s 30 with her student debt retired (and probably earning more), she could refinance her mortgage, taking a 15-year amortization period. For Sheila, that would be prudent use of her cash flow — and she’d still be mortgage-free on her 45th birthday.

But no longer: Ottawa has decided Sheila and her bank, working in each other’s interests, cannot be trusted to make good decisions.

By all means, governments should ensure our banks follow sound lending practices.

And our federal government should do all it can to create more Sheilas who are prudent and wise with their finances. But Ottawa should also ensure Sheila will have the full range of choices before her to secure her own long-term prosperity.

This week, the government did neither.

Some other thoughts that I couldn't squeeze in to the column:

• In refusing to continue to provide CMHC-backing to home equity lines of credit (HELOCs), Finance Minister Jim Flaherty argues that Canadians taxpayers should not have to bear the risks for what should be a private sector arrangement between a lender and a borrower. Fair enough. But then, isn't that an argument to shut down the CMHC altogether? And, in any event, as Flaherty himself conceded, there are no indications that CMHC's guarantees were actually costing the Canadian taxpayer anything. (In fact, some have argued that the federal government makes a tidy sum through CMHC's insurance activities). In any event, I think it's doubtful to assume that if a consumer cannot get a HELOC without the CMHC's backing that that consumer will simply not borrow. In fact, that consumer will now likely seek a loan at higher rates or, likely worse, end up putting more on a credit card.
• In lowering the amount a consumer can borrow against a home — from 90 per cent of its assessed value to 85 per cent – Flaherty argued that this was an appropriate measure “to promote saving through home ownership.” Promoting savings, seems to me, to be an excellent policy objective. But there is one fabulous, widely-endorsed, way for the federal government to goose savings rates: Cut income taxes and raise consumption taxes.
• Both Flaherty and the Bank of Canada have indicated in the last several months that they are worried about problems down the road because of rising levels of household debt when measured against disposable income. The most recent measure was an all-time high for Canada. For every dollar of disposable income, Canadians now owed $1.48. On its own, this statistic might be cause for concern. But surely another important ratio in measuring the ability of Canadian households to service and manage their debts is the ratio of debts to assets. And, as BMO Capital Markets deputy chief economist Doug Porter has noted, “While debt has risen to record heights, so too have financial assets, due to a rebound in equities and an underlying rise in savings. Taking these factors into account, as well as the recovery in Canadian full-time employment, leads to the conclusion that household finances are not nearly as weakened as the dire headlines would suggest.”
• Canada's bank watchdog, the Office of the Superintendent of Financial Institutions, has already instructed lending institutions to do more testing of the risks that consumer debt poses to a consumer's balance sheet when that consumer seeks new credit. Good idea.

Finally, let me share with you an e-mail message I received from a reader who has been a mortgage broker for 20 years.

Bravo-

Finally an article on the government mortgage rules changes that addresses what they have really done to everyone for the sake of a few. The government is always window-dressing and this is more of it.

You hit the nail on the head with your example of someone with a student loan.There are countless others.The fact is that 90% financing has been the godsend for many clients who have found themselves in a financial situation that refinancing could solve at a much lower rate and much lower payment. These don't necessarily have to be distress situations either. They can be part of a financial plan to manage their debt in a much more efficient fashion and pay it out sooner.

There was no evidence that the crop of borrowers who participated in the no money down 40 year amortization mortgages were about to default! In fact the qualification parameters of this group of borrowers was much higher due to the risk involved but the government decided they just might start defaulting so we better cancel that program.

Ask the government for statistical situation related default statistics that tie into any program and they can't provide it.They are just doing it “just in case”

If anybody in government had the faintest idea of risk-lending parameters they could have addressed qualification standards for particular lending programs instead of taking the easy way out ,but that might have involved some thought and conscious input.

So why reduce the refinance limit to 85%? To protect our equity,of course!

The same holds true with 30 year amortizations.They are protecting the Canadian public from themselves and helping them pay off their mortgage sooner! All throughout my 20 years I have never met a client who intended to pay their mortgage out over 30, 35 or 40 years.They did intend to use the amortization as a financial planning tool as you outlined and now that option has been compromised again not to mention the qualification parameters of the first time home buyer group!

