Oh Canada where is my country going ?

[Harare]

I was looking for info on who really started us down the road of higher taxes and debt as we keep hearing this blamed on Mulroney when in fact it was that slimeball commie Trudeau and I found this site. It's a very interesting site loaded with great info.

Does anyone here know who is behind it ? Underground royal commission

Take the test - The TEST

Nice charts about our fiscal mess on this page and the next:

Fiscal mess

And scariest of all this one that Libs may not want to look at.

Growth of Government

[stignasty]

I was looking for info on who really started us down the road of higher taxes and debt as we keep hearing this blamed on Mulroney when in fact it was that slimeball commie Trudeau

oy

[geoffrey]

I was looking for info on who really started us down the road of higher taxes and debt as we keep hearing this blamed on Mulroney when in fact it was that slimeball commie Trudeau and I found this site. It's a very interesting site loaded with great info.

Does anyone here know who is behind it ? Underground royal commission

Take the test - The TEST

Nice charts about our fiscal mess on this page and the next:

Fiscal mess

And scariest of all this one that Libs may not want to look at.

Growth of Government

Good information, but I caution you to use caution . The 'increase in government spending' graph includes debt service charges, which obviously increase with compounded interest exponentially. I don't believe that is a fair way to show government spending, you have to remove the debt services and that shows the actually 'size' of the government.

It's obviously a right-wing website and I hope everyone views it as such and realizes some of the biases in information.

Also agree with the 'Trudeau started it'.

I aced the test by the way.

[Riverwind]

Take the test - The TEST

Although I don't disagree with everything this test implies I find many of its points deliberately deceptive and intended to misinform.

For example:

3. How much has the federal government’s accumulated debt grown between 1961 and 2001?

d) 3,600%

The absolute rise in debt over 40 years is a meaningless number because it does not take into account growth in the economy or inflation. The only meaningful number is debt as a pecentage of GDP.

5. Of Canada’s entire Gross Domestic Product (GDP), how much is generated by government spending at all levels?

a) 38

This is a meaningless number unless you think about what is included in those expenditures. In Canada, almost all healthcare costs are include in government spending (~10% of GDP). If you want to compare this number with the US then you must include the amount of money spent on private healthcare in both countries.

6. How much do Canadians pay in taxes annually to all levels of government?

c) $357 billion

This question is also meaningless because the absolute amount of taxes paid is a measure of nothing. What is important is the value of services received in return for taxes paid.

7. Each year, The Fraser Institute calculates Tax Freedom Day, the first day of the year in which the money that Canadians earn is for themselves. All money earned prior to Tax Freedom Day goes to one of three levels of government – federal, provincial, or local. What date was Tax Freedom Day in Canada in 2003?

I am curious what the tax+health insurance freedom day would be in the US? For many people it would Dec 31 because the cost of health insurance exceeds their annual income.

[Harare]

Thanks guys, keep it coming. I agree that - like everything - it has some biases and that some figures are somewhat misleading.

I would really like to hear some more comments from Dippers and Libs about their solutions for dealing with our mountain of National debt and the $30billion plus we spend to service this debt instead of so many others things that we could now be enjoying. And also their opinions on how we got to this place.

Even if we manage to spend 10 Billion per year to pay down our National Visa card it will still take 40 years ?

ps, Thank-you so much Mr Trudeau, I think the wrong mountain was named after him

[BubberMiley]

Are CPC supporters going to actually be surprised when we have a deficit under Harper's government within 2 years? Neocons always run big deficits by cutting taxes and then trough-feeding their corporate friends. Just look at Reagan, Bush Jr. etc. Already Harper's saying he'll cut taxes, never get rid of a social program, and look into missile defence.

[August1991]

I largely agree with Sparhawk. The questions of the quiz are misleading and it was quite easy to score well: just guess the bias of the question.

If I say it once, I'll say it a million times. Government debt is nothing like your family's debt.

If you don't believe me, just think how the world cannot be in debt (unless someone figures out a way to borrow from Martians). Governments are in a slightly similar situation.

The debt of the Canadian government used to be presented as a sign of the confidence people have in Canada. The larger the debt, the more confidence people have. I think that's a better way to view this question. (It is worth noting too that to operate well, Canadian capital markets require government debt to set benchmark rates.)

The web site also presents data on government spending. This too is misleading. We have three levels of government in Canada and it is almost meaningless to consider only one level. In addition, government budgets include programme spending, transfer payments to individuals and interest payments. These last two items should arguably not be considered as part of government spending, and they are not included in GDP calculations.

The best table I have ever seen on this general topic was prepared by the Fraser Institute. It shows combined government expenditures on goods and services & investments rising from 9.6% of GDP in 1926 to 20.7% in 1996. (The table wisely skips over the war years when government took a large part of GDP.) This growth is partly due to the fact that services in general represent a larger share of GDP, and governments in general offer services.

