Harper's Best Fiscal Stimulus Package: Cut Taxes

[jdobbin]

I have a better suggestion. If the federal government wants to adopt a fiscal stimulus package, it should give the money to taxpayers - through lower taxes.

That assumes that the taxpayer will use their money to spend rather than pay debt.

In a downturn in the economy, everyone sitting on their money helps to make the situation worse.

It is sometimes government spending that moves things along.

I know that some right wingers support Friedman through thick and thin but most people don't have the stomach for the kill off that the market requires to right itself, especially when it can lead to widespread suffering.

[kuzadd]

Reality check wrt the "miracle" of the Irish economy.

The Irish economy is in shamrocks, er sorry shambles.

Kiss the blarney stone, but the Irish eyes ain't smilin no more.

Cowen unveils plan amid 120,000 job loss forecast

No indication of turnaround in Irish economy

Experts warn downturn will only get worse in 2009

Think tank issues gloomiest outlook yet for Irish economy

just a sampling.....

[jdobbin]

oh my.. One need only look to Ireland for an example of where strategic cuts to taxes hace helped an economy...

Anyways, now it's your turn. Give us all an example of where high taxes have helped an economy.

ready? go!!

Ireland is in a tailspin now.

http://www.monstersandcritics.com/news/bus..._Irish_economy_

'The Irish economy is in the midst of a contraction that is large by both historic and international comparisons,' the Economic and Social Research Institute (ESRI) said in a statement.

Ireland's gross national product, which does not include net investment from abroad, is expected to fall by 2.6 per cent this year before slumping by 4.6 per cent next year.

Investment in Ireland would drop by 19.3 per cent in 2009, the ESRI forecast, while consumption would drop 3.6 per cent.

Some 117,000 more people would be unemployed next year, and Ireland would once again see more people leave the country than enter it to work, with net outward migration of 50,000 people in 2009, according to the ESRI.

So does Ireland need another tax cut. Ready, set, go!

[Goat Boy©]

Giving people back their money does not cause a deficit.

Lowering consumption taxes does not cause a deficit.

Government spending that exceeds government revenue causes a deficit.

Why is Canada going into deficit? Canada wastes far too much of our money on niceties such as arts and culture, immigrant services (cause we need interpreters in 150 languages - see City of Edmonton 311 service), Bombardier bailouts, gun registries, Governor General travel expenditures to "share our northern climate sameness", etc, etc, etc.

Look at your household. When times are great and you're flush with cash, you can go to the movie theater three times a week if you wish. When times turn and you have to decide to cut out the movies or cut the grocery bill, do you continue going to the theater? No. The useless expenses should be the first things cut. What is the total federal taxation revenue? If the GST cut cost $26 billion dollars, fine. Can anyone tell me that this country doesn't waste at least that much on "arts and culture" expenditures each and every year? Maybe...maybe not. But I can guarantee you we dwarf that number annually on "non-essential" program spending.

Cutting taxes to taxpayers benefits the economy overall. As for the "it's permanent" arguement...I sincerely hope so.

I agree in full, but on the opposite end they control inflation this way too. Things already cost more in Canada, what would happen if PPP went up 30% overnight?

[Mr.Canada]

Ireland is in a tailspin now.

http://www.monstersandcritics.com/news/bus..._Irish_economy_

So does Ireland need another tax cut. Ready, set, go!

I'm sure you'll find a way to blame Harper for it somehow. Some trade they made or something...

[Goat Boy©]

If its monumental spending that does nothing for Canadians who need help that you're worried about...the federal government wants to spend $420 billion on our military. I'd rather see that cut first.

The military desperately needs that money, they haven't been the same since Trudeauski. However now is not the time. I mean it's not $420 billion to buy new ways to kill people, they are still using equipment left over from the 50's. Blue on blues like the poor bastards that got bombed in Afghanistan because they didn't have a TACBE to tell the hog driver they were friendlies. Equipment for clearing minefields, etc, etc.

[jdobbin]

I'm sure you'll find a way to blame Harper for it somehow. Some trade they made or something...

Harper is to blame. He has kept overspending despite promising not to do every budget.

[Goat Boy©]

Harper is to blame. He has kept overspending despite promising not to do every budget.

This is why I'm going to stop wasting the time reading your posts.

[jdobbin]

This is why I'm going to stop wasting the time reading your posts.

Feel free to put me on ignore. I won't mind. Really.

