BC to be an emerging global economy by 2018
March 11, 2010 by CVNews
Filed under BC news, Business, Government
HST report: giant leap forward for investment, jobs.
Ministry of Finance.
Sales tax harmonization and corporate tax cuts will increase capital investment by $14.4 billion and result in a net increase of 141,000 jobs by the end of the coming decade according to a report released today by economist and tax expert Jack Mintz, announced Finance Minister Colin Hansen.
“The Mintz report confirms that the HST, along with federal and provincial corporate tax rate reductions, will dramatically improve the competitiveness of B.C. businesses, both here at home, and abroad,” said Hansen. “Sales tax harmonization is an essential step to encourage new investment, improve productivity and create jobs for British Columbians.”
The report also notes that sales tax harmonization, independent of corporate tax cuts, will account for an $11.5-billion increase in capital investment and a net increase of 113,000 jobs by the end of the coming decade. By lowering the tax on new investment, the HST will encourage capital investment, make B.C.’s economy more tax competitive, and create new jobs and opportunities across the province. While some businesses may not benefit directly from sales tax reform, the significant increase in business activity resulting from the reform will help all sectors of the economy.
“Without a doubt, British Columbia’s sales tax harmonization will be a game changer, promoting capital investment in the province and providing an opportunity for the private sector to create jobs and pay higher wages to workers,” said Dr. Jack Mintz. “Tax reforms will have a profound effect on the economy with B.C. leaping toward fast becoming one of the most competitive jurisdictions in the world.”
All industrial sectors in B.C. will benefit from sales tax harmonization and will see their effective tax rate on new investment drop by over a third, according to Mintz, while some will see reductions of over 40 per cent. Small businesses will also see substantial benefits with their effective tax rate on new investment declining by almost 60 per cent.
The report concludes that by 2018 B.C. will have an internationally competitive marginal effective tax rate on capital – lower than Alberta, Ontario and the current average of 20 major industrialized and emerging economies including that of the United States, the United Kingdom, Australia, France, Germany, Italy, Japan and South Korea.
Widely published in the field of public economics, Mintz was appointed the Palmer chair in public policy at the University of Calgary in January 2008.
The report can be found online at http://www.gov.bc.ca/hst.
Vancouver
March 8, 2010
Ministry of Finance
2010FIN0013-000236
Campbell’s HST Illusion; The U of Calgary paper supposed to support the tax is full of holes and wishful thinking. By David Schreck, 10 Mar 2010, TheTyee.ca. Link here; http://thetyee.ca/Opinion/2010/03/10/HSTIllusion/
~Endangered.
For those that don’t have the time or interest to follow this link and read this piece of inflammatory rhetoric, don’t bother…it is typical Tyee BS. A lot of fluff….nothing to really back it except for the collective circle of back patting by like minded thinkers.
I worked as a restaurant server waaaaay back when the GST was introduced. The exact same partisan accusations and apocalyptic theories were thrown around then. “This will kill restaurant business.” “Our tips will go down” ” the end is near..make peace with God…blah blah blah.” All really believable theories; why not it makes sense?? Businesses was not affected at all…not one bit and our tips actually got bigger as folks would tip on a bill that was 7% higher….hmmmmm?
I am never a big fan of increasing my spending, but I am a fan of being able to pay for all the social programs and government operations that we citizens demand. In short I am a fan of a high standard of living. So to endangered and those who are so against this tax; what social programs or governmental operations are you willing to sacrifice because of lack of funds and if you are not willing to see a decrease in spending in hospitals, education, job creation, etc, etc….where do suppose the money should come from?
How to raise taxes and lose money
How is it even possible to introduce new taxes and take a loss?
Easy! The budget shows that in the upcoming 2010-11 year the HST — scheduled to be imposed July 1 — will actually lose $113 million dollars.
And the budget shows 2008′s carbon tax, which increases one cent a litre at the gas pumps on July 1, will cost the government $69 million more than they take in, thanks to personal tax cuts that were supposed to make it “revenue neutral” but went too far.
