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15 Oct 08: Challenges for the Next Canadian Government

GAP

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When one retires, on a pension, a person should be given his/her unused contributions (but not the employer’s or government’s ‘shares’ – 75% of the employer’s share should be reimbursed) and should be allowed to roll them directly, tax free, into a RRSP

Less what they have collected over the same lifetime.....therefore, the annual collector is not in the same boat as the once in a lifetime collector...............
 

a_majoor

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The economic challenge is to get John Galt back to work. While this is a global issue, whoever figures this out first and brings Capital back to work will have a huge advantage over the others:

http://pajamasmedia.com/edgelings/2008/12/22/capital-is-on-strike/

Capital Is On Strike

Posted By edgelings On December 22, 2008 @ 12:01 pm In Opinion, Uncategorized | 6 Comments

by Rich Karlgaard

In her magnificent (and prescient) book The Forgotten Man Amity Shlaes creates a useful metaphor that is easy to grasp and explains a lot. It is the idea that capital can go on strike.

Capital is on strike now. It is one of the causes of the crash of 2008 and the fourth-quarter mini-depression.

Ben Bernanke is working hard to pop the Treasury bubble–which grows in times of deflation fears–in order to get capital off the strike line and back into productive investment. Bernanke is using the only tool available to him. He is “dropping money from a helicopter,” some $2 trillion worth since September.

(The helicopter quip was originally [1] Milton Friedman’s. Don’t you wonder what Uncle Milt would have to say about the 2008 crash?)

Reinflation is one way to get capital off the strike line and back into the game. But reinflation is like medicine. You must get the dose right and you can’t administer it forever because it will ultimately weaken the patient and cause its own problems. Proper fiscal policy is the way to keep capital in productive investment. That would mean applying reasonably low tax rates on personal and corporate income and reasonably low rates on capital gains and dividends.

As Shlaes writes in The Forgotten Man, if Hoover caused the Depression, FDR prolonged it by constantly attacking the investor class, whom he called the “malefactors of great wealth”–a phrase originally said by the first Roosevelt, Theodore. FDR’s attempt to pack the Supreme Court in 1937 was driven in part by his wish to tax the rich retroactively.

Consider this thought experiment: Imagine if the incoming Congress and Obama administration raised taxes on capital gains to 30% only to discover that the revenue receipts were not as high as planned. So imagine they then applied the 30% rate to all gains since 2003.

That’s essentially what Roosevelt wanted to do. Sensibly enough, the Supreme Court rebuffed him. Thus did FDR try to pack the Court in 1937 by adding one new justice for every sitting justice over age 70.

That’s how capital goes on strike. It goes on strike when it is attacked or when the rules are unclear.

If President-elect Obama wants to be a hero and get credit for pulling the economy out of the ditch, he has to get capital off the strike line. Demand-side stimulus, whatever its merits might be, won’t do that. The only policy levers that will get capital back in the productivity game is a monetary reinflation accompanied by the promise of reasonably low tax rates–let’s say 20% for capital gains, dividends and corporate rates.

The capital gains tax, of course, must be indexed for inflation.

If Obama can get capital back in the game, the economy will recover quickly. Elsewhere on today’s Edgelings (and in the Wall Street Journal) my friend Mike Malone suggests some regulatory reforms that will also get capital off the strike line.  READ MALONE’S STORY [2] HERE

Article printed from Edgelings.com: http://pajamasmedia.com/edgelings

URL to article: http://pajamasmedia.com/edgelings/2008/12/22/capital-is-on-strike/

URLs in this post:
[1] Milton Friedman’s: http://en.wikipedia.org/wiki/Milton_Friedman#Economics
[2] HERE: http://online.wsj.com/article_email/SB122990472028925207-lMyQjAxMDI4MjI5MjkyMDI0Wj.html
 

a_majoor

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Maybe this is the stimulus package:

http://business.theglobeandmail.com/servlet/story/RTGAM.20090102.wflahertyconsumer0102/BNStory/Business/home

Flaherty hints at tax cuts in budget
   
JULIAN BELTRAME

The Canadian Press

January 2, 2009 at 5:34 PM EST

OTTAWA — As retailers begin to tally up results from their year-end sales and forecasters agreed that the first part of 2009 will be painful, the government is looking for ways to stoke consumer confidence.

Finance Minister Jim Flaherty said Friday he's reviewing options for putting more money in people's pockets through tax cuts as part of a multi-billion dollar stimulus package that will include infrastructure spending and help for laid-off workers.