So who benefits? Do you think credit card companies and the banks who extend limits on credit cards at will and who extend lines of credit with the sweep of a pen will like the fact that this higher interest rate debt has less chance to be paid out and consolidated? Why do we never see legislation to deal with the systemic financial rape of the public. Mortgages are clearly not the problem but maybe there might be a banker whispering in the government's ear about the financial armaggeddon about to befall us. Must be tough to whisper while you salivate.

Public Safety Minister Vic Toews (above as snapped by the Sun’s Andre Forget) – who represents the southeastern Manitoba riding of Provencher and who is the Harper government’s political minister for Manitoba — is no fan of the province’s “paper of record”, the Winnipeg Free Press. (Full disclosure: My chain’s horse in that race is the Freep’s competitor the Winnipeg Sun.).

But I would go so far as to say, Toews is sceptical of the worth of all of us in the mainstream media. Last year, Toews took a nasty swipe at me and the Freep‘s Ottawa bureau chief Mia Rabson [full disclosure again: At the time I was working for Canwest/Postmedia and Mia was my office colleague] for the reporting we did at the beginning of the Rahim Jaffer affair.

Toews – to give you a bit of background — was Harper’s first justice minister, then moved to Treasury Board before being moved over to Public Safety. He is also a lawyer, a former attorney general for Manitoba and the Ottawa rumour mill has him in line for a seat on Manitoba’s Court of Queen’s Bench.

All if which is to say: Toews is a well-educated guy and he’s part of Prime Minister Stephen Harper’s inner circle. That’s why we’re interested in what he tells his supporters and, tonight, Toews goes after Free Press columnist Dan Lett. Lett’s column “Political combat in south Winnipeg” spurred Toews to send the following e-mail message to his supporters:

Dear Friends, Colleagues and Others,

The word is in, according to Winnipeg Free Press columnist Dan Lett that is. Here’s Lett’s take on what will happen in Manitoba in the next federal election.

“… a quick examination of Manitoba’s 14 federal ridings shows clearly that…only three seats in the province with any chance of changing hands. If you’re a federal party leader and you’re going to campaign in Manitoba, you’d be wise to stay south of the Assiniboine River.”

It must have been a very quick examination, despite Lett’s insistence that the outcome is “clear”.

Perhaps it’s about the same amount of time that Lett spent during the 2006 election just before Rod Bruinooge snatched Winnipeg South from then cabinet minister Reg Alcock by a little over a hundred votes, and then consolidated that win by over 5,000 votes from another impressive Liberal candidate in 2008.

Or perhaps it’s the same amount of time he spent during the 2008 election campaign when everyone at the Winnipeg Free Press confirmed that their party’s candidate in St. Boniface would safely retain that seat, while condescendingly acknowledging that although Shelly Glover was a good candidate she was in the wrong riding if she wanted to be a Conservative MP.

And moving outside of Winnipeg for a moment – who can forget his insightful analysis of my own slim chances in Provencher in the last election? [Wishing Toews would provide a link here to this one – Akin]

But we can be sure Jack Layton will take Lett’s advice seriously: be “wise” and stay south of the Assiniboine River. He’ll just forget about his party’s recent byelection loss in North Winnipeg where only 30 percent of the electorate turned out to give a well known Winnipeg Free Press candidate a squeaker of a victory in a riding where some have said that New Democrat party membership applications are handed to babies when they leave the maternity ward. [That would be Liberal Kevin Lamoureux’s upset byelection victory in the riding long held by the NDP’s Judy Wasylycia-Leis – Akin]

Oh, and Dan, what about Winnipeg Transcona where the New Democrat MP won a hard fought battle against a Conservative by about the same margin as the Liberal victory in Winnipeg South Centre? [That would be Jim Maloway who, with 45.8 % of the vote beat 2nd place finisher Thomas Steen who took 40.7% of the vote – Akin] Yup, just keep on walking down the road without a sideways glance across the railroad tracks if you are the Conservative leader.

