A proposal for government fiscal honesty.

[Machjo]

I'd like your opinions on this. Let's say we introduced the following law to force government to be honest with the public as to the real costs of government:

1. Spending on the part of each level of government must restricted to within its budget within one year of the passing of this law.

2. The federal government would be prohibited from creating any new money as long as either the Bank of Canada rate is above 0% and the national inflation rate is not below 0%.

3. No level of government would be allowed to either reduce taxes or increase spending as long as it carries any debt, the Bank of Canada rate is above 0%, and the rate of inflation within its jurisdiction is not below 0%.

The way I see it, such a law woud force any socialist government to raise taxes before it could even consider spending increases, and would force any conservative government to reduce spending before it could even consider any tax reductions. In both cases, it would force the governemnt to be honest with the public about the real costs of its decisions.

What would be your thoughts on such a proposal?

[Topaz]

Everytime there was a thought of a election, the Tories were out spending money, to their ridings to buy votes. They were so anixous to bring our military to to code, that they haven't been watching the money and how much more is going to have to be paid out to military equipment on order? The USE the excuse of global crisis to say its not their fault in the spending of the deficit. I think with this Tory government we have two different honesty, one they see it as, and one the rest of Canada sees it as. http://www.thestar.com/news/canada/federal...rsal-of-fortune

[Machjo]

Everytime there was a thought of a election, the Tories were out spending money, to their ridings to buy votes. They were so anixous to bring our military to to code, that they haven't been watching the money and how much more is going to have to be paid out to military equipment on order? The USE the excuse of global crisis to say its not their fault in the spending of the deficit. I think with this Tory government we have two different honesty, one they see it as, and one the rest of Canada sees it as. http://www.thestar.com/news/canada/federal...rsal-of-fortune

Thanks for the article. An interesting read indeed. I'd be curious though on your thoughts on the proposal in the OP.

As far as I can tell, if such a law were in place, the government would find itself having to make some tough decisions. Harper has reduced taxes while increasing spending. With such a law in place, he'd have been forced to make very different decisions, either to reduce spending, increase taxes, or both, thus making it fdifficult for him to create a false impression of how affordable the current government is.

So what are your thoughts on the OP?

[Riverwind]

1. Spending on the part of each level of government must restricted to within its budget within one year of the passing of this law.

Only works until <fill in the blank> crisis requires the law to be repealed.

2. The federal government would be prohibited from creating any new money as long as either the Bank of Canada rate is above 0% and the national inflation rate is not below 0%.

The government does not create money - that is why it has to issue bonds. Only the BOC creates money. The government only issues new bonds if it rolls over existing bonds or runs a deficit. See comment above for deficits.

3. No level of government would be allowed to either reduce taxes or increase spending as long as it carries any debt, the Bank of Canada rate is above 0%, and the rate of inflation within its jurisdiction is not below 0%.

If the debt as a percentage of GDP is stable or falling then inflation will eventually take care of the debt. Trying to force the government to pay of debt first would result is a large number of service cutbacks because many costs are increasing at faster than the rate of inflation (i.e. health care).

We already have a system where government spending increases as the economy slows down (i.e. EI). What we need is a reverse where taxes increase automatically as the economy speeds up. e.g. if the government runs a deficit during a recession then the GST automatically increases the second year after the recession ends and stays raised until the deficit is eliminated.

[Machjo]

Only works until <fill in the blank> crisis requires the law to be repealed.

And so this would force government to think ahead and ensure large budget surplusses in good times to prepare for the following recession.

The government does not create money - that is why it has to issue bonds. Only the BOC creates money. The government only issues new bonds if it rolls over existing bonds or runs a deficit. See comment above for deficits.

Well, the BOB belongs to the government, so it is essentially a part of the government.

If the debt as a percentage of GDP is stable or falling then inflation will eventually take care of the debt.

The problem with inflation though is that it hurts those who have no money to hedge against the inflation the most, thus acting as a kind of regressive income tax, which is not particularly fair to the poor who work hard for their money just to then see it wither away.

