Deficit is growing ...150 Billion!

[Werecar]

I googled, because I thought the program was still in effect too.

I agree with you though - lowering income tax would have been better than lowering the GST. One just had better optics, and better short term results.

Actually now if you think about the GST hike makes even more sense what with us not refunding it to visitors. More revenue garnered from them that doesn't need to be garnered from the tax paying citizenry.

[lily]

The GST hike? You mean lowering it?

I might agree, but I'd still rather see my income taxes lowered, for all the reasons you gave above. It's my money and I want it.

[madmax]

Sorry but I'd much rather save 2% on all my purchases than contribute to some fund to bail out some worthless company or fund some misguided social program. If you feel like paying extra tax, feel free to donate to the government, and leave the rest of us out of it.

Best you log off now. Use a private non tax payer supported/funded forum.

Hold to your guns and don't return.

[ToadBrother]

Now heres a great idea.... The Feds have spent too much, and given too much away in 10s of BILLIONS of dollars in Tax cuts. So they need revenue, and some jerk says, the best way to do this is to help KILL the retail market and increase the Goods and Services Tax.

Most economists seem to agree that consumption taxes are far superior to other forms of taxation. Consumptions taxes have some of the same redistributative effects that income taxes do, but without be necessarily so onerous. A wealthier person could in fact find ways of paying less consumption taxes simply by buying less, while the poor, whose purchasing power is low anyways, end up not paying so much anyways. There were very sensible reasons why Brian Mulroney created the GST, and while it basically put the final nail in the coffin of the Conservative government of the time, it was retained by the Liberals despite all their protestations when it was instituted, precisely because someone like Paul Martin and his economic team knew the inherent value of the tax. Only Harper and Flaherty were foolish enough to make the idiotic promise to cut it, and then actually stupid enough to carry it out, despite even many conservative-oriented economists saying "Don't!"

This was precisely the message that most economists tried to point out to Harper when he was making good on the promise to lower the GST. They kept saying "lower your income and corporate taxes, which will do the economy the most good, and leave the GST alone." Well, now, of course, Harper has positioned government revenue streams in the worst possible position; with a lower GST bringing in less revenue, while an underperforming economy means that income and corporate taxes produce less revenue, and he can't even meaningfully cut the latter to stimulate growth because to do so would cut government revenues even further. A smart government would abandon what was ultimately a partisan F***-you to the Liberals, jack the GST back up and then perhaps look at some modest cuts to other taxes to encourage investment and employment.

I'm not quite sold on the concept, but I know some folks actually argue that we should only have consumption taxes.

Edited July 14, 2009 by ToadBrother

[Jerry J. Fortin]

Most economists seem to agree that consumption taxes are far superior to other forms of taxation. Consumptions taxes have some of the same redistributative effects that income taxes do, but without be necessarily so onerous. A wealthier person could in fact find ways of paying less consumption taxes simply by buying less, while the poor, whose purchasing power is low anyways, end up not paying so much anyways. There were very sensible reasons why Brian Mulroney created the GST, and while it basically put the final nail in the coffin of the Conservative government of the time, it was retained by the Liberals despite all their protestations when it was instituted, precisely because someone like Paul Martin and his economic team knew the inherent value of the tax. Only Harper and Flaherty were foolish enough to make the idiotic promise to cut it, and then actually stupid enough to carry it out, despite even many conservative-oriented economists saying "Don't!"

This was precisely the message that most economists tried to point out to Harper when he was making good on the promise to lower the GST. They kept saying "lower your income and corporate taxes, which will do the economy the most good, and leave the GST alone." Well, now, of course, Harper has positioned government revenue streams in the worst possible position; with a lower GST bringing in less revenue, while an underperforming economy means that income and corporate taxes produce less revenue, and he can't even meaningfully cut the latter to stimulate growth because to do so would cut government revenues even further. A smart government would abandon what was ultimately a partisan F***-you to the Liberals, jack the GST back up and then perhaps look at some modest cuts to other taxes to encourage investment and employment.

I'm not quite sold on the concept, but I know some folks actually argue that we should only have consumption taxes.

That would be me! Its the only smart way to go, and its the only way to increase disposable family income available to the government .