Link here; http://thetyee.ca/Opinion/2010/03/04/WakeyWakeyTaxpayer/index.html
~where’s the money to come from? Not business or corporations and not the poor so there’s only one section of society left. As Barrack Obama said you can’t cut taxes and increase spending, it just doesn’t work. ~Endangered.
We need to get over the idea that ‘democracy’ means the people run the government and government exists to serve the people. It has never been so. The legislature is merely a consultative body to the ‘Crown’ (and some might also say, the Bar). The Lieutenant-Governor and the Executive Council (cabinet) run the governemt in BC for the ‘Crown’. That is well established. Where did we get the notion that the people are in charge?
Always remember, while those in charge may well do what we want much of the time, when there is fundamental disagreement they will always overrule / ignore the people and do what they consider important. It is no secret. The secret, if there is one, is who really is the ‘Crown’.
http://www.ltgov.bc.ca/ltgov/default.htm
Only if we, as THE people decide to take a submissive role in the operations of our municipal/provincial/federal affairs do concede to the notion that the government is “in charge.” No matter how you want to look at it the government is, has and always will be charged with the duty to provide those people in the area of jurisdiction with certain services and they in turn must collect enough taxes to fully satisfy a budget to pay for these services that we all demand.
So no matter how you choose to look at the government, no matter how you want to feel the government is some overbearing monster that takes pleasure in the misfortune and debilitation lesser humans; the fact still remains that they need to provide funds for certain services, they need to direct some funds to certain sectors that will stimulate jobs and they need to grow our economy with the assistance of our tax dollars. That said; I asked the question above and I will ask again, certain services are vitally crucial to our quality of life…where do you suppose the money should come from?? I am satisfied with the HST as a means to fill government coffers, as are many British Columbians..what’s the socialist answer?
Why Flaherty Loves His $50 Billion Deficit
After creating it with tax cuts, he has an excuse to slash government…..
…..It is astonishing given all the commentary and news stories about the “sudden” $50 billion federal deficit there has not been a single story in the mainstream media that focuses on the principal explanation: the huge tax cuts made by the Liberals and Conservatives since 1995. Here’s the link; http://thetyee.ca/Views/2009/06/01/
~The tax cuts to Business and Corporations are part of the deficits which are used as an excuse to cut government and the social safety net further. This is also the only “recession” in that Canadian productivity fell instead of increased. Why? Endless tax cuts means companies have to do absolutely nothing to see an increase of profits. Easy money. How about the IPP’s rates that are being awarded at the current income tax rates? the Tax payer is LOCKED IN even as the producer will see declining rates on the profit. ~Endangered.
“The problem is that productivity in Canada has been lagging in the past decade.
Last week, Bank of Canada governor Mark Carney put the blame squarely on the shoulders of Canadian business people, saying they have failed to invest in productivity-enhancing technologies despite plentiful government incentives, including a competitive tax system.”
Link here; http://www.theglobeandmail.com/report-on-business/economy/opportunity-lies-in-emerging-markets-jenkins-says/article1516010/ ~Endangered.
The HST is going to ruin BC for everybody except the rich! My plans of buying a home in the next few years are now out of the question. On top of that we are now paying an axtra 8% on most food we buy! Also our health care costs are equal or more compared to most USA insurance companies. BC residents pay 10 times as much for our mandatory health care than every other province. Cost of living has been going through the roof in the past five years in BC. In Alberta I would hardly notice my taxes taken off my pay cheque, I pay 25% in BC and still have a bill at the end of the year. I made $29,000 last year and payed $8940 in taxes plus $1150 for mandatory health care. Thats over 1/3 of my income! Tell me if im way off here but does not seem like alot? My accountants said its because of the teir system? I guess im at the bottom of a tax bracket.
That’s a lot of money to be paying to the banks. Since we live in a system where we are basically forced to work in order to live, and forced to pay taxes if we work, i think by any definition this is the textbook definition of s-l-a-v-e-r-y. Even in China (supposedly not a free country) the flat 20% tax that everyone pays goes to run the country, not to the evil banksters. It’s about time we woke up and collectively found a way to channel the fruits of our labors for everyone’s benefit, not to some elitist slavemasters who think they own the world and everything living on it.