What an analysis, but is it really as “wise” as Lett himself characterizes his own advice?

Really, after the quick look and all of the fluff, isn’t this article just about Lett making sure that his Liberal candidate in Winnipeg South [Conservative MP Rod Bruinooge is the incumbent – Akin], Terry Duguid, is given another bit of glowing press, stating:

“If Duguid doesn’t win the riding, it won’t be for lack of effort. He remains perhaps the hardest-working candidate in the province, knocking on doors, organizing events and getting his name and picture in the media more than a lot of sitting MPs.”

Gee Dan, is it just my imagination, or is it usually in your articles where I ever see Duguid’s name? And I’m not even counting the times when you cite him as your “reliable unnamed source” when no one credible is willing to help you flog your pet theories and assorted conspiracies publicly. (Note to reader: I have to admit that I am naturally suspicious when a Winnipeg Free Press reporter calls an unnamed source “reliable”. Why not name the source and let the readers determine if he is “reliable”?)

But, getting back to your “quick examination” Dan, may I suggest you have another quick look at the rest of the electoral map of Manitoba? Let us know what you think of the other close races in the province. Not that I am actually interested in your analysis but I am curious if you can talk about them without mentioning your Liberal  colleague in Winnipeg South.

And a bit of friendly advice – if you are going to take another quick look at those ridings, perhaps you might want to check with your optometrist first to determine whether the rose coloured glasses you insist on wearing on the job impede your ability to determine what is actually going on around you.

Been kicked out of Twitter now for the last hour or so ..

Got a “You've hit your hourly usage limit” message after what I thought was a relatively light morning of tweeting.

PC Mag has something up about this: New Twitter.com Restricts Usage With Rate Limits, Too

 

The federal government this morning announced new rules when it comes to taking out a mortgage or using your home as collateral to borrow more money.

The Department of Finance calls this “Supporting the long-term stability of Canada's housing market”.

There are three basic changes that will come into effect on March 18:

• The maximum length of a government-insured mortgage will be 30 years, down from 35 years.
• The government will no longer insure home equity lines of credits or HELOCs
• If you want to borrow against your home, the maximum amount you can get will be 85 per cent of your home's assessed value, down from 90 per cent.

Here's the bottom line on these changes from BMO Senior economist Michael Gregory:

Before this weekend, the speculation had been that tighter mortgage insurance rules would be included in the upcoming federal budget. However, there is a risk that the budget could become a catalyst for a federal election (meaning the budget wouldn’t pass), and these measure were obviously deemed too important not to be passed and put in place for when Canada’s housing market wakens from its winter slumber in a couple months. For the new homebuyer, the reduced amortization is a significant change that should soften the demand for homes/mortgages below what they otherwise would have been. It also provides a bit more cover for the Bank of Canada; they don’t have to resort to policy rate hikes as readily to address high and rising household debt burdens, which would have dampening impacts well beyond just the housing sector (the BoC’s next policy decision comes tomorrow, but no policy rate hikes were expected).

Gregory also does some quick calculations to show how these changes will result in higher monthly mortgage payments but big-time savings over the life of a mortgage:

Assuming a $300,000 mortgage

 

Monthly payment

Interest rate

Total payments

 

Interest	30-year	35-year		equivalent	saved over life
rate	amortization	amortization	Difference	(35-year amort.)	of mortgage
3%	$1,265	$1,155	$110	64 bps	$29,579
4%	$1,432	$1,328	$104	56 bps	$42,288
5%	$1,610	$1,514	$96	49 bps	$56,139
6%	$1,799	$1,711	$88	43 bps	$70,924

While Michael Ignatieff headed west to Vancouver to begin a 20-city 11-day tour ostensibly to build support and momentum for the spring political seasons that could include a federal election, NDP Leader Jack Layton was on a tour of his own. Last night,  he was in Sudbury, Ont.

I'm intrigued by some of the language he used in his Sudbury speech and will presumably use again in the future when it comes to the issue of bringing down the government this spring over the budget. I believe Layton and the NDP could be convinced to vote for the budget, despite the presence of corporate tax cuts, if the NDP can, in Layton's words, “get things done for Canadians.”

