saylavbda wrote:As for individuals doing the same, never said they would spend wisely, but at least they would enjoy the benefits of the crap they buy.
Which is fine if they're buying this crap with their money. That doesn't bother me if the money comes from a tax cut because govt has spare surplus. But when they buy it with money from a tax cut financed through borrowing, they're buying it with money from future generations who have no say and will derive no benefit.
If it is spent on fast food, SUVs and junk food, and last I looked these products are made locally, then the money would be spent locally.
The pretzels in my cupboard, my only junk food, were made and packaged in Hanover, Pennsylvania. The Subaru Outback I'm thinking about buying is assembled in Indiana. Though big employers, albeit at min wage, fast food franchisees have to buy all of their supplies from head office. I have no idea how much stuff McDonald's produces in Canada, but suspect that most of it comes from the US.
Also, other posters have already shown that tax cuts have a better multiplier effect than govt spending.
At least one linked to a study that said the opposite. I don't know how such things are determined so I checked Wikipedia. My eyes quickly glazed over, but it seems to be theoretical and there are at least six ways in which multipliers are calculated. So I don't know that they're particularly relevant. If I understood it -- a huge if -- one of the studies linked in this thread based its conclusion that tax cuts win on the premise that the absence of tax cuts creates expectation that tax rates will rise and taxpayers respond by setting aside money to pay higher taxes at some unknown point in the future. That's absurd. Aside from estate planning, nobody -- individual or business -- sets aside money to cover tax hikes that are not even rumored, let alone announced. Indeed, accountants and debt counsellors will tell you that a substantial number of sole proprietor self-employed people don't even set aside money for the tax bills they
know will come due in three months.
In any event, the non-partisan Congressional Budget Office did a huge study and concluded that the enormous Bush tax cuts of 2001 and 2003 have not paid for themselves. And, last night on NPR I heard an economist say that the blizzard of "rebate" cheques distributed by the IRS last year did not work in stimulating the economy. In fairness, I don't know how that can really be determined, let alone in less than a year, and every economist seems to have a political orientation. The bottom line, I suggest, is that outside of localized taxation and spending -- where you can actually see the money move -- a multiplier effect can't be objectively quantified.
Sounds great, but if the infrastructure spending is needed, then it would already in the works.
Projects are in the works -- the term is "shovel-ready" -- but they've been frozen for various reasons, mainly budgetary. Few people recognize and appreciate the value of maintenance. Politicians and public administrators in particular find it easy to benefit from the short-term gain of low-balling and stalling maintenance in the expectation that they won't be around when the breakdown or structural failure occurs. This is particularly true in areas like Ontario where municipalities have to balance their budgets annually and in the US where quite a few state and local govts operate under arbitrary property tax caps.
Also, ongoing research and development creates valid uses for money that were not previously anticipated. For example, the cost of road salt has skyrocketed in recent years. Additionally, there is growing awareness that salting roads in winter damages the environment. There is a new system in which a wheel is installed on salt trucks that feeds road condition data to an onboard computer, which tells the driver when to spread salt and how much to spread. Some trucks can even dynamically mix sand and salt to optimally address the condition of a particular section of highway. It's obviously a wonderful innovation that can yield financial, environmental and road safety benefits for years to come. Yet NPR found that few state and local govts had purchased it because it's costly and there's no room in existing budgets.
But the worry of some is that addition projects undertaken, over an above the needed projects, to stimulate the economy will be 'bridges to nowhere' with little lasting benefit. History provides support for these concerns.
Sure, that is a worry and there's a 100% certainty that stupid projects will be funded when govt moves to spend a large amount of money in a short time. But what's the certainty that individuals would productively spend all, of even most, of their stimulus cheques or tax cuts?
Let's focus on the stimulus cheque since, unless rates are really slashed, a tax cut would increase income by only a few bucks a week. Joe Canadian receives a cheque for $500 and goes to spend it. Great, that's what it's for -- to be spent. He buys a big screen TV. Now, there are no TVs made in Canada. And, my understanding is that markups on electronics are razor-thin. If so, the retailer gets some money with which to pay its employees, landlord and domestic suppliers but not a whole lot. Most of the benefit goes to the TV manufacturer and its wholesaler as the dealer orders a new one to replace the unit sold. And, if Joe gets the TV at BestBuy, the profit on that sale goes to the corporate parent in the US. So I don't think govt's borrowing of $500 has produced a whole lot of benefit for the national, provincial, regional or local economy.