The comments come as the finance minister prepares for a second meeting with his freshly minted council of economic advisers next week and amid fresh evidence that Canadian consumers are growing more pessimistic.

Corporate tax cuts and the new tax-free savings accounts that came into effect on Jan. 1 will help stimulate the economy, Mr. Flaherty said Friday, but added he's considering other measures for the Jan. 27 budget.

“There are a couple of ways to stimulate the economy. One is spending on the infrastructure side and other ways. And tax reductions — leaving more money in people's pockets — is also stimulus to the economy,” Mr. Flaherty told reporters at a news conference.

“We've been reviewing other (tax) options,” he added.

Liberal Leader Michael Ignatieff recently warned that the budget will be Prime Minister Stephen Harper's “last shot” to show economic leadership or face losing a non-confidence vote.

The Liberals and NDP, with the support of the Bloc Quebecois, were prepared to topple the minority Conservative government in early December over perceived inaction on the stumbling economy, but Mr. Harper received a reprieve by shutting down Parliament until Jan. 26.

Mr. Flaherty was not specific about what he will propose in the budget — that Mr. Harper has said would result in a deficit of up to $30-billion — but said he will seek to support “people who are enduring the brunt of the recession ... with job losses and job retraining.”

Statistics Canada will provide an update on the unemployment situation on Friday when it releases its labour force survey data for December.

About 71,000 jobs were lost in this country during November, the biggest one-month drop since 1982, although the figures were skewed by unusually high employment in October due to temporary jobs related to the federal election.

Economist Dale Orr of IHS-Global Insight said the most effective form of tax cuts to stimulate the economy short-term may be through eliminating the five-per-cent federal goods and services tax for one year on big consumer items such as autos, furniture and appliances.

With consumers worried about their jobs, Mr. Orr said Canadians are more likely to pocket than spend any income tax reduction. And an across-the-board one-point drop in the GST would likely be more costly and less effective than a larger, targeted cut, he added. (Interpolation: What's wrong with that? Saving is the soil for economic growth, and the root cause of the financial crisis is the imbalance between wealth and debt.)

“It's in the big items where you can actually change consumer spending,” Mr. Orr said. “If you save a few pennies on a cup of coffee, nobody is going to buy more coffee because it's lower.

“But if people are thinking (they) should get a new car this year or next, if (they) can save five per cent by buying it this year, it could be effective.”

Liberal finance critic Scott Brison said “the right tax cuts” can help stimulate the economy, but was not specific. The Liberals had opposed two previous cuts to the GST, arguing that reducing income tax would have been better for the economy.

Mr. Flaherty said he was concerned about the impacts on Canada of the sharply deteriorating global situation and that finance officials have been working throughout the holiday season on preparing a response in the budget.

The minister also said it was not a good sign that two new surveys released Friday found consumer confidence in Canada sinking to depths found in the United States, where the economy is faring far worse.

A Harris-Decima sponsored by Winnipeg-based mutual fund firm Investors Group, found 64 per cent of 2,000 respondents said they were feeling pessimistic about the economic outlook for 2009.

That's twice as high as the number of individuals who felt less confident about the economy in a survey last August and similar to the poor consumer confidence levels reported in the United States.

But the proportion of survey respondents expecting a deterioration of their own financial situation was unchanged at 18 per cent.

A separate poll from the Boston Consulting Group found that 62 per cent of the 1,000 Canadians surveyed said they intended to cut spending this year, more than the 58 per cent of Americans who answered the question the same way.

“People are basically tightening their belts as a way of being careful, but it's not a situation where they are not sleeping at night,” said Jeff Walker, senior vice president with Harris-Decima.

Many Canadians have yet to translate general pessimism about the economy into their own personal situation, likely because Canada has yet to experience a sustained period of job losses, Mr. Walker said.

Net employment is up in 2008, despite the one-month 71,000 job loss in November.

Anecdotal evidence suggests the economic uncertainty has also not completely deterred Canadians from shopping during the holiday season.

No firm Canadian data will be available before next week, when some U.S.-based retailers report results for their divisions in Canada, and Statistics Canada won't release its national tally of December sales until mid-February.

But debit-card operator Interac processed 15.9 million transactions on Dec. 23, its busiest shopping day of the year, up about two per cent from 15.6 million on the peak day of December 2007.