Once that is done, we could do something else smart. Get rid of fractional reserve banking, force the banks to actually fully fund their deposits and actually have the central bank in Canada control monetary policy. If the Bank of Canada were to actually lend the private banks the money they create out of thin air and charge them interest for it, we would be out of debt inside a decade and the central bank would become a money making revenue stream for the feds.

[madmax]

Most economists

We have to stop here... as most economists are unable to find work in their fields. Most practicing economists debate theories and models and most economists have been shitting their pants because they couldn't see the forest through the trees. Just like most economists moved from supporting closed local economies with controlled foreign insourcing to an virtual abandoninng of mixed local economies for unempeded importing of foreign goods, foods and resources. All in the name of unsustainable economic expansion and the destruction of healthy local economies.

It does work as a global economic model. It just may suck, where you live because of it. Its a pretty basic premise and it doesn't take alot of thought. WHich is why I have little use for "economists". Virtually none of whom can hold job in real world conditions.

Economics is great, there are many forms of economics, and I do enjoy the modelling and the debates.

But everything in our economy is open to debate and everything in our economy is controlled, its just a matter of where we want to put the potentiometers.

So, I take the words.... "most economists" with a grain of salt.

Essentially, all Mulroney truly succeeded in doing was create another form of tax revenue.

All Paul Martin did, was receive the benefits of this extra tax and use the extra tax to pay off bills, cut services, and give wealthy people a break.

After 15 years of this, we have demonstratable evidence that outright tax breaks do not sustain an economy nor does it keep multi nation companies operating in Canada. They take the extra dough and continue on their merry way.

With a revenue stream larger then ever in Canadian History, the Conservative Government is on course to running deficits that would put Trudeau and Mulroney to shame, and they didn't have the extra stream of revenue created by the GST.

In areas where GST style of taxes have proven their merit, has been in regions where Progressive Income Taxes are maintained or increased in order to ensure proper government services.

Of course people would love to see income taxes removed, just like some like to see a reduction in the GST.

Fact is the Conservatives brought it in, the Liberals benefited from its revenue potential, and the Conservatives trimmed it back a bit so that I have 2cents in my pocket each time I get a coffee.

In the end, regardless of the revenue stream, or those who want to argue the merits of one revenue stream over the other, the truth is....

This government ignored the economic crises around it, ignored the manufacturing sector, played politics, and then called and unnecessary election in order to attain greater power for themselve.

It was a NERO proposition. Fidelling while the country crumbles.

Now they are running around like cats with their tails on fire handing out cheques across the country, and pretending to the public they have done a great job.

They will deal with the fallout when the bills start to come in later.

So... having seen the experience when the GST was brought in, its initial offering slowed down economic recovery, as retailers who were already in pain because of the recession, had another 7 cents to deal with and consumers held back spending that much more. Eventually there was recovery and all was forgotten....

Anyone looking at this recession like the 1990 recession is fooling themselves. And anyone comparing this recession to the similar job loss figures of hte 80s is also missing the point. In the 80s the recover allowed for people to go back to their jobs.

There are no jobs to return to today as the company that was actually making money, has left the country. It wasn't about work slowdown. The companies that were on the edge are now bankrupt.

The government has screwed up on both counts, but is spending money on some pretty interesting pork projects that will have little if any long term benefit on the job market.

And don't get me wrong....

other then some quibbling, the Liberals would offer a tax cut on income and increase the GST and somehow believe that waving a magic wand is going to fix anything.

The parties are very closely aligned in economic ideology, and yet neither appear able to steer the bus.

[madmax]

we could do something else smart. Get rid of fractional reserve banking, force the banks to actually fully fund their deposits and actually have the central bank in Canada control monetary policy. If the Bank of Canada were to actually lend the private banks the money they create out of thin air and charge them interest for it, we would be out of debt inside a decade and the central bank would become a money making revenue stream for the feds.

Bravo... but I don't see a revolution on the horizon and that is what it would take to implement the monetary reforms you are speaking of.

[Jerry J. Fortin]

Bravo... but I don't see a revolution on the horizon and that is what it would take to implement the monetary reforms you are speaking of.

Wait for it, it may not start here. The reality is that the little folks are getting a little upset. You can look back into history and see what has happened when this kind of economic downturn plays out. It isn't pretty.