In Tight Times, Campbell Gov’t Chooses to Help Big Banks
Inept budgeters axed $100 million yearly tax revenue from fat financial institutions. And it gets worse. By Will McMartin, 3 Mar 2010, TheTyee.ca
…The new levy was intended to ensure that Canada’s banks, insurance companies and trusts, all headquartered outside B.C. — and very, very profitable — nonetheless would continue to pay some monies (albeit much-reduced than formerly) directly into the provincial treasury.
That minimum tax rate was to kick-in in 2010/11 (the upcoming fiscal period), when the corporation capital tax was completely eliminated. The specific tax rate — that is, the percentage of each bank’s paid-up capital that would be paid in tax — and total revenues were expected to be revealed by Hansen in yesterday’s budget.
Shockingly, they were nowhere to be found. Hansen and his government colleagues, you see, instead opted to repeal the minimum financial institutions tax — even before it takes effect!
So, two years after deciding to forego most of the $100 million-plus generated annually for the province by the corporation capital tax — instead accepting a one-time payment $48 million — the Campbell Liberals now have resolved to let Canada’s big banks keep the entire amount and pay nothing to Victoria.
Run a lemonade stand? Please.
Targeting the least vulnerable
That decision by Hansen and the BC Liberals no doubt will please Taylor, who, following her decision to repeal the corporation capital tax and quit politics, accepted an appointment to the board of directors of Canada’s second-largest bank, the Toronto-Dominion.
It also will excite the country’s largest financial institutions, which, despite the recent global economic downturn, have racked up gigantic operating profits in the year just ended. In 2009, the Royal Bank had an annual profit of $3.9 billion; the T-D, $3.1 billion; Scotiabank, $3.1 billion; the BMO (the Bank of Montreal), $1.8 billion and the CIBC, $1.2 billion.
B.C.’s share of the pie? Nothing….. Link here; http://thetyee.ca/Opinion/2010/03/03/TightTimes/
~The banks and Financial institutions will not leave B.C. if taxed and they won’t be generating any new jobs from the tax cuts either.
~Endangered.
Tyler, you have so many things mixed up in your rant against British Columbia it is so so unfortunate for you.
Fact: British Columbia has the lowest, count them lowest personal income tax in Canada
British Columbia has the second lowest corporate tax in Canada
The HST does not affect housing if that NEW house is under $ 500,000 so I guess you are planning on buying a GREAT BIG house. Congratulations !!!
Only the rich can afford HST ????? Come on Tyler, They will be paying more HST ( PST + GST ) and their hair cuts will still look as good or bad as before.
Knowledge not kept in the brain cells? The HST is a combination of GST of 5% and PSt OF 7%. YOU ARE ALREADY PAYING IT RIGHT NOW UNDER DIFFERENT NAMES !!! NO change but the name. Don’t get too caught up in the frenzy. It’s exactly the same arguments that were running about when the GST was first brought into effect in Canada.
Same sort of arguments for not smoking in resturants and bars, The world was / is going to come to an end.
Same result with the HST as with the GST — nothing. We will still get our hair cut, drink our beer and wine, still buy the ATV and still pay the PST and GST but horrors, we now call it HST.
If you paid that amount in taxes and still had to pay more, you’d best get a different accountant rather than paying for a $ 500,000+ house. That accountant does not sound too good.
I guess he has not educated you and others on how best to utilize the tax laws in the best manner possible for yourself and still keep within the laws.
Do you have a second job?
Do you work out of your house?
Do you write off parts of your house because of your inhome office?
Do you write off part of your vehicle expense and insurance and gas and maintenance due to job related in home expenses?
Time to get a better set of advise than that which you have been receiving
Sorry Tyler, but your rant against anything happening here in BC does not bode well for the advise you have been receiving from others.
Best regards
David R Pacey
President
BC Liberals Columbia River Revelstoke
250 342 1524
Victoria’s billion dollar P3 decision…
….It is not hard to figure out why the province, with its enthusiasm for P3s, would have liked to have seen this business case kept secret too. First of all the Business Case reported that even using Partnerships BC’s skewed methodology for looking at these things it would be cheaper to do this project publicly than to use a P3.
