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Canada's plunge into ever deeper debt


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Andrew Coyne's column makes for gloomy reading. There's not a lot of new information in it, but he points out that the earnestly stupid Liberals are eagerly planning on massively ramping up spending even as we exit covid, and that there's really no alternative in the wings since the Tories are visionless, leaderless and lack even the most rudimentary ideas other than imitating the Liberals. He also makes the point that the only way to counter this is a platform built on growth in the economy - not redistributing money but making more. Focusing on growth with broad policies to encourage industry (which to my mind also means cutting the red tape off natural resources), cutting corporate taxes and corporate welfare and tax loopholes, and cutting interprovincial trade barriers. It would be a brave program which would catch people's attention. Unfortunately, 'brave' does not seem to be among the attributes of Erin O'Toole. And if he has any vision or ideas he's keeping them well-hidden.

But it is clear the Liberals intend this budget to be something else again, a transformative document that will not only “reimagine economic systems ,” as the Prime Minister has it, but redefine the relationship between government and society, seizing the “opportunity” (the Prime Minister, again, but also the Finance Minister) of the COVID-19 pandemic to expand the size and scope of government, radically and permanently – and, not incidentally, kick off the Liberals’ re-election campaign.

All told, the C.D. Howe Institute, in an unusually gloomy “Shadow Budget,” projects the federal debt, far from the gradual decline relative to GDP forecast in the fall economic statement, is likely to rise, first slowly then rapidly, cresting at 60 per cent of GDP by the end of the decade and climbing to more than 66 per cent in the decade after that. Older readers will recall that was the level the federal debt reached at the height of the mid-1990s debt crisis.

Let us suppose, just for the moment, that there were an opposition party that was even faintly troubled by any of this; let us suppose, even more outlandlishly, that it was prepared to do something about it. It will not be enough for that unnamed party merely to say no to Liberal spending schemes: The Liberals are itching to spend the next election campaigning against “austerity.” It will need, rather, to present an alternative vision, as compelling in its own way – or at least, compelling enough.

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Two developments: 1) less than super-optimistic longer pandemics cycle; and 2) PS happily burning away public budget as though nothing happened running concurrently can plausibly produce a crisis of the public functions in this country that has been decades in the making.

Edited by myata
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A wide segment of the public has weakened and become used to government handouts.  While much support was needed early on, the Trudeau government seems to want to make mass welfare permanent rather than take on the important and courageous task of transitioning the public back to work.  In the end it has to pay off for people to bother putting away the weed and collecting the pogey.  My biggest problem with this government is they don't make hard and careful choices.  They just borrow and spend and saddle future generations with debt.  They rely on immigration to grow the tax base (vastly increasing Canada's carbon footprint), making a mockery of so-called climate change initiatives.  Basically they've raised the cost of living through increased housing demand and carbon taxes, yet all new and added forms of taxation will go towards servicing the debt. Yet somehow borrowing more money to pay for big ticket new programs will make Canada more competitive.  Of course the Libs are beholden to the support of the NDP, who are blackmailing the country into "pharmacare" and other costly programs.  There's no selectivity or cutting one's cloth to fit.  

Edited by Zeitgeist
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2 hours ago, Zeitgeist said:

Basically they've raised the cost of living through increased housing demand and carbon taxes, yet all new and added forms of taxation will go towards servicing the debt. Yet somehow borrowing more money to pay for big ticket new programs will make Canada more competitive. 

Not only the debt but the astronomical cost of running public functions and affairs. It makes anything innovative and effective impossible because the cost of even a trivial change (like upgrading payroll system) becomes astronomical and can lead to decade-long debacles.

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11 hours ago, Argus said:

Andrew Coyne's column makes for gloomy reading. There's not a lot of new information in it, but he points out that the earnestly stupid Liberals are eagerly planning on massively ramping up spending even as we exit covid, and that there's really no alternative in the wings since the Tories are visionless, leaderless and lack even the most rudimentary ideas other than imitating the Liberals.