[Werecar]

Essentially, all Mulroney truly succeeded in doing was create another form of tax revenue.

All Paul Martin did, was receive the benefits of this extra tax and use the extra tax to pay off bills, cut services, and give wealthy people a break.

After 15 years of this, we have demonstratable evidence that outright tax breaks do not sustain an economy nor does it keep multi nation companies operating in Canada. They take the extra dough and continue on their merry way.

With a revenue stream larger then ever in Canadian History, the Conservative Government is on course to running deficits that would put Trudeau and Mulroney to shame, and they didn't have the extra stream of revenue created by the GST.

In areas where GST style of taxes have proven their merit, has been in regions where Progressive Income Taxes are maintained or increased in order to ensure proper government services.

Of course people would love to see income taxes removed, just like some like to see a reduction in the GST.

Fact is the Conservatives brought it in, the Liberals benefited from its revenue potential, and the Conservatives trimmed it back a bit so that I have 2cents in my pocket each time I get a coffee.

There was a great deal more to the Liberals bringing in a balanced budget that didn't simply include sitting back allowing the GST to do the heavy lifting.

http://www.andrewspicer.com/article388.html

Bill, at Bound by Gravity, has a posting in which he argues against Paul Martin's record as Finance Minister.

He argues that it was really Brian Mulroney who did the heavy lifting in terms of shaping up Canada's federal finances, and Martin's role was "all smoke and mirrors".

The argument is based on the idea that it was Mulroney's unpopular Free Trade and GST that saved the day.

But looking at the numbers, I still am left with the impression that it was Finance Minister Paul Martin who balanced our budgets, while the Mulroney team showed little control.

The numbers I spent most of my time looking at were this table of federal budgetary revenues as a percentage of GDP, and this table of federal budgetary expenses as a percentage of GDP. I assigned budgets beginning with 1984-85 to Mulroney and 1993-94 to Chretien.

What becomes clear pretty quickly is what we know already -- in the Chretien-Martin years, the federal government performed dramatically better in terms of the defict/surplus. In 1983-84, the debt was 7.9% of our GDP, and the following year saw it hit 8.3%. At the end of the Mulroney term, debt had been reduced to 5.6% of our GDP, or $39-billion. Jean Chretien was elected, and about two years later, things began to change dramatically, and by 1997-98 we were in surplus, never to look back.

Here's another way to look at it. If you take the surplus or debt from each year, and use the Bank of Canada's inflation calculator to convert them to constant dollars, the Tories borrowed over $400,000 in constant dollars, while Chretien's team borrowed under $80,000 (over one more year).

Yes, in real dollar terms, Mulroney's final-year deficit was 15% smaller than the deficit in 1983-84, but that left Chretien and Martin to do the other 85% of the job, and then continue on into surplus.

The overall accumulated debt, grew (as a % of GDP) in every Mulroney year, but fell consistently from 1995-96 until the present. In other words, Mulroney always grew the debt faster than the economy, and the tide was reversed only after his 9 years in office.

So, how was it done?

A closer look at the numbers shows it was not done on the revenue side. Under Mulroney, federal government revenues averaged 16.8% of GDP. Under Chretien, 16.4%. This was not a big change.

It happened mainly on the expenses side.

The Mulroney years averaged spending (including interest) at about 22.4% of the GDP. In 1983-84 it was 23.4%, the following year it was 24.0%, and the lowest in hit during the Tory term was 21.5%.

In the Liberal years, the size of the government was never once as high as Mulroney's low of 21.5%. In 93-94 it was 21.3%, and in 2002-03 it hit a low of 14.8%. That's the lowest point for all the data I have, beginning in 1961-62.

Some accuse Paul Martin of acheiving this result entirely on the backs of the provinces. Obviously, there were cuts there, but these were not the only cuts:

* Transfers to Other Levels of Govt, reduced from a Mulroney average of 3.7% of GDP to a Chretien average of 2.8%, for a savings of 0.9%

* Transfers to Persons, reduced from a Mulroney average of 5.2% of GDP to a Chretien average of 3.9%, for a savings of 1.2%

* National Defence, reduced from a Mulroney average of 1.6% of GDP to a Chretien average of 1.1%, for a savings of 0.5%

* All other spending, reduced from a Mulroney average of 6.0% of GDP to a Chretien average of 4.8%, for a savings of 1.2%

* Interest on the debt, reduced from a Mulroney average of 5.9% of GDP to a Chretien average of 4.8%, for a savings of 1.2%

So, basically, all spending was controlled, and shrunk as a percentage of GDP. Revenues were kept constant, and as a result, a huge deficit was melted away into a surplus. Mulroney failed to do these things himself.