I happen to think governments are too large, but I don't think we live in a socialist state. The data shows this.

I am concerned what goods and services our governments buy, and whether they get value for money. I also think government transfer payments should go to people who deserve them, and not friends of people in government. I am much less concerned about government deficits. Interest on government debt is payment for the cheapest money anyone posting to this forum will ever be able to borrow.

[Riverwind]

Even if we manage to spend 10 Billion per year to pay down our National Visa card it will still take 40 years ?

We don't have to 'pay off' the debt. As long as the economy grows and we don't run a deficit then the GDP to debt ratio will fall and the the percentage of tax revenues required for debt interest charges will drop to insignificant levels.

Here is a chart that illustrates my point:

http://oldfraser.lexi.net/publications/pps/13/figure11.html

You will note that interest payments spiked in the 1930s and then dropped off. The drop off was not caused by debt repayment but by a rapidlly growing economy (the gov;t ran a huge defict during the war years). The graph only goes up 1996 - if it had data to 2006 you would see the ratio of interest to GDP is declining rapidly. As long as Harper stays the course set by Martin (surpluses, modest debt repayment) then gov't debt will be a non-issue in 10 years.

[BubberMiley]

but judging from both Lib and CPC campaign promises, that course ain't gonna be stayed.

[Guest eureka]

Nice to see some sense on this topic, sparhawk and August. I would comment more on who was responsible for the debt we have (M?) but we have done it all before.

One thing, though, is that the Fraser institute lies (distorts figures) wrt its tax freedom day. Canadian taxes amount to 36% of GDP. That takes us to a little more than one third of the way through a year and nowhere near tthe date calculated by the Fraser Institute. Earlier than most countries AND, earlier than in the US if healthcare is factored out.

Of course, some of the difference is in the US spending on its military and on paying the wives of elected officials for campaigning; and on bridges to nowhere' and to.....

[Harare]

Even if we manage to spend 10 Billion per year to pay down our National Visa card it will still take 40 years ?

We don't have to 'pay off' the debt. As long as the economy grows and we don't run a deficit then the GDP to debt ratio will fall and the the percentage of tax revenues required for debt interest charges will drop to insignificant levels.

Here is a chart that illustrates my point:

http://oldfraser.lexi.net/publications/pps/13/figure11.html

You will note that interest payments spiked in the 1930s and then dropped off. The drop off was not caused by debt repayment but by a rapidlly growing economy (the gov;t ran a huge defict during the war years). The graph only goes up 1996 - if it had data to 2006 you would see the ratio of interest to GDP is declining rapidly. As long as Harper stays the course set by Martin (surpluses, modest debt repayment) then gov't debt will be a non-issue in 10 years.

So are you saying that in ten years (assuming surpluses, modest debt repayment) NONE of our taxes will be wasted on servicing our debt ?

Any other question IMO is irrelevant. It may not be real money to the government but money that I pay in taxes is very real.

Yes it's OK to go into debt to deal with a crisis like a war or to invest in something where the ROI justifies it but let's face it the government has a piss poor record on picking winners.

[Riverwind]

So are you saying that in ten years (assuming surpluses, modest debt repayment) NONE of our taxes will be wasted on servicing our debt ?

How much are are taxes 'wasted' paying for a military? How much is 'wasted' paying for foreign aid? How much is 'wasted' paying for R&D?

Government spending is about priorities. We could pay off the debt faster by sacrificing gov't programs or tax cuts but many people want those programs and tax cuts. Personally, as long as there is no deficit then I don't see any need to sacrifice programs or tax cuts in order to pay off the debt faster because the debt to GDP ratio will drop anyways.

[Harare]

You didn't aswer the question about how we'll have no debt in ten years.

No R&D is not a waste unless I suppose nothing comes of it.

Foreign aid is a waste if it's ineffective or simply lines the pockets of dictators as is often the case.

Military is never a waste unless of course if it's so under equpipped that it can't defend, fly men and equipment, rescue in crises ( like a major earthquake in Vancouver) or function as effective players in peackeeping causes.

Money spent on debt servicing does absolutley nothing for the Canadian people.

[August1991]

So are you saying that in ten years (assuming surpluses, modest debt repayment) NONE of our taxes will be wasted on servicing our debt ?

Any other question IMO is irrelevant. It may not be real money to the government but money that I pay in taxes is very real.

Yes it's OK to go into debt to deal with a crisis like a war or to invest in something where the ROI justifies it but let's face it the government has a piss poor record on picking winners.