John Winter of retail consultancy John Winter Associates, said in an interview that amid “spectacular deals” in many stores, he projects “sales up a little bit, but margins much poorer than last year because of the discounting.”
 

a_majoor

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This might also be appropriate for the Canadian Economic Superthread as well. The interesting thing to note is the $6 billion "Structural surplus" which can be tapped to lower taxes. This seems to be over and above the real savings that are available by chopping ineffective programs ($19 billion by ending subsidies to business, and untold millions/billions on agricultural subsidies, regional "development funds" etc.)

http://www.calgaryherald.com/life/family/cuts+possible+affordable+Flaherty+told/1203234/story.html

Tax cuts possible, affordable, Flaherty told
 
By David Akin and Andrew Mayeda, Canwest News ServiceJanuary 21, 2009Comments (1)

Finance Minister Jim Flaherty: 'We are going to take steps in the budget, not only short term but longer term steps, to ensure that we build capacity during the recession so that Canada exits the recession even stronger than we entered it. Finance Minister Jim Flaherty on Wednesday promised Canadians tax relief in next week's federal budget, hours after an independent parliamentary research group said that Canada can, indeed, afford some permanent tax cuts.

"There will be some tax measures in the budget, and we are conscious of the need to use the tax system, to the extent possible, to create further stimulus in the economy," Flaherty told reporters after a Parliament Hill meeting of the Conservative caucus.

As the caucus met, the Parliamentary Budget Office (PBO) released a briefing note that said Canada may have a structural surplus of about $6 billion, which means Flaherty could introduce some tax measures worth at least that much without harming the country's long-term fiscal capacity. In concluding that Canada afford permanent tax cuts, the independent, non-partisan office may help bridge the political divide that has emerged in the last week between Conservatives and Liberals over what role, if any, tax measures ought to have in the economic stimulus package that will be part Flaherty's budget.

The Liberals had warned against deep tax cuts, saying they would prevent Ottawa from ever raising enough money to get out of deficits down the road. (Interpolation: when you or I need to get out of "deficit" [debt] we cut spending. Enough said.)

Flaherty also said his fourth budget — Canada's first deficit budget in a decade — would provide a clear roadmap to a return to balanced budgets.

"What we will show in our economic plan (is) how we will exit from deficit as the economy exits from recession," Flaherty said.

"We are going to take steps in the budget, not only short-term but longer-term steps, to ensure that we build capacity during the recession so that Canada exits the recession even stronger than we entered it."

But the budget office warned any federal government against trying to pull the country back into the black too rapidly, saying that an exclusive focus on a return to surpluses could do more harm than good to the economy.

"If the government were to aim for a surplus position within the next five years, it would likely require contractionary measures in the outer years, while the economy is still expected to be below its potential capacity," the office wrote.

That said, it notes that the government has what it calls a "structural surplus" of about $6 billion. By that, it means that in normal economic times, with Canada's GDP growing at an average rate, the government would collect $6 billion more in revenue than it would spend.

Prime Minister Stephen Harper and his senior advisers have told reporters over the last week that the federal budget will contain some "permanent" measures" to reduce this "structural surplus." A permanent measure might be something like an income-tax cut aimed at the middle classes.

Still, the budget office warns that attempts to cut the "structural surplus" should proceed with caution.

"Any permanent fiscal actions (e.g., permanent tax cuts or permanent spending increases) exceeding $6 billion annually would likely result in structural deficits, limiting the government's ability to manage future cost pressures due to, for example, population aging."

The budget office's conclusion that there is still a structural surplus, even after the Conservatives axed the GST by two per cent — worth about $15 billion a year to the government — may help quell Liberal objections to a tax cut. Liberal Leader Michael Ignatieff has said his party would have trouble voting for a budget that reduces the government's fiscal capacity or tax revenue to the point that it could not recover from the deficit without massive program cuts.

The prospect of a government defeat over its economic policy diminished Wednesday when Ignatieff said Canada needs an election over next week's budget "like a hole in the head."

While the NDP and Bloc Quebecois continue to say they will oppose the budget, "no" votes from all three opposition parties are needed to topple the Harper Conservatives.

The budget office also had some dismal projections for the state of the federal treasury, saying that, even before Flaherty spends a nickel next week, the deficit for 2009-2010 will be about $13 billion.

The purpose of the briefing note is to give MPs and Canadians some baseline numbers to work with when they review the measures Flaherty will table in his budget Tuesday. The briefing note also suggests questions that MPs ought to consider. For example, if one of the over-arching goals of the U.S. stimulus package is to create three million jobs by 2010, does Canada have a measurable objective for its stimulus package?