The problem that the Conservatives face is that the MSM is a bunch of radicalized socialists who will obliterate the Conservatives for forgetting to dot an i or cross a t, while the PM can wear blackface and call the Japanese ambassador Chinese all day long. The PCs have to play the game the way the media lets them play it or they are finished. 

I was really hoping that Dr Lewis would win the leadership of the Conservatives because she's the only person in the party right now who can say intelligent, meaningful things without being branded as a racist Nazi slaveowner by the CBC and CTV.  

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On 4/18/2021 at 11:38 AM, Argus said:

Andrew Coyne's column makes for gloomy reading. There's not a lot of new information in it, but he points out that the earnestly stupid Liberals are eagerly planning on massively ramping up spending even as we exit covid, and that there's really no alternative in the wings since the Tories are visionless, leaderless and lack even the most rudimentary ideas other than imitating the Liberals. He also makes the point that the only way to counter this is a platform built on growth in the economy - not redistributing money but making more. Focusing on growth with broad policies to encourage industry (which to my mind also means cutting the red tape off natural resources), cutting corporate taxes and corporate welfare and tax loopholes, and cutting interprovincial trade barriers. It would be a brave program which would catch people's attention. Unfortunately, 'brave' does not seem to be among the attributes of Erin O'Toole. And if he has any vision or ideas he's keeping them well-hidden.

But it is clear the Liberals intend this budget to be something else again, a transformative document that will not only “reimagine economic systems ,” as the Prime Minister has it, but redefine the relationship between government and society, seizing the “opportunity” (the Prime Minister, again, but also the Finance Minister) of the COVID-19 pandemic to expand the size and scope of government, radically and permanently – and, not incidentally, kick off the Liberals’ re-election campaign.

All told, the C.D. Howe Institute, in an unusually gloomy “Shadow Budget,” projects the federal debt, far from the gradual decline relative to GDP forecast in the fall economic statement, is likely to rise, first slowly then rapidly, cresting at 60 per cent of GDP by the end of the decade and climbing to more than 66 per cent in the decade after that. Older readers will recall that was the level the federal debt reached at the height of the mid-1990s debt crisis.

Let us suppose, just for the moment, that there were an opposition party that was even faintly troubled by any of this; let us suppose, even more outlandlishly, that it was prepared to do something about it. It will not be enough for that unnamed party merely to say no to Liberal spending schemes: The Liberals are itching to spend the next election campaigning against “austerity.” It will need, rather, to present an alternative vision, as compelling in its own way – or at least, compelling enough.

I actually have to agree with you, and Andrew Coyne of course, on this one. All forms of deficit spending -- whether based on liberal left economic theory (Keynsianism rebranded as MMT over the past 10 years or so) or the rightwing varieties like supply side economics -- cut taxes (especially business, investment and estate taxes) so low that governments can't pay for essential services (except military procurements of course) and in both the left and right sides of standard economic theory, future economic growth is supposed to take care of everything, and shrink those deficits!

In reality, the ballooning deficits we are creating today, may indeed be excused by trying to maintain economic activity in the midst of the worst disease pandemic in a century. But, nevertheless, all of the red ink being written every day now by all levels of government, business and personal debt of the vast majority of people today, all of these debts have to be paid back in the future OR our currency along with the USD, the LB and the Euro will end up insolvent when the time comes that a consensus of debtholders start believing that they won't get paid back in the future, or will only be paid back a fraction of what they are owed. 

I'm expecting this from two "guaranteed" pension funds I've just started collecting on, aside from the modest CPP....which I don't believe will be indexed to future inflation levels either. So, I'm hoping that my modest private holdings, property values, and so far at least -- continued good health will make it possible for me to continue working in the future if and when I need to.  I'm not expecting the good times to continue rolling on now as the shit starts to really hit the fan in the future! 