But the Business Case went much further than that and actually released the raw numbers used. These raw numbers compare the total payments over the 30 years of the contract for both the P3 and traditional procurement. They showed with a public project taxpayers would pay roughly $1.65 billion. Using a P3 would cost $2.36 billion – an additional $700 million. A hybrid project, using a P3 for some of the work would cost about $2.03 billion – still $350 million more than public procurement. .. Link here; http://www.policynote.ca/2010/03/16/victorias-billion-dollar-p3-decision/
Survey says public opposed to public-private partnership for sewage centres
……If the facilities are built with a P3 or a hybrid model, Vancouver Island’s construction industry would effectively be shut out of the projects, said Greg Baynton, president of the Vancouver Island Construction Association.
The contracts for privately built facilities would be in the range of $200 million to $500 million, Baynton said, too large for Island companies.
“It would basically eliminate regional construction from those projects, with some fairly dire consequences to the industry and the community at large,” he said.
If done privately, the projects would be simply too large for Island companies, so they would go to national or international companies.
“These conglomerates participate and come to communities like ours for one reason and one alone — that is profit,” Baynton said.
Don Cameron, president of the Island Equipment Owners Association, said a P3 model “could very well mean the end of this local industry as we know it.”
The association has 170 member companies employing over 2,500 people in civil engineering, excavation and heavy construction on southern Vancouver Island. …..
“Large multinational companies will blow into town and displace years of meaningful well-paying employment during construction and then leave town and in their wake, the skeleton of what was once a vibrant industry,” Cameron said. … “Large multinational companies will blow into town and displace years of meaningful well-paying employment during construction and then leave town and in their wake, the skeleton of what was once a vibrant industry,” Cameron said.
Link here; http://www.timescolonist.com/technology/Survey+says+public+opposed+public+private+partnership+sewage+centres/2687541/story.html
~ And they’ll get a tax break while doing it ~ Endangered.
Municipalities warn they can’t bear brunt of social programs as governments cut
March 24, 2010 – 16:57
THE CANADIAN PRESS
OTTAWA – A new report says cities and towns are still reeling from the downloading of responsibilities over the past decade, and are in bad shape to handle further cuts.
The report for the Federation of Canadian Municipalities says there’s an increasing number of people slipping through the traditional safety net of federal and provincial services.
Vulnerable groups such as single moms and immigrants are becoming more reliant on city-backed services such as affordable housing, emergency shelters and subsidized daycare.
“People are falling through the cracks and are looking to their cities and towns for help,” said Brock Carlton, who heads the federation.
“We have a new class of working poor in our country. These are people that the welfare system no longer protects or supports.”
As struggling people gather in big cities to look for well-paid work, they find themselves squeezed by deteriorating government handouts. They are straining municipal infrastructure such as public transit, recreation and libraries, the report points out.
“The situation unfortunately is only going to get worse,” Carlton said.
The federation fears this dependency will be exacerbated by other levels of government that are worried about their fiscal situations, and are unwilling to commit to steady funding.
But the federation acknowledges that the federal government has committed to keeping transfer payments intact, and has also spent billions on municipal infrastructure through its unprecedented stimulus package.
“We’re not necessarily hearing about potential cuts,” Carlton said. “It’s more about getting ahead of the conversation.”
Ms Endangered, I’m sorry but your rational for not doing P3′s is missing something very large here Actually a couple of things
When you run the numbers you are quoting, $ 1.65 billion with a $ 700 million ” profit ” over 300 years, that comes to a staggering 1.41393 % profit per year. That is not something I persoanlly would invest in but then I could have dropped a decimal point here so correct me if I am wrong.
The other thing is, apparently a construction industry ( union ) spokesperson is waxing poetic about the loss of the construction industry as we know it ? Is that so ? ]
I wonder how a P3 partner would get a large project accomplished roads, sewer plant, transmission line, dams etc etc without using that self same industry / union spokesman / woman? I would think that all those companies would end up being employed, just by a different general contractor that in these instances would be called the ” P3 ” partner.
