“The last thing you would want when the economy slows down is to intentionally raise taxes or cut spending just to stay out of a deficit,” he said. “It's bad economics and I suspect [the party leaders] know it.”
Ottawa's budget deficit exploded to $41-billion in 1992-93, in the wake of the last big recession, up from $28-billion in 1989-90. But subsequent moves to eliminate the deficit and pay down the federal debt – which now represents about 30 per cent of gross domestic product, down from a peak of 70 per cent – means Ottawa has room to prime the pump.
Right now, fortunately, our debt is only 30% of GDP. As the economy weakens, however, without even going into deficits, that percentage mark is going to increase as Canada's GDP takes a nose dive alongside the US economy.
Considering the federal government has already decided to steal so much wealth from citizens, it should do what it can with that wealth to help those who need it most during economic turmoil. This does not mean it should run deficits. Deficits do nothing to assist in creating new manufacturing jobs and only cripple the country further. A budget deficit represents a government spending more than it can afford, which is essentially what is causing this mess.
Cutting taxes and spending will leave more capital in the private sector and make it more attractive for businesses to invest capital in our economy. This will create jobs and help those in need more than the government could ever do.
Some will have you believe, as John Maynard Keynes believed, that the government should borrow and spend more to invest in its own economy. This would create jobs supposedly. Murray Rothbard wrote in his 1992 article The Recession Explained:
"...contrary to Keynesian myth, government spending is not "investment" at all (a cruel joke), but is wasteful "consumption" spending. The "consumers," in this case, are the politicians and government officials who leech off the productive private sector."
Where does the government get the wealth it uses to "invest" in its economy?
- It raises taxes, which only makes companies which produce wealth less likely to invest in Canada.
- It prints money, which taxes everyone through inflation.
- It borrows money; this of course causes no new wealth to be created, just increases the burden on the tax payers to pay off the loans in the future
The type of thinking that suggests spending more and running deficits to create new jobs is kind of like saying if you break a window, you've given a carpenter a job. Yes, the carpenter has a job, but no new wealth within the country has been created. The carpenter just wasted 4 hours replacing a window when he could have been doing something more productive.
Only lower taxes and people saving their wealth will allow our economy to be sustainable. These continual suggestions that the government should spend more or the Bank of Canada should print more money will only continue encourage us down the destructive path we have been heading in.
34 comments:
"A budget deficit represents a government spending more than it can afford, which is essentially what is causing this mess. "
Good thing we are posting budget surpluses With social services, eh?
"A budget deficit represents a government spending more than it can afford, which is essentially what is causing this mess. "
Then the war and loss of jobs in the United States are the prime cause, because the US has lost over 2.3 million jobs in the last five years and is spending a whooping 36% of its budget (which it finances with debt) to pay for the war. The Clinton/Newt government balanced the American budget with a surplus, and with almost a trillion dollars for social services.
"Cutting taxes and spending will leave more capital in the private sector and make it more attractive for businesses to invest capital in our economy. This will create jobs and help those in need more than the government could ever do."
Oh goody! More 7 and 9 dollar an hour jobs! Praise the capitalists!
"Some will have you believe, as John Maynard Keynes believed, that the government should borrow and spend more to invest in its own economy. This would create jobs supposedly."
Keynes wrote his theories in 1936 as a response to the Great Depression and was right in a limited respect. Government spending does create jobs and if the government invests in the economy intelligently, it does create real wealth. Examples: highway system, internet, public education, any technology that came from NASA, and the ample subsidization and loans given to businesses by the government. This is irrefutable. The problem with Keynesian economics is that it has a limit: the deficit.
Printing more money is not a Keneysian argument. Taxing and borrowing are. The argument is that savings cause a huge problem for the economy, and inevitable recessions and depression, because people are not spending their money and driving the economy. This is sound economic thinking. However, people spending on credit puts the entire system on a precipice, because credit is not derived from any real production source (e.g. factories), like taxes. The opposite of this precipice is one of the causes of the Great Depression: saving too much, spending only on luxury items. If everyone is saving, then the economy slows down, and if troubles occur, the economy goes into recession or depression. This is basic supply and demand. Saving excessively is just as bad as spending extravagantly using credit. The golden middle, the golden middle that has driven the economy for sixty years, and which drives the international economy, is maximum spending and minimum saving.
"Good thing we are posting budget surpluses With social services, eh?"
Yes, but what happens when the government loses tax revenues because companies aren't exporting as much to the US?
"highway system, internet, public education, any technology that came from NASA"
How were these paid for? I would agree these would represent creations of wealth if the labor was free. But there's a cost to building these infrastructures. Where did the money come from?