So what's his price for support of the budget? A boost in CPP and GIS; cutting taxes on home heating oil; and restoration of a home renovation tax credit. That doesn't sound too hard to do, now, does it?

Here's a couple of excerpts from Layton's Sudbury speech:e

“I’m ready for an election. But I’d rather get things done . . .”

“Don’t get me wrong. I’m ready to fight an election. New Democrats are ready to run the most ambitious campaign in our history. We have the money in the bank … and over the coming days, I’ll be announcing some tremendous new candidates. Candidates that’ll help us defeat Conservatives across the country. But until then, we have a responsibility to get things done for Canadians. Mr. Harper and Mr. Ignatieff have thrown up their hands — given up.”

“This is the kind of practical leadership I've always tried to bring to the table. Like in 2009, when we reached out to other parties and secured help for 190,000 hard-hit families.”

“So to Mr. Harper and Mr. Ignatieff, I say: Surely, there are some practical things that we can accomplish together this spring. First of all, surely all parties can agree to strengthen people’s guaranteed public pension . . . New Democrats are fighting to make sure stronger public pensions are part of the next budget. We’re looking for practical steps here. Like a modest increase in the guaranteed Canada Pension Plan. And an increase to the GIS, so seniors can afford the everyday basics they need. With a little cooperation, we can get it done.”

“Here’s a second area where party leaders should be able to find common ground — reducing your home heating bills. New Democrats have called on Mr. Harper work with us to drop the 5% federal sales tax on your home heating. We’d also bring back the eco-renovation tax credit — so families can make their homes more efficient to cut their bills even further. We're not giving up on this. And we’re going to fight to get you one in the next budget. “

 

The Literary Review of Canada publishes an interesting an important essay by Susan Crean (and leaves her byline off the  Web version) about an important institution in Canada's cultural life: Library and Archives Canada. Some excerpts:

The biggest pressure, however, comes from the digital revolution, which has transformed the world of documentary production—and with it the work of archivists—while irrevocably changing public expectations. Digital access is now seen as a quasi right and digitization as a means of mass democratization. So it is no surprise that this has become the central preoccupation of LAC and has apparently led to a radical reassessment of its purpose. In a speech to the Association of Canadian Archivists last June the new chief archivist Daniel Caron [Caron's speeches are online here but this speech is not there – Akin] —the first chief archivist not to have a degree in history, but rather a PhD in economics—spoke of the “public memory monopoly once exercised by archives,” bemoaning the fact that the “documentary moment” in the analogue world is hopelessly long. Archivists are lost “within an anachronistic time and space,” he contends, noting that in the age of self-documentation, information needs to be ubiquitous, instant and unmediated.

In late 2009, Caron also released a set of “Modernization Papers” addressing the challenge of digitization within LAC. These are strategic planning documents, largely concerned with “management process” and written in a style that eschews description and the active voice. As a result, there is no sense of the archives as a living institution and participant in the intellectual life of the country.

…

On a broader, more philosophic level, the notion of digitization as an agent of equality needs a bit of scrutiny. Contrary to the rhetoric, it is not really value-free. Databases are like maps; they are ­representations of reality and similarly model a set of relationships, for example between author and title and language (or land and water and altitude), which means that selection is always involved.

… Digitization is no guarantee of access, either. Far from being more accessible I experienced LAC as having disappeared behind its website and into a fog of MBA speak. The site is not for neophytes; it assumes you know what a fonds is, and what a MIKAN number is for, and that the accession number is likely to be the search key, which is fair enough. But where are the glossary and FAQs for those who do not know?

In the fall of 2009, the federal government sent up a $1 billion fund called the Pulp and Paper Green Transformation Program. The goal of the program was to provide pulp-and-paper firms with a subsidy for the “black liquor” produced as a byproduct of the kraft paper manufacturing process. “Black liquor” can be used as a fuel.

Last week, Prime Minister Stephen Harper was one of several government MPs to announce $278 million in disbursements from this fund bringing the total drawdown from this fund so far to $616 million. Today, Natural Resources Minister Christian Paradis was in Matane, Quebec where he announced a grant of $18.9 million to the local Tembec mill.