In a few weeks, most people will be paying their taxes. Some people will have to borrow money to pay their taxes. They will be borrowing at rates over 5%.

The federal government borrows money at rates well below 5%.

So, does it make sense for the government to tax and individuals to borrow or for the government simply to borrow?

It makes even less sense to tax people to pay back the government debt. It's cheaper to just pay the low interest charges and roll the debt over forever.

ROI and picking winners are critical questions but how we finance government is not related to them.

Harare, read this:

Who will do you more good: the guy who wants to cut taxes or the guy who wants to pay down the national debt?

Well, why pay the debt at all? The answer—the one and only answer—is that it has to be paid eventually, and if we don't pay it now, we'll be taxed to pay it later.

[Riverwind]

Money spent on debt servicing does absolutley nothing for the Canadian people.

I pay interest on my car loan and I don't consider that a waste because I get the use of a vehicle that I would not have been able to afford if I had paid cash up front. However, I choose a vehicle with a price that ensured the interest payments would not eat up a huge percentage of my income.

The rational is also true for governments. As long as interest payments do not take a large percentage of tax revenue then then money is not wasted if that means the government can do other things with its money.

[August1991]

As long as interest payments do not take a large percentage of tax revenue then then money is not wasted if that means the government can do other things with its money.

Its not the government's money. It's our money.

I think this error is the source of all this confusion about government debt and taxes. People view the government as this thing, like their parents. They believe parents shouldn't go into debt, unless it's to buy something important like a house.

People don't realize that a government is our agent, with limitless ability to take our money at any time.

[Riverwind]

People don't realize that a government is our agent, with limitless ability to take our money at any time.

The gov't has a limited ability to tax. A tax rates rise, the economy slows and tax evasion increases. The net result is the gov't will see tax revenues decline if it raises taxes too much. You could compare this to a self-employed person who can increase his/her income by working more hours: that person has a theoretical limit of 24 hours/day, however, that person will likely reach mental and physical limits after about 16/hours per day. A prudent self employed person would manage debt levels to ensure interest payments are manageable with 8 hours/day.

A prudent gov't should do the same thing: ensure debt and interest payments are manageable at a reasonable level of taxation and keep the additional taxation room available for emergencies.

[August1991]

People don't realize that a government is our agent, with limitless ability to take our money at any time.

The gov't has a limited ability to tax. A tax rates rise, the economy slows and tax evasion increases. The net result is the gov't will see tax reveues decline if it raises taxes too much. You could compare this to a self-employed person who can increase his/her income by working more hours: that person has a theorectial of 24 hours/day, however, that person will likely reach mental and physical limits after about 16/hours per day. A prudent self employed person would manage debt levels to ensure interest payments are managable with 8 hours/day.

A prudent gov't should do the same thing: ensure debt and interest payments are manageable at a reasonable level of taxation and keep the additional taxation room available for emergencies.

Sparhawk, you just made a Laffer Curve argument and I don't think anyone believes that the Canadian government is anywhere near reaching its maximum tax potential.

I usually stop listening when any argument compares a government to a person or a family. Government is an entirely different beast. A government is self-employed person who has access to your bank accounts and credit cards.

Government debt is really part of its monetary policy. Governments issue money so that the economy grows but we don't have inflation. They should issue government debt (ie. run deficits) with a similar idea in mind.

[Harare]

So are you saying that in ten years (assuming surpluses, modest debt repayment) NONE of our taxes will be wasted on servicing our debt ?

Any other question IMO is irrelevant. It may not be real money to the government but money that I pay in taxes is very real.

Yes it's OK to go into debt to deal with a crisis like a war or to invest in something where the ROI justifies it but let's face it the government has a piss poor record on picking winners.

In a few weeks, most people will be paying their taxes. Some people will have to borrow money to pay their taxes. They will be borrowing at rates over 5%.

The federal government borrows money at rates well below 5%.

So, does it make sense for the government to tax and individuals to borrow or for the government simply to borrow?

It makes even less sense to tax people to pay back the government debt. It's cheaper to just pay the low interest charges and roll the debt over forever.

ROI and picking winners are critical questions but how we finance government is not related to them.

Harare, read this:

Who will do you more good: the guy who wants to cut taxes or the guy who wants to pay down the national debt?

Well, why pay the debt at all? The answer—the one and only answer—is that it has to be paid eventually, and if we don't pay it now, we'll be taxed to pay it later.

Thanks for the info August, I'm not a debt repayment alarmist, however all of you info is based on a 2 huge and dangerous policy wonk assumptions -

Interest rates will for ever remain low

No major crisis will hit this country in the next thirty years.

Just suppose that Avian flu hits us like the Spanish flu did, what happens if GM goes broke or the Chines automakes choose not to invest in plants in Buzz Hargroves back yard in Ontario......