Flaherty is expected to table an economic stimulus package worth tens of billions that could leave Canada in a deficit for the first time in a decade. That deficit, which could be $30 billion to $40 billion would get added to the national debt.

Since 1998, successive Liberal and Conservative governments have retired about $105 billion from that debt. When the government's fiscal year ends on March 31, the federal debt will stand at about $457 billion or 28.5 per cent of GDP. Relatively speaking, Canada's debt is the lowest in the G7.

Still, the relative success Canada has had in lowering its debt will be of little comfort to Canadians as they watch much of that work undone.

The Conservatives, for example, have retired about $37 billion in federal debt since taking office in 2006.

But Flaherty could wipe out his own gains in one budget if the deficit approaches $40 billion. Every year's operating deficit gets added to the federal debt.

Under one of the "status quo" forecasts put together by the budget office, Ottawa will increase the federal debt by about $100 billion by the spring of 2014.


With file from Hubert Bauch

© Copyright (c) The Calgary Herald
 

Rifleman62

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The Star http://www.thestar.com/comment/columnists/article/574487

Next week's budget will be the flip side of '95

Jan 21, 2009 04:30 AM
CHANTAL HÉBERT

OTTAWA—Even if the troubled life of a nascent minority Parliament did not depend on it, next week's federal budget would be one for the history books.

It is no accident that 1995 was the last time so much hype surrounded the preparation of a Canadian budget. Then as now, a transformative exercise was in the works.

Paul Martin's second budget as finance minister set in place the conditions for a decade of federal surpluses and helped put its author on track for the job of prime minister. But it also created larger gaps in Canada's social safety net, most noticeably on the fronts of health care and unemployment relief.

Indeed, by most popular standards, Martin's iconic 1995 budget was a bad-news political document. Very few Canadians escaped the pain associated with it. Some of its collateral damage endures to this day.

In many ways, next week's budget will be the flip side of the one Martin delivered almost 14 years ago.

In 1995, the social envelope was too big to ignore in the quest for cost-saving measures. Next week, social programs will be left alone. Prime Minister Stephen Harper has vouched to keep the provincial transfers for health, post-secondary education and welfare on their current track.

In 1995, the budget winners were the programs that escaped the government's knife. Next week, the losers will be the groups who fail to get extra financial attention from the federal government.
The 1995 budget put Canada on track for balancing its books. Next week's will herald a new cycle of federal deficit-financing.

Political convention would suggest that it is harder to cut programs than to spend money. But that premise will be seriously put to the test Tuesday.

When all is said and done, Martin faced an easier task in balancing the books than Harper does in trying to spend Canada out of the worst of a global recession.

To achieve his goal, Martin had to reset the internal mechanisms of the federal apparatus. But Harper has no control over the major pieces in the global financial puzzle. If they don't fall into place, his budget will have little or no durable positive impact and it will turn into an albatross around the neck of the Conservative party.

At this point, forecasters agree that red ink will not be a passing feature of the federal fiscal picture. For all the current talk of an exit strategy from the upcoming deficit cycle, talk is all that it is.
There are some obvious pitfalls to avoid. Measures that take a permanent toll on the federal government's fiscal capacity would only make getting back in the black immensely harder.

But beyond that, and with the best of intentions, no one can forecast with certainty whether Tuesday's budget will end up being part of the problem or part of the solution.

Too much of its success lies elsewhere, in particular in Washington and the presidency that was inaugurated yesterday.

For all of the above, the test of the budget can only rest with the demonstration that Canada will have something constructive to show for its spending once the current downturn comes to an end.

That may sound like a modest criteria except that it is a test that successive Liberal and Conservative regimes failed to meet when Canada was awash with surplus money and the opportunity for modernizing the country's social and physical infrastructures came and went.


 

Brad Sallows

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I cannot express strongly enough how frustrated I am that the Conservatives have been stampeded into adopting the Liberal/NDP/Bloc spending panic.

The new spending will achieve f*ck-all of consequence except to write down several years' worth of miniscule "principal payments" on Canada's federal debt.  There is no reason to believe that the pundits and experts have any idea whatsoever of what to expect: compared to all previous economic downturns, the current state of global commercial interaction, technological and social advances, and levels of government spending as a fraction of economic activity have no precedent on which to base wild-ass guesses, let alone sober predictions.  Unintended consequences - the unforeseen and unforeseeable reactions of millions of "invisible hands" - will pervert everything.  I truly wish for once the "great minds" would admit they really haven't a f*cking clue and allow the system to find its own stability.
 