Yes , governments through out the world are starting to recognize that we can no longer afford to have the nanny state continue to support those that have not kept their eductation up so that they can obtain well paying jobs. Governements are starting to realize that subsidies for living expenses are tantamount to simple wage subsudies and that those end up taking away the desire, the need, and the initiative to better ourselves. We then tend to sink to the lowest common denominator rather than truning around and improving our own eductation, work ethic, work ability and attitude.
To slip to the lowest common denominator was very very well illustrated in Ann Raynds book, Atlas Shrugged. It has also been very well illustrated in the recent demise of the previous Soviet Socialist Republic. They too sank to the lowest common denominator and still had their own power elite and their own well paid elite.
But my point might be, we cannot forever susidize every thing without dragging the entire population into the cellar. Call that the lowest common denominator. There will always be those demanding more and more and more even when they are receiving plentiful resources.
Just a few thoughts which come from the valley
Since you brought up Russia’s economic problems, here’s an IMF interpretation of their and I would say our problem;
“Typically, these countries are in a desperate economic situation for one simple reason—the powerful elites within them overreached in good times and took too many risks. Emerging-market governments and their private-sector allies commonly form a tight-knit—and, most of the time, genteel—oligarchy, running the country rather like a profit-seeking company in which they are the controlling shareholders. When a country like Indonesia or South Korea or Russia grows, so do the ambitions of its captains of industry. As masters of their mini-universe, these people make some investments that clearly benefit the broader economy, but they also start making bigger and riskier bets. They reckon—correctly, in most cases—that their political connections will allow them to push onto the government any substantial problems that arise.
In Russia, for instance, the private sector is now in serious trouble because, over the past five years or so, it borrowed at least $490 billion from global banks and investors on the assumption that the country’s energy sector could support a permanent increase in consumption throughout the economy. As Russia’s oligarchs spent this capital, acquiring other companies and embarking on ambitious investment plans that generated jobs, their importance to the political elite increased. Growing political support meant better access to lucrative contracts, tax breaks, and subsidies. And foreign investors could not have been more pleased; all other things being equal, they prefer to lend money to people who have the implicit backing of their national governments, even if that backing gives off the faint whiff of corruption.
But inevitably, emerging-market oligarchs get carried away; they waste money and build massive business empires on a mountain of debt. Local banks, sometimes pressured by the government, become too willing to extend credit to the elite and to those who depend on them. Overborrowing always ends badly, whether for an individual, a company, or a country. Sooner or later, credit conditions become tighter and no one will lend you money on anything close to affordable terms.
The downward spiral that follows is remarkably steep. Enormous companies teeter on the brink of default, and the local banks that have lent to them collapse. Yesterday’s “public-private partnerships” are relabeled “crony capitalism.” With credit unavailable, economic paralysis ensues, and conditions just get worse and worse. The government is forced to draw down its foreign-currency reserves to pay for imports, service debt, and cover private losses. But these reserves will eventually run out. If the country cannot right itself before that happens, it will default on its sovereign debt and become an economic pariah. The government, in its race to stop the bleeding, will typically need to wipe out some of the national champions—now hemorrhaging cash—and usually restructure a banking system that’s gone badly out of balance. It will, in other words, need to squeeze at least some of its oligarchs.
Squeezing the oligarchs, though, is seldom the strategy of choice among emerging-market governments. Quite the contrary: at the outset of the crisis, the oligarchs are usually among the first to get extra help from the government, such as preferential access to foreign currency, or maybe a nice tax break, or—here’s a classic Kremlin bailout technique—the assumption of private debt obligations by the government. Under duress, generosity toward old friends takes many innovative forms. Meanwhile, needing to squeeze someone, most emerging-market governments look first to ordinary working folk—at least until the riots grow too large. ….
…. Becoming a Banana Republic
In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets (and only in emerging markets): South Korea (1997), Malaysia (1998), Russia and Argentina (time and again)………
Link here; http://www.theatlantic.com/magazine/archive/2009/05/the-quiet-coup/7364/
Fitting title for this article “Emerging” Global “Market” ~ Endangered.