"the golden middle that has driven the economy for sixty years"
Don't you find it a bit arrogant to suppose that in the last 60 years we somehow found a golden middle of spending and saving?
Savings create capital, which allows from investment, which creates jobs.
Borrowing does allow for investment, and creating jobs, but at a higher price which does need to be paid back. A loan is a loan whether its the government borrowing it, or its a household borrowing it; there's always someone on the other end waiting to get paid. Watch the first portion of the zeitgeist posting I made and ask yourself if this is truly a monetary system that makes any sense.
There's no reason to believe a healthy economy could not exist without being in debt to a bank or another nation.
Primarily from taxes and borrowing, borrowing which has already been paid.
No, no I don't. I think for most of the last sixty years there has been a healthy distrust of credit. Credit was something to be used for emergencies, for things you were going to buy anyway, but want now (for example, my camera was bought on credit, and will be paid off in three months; I consider this a responsible use of credit, and even now I don't like being on it), and for mortgages and cars, you know, big items.
It is only the last 15 years that personal credit spending sprees have become famous and prevalent, and even now they are still the minority.
Sorry, but Garth type jobs are not the type of jobs that can support families. Those type of jobs are created predominantly, again, from the conservative use of credit, i.e. business loans.
Even on a job that pays a health wage, say 20 bucks an hour, you'd have to save for a very long time to have enough capital to start even a small business. When I was in Australia, for example, I asked some fish and chips owners how much it cost to enter their business. They quoted about 200 grand. Sorry, but that is not the type of money that can be saved from riddly dink jobs. It is the type of investment that takes savings as a form of initial collateral and loans as a the primary source of capital (that or venture capital).
"Primarily from taxes and borrowing, borrowing"
If they taxed it, there was no net increase in wealth in the society. They took from themselves and gave back to themselves.
If they borrowed, then the society would just need to create more wealth ON ITS OWN in the future to pay it back, at a cost as well.
Neither provide a net increase in wealth to the society.
"I think for most of the last sixty years there has been a healthy distrust of credit"
Of course. After society goes through something like the great depression, people realize it is better to save than to borrow and go bankrupt.
This frugalness has been lost on our society. If you had waited three months to buy the camera you would have saved yourself the interest and you would have the same camera.
They paid scientists and engineers that developed the tech. Therefore, net increase in wealth. Calculators.
I'm not totally against borrowing money and debt. The problem with our monetary system is that the cost of borrowing is far too low causing too much mal-investment. And this cost is not determined by the market, as the cost of your camera is, its determined by a small group of men at the Fed. And why would these men want to set an artificially low interest rate? Because then more people will borrow and then more people will owe, forcing us to work simply to pay off the debt we owe to the banks. Not to save or build our own capital.
Why does it cost $200,000k to start a little fish and chips place? Because low borrowing costs have pushed up prices on everything as it gives the illusion people have more money than they actually do.
Of course, this is all starting to come to a crashing halt.
And when it does, who will land on the bottom? The people who are owed the money (central banks, IMF, the World Bank)? Or the people that owe the money? Poverty around the world has grown over the past century since these organization have emerged and provided loans to poor countries to help build infrastructure.
I'm a little of course here. I guess what I'm saying is that, borrowing isn't always bad, but the market should determine the cost of borrowing. Borrowing money now only supports the corrupt monetary system and the corporations you hate so much.
"They paid scientists and engineers that developed the tech. Therefore, net increase in wealth"
But they taxed everyone else within the society to pay these people. No increase in wealth. Just a redistribution.
A government borrowing money is morally wrong. Indebting other people without a choice is as immoral as forcing a an income tax on everyone.
Causing too much mal-investment? CAUSING? That sounds a lot like determinism. In my opinion, it is not the central banks that are at fault, but the banks and companies that offered sub-prime loans.
Listen, by your own theory of freedom it is the market's fault. In a completely deregulated market, people would be able to offer any type of loan they wanted. This would lead to a boom and bust cycle. IE speculation.
No, wage and salary raises, until a couple of years ago with the increase in the price of oil, have traditionally kept with inflation. If you get a raise that is more or equal to inflation, your income is the same as inflation. It costs "200,000", because it is, quite simply, expensive to enter a market.
Technically those countries were poor before. Also, South Korea got many loans and is doing fine. If anything, the IMF eliminated a lot of the corruption of the politics here.
I have a problem with your argument, because you haven't told me who is going to mint the gold coins. As soon as you fiat the system, you will have the same problems. The only alternatives seem to be communal production or bartering.