Trying to force the government to pay of debt first would result is a large number of service cutbacks because many costs are increasing at faster than the rate of inflation (i.e. health care).

Either that or tax increases. That's my whole point. Make people aware of the real costs of government by putting an end to printing or borrowing our way to 'prosperity'. It would help make people more aware that we get nothing for nothing. If we want more services, then taxes go up. We want low taxes, then government spending must drop. It would make it clear to everyone that it is either or, and we must make our choice.

We already have a system where government spending increases as the economy slows down (i.e. EI). What we need is a reverse where taxes increase automatically as the economy speeds up. e.g. if the government runs a deficit during a recession then the GST automatically increases the second year after the recession ends and stays raised until the deficit is eliminated.

That might work too. But it would have to be an automatic tax increase whether the government likes it or not, whether it's popular or not.

[ToadBrother]

I'd like your opinions on this. Let's say we introduced the following law to force government to be honest with the public as to the real costs of government:

1. Spending on the part of each level of government must restricted to within its budget within one year of the passing of this law.

2. The federal government would be prohibited from creating any new money as long as either the Bank of Canada rate is above 0% and the national inflation rate is not below 0%.

3. No level of government would be allowed to either reduce taxes or increase spending as long as it carries any debt, the Bank of Canada rate is above 0%, and the rate of inflation within its jurisdiction is not below 0%.

The way I see it, such a law woud force any socialist government to raise taxes before it could even consider spending increases, and would force any conservative government to reduce spending before it could even consider any tax reductions. In both cases, it would force the governemnt to be honest with the public about the real costs of its decisions.

What would be your thoughts on such a proposal?

This is all very lovely, but what happens when a major earthquake hits VAncouver and Vancouver Island, or a major epidemic breaks out in Montreal?

What happens if the budget (which is just a forecast; an educated guess) is blown to pieces by, say, war or major economic collapse?

We all want governments to live within their means, just as we try to live within our own means, but sometimes, as the saying goes, sh*t happens.

[Jerry J. Fortin]

This is all very lovely, but what happens when a major earthquake hits VAncouver and Vancouver Island, or a major epidemic breaks out in Montreal?

What happens if the budget (which is just a forecast; an educated guess) is blown to pieces by, say, war or major economic collapse?

We all want governments to live within their means, just as we try to live within our own means, but sometimes, as the saying goes, sh*t happens.

Why not just reform the banking laws? Eliminate fractional reserve banking and have the Bank of Canada provide funding to banks in Canada at interest.

[OddSox]

This all sounds a lot like California's system - where spending has to be voted on by referendum, and tax rates as well. How's it working out for them?

[eyeball]

This all sounds a lot like California's system - where spending has to be voted on by referendum, and tax rates as well. How's it working out for them?

Its probably causing cancer.

[Wild Bill]

Thanks for the article. An interesting read indeed. I'd be curious though on your thoughts on the proposal in the OP.

As far as I can tell, if such a law were in place, the government would find itself having to make some tough decisions. Harper has reduced taxes while increasing spending. With such a law in place, he'd have been forced to make very different decisions, either to reduce spending, increase taxes, or both, thus making it fdifficult for him to create a false impression of how affordable the current government is.

So what are your thoughts on the OP?

I'm not sure of your real motive here. Are you suggesting a system that would have prevented Harper from bowing to Opposition pressure to shovel out stimulus money?

After all, we all saw how at first Harper seemed indifferent to the severity of the fiscal crisis. The Opposition howled that his government was cruel and unkind. If the Tories didn't immediately start shoveling out stimulus money they were going to bring the government down!

Afterwards of course they accused the government of spending too much money! Oh well, that's just politics. No one expects it to be sane or rational.

Still, your proposal would have prevented that spending from happening. I'm just wondering if that is one of your goals.