Or are you going deny that Harper broke his promise not to spend past the rate of inflation and increase in population?

Edited December 20, 2008 by jdobbin

[Goat Boy©]

Feel free to put me on ignore. I won't mind. Really.

Or are you going deny that Harper broke his promise not to spend past the rate of inflation and increase in population?

A politician......break an election promise? Never! I'm certain the Liberals and New Depression Party never break promises either eh? It is what it is, all you're doing is slandering.

[Topaz]

This is why I'm going to stop wasting the time reading your posts.

Well, Goat Boy, if Harper never wasted the 12 Bil plus 3 Bil were did it go????

[jdobbin]

A politician......break an election promise? Never! I'm certain the Liberals and New Depression Party never break promises either eh? It is what it is, all you're doing is slandering.

Slander? That would somehow indicate I was not telling the truth that Harper promised in what he did in his policy platform. The Parliamentary Budget Officer has already laid the blame on spending and that is Harper's crutch to bear.

I know Harper supporters can't believe that a deficit can't be the result of something that Harper did in terms of policy but the fact remains that if Harper had better control of his finances, Canada might have gone through 2009 without a deficit.

[Mr.Canada]

Harper is to blame. He has kept overspending despite promising not to do every budget.

I don't think Harper writes the budgets for Ireland, which is what I was quoting, but I could be wrong.

[jdobbin]

I don't think Harper writes the budgets for Ireland, which is what I was quoting, but I could be wrong.

Think it was Harper that pointed out to Ireland and their miracle a few years back. Looks like he is duplicating it right here in Canada.

[Mr.Canada]

Think it was Harper that pointed out to Ireland and their miracle a few years back. Looks like he is duplicating it right here in Canada.

Hehe, this is getting silly. Harper is a brilliant strategist and an economist by trade. It's obvious he knows what he's doing.

[jdobbin]

Hehe, this is getting silly. Harper is a brilliant strategist and an economist by trade. It's obvious he knows what he's doing.

And Ignatieff is probably the smartest man on the planet. He is like an Olympian and a intellectual all wrapped up as a Canadian idol. I'm sure he has a great singing voice as well and could solve all Canada's problems just by humming.

[Mr.Canada]

And Ignatieff is probably the smartest man on the planet. He is like an Olympian and a intellectual all wrapped up as a Canadian idol. I'm sure he has a great singing voice as well and could solve all Canada's problems just by humming.

Lol. Is that how my posts look sometimes? If it is probably sounds as ridiculous as this one does. Lol, pretty funny though, I had to read it a few times. Ahhh...nothing like blind partisanship. That's all we need is some karaoke during question period...

Edited December 21, 2008 by Mr.Canada

[M.Dancer]

Sales of alcohol however are increasing across the board everywhere and I suspect the same is true of drugs.

I can't speak for the drugs but a blanket statement like that ("Sales of alcohol however are increasing across the board ') is false. Alcohol sales are down 3.5% in the US and the LCBO is ctting prices "accros the Board" on premium brands in order to meet sales targets set last year...which is good if you like 21 year old Macallum...it will be about $15. less.

http://www.thestar.com/Business/article/548724

[White Doors]

Cutting taxes helps, but it only helps in the short term. By doing so, we'll be putting our burden on our children and their generation.

Really? What if we keep taxes high and their mothers and fathers have no money to have children? How would that work out?

[Mr.Canada]

Really? What if we keep taxes high and their mothers and fathers have no money to have children? How would that work out?

Ask Jack Layton that's what he wants to do.

[White Doors]

Ireland is in a tailspin now.

http://www.monstersandcritics.com/news/bus..._Irish_economy_

So does Ireland need another tax cut. Ready, set, go!

Yes, you are right - Ireland should have minded their own and let their 'better's lead them around by their noses. Ireland is a dynamic economy and as a Canadian example, have gone from a Newfoundland to a BC economy in under 20 years, but yes, I guess you are right, when you don't grow at all it is hard to stop growing for a bit isn't it? unreal.

[capricorn]

He is like an Olympian and a intellectual all wrapped up as a Canadian idol. I'm sure he has a great singing voice as well and could solve all Canada's problems just by humming.

Didn't you hear? CTV canceled Canadian Idol.

If he hums, it would probably be "I wish I was in Dixie" or "I'm a yankee doodle dandee.