Now, I'm not going to argue that economically Mulroney was all disaster and Martin was the golden child. Certianly, Martin can't own responsibility for Canada's strong economy. However, Paul Martin's record on fiscal management is far from "smoke and mirrors" and actually is a strength he should be campaigning on. It's how he became popular in the first place, and (in my opinion) rightly so.

Thats why Martins example is being touted as a solution by others: http://www.independent.co.uk/news/uk/polit...ht-1741920.html

[madmax]

Thats why Martins example is being touted as a solution by others: http://www.independent.co.uk/news/uk/polit...ht-1741920.html

Paul Martin would also have had the benefit of alot of Canadian Owned Companies paying taxes. Those companies have since been purchased by prospecting companies and relocated or idled indefinitely.

Martin did have to suffer the corporate plundering that had just started to take shape during his last year as Prime Minister.

Certainly some are looking at the Martin Era regarding balanced budgets. Just like people look at the Provincial NDP governments that have a long record of balancing budgets through good times and bad. However, Bob Rae, Grant Devin style spending appears to be the order of the day, with declining revenues to match. Income tax cuts will not balance a budget, nor will they stimulate an economy as we have seen.

Paul Martin appears to be getting the credit of that mid 90s directional change and mud is being tossed at Mulroney is deserved, however, give credit where credit is due. The change of fiscal policy and deficit spending of the federal government wouldn't have happened without the pairie winds blowing in the Reform Party and Preston Manning.

[Mr.Canada]

If Ignatieff wants to win the election then he would have to remove the deficit and the only way to do that is to cut services and spending drastically. If he does that I'd vote Liberal. But sadly he doesn't have the guts to do the job of PM. We don't need another fence sitter in power, no thanks. I'd rather keep the dull guy who makes decisions and gets things done.

[Jerry J. Fortin]

If Ignatieff wants to win the election then he would have to remove the deficit and the only way to do that is to cut services and spending drastically. If he does that I'd vote Liberal. But sadly he doesn't have the guts to do the job of PM. We don't need another fence sitter in power, no thanks. I'd rather keep the dull guy who makes decisions and gets things done.

Or increase revenues, either way balancing the books ain't gonna be easy. The guy ain't gettin' it done dude. Pretty tough with a minority show. The guy has no clue how to play well with others, you COULD get a lot done that way, but not with Stevie the Wonder PM calling the ball.

Edited July 14, 2009 by Jerry J. Fortin

[ToadBrother]

Or increase revenues, either way balancing the books ain't gonna be easy. The guy ain't gettin' it done dude. Pretty tough with a minority show. The guy has no clue how to play well with others, you COULD get a lot done that way, but not with Stevie the Wonder PM calling the ball.

You know, Harper could have gone down in history as one of the great PMs if he had asked the NDP and Liberals to form a National government.

[Mr.Canada]

Or increase revenues, either way balancing the books ain't gonna be easy. The guy ain't gettin' it done dude. Pretty tough with a minority show. The guy has no clue how to play well with others, you COULD get a lot done that way, but not with Stevie the Wonder PM calling the ball.

We don't need a nice guy for a PM. Any PM that was any good was nasty when they had to be. Who are our "Nice" PM's over the last couple decades? Joe Clark, Turner and Kim Campbell, where did being nice get them? Let's not forget Martin who was a pretty nice guy. All were thrashed badly.

Jean Chretien was not a nice politician at all, very nasty. That's the game.

[ToadBrother]

We don't need a nice guy for a PM.

No, we need someone who recognizes he's in a minority during a very rough economic patch, and doesn't want to continually play partisan games.

Any PM that was any good was nasty when they had to be. Who are our "Nice" PM's over the last couple decades? Joe Clark, Turner and Kim Campbell, where did being nice get them? Let's not forget Martin who was a pretty nice guy. All were thrashed badly.