Profiteering in education by private sector will not be allowed: Sibal
Asserting that education would remain a not-for-profit sector, HRD Minister Kapil Sibal on Wednesday made it clear that government will never allow profiteering in education that would go as dividends to the share holders.
“Let us be clear that Indian businessmen, who probably because of meltdown do not get profit anywhere, want to get profit out of education. I, as a minister, will stand as a rock to ensure it does not happen,” he said.
Mr. Sibal was speaking at an interactive session on ‘Changing face of Indian education’, organised here by FICCI Ladies Organisation.
He said educational institutions can make profit, which has to be ploughed back to the institution for its development.
“But we cannot risk the career of students to the fortune of stock market. We cannot allow profit going back to the share holders as dividend,” Mr. Sibal said to a question on why the government should not allow education to become a profiteering business segment.
He emphatically said that no country in the world allows profiteering in education.
“Which country allows making profit from education? No country. Harvard is a trust, Yale is a trust. Stanford is a trust. Mr. Stanford is not known for his business, but for his philanthropy,” the minister said. …
Link here; http://beta.thehindu.com/news/national/article104274.ece
~ Our natural resources are supposed to be a public asset used for the public good, it is part of Governments Fiduciary responsibility. Instead they are being sold off at bargain basement prices; Lucrative contracts are awarded and taxes on the profits are being slashed. As this “Beggar thy neighbour” Globalization policy continues, Alberta corporations like Encana also want Alberta to Harmonize their taxation with BC’s to “compete” The extra production drives commodities prices down further which mean lower Government revenues in both provinces. Governments have become dependant upon DEBT to fuel the economy and that isn’t really growth. Link to our economic problems here; http://whispersfromtheedgeoftherainforest.blogspot.com/2010/03/great-reckoning.html. ~ Endangered.
I had 4 different accountants look at my taxes, they all came up with the same numbers and explaination. You cant write off an auto expense unless you own your own business. And no we are not paying HST under different names right now, when I buy pre packeged food, go golfing, skiing, buy a new home or car I dont pay the extra % right now, but we will when the HST goes through. I will not buy anything in BC untill they loose the HST. We already pay way more tax than Alberta, it only makes sense to do your shopping there. Food/Gas are 30% less in Banff compared to Invermere. Its as no brainer.
loll the liberals really screwed them selves on this whole HST thing. Now I cant buy a new home here in BC, I guess I will start looking in Alberta instead. Or I will just hold tight untill the HST is struck down by the people. Tyler you are right, if you just jump over the border to Alberta you end up paying a whole lot less for everything and less tax is a huge bonus. I already buy most of my stuff in Alberta, now I will buy everything there.
Anon asked what the socialist answer was to filling the provincial coffers. I really couldn’t say but the Economic answer is Demand side as opposed to our current Conservative supply side policy.
“According to Supply Side theory, tax cuts should go to the wealthy for only they can afford to use the extra income to invest in the economy � to increase its capacity to supply goods. But there is nothing to make sure they actually invest, especially in the U.S. economy.
The new money might simply sit in the bank, or be spent on expensive foreign imports. It might be wasted in misdirected speculation, or invested in fast growing markets like southeast Asia. Without the ability to ensure that tax cuts are, in fact, invested in new productive assets, Supply Side Economics cannot ensure any real linkage between tax cuts and the hoped-for economic boom.
Revealingly, Supply-Siders strenuously resisted calls to tie tax cuts to actual productive investments, that is, give the tax cut only after the investment had been made. This led critics to suspect the real motives behind the theory. The only thing that was certain was that the rich would become richer and revenues to the government would be lower. Beyond that, it is all just wishful thinking.
Contrast this wishful thinking with Demand Side economics. Demand Side Economics, says that if taxes are to be cut, they should go to those who earn the least amount of money. The reason is that low-income workers spend virtually all of their incomes. Money given to them goes right back into circulation, fueling a boom in consumer spending. This is essentially the policy that rescued the U.S. economy from the Great Depression. This, say the Demand Side economists, is the real foundation for an expanding economy. How has this theory held up in practice?