GAP

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I couldn't agree more.....this whole response is bullshite.....

 

a_majoor

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Although this quote is from Rush Limbaugh speaking about the American Administration and Congress, it is applicable here, moreso because 4 Federal parties (Liberal, NDP, BQ and Green) and @ 66% of Canadian voters actually endorse this sort of thinking:

Obama's plan would buy votes for the Democrat Party, in the same way FDR's New Deal established majority power for 50 years of Democrat rule, and it would also simultaneously seriously damage any hope of future tax cuts.  It would allow a majority of American voters to guarantee no taxes for themselves going forward.  It would burden the private sector and put the public sector in permanent and firm control of the economy. Put simply, I believe his stimulus is aimed at re-establishing "eternal" power for the Democrat Party rather than stimulating the economy because anyone with a brain knows this is NOT how you stimulate the economy.

The challenge forthe CPC is to give the appearance of a stimulus package in the budget without creating long term burdens on the private sector and permanent increases in State power over the economy.
 

a_majoor

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Healthcare is another structural issue that really needs to be addressed before it drags us down even further:

http://www.nationalpost.com/opinion/story.html?id=1222021

Medicare, made in India
National Post 
Published: Tuesday, January 27, 2009

Medical tourism -- jetting off to an exotic location for a couple of weeks on the beach and a little surgery -- is a booming business. One consulting firm estimates that in 2008 nearly 1.5 million Americans and 100,000 Canadians sought out-of-country treatment. But soon, even Canadians who never set foot abroad may come to rely on foreign physicians: This week, we learned at least one Canadian clinic has begun outsourcing the reading of diagnostic scan results to North American-trained doctors working in India.

Before friends of state monopoly health care begin complaining about this "dangerous" new development in Canadians' treatment, they might consider how their vehement opposition to private innovation in medical service delivery has led us to this point.

No doubt, some diagnostic testing would be headed offshore no matter what health policies Canada had adopted. One of the reasons an Ontario radiology clinic has begun sending the images it takes to Telediagnosys, in the western Indian city of Pune, is that it can. Broadband Internet transfers are now so good that MRI, CT or X-ray images can be sent around the world as easily as from one floor of a hospital to another.

This development has only been encouraged by the insistence of medicare supporters that all new technologies be introduced by the public health system or not at all. Despite an increase in public spending on health of more than $100-billion over the past five years, government health departments have not been able to keep up with rapid technological change. There is no way to tax away enough money from productive sectors and workers to pay for the egalitarian blueprints of medicare devotees.

Investors, motivated by the scent of profits, were required. But because they are shunned under our health system, the necessary capital never appeared and the newest generations of high-tech medical machinery were never bought, or at least not bought in sufficient quantity to treat all Canadians quickly. The need to preserve universal medicare ensured Canada would have a shortage of both new medical equipment and -- just as importantly, as this case shows -- the doctors needed to use it.

Dr. David Vickar, a highly respected Edmonton radiologist, may chuff that "imaging studies are not to be downplayed and treated as a commodity like a pound of butter or sack of wheat." Really? How many Canadian radiologists see or speak with the patient in a routine diagnosis? Generally, they receive his or her test results from a laboratory and communicate the results back to the lab or the patient's family doctor. What then does it matter whether the radiologist offering the assessment is 10 blocks or 10,000 kilometres away? In complicated diagnoses, a local doctor can always be called in.

We need to de-mythologize health care. Our nation's sentimental attitude toward the subject is holding back the expansion of services in Canada and leading to ever-lengthening waiting lists and a deepening doctor shortage. As our population ages and Baby Boomers enter the prime care-consuming years, our insistence on maintaining the government health monopoly is going to lead to a train wreck in care.

We need to stop worrying about such tangential issues as whether our blood tests are being read in Mumbai or Medicine Hat, and start looking for solutions --private as well as public-- that will give the greatest number of Canadians the best care as quickly as possible.

© 2008 The National Post Company. All rights reserved. Unauthorized distribution, transmission or republication strictly prohibited.
 

a_majoor

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While many many people in the Blue end of the Blogosphere are quite angry at the current Federal budget, there were few realistic responses that the Government could have made without making a kamakazi run. Like it or not (Not), we are stuck with it. The only potential bright spot is the true recession might actually bottom by summer and the turnaround begin in late 2009 early 2010, so the government "could" withdraw the spending extravaganza and pull us away from the sustained deficits for five years scenario.