To what extent has govt's borrowing of $500 produced tangible benefit for Joe? Does doubling the size of Joe's TV screen increase his knowledge, productivity and earning power? No. Will it save him money? Well, maybe if he goes to the movies less often. But that will hurt the economy because the movie theatre owner will lose business though this economic loss would be partially offset tby the rental fee Joe pays for the DVD -- assuming he doesn't borrow it for free from the public library.
Will there be any environmental gain from Joe buying a big screen TV? Just the opposite. The new TV will likely consumer more power than the old one. If he throws out his current TV, its toxic components will have to be dealt with. And the new, larger TV will have even more toxicity to be dealt with when its days end.
Sorry, I have more confidence that the workers are not so useless and only able to do simple manual labour. It's not like cars are no longer going to be built, Toyota just opened a new plant in Woodstock.
And it's been staffed. If Detroit vehicles haven't been selling in recent years, how would substantially reducing the supply of them going forward create such tremendous demand for Toyotas that Toyota would build a lot of new plants? Toyota -- or more likely a newer entrant like KIA -- might well buy an idle GM factory in Oshawa or Windsor, but without restrictive work rules would need less staff and would likely be loath to hire those over 40. We don't have to speculate about this, since it has already occurred -- years ago -- in places like Flint, Michigan. Whether in Canada or the US, there aren't many new factories being built. And those that are being built don't require a whole lot of workers. If govt banks money to meet economic hardship needs that don't materialize, it can then dividend out the overage. If it doesn't bank money on the assumption that all the affected will quickly find new livelihoods and they don't, it will have to scramble to fund support on an ad hoc basis.
Not a huge user of govt service, but if limiting myself to educational material from the library will make you happy, then so be it. I'll also gladly give up....
Actually, you are huge user of govt service but don't realize it. For example, this morning you woke up in a house that was fully or partially heated with electricity. Hydro is subsidized in Ontario and I believe all the other provinces. Are you prepared to pay the full cost of producing/importing the power you consume? If you live in an Ontario city or suburb, there's a subsidy for delivering the water you drink and disposing of the urine you pee. I suspect water and sewage rates are subsidized all across Canada. How about paying full cost on a metered basis?
Let's pause and consider sewage. As a rural resident, I pay the full cost of maintaining a septic system. If any part of the system needs repair, I have to foot the bill. This week it was reported that cracks have been found in one of Toronto's main sewer tunnels. Repairs are expected to cost $30 million. This should be levied on the home and property owners whose buildings are tied into that line. More likely, it'll be levied across Toronto's entire tax base.
Most likely, Toronto will go crying to the province, which will end up footing much or most of the cost -- and I, as a provincial taxpayer, will have to cover part, albeit a minuscule amount.
The list you cited contained only one govt activity that you personally use -- CBC. Ending public funding for CBC is a slam-dunk; I personally don't know anyone -- including friends who work there -- who wouldn't kill MotherCorp's $1 billion annual allowance. APTN is a commercial network that's funded by cable/satellite subscriber fees and advertising.
I don't know if you have school-aged children. If you do, would you be willing to see much higher college and university fees? Canada subsidizes post-secondary education to a much greater extent than the US, our primary competitor in intellectual capital. How about reducing these subsidies to the average US level? It would mean some combination of higher fees, program elimination and even school closure, but would free up a lot of money that individuals could spend on their own.
If I, as a rural resident, have a fire and call 911, I'll be billed for the cost of each truck that responds -- so much per hour spent on the scene. This enables rural townships to keep fire service affordable. AFAIK, urban/suburban residents face no such charge. Would you be willing to accept such a system of self-insurance?
If the goal is to remove the burden of debt from the future generation, then we're talking about more then just the current situation.
Best way to do that is to control spending (govt doesn't have the best track record in that field) and increasing revenue. IMHO, best way to do that is to increase the tax base, not tax rates.
Who has suggested
increasing tax rates? No one in Canada. And in the US, even Obama has said he might delay his plan to roll back the Bush tax cut for those earning $250,000+.
Now what would help do that more, lower taxes or higher govt spending? Actual evidence as noted by other posters above is lower taxes.
What
actual evidence? There is actual evidence to the contrary. The Harper govt entered office with a budget surplus and proceeded to implement both broad based and targetted tax cuts, a whole slew of them. The surplus it inherited is now a deficit and we're only in the early days of what might well be the worst recession in decades.