So, my thinking is about as nihilistic as most millennial kids.. like my two sons who still don't see a point to saving for retirement off in some distant future that looks impossible to most young people today. 

Whether we consider ourselves communitarian socialists or rightwing individualists, we have to deep six all fanciful notions that the future will pay for the greed and plundering of resources and fouling up the environment we do today. Our political, business and thought leaders all seem to acting on the presumption that we can just continue borrowing from the future and leaving a more indebted and unlivable world for those who come after us. Our primitive ancestors who had to try to understand and try to live in harmony with the conditions of their local environments, all seemed to share beliefs that there were limits to how much game they could hunt, fish, or burn tracts of forests for both hunting and planting favorite foods. If they exceeded whatever the elders determined to be the "limits to growth," it was time to divide the community, and at least some of the people had to move on to new lands. But as things got more crowded, that became increasingly difficult and led to wars over territory.

And then clueless Euro's arrived on these shores who, after leaving their diseased, crowded, and warring homelands, thought they arrived in a big, bountiful candy store and just had to kill off enough of the locals to lay claim to pristine new lands that would provide evermore bountiful harvests for everyone till time immemorial. Now, it's time to end this way of thinking entirely and make all nations of the world live within resource and ecological limits of this planet...that's running out of non-renewable resources right now, barely 200 years into the "industrial revolution." 

And this is where all talk of money, debt and economic theory has to intersect with the real world of resources and resource limits, no matter what worldview and set of theories you want to work with!

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On 4/19/2021 at 6:20 PM, Right To Left said:

And this is where all talk of money, debt and economic theory has to intersect with the real world of resources and resource limits, no matter what worldview and set of theories you want to work with!

That's it, there's no new ideas, no meaningful goals all came down to spend a lot more or a bit less, one number to answer them all.

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6 hours ago, myata said:

That's it, there's no new ideas, no meaningful goals all came down to spend a lot more or a bit less, one number to answer them all.

I was listening to the liberal "Current Affairs" podcast this morning, and a little taken back by how a panel discussing MMT theory were having unusually heated arguments about theory and practice because of the ramifications of separating tax collection from government spending for both domestic and military programs. 

Unlike Keynsianism, so called "modern monetary theory" doesn't believe there are limits to how much new money can be created and spent...declaring that it's not inflationary as long as the central government is in control of its own money supply. So, with all of the central banks in the IMF trading block all collaborating together to increase their currencies, everything should carry on and taxes never need to be increased. 

So, why should there be any taxes for anyone to pay to begin with? And this is why all of a sudden, believers in MMT are hitting the panic button! If the USA for example can spend trillions creating a Medicare system that covers everyone...like other western nations have, and spend trillions on building new infrastructure and trillions to upgrade public education and public spending programs for the poor, along with the trillions more demanded by the military............ who gets the check for all of this at the end of the night? 

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8 minutes ago, Right To Left said:

I was listening to the liberal "Current Affairs" podcast this morning, and a little taken back by how a panel discussing MMT theory were having unusually heated arguments about theory and practice because of the ramifications of separating tax collection from government spending for both domestic and military programs.

Maybe it depends on how it is spent. If it's real programs with real workers and real wages then there's no way massive deficit spending wouldn't cause inflation as supply of most real stuff is still limited. But if most of the money flow into billionaire accounts, financial speculation and luxury consumption I agree regular folk may not even notice. Of course there wouldn't be much new working in the reality maybe a few more bucks in the handout. Wait, did it remind of something?

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7 minutes ago, myata said:

Maybe it depends on how it is spent. If it's real programs with real workers and real wages then there's no way massive deficit spending wouldn't cause inflation as supply of most real stuff is still limited. But if most of the money flow into billionaire accounts, financial speculation and luxury consumption I agree regular folk may not even notice. Of course there wouldn't be much new working in the reality maybe a few more bucks in the handout. Wait, did it remind of something?