Bill Clinton reversed Reagans Supply Side policies, raising taxes on the wealthy and lowering them on the working and middle class. This Demand Side formula was fiercely resisted by Republican leaders in Congress who predicted a stock market crash and another Great Depression. Indeed, every single Republican member of Congress voted against it. It took a tie-breaking vote by Al Gore in the Senate to get the bill passed. What happened?
The economy produced the longest sustained expansion in U.S. history. It created more than 22 million new jobs, the highest level of job creation ever recorded. Unemployment fell to its lowest level in over 30 years. Inflation fell to 2.5% per year compared to the 4.7% average over the prior 12 years. And overall economic growth averaged 4.0% per year compared to 2.8% average growth over the 12 years of the Reagan/Bush administrations.
It wasnt even close. The economy performed dramatically better in almost every way once Supply Side policies were replaced with Demand Side policies.
The most dramatic outcome was the reversal of the Reagan-era Supply Side deficits. Clintons Demand Side policies not only paid down the Reagan/Bush deficits, they produced the first budgetary surpluses since 1969. By the time Clinton left office, the government was running surpluses of almost $140 billion per year. This is what he turned over to George W. Bush in January of 2001.
Bush, of course, returned to the Supply Side policies of Reagan and his father. He lowered taxes on the very rich his base as he calls them. His $1.6 trillion in tax cuts give 45% of the benefits to the top 1% of the population. It is classic Supply Side economics. What happened?
According to the Economic Policy Institute, “By virtually every measure, the economy has performed worse in this business cycle than was typical of past ones.” GDP growth since the bottom of the 2001 recession has averaged 2.8%. But it grew at an average rate of 3.5% over the prior six recoveries dating back to World War II. Or consider jobs: 1.3% more jobs under Bush versus 8.8% more during earlier upswings.
Private sector jobs an especially telling measure of economic health are up only 1% since 2001 versus an average of 8.6% for past recoveries. Investment? That Holy Grail of Supply Side orthodoxy? Up 3.6% compared to the 8.2% average for the six earlier rebounds. Pick your measure: growth, jobs, income, spending, investment. The recovery based on the Bush II Supply Side tax cuts is one of the weakest ever recorded.
The one thing the Supply Side revival did excel at not surprisingly is debt. Bush turned a $136 billion surplus from Bill Clinton into a $158 billion deficit in his first year. When he took office, the national debt stood at $5.8 trillion. It now stands at $8.1 trillion and is projected to hit $10 trillion by 2008 when Bush�s second term is over. The ten-year cumulative deficit forecast by the non-partisan Congressional Budget Office has changed from a $5.6 trillion surplus in January 2001 to a $3.4 trillion deficit in March of this year an almost inconceivable swing of $9 trillion to the worse in only six years.
After more than 17 years of experience with Supply Side economics, we now know beyond doubt that this is not an accident.
These mammoth debts are a huge boon to that rich base that Bush loves to coddle. It is they, the very rich, who loan the money to the government to fund its debts. And since more borrowing drives up interest rates, they get to do so at higher and higher rates of return. This is simple supply and demand. By increasing the demand for borrowed money in the economy as a whole, Supply Side deficits drive up the cost, not just of government borrowing, but of ALL borrowing everything from credit cards and mortgages to car loans and municipal bonds.
In other words, Supply Side economics rewards the rich both coming and going. Higher government debt leads to higher interest rates for all borrowing or in their case, lending. And then, they get to pay lower and lower taxes on their higher and higher earnings. It is a magical two-fer worth hundreds of billions of dollars a year. ” …. Link here; http://www.commondreams.org/views06/0514-20.htm
~People seem to have forgotten that Unemployment insurance, welfare were introduced not as charity but as ECONOMIC STABILIZERS, providing an artificial demand during down turns in the normal economic cycles. Regulation was introduced to limit the “gambling” as “Liquidity sought(seeks) the greatest returns”.
~Endangered.
New Economic Data Shows that Right Wing Economic Theory Is Simply Wrong.