"But they taxed everyone else within the society to pay these people. No increase in wealth. Just a redistribution."
Your understanding of economic is obviously limited. The value created by the invention of calculators far exceeds the taxes it cost to pay the engineers to develop them.
"A government borrowing money is morally wrong. Indebting other people without a choice is as immoral as forcing a an income tax on everyone."
Wrong. People elect those politicians. It is therefore the same as you borrowing.
"The value created by the invention of calculators far exceeds the taxes it cost to pay the engineers to develop them."
I wasn't aware the government created the calculator. And through some quick reading, I couldn't find reference to the government subsidizing IBM or Casio to invent the calculator. The private sector invents most of what our most useful products today, and they do it more efficiently than government. Politicians do not solve problems. They get elected, and they work to stay elected by pandering to donors and using the $ to advertise and make people think they're trying to make the world better. Well they don't. They have no incentive to. The establishment wants to stay established and change is bad. Change will only occur when more power and wealth is put in the hands of the people.
"People elect those politicians. It is therefore the same as you borrowing."
I don't remember deciding for the Bank of Canada to print billions of dollars over the past week to destroy the currency for which I live on.
Thankfully, the Canadian government isn't borrowing money so I can't complain about that, yet.
Must be an urban legend I picked up. Anyway, these are some confirmed objects that NASA created, all of which contradict your assertion that government is somehow inherently uninnovative and corrupt. Private corporations are also corrupt. For example, the corporations in China regularly threaten the government that they will leave if there is unionization.
microwave, velcro, cordless drill, fireproof uniforms, smoke detectors and freeze-dried foods.
"I don't remember deciding for the Bank of Canada to print billions of dollars over the past week to destroy the currency for which I live on."
If you still lived in the US, you'd be responsible, because you didn't DECIDE to become a politician and "beat" the corrupt professional politicians in the elections.
"you didn't DECIDE to become a politician and "beat" the corrupt professional politicians in the elections."
Thats like saying I should become a doctor if I want to change the entire medical system.
"the corporations in China regularly threaten the government that they will leave if there is unionization."
People are corrupt whether in politics or business. It should be the governments job to protect the people from this corruption. They can do this by protecting their rights. China is not protecting the individual's rights.
The problem occurs when corrupt politicians combine with corrupt businessmen. With the proper government this could be prevented.
"microwave, velcro, cordless drill, fireproof uniforms, smoke detectors and freeze-dried foods."
Who is to say these things would not have been invented otherwise?
I'm only taking the time to look up one these inventions you mention:
"The hook-loop fastener was invented in 1941 by Swiss engineer, George de Mestral [5][6][7] who lived in Commugny, Switzerland.
The idea came to him one day after returning from a hunting trip with his dog in the Alps. He took a close look at the burrs (seeds) of burdock that kept sticking to his clothes and his dog's fur. He examined them under a microscope, and noted their hundreds of "hooks" that caught on anything with a loop, such as clothing, animal fur, or hair. [3] He saw the possibility of binding two materials reversibly in a simple fashion,[6] if he could figure out how to duplicate the hooks and loops.[7]"
NASA is often credited with the invention only because they made use of it, not because it was their idea.
Another urban legend. What about the others?
So NASA developed velcro, which in turn led to its widespread use?
Unfortunately, you didnt read the full entry:
"In all, it took ten years to create a mechanized process that worked.
De Mestral acquired patents in each of these countries as he expected a high demand immediately. Partly due to its appearance however, velcro's integration into the textile industry took time. At the time, velcro looked like it had been made from left-over bits of cheap fabric, and thus was not sewn into clothing or used widely when it debuted in the early 1960s.[6] Velcro got its first break when it was used in the aerospace industry to help astronauts maneuver in and out of bulky space suits."
This is a pretty damning argument against the free market system. It took him 10 years to develop and then once he got it on the market it wasn't popular. NASA, the equivalent of a huge corporation in government, picked it up and made him rich. In short, this means that there is not enough capital for the little guy to develop his or her ideas properly without the help of big capital.
"The problem occurs when corrupt politicians combine with corrupt businessmen. With the proper government this could be prevented."
I don't see how this can be prevented. I think you are swinging at clouds.
Could you please outline what the "proper government" would look like?
This is a little more helpful, but I still don't know if it is completely true:
http://www.thespaceplace.com/nasa/spinoffs.html#Top
One day when I`ve read enough I`ll write my own manifesto describing the best form of government that will provide individual liberty and won`t place the masses into slave labour as you fear.
Oh goody.
I know you're tingling with excitement.
I'm just happy that you understand that your position is 100% idealistic.
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