Other things can be done in the mean time:

http://www.bluelikeyou.com/2009/01/29/a-message-to-the-naysayers/

A Message to the Naysayers

David Asper’s column in today’s National Post is a must-read for anyone complaining about the liberal lean to the left of the stimulus budget (you know who you are). His insights follow closely on the heels of Stephen Taylor’s excellent post yesterday, as well as Monte Solberg’s column in the Ottawa Sun. The message is this:  Look at the big picture.

Asper is speaking to the ‘ideologically minded conservatives’ when he points out that this latest budget saved us from a far worse fate. Just imagine the havoc the now-defunct Coalition would have wreaked on the economy and our country as a whole (and the latter would have been in jeopardy too!).

Now the Harper Government is able to carry on with its mandate and work towards those objectives that resonate with fiscal conservatives:

…Small-c conservative-minded Canadians should focus on the future. By keeping the Conservative government intact, the PM and his Cabinet will now have the opportunity to move on several aspects of government policy that could provide important offsets to increased spending.

At the top of the list has to be a serious plan to reduce the size and operation of government in the long term. This is not new, and in fact was a top priority of Reg Alcock when he was president of the Treasury Board in Paul Martin’s short-lived Liberal government. The current Treasury Board President, Vic Toews, also has pursued this goal.

It’s not just about the size and compensation of the public service either. As the Finance Minister has hinted, the government unnecessarily owns and operates far too much land and too many buildings. Such holdings represent capital assets and value that can be unlocked in favour of the government, and be more productively deployed in the hands of the private sector.

Government processes and the way it deals with its customers – us — can also be done differently and more efficiently. If this means fewer people, it can be accomplished through natural attrition, retraining and re-assignment of jobs, thereby limiting potential labour upheaval with the powerful public service unions…

That last bit about customers is reminiscent of what Stephen Taylor wrote yesterday:

…A minority government is like a constant job interview, and the employer right now is a glutton. Pass the antacid and bring more pork; 62% of Canadians voted for those without without a predisposition to sound economic sense, while the rest voted for those that know better…

So keep your eyes on the big picture, fellow conservatively-minded citizens.  Please do what Stephen suggests, which is to grow the conservative movement in any way you can so that we can achieve that majority, and thereby improve this great country.

At the very least, try not to destroy it by sulking and threatening not to vote in the next election.
 

a_majoor

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If we substitute (name of Canadian Province) for California, then we see the same pattern to greater or lesser extents here in Canada:



- Works and Days - http://pajamasmedia.com/victordavishanson -

Thoughts on the Therapeutic Style

Posted By Victor Davis Hanson On January 31, 2009 @ 10:40 pm In Uncategorized | 143 Comments


Who is the “They” now in California?

How does one explain how California is broke, tens of billions of dollars in aggregate debt, despite having among the highest sales and income taxes in the nation?

We are naturally rich beyond belief—timber, oil, agriculture, a long sea-coast, wonderful weather, mountains, sea, and valleys—and inherited lucrative industries in tourism, computers and software, defense and great universities. Our grandparents left us a once wonderful freeway network, a tripartite higher education system, ports, airports, dams and canals.

So what went wrong, and why are tens of thousands of Californians leaving the state with bachelor degrees and above, while tens of thousands enter without high-school diplomas?

Many answers have been offered—incompetent governance, judicial intrusions, the ballot propositions, trial lawyers, unions, dysfunctional and politically-correct schools, or illegal immigration. But look at it in some sense as the long hoped-for end of the nebulous “them / they.”

For years the open borders lobby accused “them” (whites? The establishment? Conservatives? etc.) of racism in wanting the border with Mexico closed, an end to state entitlements to illegal aliens (remember the Satanic Prop 187?), and deportations of thousands of aliens in state prisons (a cost nearing $1 billion per annum). But now the state legislature is largely controlled by those who in the past argued for de facto open borders and an expansion, not a curtailment, of entitlements for those without legal residence. So whom to blame? There is no “they” anymore. The outsiders are insiders and own the state—and its contradictions they once helped to ensure.

Ditto environmentalism. “They” (fill in the blanks: right-wing employers, CEOs, national companies, etc.) were the villains to be overcome in order to stop drilling off our shores, and to put ever more of our timber and recreational and scenic areas into no-use wilderness areas. We were not to build dams. No more canals. Put aside more farm land. No more nuclear plants. Forget coal. Tax gasoline and make it expensive to refine. It is fair to say now that the environmentalist agenda runs the state, and so there likewise is no more “them” to blame—and we must live with the results. I cannot begin to count in my own personal realm of knowledge the farmers who went broke, the high-tech engineers who moved to Nevada, the small business owners who shut down or moved out of state.