Also: Today, we crunch the numbers on where the money is going from this program on a riding-by-riding basis:

By political colour:

• Mills in Conservative ridings to receive grants: 23 worth $520.7 million
• Mills in NDP ridings getting money: 8 worth $49.1 million.
• Mills in BQ ridings getting money: 2 worth $43.7 million
• Mills in Liberal ridings getting money: 1 worth $21 million

By province:

• Mills in BC getting money: 12 worth $319.2 million
• Mills in AB getting money: 6 worth $188.3 million
• Mills in NB getting money: 5 worth $55.8 million
• Mills in ON getting money: 5 worth $24.5 million
• Mills in MB getting money: 3 worth $3.1 million
• Mills in QC getting money: 2 worth $43.7 million.
• No money so far for NF, NS, PE, SK

UPDATE: There may be no money from this program for NF or SK mills because, according to data I just found at Industry Canada's Web site, there are no mills in either of those provinces that produce paper other than newsprint. This program is aimed, I believe at makers of kraft paper. The Industry Canada data lists the Paper (not Newsprint) Mills so they could be kraft, tissue paper or other kinds of paper. There are 91 such mills in the country, more than half of which are in Quebec and Ontario.

Here's all the grants so far:

Plant	Location	Amount	Party	MP
Zellstoff Celgar	BC Castlegar	$40,000,000	NDP	Alex Atamanenko
Domtar	QC Windsor	$24,800,000	BQ	Andre Bellavance
Pacific Forest Industries	AB Boyle	$62,900,000	CPC	Brian Jean
Domtar	ON Espanola	$995,000	NDP	Carol Hughes
Domtar	ON Espanola	$700,000	NDP	Carol Hughes
Domtar	BC Kamloops	$24,100,000	CPC	Cathy McLeod
Domtar	BC Kamloops	$33,500,000	CPC	Cathy McLeod
Domtar	BC Kamloops	$17,300,000	CPC	Cathy McLeod
Weyerhaeuser	AB Grande Prairie	$32,000,000	CPC	Chris Warkentin
DMI	AB Peace River	$40,570,000	CPC	Chris Warkentin
Canfor	BC Prince George	$4,400,000	CPC	Dick Harris
Canfor	BC Prince George	$11,200,000	CPC	Dick Harris
Canfor	BC Prince George	$100,200,000	CPC	Dick Harris
Cariboo	BC Quesnel	$41,500,000	CPC	Dick Harris
Domtar	ON Dryden	$1,900,000	CPC	Greg Rickford
Domtar	ON Dryden	$20,800,000	CPC	Greg Rickford
Irving	NB Lake Utopia	$22,000,000	CPC	Greg Thompson
Nanaimo	BC Nanaimo	$3,560,000	NDP	Jean Crowder
Nanaimo	BC Nanaimo	$750,000	NDP	Jean Crowder
Tembec	QC Matane	$18,900,000	BQ	Jean-Yves Roy
Howe Sound	BC Port Melon	$6,000,000	CPC	John Weston
Howe Sound	BC Port Melon	$36,700,000	CPC	John Weston
AV Nackawic	NB Nackawic	$2,050,000	CPC	Mike Allen
AV Nackawic	NB Nackawic	$320,000	CPC	Mike Allen
Twin Rivers Paper	NB Edmundston	$21,000,000	LPC	Jean Claude D'Amours
Tolko	MB The Pas	$810,000	NDP	Niki Ashton
Tolko	MB The Pas	$1,260,000	NDP	Niki Ashton
Tolko	MB The Pas	$1,000,000	NDP	Niki Ashton
Cascades	ON Trenton	$83,000	CPC	Rick Norlock
West Fraser	AB Hinton	$15,000,000	CPC	Rob Merrifield
West Fraser	AB Hinton	$170,000	CPC	Rob Merrifield
West Fraser	AB Hinton	$37,680,000	CPC	Rob Merrifield
Irving	NB Saint John	$10,400,000	CPC	Rodney Weston