….But the second piece of economic news tells even more about the bankruptcy of right wing economic thought. Throughout the heyday of Reagan’s “supply side revolution” and Bush’s tax cuts, the Republicans and the right wing intellectual establishment have hung fast to their foundational belief that tax cuts for business would create private sector jobs.
Well, the great experiment in “trickle down” economics is over and the results are in. The New York Times reports that, “For the first time since the Depression, the American economy has added virtually no jobs in the private sector over a 10-year period. The total number of jobs has grown a bit, but that is only because of government hiring.”
In fact, since George Bush and the Republicans in Congress passed two massive tax cuts, we have seen a massive, secular decline in the creation of private sector jobs.
Of course it won’t surprise anyone that this decline has been led by the reduction of American manufacturing jobs. There has been a decline of 3.7% in overall manufacturing jobs in the United States over the last decade.
Remember that we’re talking here about an absolute lack of increase in private sector jobs — zero increase in actual jobs — even as the population of the United States has grown. Economists tell us that the economy must create 150,000 new jobs each month just to stay even with population growth.
The failure of the economy to produce any private sector jobs at all would have been even more devastating had it not been for a small but significant growth in public sector jobs at the state, local and Federal levels. Of course these are precisely the kind of jobs that the Republicans and Right decry at every opportunity. “Every one knows,” they say, “that job growth is really driven only by the private sector.” Wrong…maybe in the imaginary world of the Heritage Foundation or Cato Institute, but not in the real world of the American economy.
And let’s be clear, the Bush tax cuts didn’t just produce fewer jobs than advertised. They didn’t produce any private sector jobs at all. The whole experiment in handing over money to the wealthiest people in America so they could use it to benefit the rest of us was a colossal – empirically verifiable – failure…..
Link here; http://www.huffingtonpost.com/robert-creamer/new-economic-data-shows-t_b_259540.html
~Endangered.
Link to the NY Times article here; http://www.nytimes.com/2009/08/08/business/economy/08charts.html
Look at the embedded graph.
~Endangered.
Businesses warned to brace for spending slowdown
-Benjamin Tal, economist with CIBC, has developed a new consumer capability index based on seven economic factors to measure the ability of Canadians to spend.- Businesses should brace themselves for a likely slowdown in Canadian spending in 2010 as consumer fundamentals are at their weakest point in 15 years and do not match up with recent rebounds in sentiment, a new CIBC World Markets report says. ….
…”The recent surge in spending is not backed up by rising consumer fundamentals,” Mr. Tal said in the report. “The ‘V-shaped’ recovery in consumer confidence we have seen throughout the second half of 2009, has actually coincided with a drop in the ability of households to spend.”
He warns that if, as expected, the Bank of Canada raises interest rates in the summer, it will have an unexpected side effect on spending as Canadians have been spending through increased debt, not rising income.
“To a certain extent debt is replacing income as a major driver of consumer purchases,” he said. “Given the vulnerable starting point of the consumer, the Bank of Canada will soon find that even a moderate monetary squeeze will be sufficient to drive a material deceleration in consumer spending.” ….
…..Other concerns include the fact that the gap between real estate gains and income growth is widening, suggesting stagnating or falling real estate markets in coming years, and that household debt is rising faster than assets.
“Despite the rebound in stock valuations and the recent surge in home prices, over the past two years Canadians have seen their liabilities rising twice as fast as their assets,” he said.
Link here; http://www.financialpost.com/news-sectors/story.html?id=2752853
~We are already more “Competitive” globally than most countries except MEXICO. Our Federal and provincial governments seem to have forgotten about our DOMESTIC economy and relied on stimulating DEBT to mask all of the problems. So the much touted Business Tax cuts won’t help small to medium sized businesses if the CONSUMER (whom is around 65% of our DOMESTIC ECONOMY) can’t afford to buy their product / services. Just think of how the rising cost of Electricity, Service fees, Natural gas, Municipal, etc PLUS the other additional taxation costs as the result of the HST on top of all of that.
-”Given the vulnerable starting point of the consumer, the Bank of Canada will soon find that even a moderate monetary squeeze will be sufficient to drive a material deceleration in consumer spending.”-
~Endangered.