Anyone with capital who wants to start business X, knows that he can be put out of business by one supposed sexual harassment suit, a racial discrimination complaint, trying to fathom 500 pages of state EPA applications, a 10% income tax rate, and now a 9% sales tax to come. In California we hunt out the misdemeanor and ignore the felonies. Drive down my avenue, drop five trash bags of wet garbage on the side of the road, and the chances are great you will never be held accountable (even if your receipts are found in the trash and turned over to the sheriff), but please don’t wire an outdoor light in the barnyard without a permit. You see, anyone who nods and obeys the law and pays, we hound; anyone who simply won’t or can’t, or causes too much trouble, we the state employee simply ignore.

Ditto unions and big government. Ever more high pensions, ever more strict work rules, ever more administrators and high salaries, ever more rules against firing and accountability—and ever fewer to pay for it all. The evil “they” who used to try to moderate unions and state spending are gone—dead, moved away, retired, zilch. And so we the taxpayers work for the unionized government employee rather than vice versa.

So now those who want unchecked entitlements, open immigration, restrictions on resource development, unionized work forces and ever expanded government won—and won big. The problem is, again, the evil “they” who were to pay for all this in ever increased income and sales taxes, to take the blame of being racist, or sexist, or homophobic or greedy, are pretty much gone (cf. the last stand of the 1% of the state that pays the majority of state income taxes). There are no more “greedy” left to pay money or emotional penance, and the therapeutic mindset is now screaming to high heaven as it looks for its awful, but missing mean parent to make it all right.

Article printed from Works and Days: http://pajamasmedia.com/victordavishanson

URL to article: http://pajamasmedia.com/victordavishanson/thoughts-on-the-therapeutic-style/
 

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When the people find that they can vote themselves money, that will herald the end of the republic.
-- Benjamin Franklin

And my google-fu isn't up to it tonight but didn't Keynes say something to the effect the when a system can't continue it will stop.

So what happens the morning after when the politicians are out of work, the police are unemployed and the banks are broke.

My guess is that people continue talking and eating and trading and travelling.

 

a_majoor

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Kirkhill said:
And my google-fu isn't up to it tonight but didn't Keynes say something to the effect the when a system can't continue it will stop.

So what happens the morning after when the politicians are out of work, the police are unemployed and the banks are broke.

My guess is that people continue talking and eating and trading and travelling.

Since there will be no effective central government under those conditions, people who wish to talk, eat or travel will do so under the sufferance of whatever warlord they swear fealty to. Examples exist from the end of the Imperium to the dissolution of Yugoslavia.

Sign up early; I have a limited number of barony's and knighthoods to offer...
 

Kirkhill

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Thucydides said:
Since there will be no effective central government under those conditions, people who wish to talk, eat or travel will do so under the sufferance of whatever warlord they swear fealty to. Examples exist from the end of the Imperium to the dissolution of Yugoslavia.

Sign up early; I have a limited number of barony's and knighthoods to offer...

Unless they turn nomad......behold the wandering peddler.
 

Brad Sallows

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Speaking of things which can't go on forever, with pretty much every government setting itself to spend a healthy deficit, from where are they expecting to get all the money?  I assume they're counting on the banks to buy bonds.

And if there turns out to be a great reluctance to facilitate the proposed spending, what then?
 

SeaKingTacco

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Brad-

My take is that there is no way all of these Govt Bonds can be made to float- so the alternative is to print money.  If we are in a deflationary cycle, my gut feeling is that a few months (maybe a year?) of printing money won't do too much damage, as all it will do is paper over some of the wealth destruction that occurred when the markets corrected in Oct 08.

Of course, very few Governments can be trusted to shut down the printing presses in time.  My prediction- from summer 2010 onwards, an inflation rate of 5%, moving upwards with interests rates two percent above that, moving upwards in lock step.  Welcome back to 1978....

Of course, I'm just guessing....
 

Brad Sallows

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>I assume they're counting on the banks to buy bonds.

OK, scratch that.  Among the recent commentary among the US bailout's supporters (now that the bill looks ready to clear the US Senate) I found the observation that the balance sheets of the US banks are in no shape to be lending money (ie. buying T-bills).  Oh, and apparently the $800B is going to be too little, too late.  It should be two or three times as much.