Jean Chretien was not a nice politician at all, very nasty. That's the game.

Jean Chretien also had a majority government. That's one helluva of bully pulpit.

[Mr.Canada]

No, we need someone who recognizes he's in a minority during a very rough economic patch, and doesn't want to continually play partisan games.

Ignatieff can vote against him and bring him down whenever he wants. He's voting with the Tories now for quite some time. The Liberals must agree with their policies for having propped them up for years on end now and through 2 elections. It's hard to condemn the sitting the government then the next day vote with them...doesn't do much for their integrity.

Harper is a master strategist and has much more political experience than Ignatieff does which is why Harper is constantly thrashing him, almost daily.

If Ignatieff doesn't like it we'll have an election any time but he's too scared. He's like a pitbull without any teeth...sad really.

[Jerry J. Fortin]

No, we need someone who recognizes he's in a minority during a very rough economic patch, and doesn't want to continually play partisan games.

Jean Chretien also had a majority government. That's one helluva of bully pulpit.

Nasty or nice, makes no difference when a complete lack of vision is the reality of those administrations. No national political will, no positive achievable goals leave citizens cold and apathetic.

Warm and fuzzy, just ain't politics with a purpose. To have a purpose requires some advance planning to formulate a functional means of attaining a desired goal. We are not there yet.............

[Topaz]

How is Harper going to get us out of the deficit? He said that cut spending and rising taxes won't work but his way is to WAIT for the good times again and let the "profits" or increase revenues pay off the debt. Wait how long? The US unemployment is still growing and so is ours and since our economies are so connected, there's no light at the end of the tunnel yet.

[Smallc]

Employment is a trailing indicator, and not a leading one.

[Jerry J. Fortin]

Employment is a trailing indicator, and not a leading one.

The only indicator that really counts in my books are the debt and deficit that enslaves the tax paying citizen.

[Smallc]

They aren't indicators of much really. As a percentage of our GDP, the debt is now very small and will remain that way. As long as we can keep the service charges to a reasonable level and we have a plan to get out of deficit, we'll be fine

[Jerry J. Fortin]

They aren't indicators of much really. As a percentage of our GDP, the debt is now very small and will remain that way. As long as we can keep the service charges to a reasonable level and we have a plan to get out of deficit, we'll be fine

How do those calculations of yours translate into the real world of shrinking GDP? The debt costs more and more to service. Now factor in a declining dollar, where does that take you?

[Smallc]

First, the GDP has stopped shrinking according to most economists. We will have a net decline in the 2% of GDP range for this year and the decline will be erased next year. Second, Canada has a AAA credit rating, so any new debt we incur requires less of a service cost. Third, we don't have a declining dollar at the moment. Even if we did, t would probably result in more economic growth for this country than a high dollar.

[Jerry J. Fortin]

First, the GDP has stopped shrinking according to most economists. We will have a net decline in the 2% of GDP range for this year and the decline will be erased next year. Second, Canada has a AAA credit rating, so any new debt we incur requires less of a service cost. Third, we don't have a declining dollar at the moment. Even if we did, t would probably result in more economic growth for this country than a high dollar.

So your plan is to spend money we don't have and hope that the economy grows and the dollar stays high. Not right bright, but a common mistake for many people. I can see spending money on accumulation of assets, in the case of nations that translates into infrastructure. That is not what we are currently doing to any great extent though. Much of the planned spending has a zero return on investment.

Look at it this way, the feds are in fact spending money on infrastructure, but it will not be federally owned. The planned spending is for provinces and municipalities. There is no upside to the feds in this kind of thing, bad freaking plan dude.

[Smallc]

I'm not hoping that the economy will grow, I know that it will. I'm not hoping the dollar will stay high (although it probably will), I'm hoping it's the exact opposite.

The government won't stay in deficit. Even if it does for a few years, we will still have the best position of any G8 country. There is nothing to worry about from this deficit, even if it is undesirable.

It's also worth noting that the government gets much of the money back in taxes and that much of the money being spent is in fact is investment in the future (in the form of transportation and knowledge infrastructure), and much of the money will come back in tax revenue anyway.