I think we notice whenever some real estate knob cold-calling for listings in a what we're told is a hot real estate market tells us that our old wood-framed bungalows are worth over $800,000!  How the f*** does that happen, and who's buying? Most young people can't afford to buy, while us "rich on paper" homeowners live in fear of Market Value Assessment and if we'll get slapped with a big property tax increase the next time the city needs more money to build a new arena or stadium or some other "worthy" cause!

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3 minutes ago, Right To Left said:

I think we notice whenever some real estate knob cold-calling for listings in a what we're told is a hot real estate market tells us that our old wood-framed bungalows are worth over $800,000!  How the f*** does that happen, and who's buying? Most young people can't afford to buy, while us "rich on paper" homeowners live in fear of Market Value Assessment and if we'll get slapped with a big property tax increase the next time the city needs more money to build a new arena or stadium or some other "worthy" cause!

Just another Covid mystery to figure out for the curious minds. By the way reminded me of the frenzy buying in days before Nortel went bust.

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Ah yes, I almost forgot about Nortel...they became such a big player, they almost took the TSE down with them!

And that other get rich quick scam Bre-X Gold...that was finally undone when they finally got caught "salting" their core samples from a dig in Indonesia with gold dust. Gold is such a lucrative and profitable mineral that even the smallest deposits are profitable, and sprinkling on a little gold dust makes all the difference between a profitable discovery and a costly loss for investors. For years afterwards, nobody would trust gold mining stocks of any company. And being in such minute quantities in the earth, continued mining means horrendous environmental costs. Which is why natives in any area near gold mines hate them and want them shut down!  For these reasons the gold and copper mining operations of giant Canadian-based operations like Barrick Gold are giving Canada a bad name also all across the global south where our name is tied to a company responsible for all of the toxic runoffs that poison their land and water supplies. 

All this crap is why we are tied at the hip to the American Empire...our most profitable Canadian based companies need American military force to continue operations in Honduras, New Guinea, Chile, Argentina, the Congo etc.. And no doubt these services are not provided by USA free of charge!  

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One aspect of this huge spending spree which I've noted is how widespread and shallow it is. You can do a helluva lot with a hundred billion dollars, but not if you fritter it away on everything from subsidized housing to daycare to green incentives. There's no big ticket item which will really change or improve Canada. The most noteworthy item is daycare subsidies, but that's hardly done much to improve life in Quebec, where women continue to have smaller and smaller families, and more and more of them have no kids at all.

But another aspect of the spending spree is what they haven't spent money on; health care. The provinces have been begging for more health care spending, for increasing their transfer payments, but even over the multi-years outlook of this budget, there's nothing. We all know health care needs improving, but the federal government has seemingly washed its hands of the problem.

Or as Roth alleges here, the Liberals only want to spend money on files they'll be given credit for in the upcoming election they're determined to trigger. Simply giving money to the provinces won't buy them more votes, to their way of thinking, so why bother? After all, the only reason to spend money is to buy votes.

In all Parliaments, but especially in minority Parliaments, budgets need to serve as previews of election platforms and there is no doubt the federal government sought to treat this week’s budget as such. While it may appear as though the spending commitments are rather indiscriminate, and certainly the figures are eye-popping, budgets are always about choices and there seems to be rather a bit more shrewdness to this government’s choices than they might be letting on.

Keeping that upcoming election in mind, it only makes political sense to decide that if you cannot spend money on everything, you should make sure you spend it on things the voters will give you credit for. This calculation might explain why a government eager to spend money on so much, would not agree to increase health transfers as premiers across the country had been pleading for. In other words, more talking about brought-to-you-by-the-Liberals affordable childcare and less talking about the quagmire of our chronically under-funded health care system (that’s someone else’s problem).

https://nationalpost.com/opinion/ginny-roth-massive-spending-liberal-budget-cynically-ignores-health-care-transfers

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