[August1991]

There is no evidence that tax cuts would have any effect on an "average Joe's" spending as we head into a recession.

The AJ could just as well save the tax cut as spend it, thereby providing no immediate relief for the economy.

Look at the US and the $600 tax rebates they received in Q2 of 2008. Now consider where their economy has ended up in Q3 and will end up in Q4 of 2008. Yeah, those rebates helped fool a lot of people into thinking the US escaped a recession which only led to months more of complacency (not to mention the interregnum problem). Nice way to put off looking for solutions to a problem when you can paper it over so quickly and easily.

A $15,000 personal tax exemption at the federal level for 2009 would mean an extra tax cut of $735 for those who make $15,000 or more in taxable income and don't have other tax credits that would have given them these tax savings in the first place (age amount and/or disability amount for low income seniors, for example). [Note that for 2009 the basic personal exemption is already $10,100.]

A rise in the personal exemption to $15,000 would, as you note, mean an immediate tax cut of about $750 for each filer with an income above $15,000. For those earning less than $15,000, the cut would be less. (The feds have provided seniors with the right to split taxable incomes but you are right that unless the exemption was raised in relative terms for them too, then this would lower the overall tax effect. Frankly, I have never understood the special treatment accorded to seniors and figure that we all should enjoy a high basic personal exemption.)

The CTF estimates that the total cost of this tax change would be $28 billion which is the number now bandied about as an acceptable deficit. This is a big bang, all across the country.

It would be important that this rise in the basic exemption be perceived as permanent. Americans perceived your example of the US tax rebate as temporary.

Indeed, there are two sources of "leakage" in the Keynesian scheme of things - imports and savings. Since this is supposedly a global recession, different countries are coordinating stimulous packages so if Canadians spend money on imports, then we shouldn't perceive this as a "leakage".

As to savings, why would an auto worker be any less likely to save than me? (Make no mistake, a government bailout package to the auto sector ultimately puts money in the hands of auto workers - after a variety of other people have taken a cut.) Governments do not give money to "economic sectors". Governments give money to people - the only question is who that person is going to be and what they have to do to get the money. I think the least effort to get the money and the broadest base of recipients are not bad criteria.

While seeing Canadians actually save would be a welcome change from decades of spiraling debt, it would not necessarily give the economy the boost that may be needed to escape the deflation spiral - although this is more theoretical in that there is not much Canada can do - we are a blip surrounded by fools in other countries who thought they could get rich by spending/borrowing and "investing" beyond their means and understanding.

msj, spare us the homespun homilies. Protestant morality may have its place but not here.

It is ironic to argue that debt got us into this crisis and then argue that the government should (follow a Keynesian approach and) go into debt to get us out of the crisis. I somehow suspect that you are no Keynesian at all, msj.

Another advantage is that when the right projects are chosen then this is investment which will provide society with benefits well into the future.

The disadvantages are that projects take time to get up and running (at least 8 months even when they are fast tracked), politicians meddle in the decisions and choose projects that have a poor net present value because they are more interested in getting elected based on the perception of doing something rather than on the substance of doing something, etc...

Most people are wise to the disadvantages which is why this type of stimulus should only be done when absolutley necessary and then be done quickly, in large amounts, and then turned down/off as quickly as possible.

Modern government bureaucracies cannot, I repeat, cannot do anything quickly, or only once. Bureaucracies are like the procreation of elephants: there's a huge commotion in the jungle, palm trees fall down and then nothing happens for 22 months. Within a few months, the elephants start the whole process again.

Maybe government bureaucrats can manage a tax cut in short and simple fashion.

Japan screwed up in the mid-90's with too little and too late. Hopefully the US is not falling into this trap. If they do then it doesn't matter what Canada does right now.

This is a constant refrain of the Noubini crowd - 1990s Japan redux. Sorry, Japan and North America are very different. Japan's population is aging and its population is declining. Japan has a current account surplus (and capital account deficit) because Japanese understandably prefer to invest abroad where projects have better prospects.

If you owned a truck, where would it generate greater benefit: on the US Interstate or in Japan?

Oh, and more thing - it is obvious by now that monetary stimulation has done sweet bugger all but that's not surprising in a credit crisis when the velocity of money is rendered stagnant (which, is to say, that there is a huge inflation risk when velocity normalizes again).

The initial monetary stimulus was designed to overcome the overnight credit freeze. This worked. The current monetary policy has yet to work through the system. (We unfortunately live in a world where people expect instant results.)