Would you rather be debt free or up to your eyebrows in debt?

Gold prices and weakness of the US dollar are two things to keep an eye on.

Sparhawk - you have a car to show for your debt, what does Canada have for it's debt ?

[Wilber]

Servicing debt either takes money away from other government programs or results in higher taxes for individuals. If you get into a position of too much debt and skyrocketing interest rates as in the eighties, you can end up running deficits because you find yourself borrowing money to pay interest on debt you already have. Carrying a lot of debt is risky, for governments as well as individuals.

Financial advisors have always told me that my first priority should always be getting rid of debt. Governments are smarter? I don't think so.

[Riverwind]

Sparhawk, you just made a Laffer Curve argument and I don't think anyone believes that the Canadian government is anywhere near reaching its maximum tax potential.

The taxing potential of a government depends a lot on the international environment. Canada's taxing potential is severly limited by the tax rates in the US. If the rates in the US go up then the tax potential in Canada goes up. I think Canada is close to its taxing potential given the current US tax rates.

Government debt is really part of its monetary policy. Governments issue money so that the economy grows but we don't have inflation. They should issue government debt (ie. run deficits) with a similar idea in mind.

In theory, the Bank of Canada could simply make the entire gov't debt vanish is second (at least the debt denominated in Canadian dollars). However, it does not do that because it would trigger inflation and cause the currency to drop. Governments should have balanced budgets during boom times for exactly the same reason.

[geoffrey]

Servicing debt either takes money away from other government programs or results in higher taxes for individuals. If you get into a position of too much debt and skyrocketing interest rates as in the eighties, you can end up running deficits because you find yourself borrowing money to pay interest on debt you already have. Carrying a lot of debt is risky, for governments as well as individuals.

Financial advisors have always told me that my first priority should always be getting rid of debt. Governments are smarter? I don't think so.

Maybe its time to change advisors, sometimes investment pays at a higher rate of return then servicing your debt costs you. And governments in the past have used this financial principle, it just turns out the Liberals have invested in the wrong things.

That being said, I feel like with our current social structure in Canada, we are reaching our highest level of economic productivity (things like EI and welfare will cap it out far below its highest level). So any further investment in our economy and society are likely to have very little gains, and so now we have to start looking at servicing the debt.

In the Mulroney days, we had a long way to go to productivity, and investments into our society and economy were paying much higher returns then any payment to the debt would.

Another consideration would be interest rates (though set in Canada for Canadians, much of our national debt is serviced overseas), which appear to be on the rise. With this, you have to start getting quite the economic gains to justify holding that big chunk of debt.

I see what you mean by having this debt could be risky, but businesses and induviduals often borrow for investment purposes and generally it works in their favour. Always be spending someone else's money .

[geoffrey]

Sparhawk, you just made a Laffer Curve argument and I don't think anyone believes that the Canadian government is anywhere near reaching its maximum tax potential.

I usually stop listening when any argument compares a government to a person or a family. Government is an entirely different beast. A government is self-employed person who has access to your bank accounts and credit cards.

Government debt is really part of its monetary policy. Governments issue money so that the economy grows but we don't have inflation. They should issue government debt (ie. run deficits) with a similar idea in mind.

Actually August, I believe we are pretty close to our maximum tax levels in Canada, especially in regards to the GST. Any additional taxes would see a mass exodus of business and high income earners to the US. The GST contributes to the highest area of tax evasion and economic slowdown in the country as well. In provinces with PST, I'm sure the rates of tax evasion are even higher. So the government isn't collecting taxes and people are not spending money, in a loss of about 15% of economic activity and productivity in Provinces with PST/HST.

Inflation is not necessarily a bad thing, at least in moderated levels. Canada has this low inflation-high unemployment strategy, and this had contributed greatly to our national debt levels in the past.

[Guest eureka]

Geoffrey, if necessary I will follow you around denying your tax mythology.

Canada is one of the lower taxed industrialized nations. Corporate taxes even are lower in Canada than in many, if not most, US states.

[geoffrey]

Geoffrey, if necessary I will follow you around denying your tax mythology.

Canada is one of the lower taxed industrialized nations. Corporate taxes even are lower in Canada than in many, if not most, US states.

No disagreement there, I see the facts. I'm just saying we are near our maximum, increases in taxes from here will hurt our businesses. It is a bit of a Laffer curve argument, but I'm not pulling a Reaganomics card here.

There are other factors you have to take into consideration when you look at a business's operating environment (labour law, labour supply, location) to look how it is competitive in the international marketplace. Our tax laws being lower right now make up for our higher cost of labour and smaller domestic market. An increase in taxes even still below other nations would hurt business and therefore the economy as well.