I do still suppose that banks in Canada, being healthier, could afford to buy Canadian government bonds, if they were so inclined.

There is something missing from the picture that I don't understand, and I'd appreciate if someone can explain it.  Who the f#ck is going to buy bonds?  I'm not going to sell out my equities near the bottom of the market in order to buy bonds - are you?  Unless there is some magic plan for reinflating the book value of a whole hockey sock of holdings, is it the case that the only resort left is to print money?  If so, good luck if you're on a fixed income or have a cap on your COLA.  You're f#cked.  Pardon me while I figure out where to park my basic savings so that they can at least gain in pace with inflation.

[Add: Having thought about it some more, the obvious solution is the likely one.  Taxes will have to be increased.  Just cutting all the willy-nilly spending should bring the deficit in range of a 2-3% GST increase.  An across the board cut in jobs or compensation to shave federal payroll by 5-10%, coupled with income tax increases (or surtaxes, as in the past) will gain us enough of a surplus to start paying down debt again before interest rates start to strangle federal revenues again.]
 

a_majoor

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There will be a great show, but no one with serious cash will pony up and buy 0% T-Bills, certainly not to the tune of $800 billion or one trillion dollars worth.

Serious investors (and people who are looking at the US Economy thread) recognize there are serious and systemic risks in the US economy that are sitting like secondary devices under the "toxic assets" IED; massive debt to equity ratio, increasing tax and regulatory burdens on the economy, unfunded government employee pensions and the looming insolvency of Social Security.

Lots of options do exist, but almost all are very ugly. Rationing healthcare, massively reducing Social Security payouts and huge tax increases are probably the least of it, and a spectacular fountain of money coming off the presses will provide the appropriate backdrop.

This will result in accelerating inflation, coupled with an increasingly depressed economy; Stagflation for fans of President Carter, and of course the United States will export inflation throughout the world (starting with us, since they purchase 82% of our exports). If American securities get dumped by panicking investors or because of the machinations of hostile nations who hold or influence large amounts of US debt, then the situation will get....interesting.

A few possible outs exist.

Much of the Stimulus package is pork set to be served in 2010, 2011 and even 2012 to influence (buy) future elections. The CBO has stated that the recession will end in 2009 without a stimulus package, so if rising public anger over the size and scale of the package is harnessed by the Republicans, then a putative Republican congress can start canceling large portions of the bill in 2010. (The Conservative government can do the same in Canada's 2010 budget).

Lower levels of government can do a 180 and swim against the tide; dramatic reductions in State, Provincial and Municipal spending and taxes will do a great deal to limit the damage, and indeed concentrate and focus financial ruin on American "Blue" jurisdictions and Canadian "Red" and "Orange" ridings. Since investors and skilled workers always migrate to where they can get the best returns on their investments, "Progressive" regions will see their economies hollow out. (This may be behind the Obama administration's attempts to hijack and politicize the US Census; they can preemptively redistrict electoral boundaries on the basis of mythical "voters" (remember ACORN?) while disenfranchising the real concentrations of voters and electoral power).

An organized or spontaneous John Galt strike will cripple large portions of the US economy, bringing many of the politicians promoting the package into disrepute as their program visibly fails.

Of course American voters can start sitting down together over a nice cup of tea....
 

a_majoor

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Why do the Kiwis get it and we don't?

http://www.thesurlybeaver.ca/index.php?itemid=646

Yes! Yes! Yes! A Politician who gets it!
02/11/09

Some original thinking from former New Zealand finance minister Sir Roger Douglas:

Act MP Sir Roger Douglas is proposing a new low-tax option for taxpayers in which the first $30,000 of income would be tax-free - but only if they pay for their own retirement, health care and welfare insurance or costs.

Income over the $30,000 tax-free threshold would be at a flat tax rate - 15 per cent - to be phased in over 15 years.


I think this is an excellent idea. Theres a not insignificant minority of the population (including me) that would prefer to have nothing to do with the welfare state. These people form a significant part of the base of most centre-right parties of the English speaking world. The gargantuan welfare state is here to stay (well at least until it becomes demographically unsustainable) so it is unreasonable to expect that any conservative government anywhere will make significant cuts to it if it wish to get re-elected, but what better way to energize right-of-centre voters than to allow them the opportunity to personally choose to take responsibility for themselves and their families and reward them by significantly lightening their tax burden.

Of course given the Harper government's propensity for spitting on its base, don't expect this forward thinking to come to Canada any time soon.

 
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