IMV, the Fed (and other central banks) are once again trying to ride the dragon. As you note, this may well lead to inflation in the medium term.

The dangers of this stimulus leading to continual government deficits, it should be noted, are probably no greater, and likely less than, tax cuts, for the simple reason that it is probably easier to turn off the taps than to increase taxes again (although, looking at recent budgets it would appear that both the LPC and CPC are drunken sailors so who knows which way is easier).

I don't care about deficits. I care about government spending. The last thing I want to see is government bureaucrats and lobbyists sitting down to figure out how to spend my money.

Many intelligent economists (including apparently you msj) disagree with this whole Keynesian approach. But if we are going to go with this Keynesian idea, then I would prefer a way that makes the (government) beast no bigger than it already is.

Cutting income taxes would have some immediate effect on Average Joe's spending, to be sure, but it doesn't 'create jobs' like gov't spending is touted to do. However, as you say, gov't job creating schemes are wide open to abuse...how effective were the Liberal advertising campaigns in Quebec or the 2 billion dollar gun registry to that end?

Canada's unemployment rate, the last time I checked, was around 6.5% give or take a decimal point, and it was up or down a decimal point from the previous month.

I prefer the local mall windows as a measure of "unemployment". Here in Montreal, many shops on Ste-Catherine Street have signs in their windows. Nous embauchons.

Sorry, this is not the Dirty Thirties.

boy oh boy, we have done tax cuts for years and years now, and wow, look where it got us.

In historical terms, we have done "government" for years now and wow, look where it got us. Governments don't prevent market bubbles and panics but they apparently make them far more dramatic and possibly severe.

The military desperately needs that money, they haven't been the same since Trudeauski. However now is not the time. I mean it's not $420 billion to buy new ways to kill people, they are still using equipment left over from the 50's. Blue on blues like the poor bastards that got bombed in Afghanistan because they didn't have a TACBE to tell the hog driver they were friendlies. Equipment for clearing minefields, etc, etc.

The ultimate government spending project: Military stuff. What is the difference between men and boys? The price of the toys.

If Canada should spend money on military stuff, then let us decide carefully what we really need. We should not decide to buy guns (or butter) under some vague, inconsistent theory that borrowing to buy stuff will make us all rich.

And Ignatieff is probably the smartest man on the planet. He is like an Olympian and a intellectual all wrapped up as a Canadian idol. I'm sure he has a great singing voice as well and could solve all Canada's problems just by humming.

Is that sarcasm or irony, Dobbin? Surely you don't believe it. Even my cat walks away in a huff when I point at an empty cat food box and I reckon that you're smarter than my cat.

----

I have a simple point in this thread.

When corporations line up to get taxpayer cash in the name of some theoretical stimulative package, there's another stimulative package that according to the same theory is just as viable (and according to recent evidence even better): cut taxes.

If Stephen Harper incurs a $30 billion deficit by forking over billions to corporate lobbyists without cutting my taxes, then I will tear up my Conservative Party membership card and never contribute a dime. (As it is, I have started to hang up on their automated phone calls.)

Edited December 21, 2008 by August1991

[jdobbin]

Yes, you are right - Ireland should have minded their own and let their 'better's lead them around by their noses. Ireland is a dynamic economy and as a Canadian example, have gone from a Newfoundland to a BC economy in under 20 years, but yes, I guess you are right, when you don't grow at all it is hard to stop growing for a bit isn't it? unreal.

The Irish economy might have boomed but it now faces some of the biggest doom and gloom in many a year.

There are are so many mistakes that have been made there that they will be case study on what not to do.

http://www.economist.com/displayStory.cfm?...FTOKEN=65789067

Total investment spending, which has become dominated in recent years by an outsized housebuilding sector, is suffering a severe contraction and this is expected to continue well into 2010. Private consumption, which accounts for 50% of annual GDP, is now also declining and will continue to do so over the next two years. Factors that will negatively impact on purchasing power and sentiment are falling employment levels, rapidly rising joblessness, strains in the banking system, further tax increases and the negative wealth effect of declining house prices and equity values.

[Hydraboss]

Well, Goat Boy, if Harper never wasted the 12 Bil plus 3 Bil were did it go????

Maybe he hid it in the Batcave under the rug where Paul Martin and Johnny Crouton put the $60 billion they stole redirected from the EI fund.

Just thinking outside the box.