[ba1614]

Everytime there was a thought of a election, the Tories were out spending money, to their ridings to buy votes. They were so anixous to bring our military to to code, that they haven't been watching the money and how much more is going to have to be paid out to military equipment on order? The USE the excuse of global crisis to say its not their fault in the spending of the deficit. I think with this Tory government we have two different honesty, one they see it as, and one the rest of Canada sees it as. http://www.thestar.com/news/canada/federal...rsal-of-fortune

HAHAHA Yes, Les Whittington and The Star represents how "the rest of Canada sees it". LOL, I mean he has no political leanings at all that find their way into EVERY column he writes.

[ToadBrother]

This all sounds a lot like California's system - where spending has to be voted on by referendum, and tax rates as well. How's it working out for them?

It's made it one of the most ungovernable jurisdictions out there. It's one of those "sounds good on paper, is hell on earth in reality" kind of systems.

[Machjo]

This is all very lovely, but what happens when a major earthquake hits VAncouver and Vancouver Island, or a major epidemic breaks out in Montreal?

What happens if the budget (which is just a forecast; an educated guess) is blown to pieces by, say, war or major economic collapse?

We all want governments to live within their means, just as we try to live within our own means, but sometimes, as the saying goes, sh*t happens.

Then that's why we aim at yearly budget surpluses in good times, so that in bad times we can tap into the surplus.

[Machjo]

This all sounds a lot like California's system - where spending has to be voted on by referendum, and tax rates as well. How's it working out for them?

This would be very different from California's. It would only prohibit tax reductions and spending increases under certain conditions. Tax increases and spending reductions would be unaffected by this law. In that sense, it's nothing like California's system.

[Machjo]

I'm not sure of your real motive here. Are you suggesting a system that would have prevented Harper from bowing to Opposition pressure to shovel out stimulus money?

Not necessarily. It would have prevented Harper from spending that money without first increasing taxes, or alternatively to reduce taxes without first spending money. The issue here is not a right-left issue, or how much the government spends, but rather to ensure it spends within its means. If it wants to increase spending, then it must increase taxes first. Harper did exactly the opposite on both fronts. He reduced taxes and increased spending.

After all, we all saw how at first Harper seemed indifferent to the severity of the fiscal crisis. The Opposition howled that his government was cruel and unkind. If the Tories didn't immediately start shoveling out stimulus money they were going to bring the government down!

Afterwards of course they accused the government of spending too much money! Oh well, that's just politics. No one expects it to be sane or rational.

Still, your proposal would have prevented that spending from happening. I'm just wondering if that is one of your goals.

So again, as for my goal, it's not to impose either capitalism or socialisem. That would be a separate issue. Rather, it's to impose fiscally responsible government either way. If socialist, fine, but raise taxes first. If capitalist, fine, but reduce spending before you reduce taxes.

In other words, balance the budget first and then you can spend to your heart's content. This would mean of course that parties would have to be more honest. If the conservatives want to cut taxes, they'll have to cut spending too. If the NDP wants to increase spending, taxes must go up too.

[Pliny]

Then that's why we aim at yearly budget surpluses in good times, so that in bad times we can tap into the surplus.

Having a surplus removes the initial purpose of your proposal which is to have taxes and government spending provide an effect on the taxpayer so he realizes how costly it is. Governments with surpluses are overtaxing the people, for one, and secondly, they do not tend to save surpluses but find ways to spend them.

BC had a balanced budget law. No government could run a deficit. Then the financial crisis hit and they rescinded that law because they felt they had to run a deficit.

Governments, that can create money at will, will do so. If they cannot they will run deficits and mortgage future production and generations with their debt.

You are right that people trying to save money lose purchasing power over time if there is inflation.

The institutionalization of the central bank favoured the banking industry and was the creation of a monopoly on the manufacture of currency. The history of governments doing that is - first, the nation's money is debased, the currency is over-manufactured, the purchasing power of the currency is devalued (inflation) and it eventually becomes worthless all because government inevitably finds an increasing necessity to spend. In the most recent case of western governments the currencies, originally being a "money-substitute", gradually were confused as and replaced actual money.

Although fractional reserve banking is a practice that could originally be termed fraudulent, it no longer can be because there is no promise to redeem it's paper for anything than paper and paper can always be printed up to satisfy any demand although it would be inflationary to do so. In my mind, this is immoral because inflation is a form of theft and at best a hidden tax.

The only way people will be aware of how government spending and taxation is affecting them is to devolve back to the use of "real" money rather than a caricature of it.

[Alex Moore]

I'd like your opinions on this. Let's say we introduced the following law to force government to be honest with the public as to the real costs of government:

1. Spending on the part of each level of government must restricted to within its budget within one year of the passing of this law.

2. The federal government would be prohibited from creating any new money as long as either the Bank of Canada rate is above 0% and the national inflation rate is not below 0%.

3. No level of government would be allowed to either reduce taxes or increase spending as long as it carries any debt, the Bank of Canada rate is above 0%, and the rate of inflation within its jurisdiction is not below 0%.

The way I see it, such a law woud force any socialist government to raise taxes before it could even consider spending increases, and would force any conservative government to reduce spending before it could even consider any tax reductions. In both cases, it would force the governemnt to be honest with the public about the real costs of its decisions.

What would be your thoughts on such a proposal?

your plan might have a chance of succeeding if the world was static. but imposing restriction as you are suggesting would have disastrous consequences in any state of emergency.

[Machjo]

Another solution I could see woud be a clause allowing the government to rescind this law for a period of no more than one year on a simple majority vote, and permanently on a supermajority vote of let's say 2/3 majority.

The fact that the government is not likely to be able to get a supermajority vote would force the government to vote to rescind the law every year if that's its intention. On the surface this might make the law useless, but in fact it could have a symbolic value. Obviously any government that should vote to rescind this law for a year would be quesitoned on it, forcing it to have a good reason for doing it, and eve then not abuse it and stay at least somewhat within budget. The psychological effect of having to rescind it each year would serve as a reminder to politicians.

[Machjo]

Another possibility would simply be to require a 2/3 superajority to circumvent this law, with no simple majority being sufficient for anything. If it really is an emergency, and a genune one, a 2/3 majority would be easy to achieve.

[Michael Hardner]

Another possibility would simply be to require a 2/3 superajority to circumvent this law, with no simple majority being sufficient for anything. If it really is an emergency, and a genune one, a 2/3 majority would be easy to achieve.

Machjo, you're talking about changing the rules for how parliament works here, which is no simple matter.

One great thing about these forums is that they attract people such as yourself, who want to contribute new ideas. Are all ideas very bad, or very good ? Certainly not. But they're all worthy of some discussion, even if it's a quick cut from MOrris.

Stick around and you'll see what problems may come from your suggestion, and you will be edified.

Cheers,

[ToadBrother]

Another possibility would simply be to require a 2/3 superajority to circumvent this law, with no simple majority being sufficient for anything. If it really is an emergency, and a genune one, a 2/3 majority would be easy to achieve.

If it's a law, then Parliament can change it at its pleasure. In other words, it would be pointless. And I would not want any of our governments constitutionally bound in this way. Constitutions should be generalistic and adaptable in regards to a legislature's power to create law.

[dre]

I'd like your opinions on this. Let's say we introduced the following law to force government to be honest with the public as to the real costs of government:

1. Spending on the part of each level of government must restricted to within its budget within one year of the passing of this law.

2. The federal government would be prohibited from creating any new money as long as either the Bank of Canada rate is above 0% and the national inflation rate is not below 0%.

3. No level of government would be allowed to either reduce taxes or increase spending as long as it carries any debt, the Bank of Canada rate is above 0%, and the rate of inflation within its jurisdiction is not below 0%.

The way I see it, such a law woud force any socialist government to raise taxes before it could even consider spending increases, and would force any conservative government to reduce spending before it could even consider any tax reductions. In both cases, it would force the governemnt to be honest with the public about the real costs of its decisions.

What would be your thoughts on such a proposal?

Problem is... who would you be counting on to enact such measures? OH YEAH! The federal government, and the parties that take turns controlling it. Chance of it happening whether its a good idea or not? ZERO.