Sick of Minority Governments - Why Canada will never have PR

[moahunter]

Actually, I dislike proportional representation because I lived through a change from first past the post, to MMP (an ugly system that results in career politicians who are accountable to no-body). But aside from that political point, and not meaning to turn this into a PR thread, this article is interesting:

http://www.theglobeandmail.com/news/...rticle1215629/

The Canadian Press Harris-Decima survey showed 64 per cent of respondents prefer a majority over a minority government, up from 52 per cent two years ago.

So, who can it be? A revived more centre / right Liberal Party under Ignatieff, or Harper's Conservatives? Or are Canadians pining after the impossible? What this indicates to me, is that if the Conservatives or Liberals get a healthy lead at the next election, Canadians may just swallow any political pride and back who they think the winner will be. But what do you think?

[MrOilers]

I think those numbers are probably accurate and that most Canadians would indeed like a majority government. However, Conservative supporters want a Conservative majority, Liberal supporters want a Liberal majority, and NDP supporters want an NDP majority, so they will vote accordingly.

Thus, I think we will be stuck with minority governments (either Conservative or Liberal) until one of the big two parties (Conservative, Liberal) REALLY steps it up and/or the other party REALLY messes up. But they are both playing cautious. Neither of them look like they will take a chance doing anything radical or polarizing anytime soon.

[moahunter]

^The key for Ignatieff is to change that dynamic by being "acceptable enough" for Conservative voters (something Dion could never do). He is positioning the party more like the "Paul Martin" days of old - i.e. fiscally conservative, no new green taxes or other taxes.

[JasonR]

Stephen Harper seems to make a gaffe a week, but his record shows that he's just as pragmatic as any Liberal PM ever has been. Nobody seems to trust him enough to give him a majority, yet the Liberals just don't look ready to govern under Michael Ignatieff.

As for proportional representation, that might work if we didn't have a fused executive and legislative parliament. But since we do, it would result in a constant cycle of elections every year.

[Green Grovenor]

If Ignatieff can frame the next election as a battle between the Liberals and Conservatives for majority status, perhaps soft left voters would shun the NDP in order to avoid writing a blank cheque for Stephen Harper.

Conservative support has collapsed in Quebec, and even a slight Liberal advantage in Ontario would translate into a lot of seats. In that scenario, the Liberals might form a majority government with less than 40 per cent of votes, albeit with very little representation from the West.

A more general comment: although I grew up watching politics as a fan, in much the same way kids embrace sports teams, I've come to find the party system boring and restrictive. Only a very narrow-minded person would agree with any party's stance on all issues, yet members of Parliament are expected to vote in blocks, in an unthinking way. The talents of our elected representatives at the federal and provincial levels are largely wasted.

[JasonR]

A lot can change in a 5 week campaign. But if there's an election this year it will be another minority.

[edmonton daily photo]

After watching the pasionate eye last night, there are some chilling commonalities between Harper policies and bush policies.

Harper is cutting taxes, but spending more and more and more.

Who is financing our debt? who are we selling our future to? CHina?

I have had it with Harper..

[JasonR]

Originally Posted by edmonton daily photo

After watching the pasionate eye last night, there are some chilling commonalities between Harper policies and bush policies.

Harper is cutting taxes, but spending more and more and more.

Who is financing our debt? who are we selling our future to? CHina?

I have had it with Harper..

Guess who else cut taxes while spending more? I'll give you a hint: he just got a nice award from the Queen.

Comparing Harper to Bush is asinine. Selling our future to China? Come on! When we hit 80% debt to GDP ratio then we can compare the two countries' finances.

Hell, when we hit 50% then we can talk. Right now we're at 30%.

[etownboarder]

JasonR... perhaps you forgot that even though taxes were cut, we still had surpluses. Just saying...

[JasonR]

And we had a balanced budget when Harper cut taxes as well.

[etownboarder]

I just find it more fun to blame him for the current deficit.

[JasonR]

Originally Posted by etownboarder

I just find it more fun to blame him for the current deficit.

You may have fun doing it, but you'll be wrong just the same.

Look, Harper hasn't been perfect, but I'll argue anyone at any time who thinks that that GST cut from 6% to 5% in 2008 somehow caused our deficit. It did not.

[etownboarder]

It didn't help.

[JasonR]

Originally Posted by etownboarder

It didn't help.

I'll disagree with that as well. Now, I'm not going to get into an argument about what kinds of taxes are best. I had enough of that in economics class back in University. There's never agreement.

But, there's a reason why Canada is weathering this economic storm better than most other countries. And there's a reason why we're going to emerge from it faster than others. One of those reasons is a steady decline in taxes that occurred between 2000 and 2008. From reducing personal taxes, to indexing the brackets, to raising and indexing the personal exemption, to GST cuts, it all helped put Canada in a very good position. Both political parties can take credit for it. The last cut, a lowering of the GST in 2008 would have had the aggregate effect of slowing the decrease in spending that comes with recession.

Also, between 1995 and 2008 successive canadian governments paid down debt while spending more and more. Our economy grew and our debt to GDP ratio shrank from 73% in 1995 to 28% in 2008.

In short, we are in a great position to emerge from this global recession faster and stronger than anyone else. Harper didn't put that in jeopardy. He helped make it possible. He can't take all the credit for it. In fact, he can only take about 25% of the credit. Most goes to Chretien and Martin. This is one of the reasons why I 100% believe that Chretien deserves all the accolades he gets, including shiny medals from the Queen. But Harper isn't a villain. All he did was continue down the same path that Chretien had been down.

[North Guy66]

Originally Posted by JasonR

Look, Harper hasn't been perfect, but I'll argue anyone at any time who thinks that that GST cut from 6% to 5% in 2008 somehow caused our deficit. It did not.

That promise was a simple vote grab to get the Sun readership knuckle-draggers to vote Conservative. Has cutting the GST from 6% to 5% help spur the economy?

[etownboarder]

I never ever ever consider GST as a determining factor when making a purchase... and I doubt many people do for that matter. I truly doubt it played any effect in slowing the decline in the economy over the last year. People can argue that it did, but have no proof to back it up. GST is the last thing on my mind when making a purchase... if you choose not to make a purchase because of an extra 2% in GST costs (even when buying a house or car), then perhaps you shouldn't be making the purchase in the first place, cause you obviously can't afford it.

[JasonR]

Originally Posted by North Guy66

That promise was a simple vote grab to get the Sun readership knuckle-draggers to vote Conservative. Has cutting the GST from 6% to 5% help spur the economy?

That cut definitely helped consumer spending, yes. Without it, spending would have dropped faster than it did. It, in essence, softened our landing.

Now, before you call me a conservative knuckle-dragger (an ignorant thing to say), the GST was always too high at 7%. Try living in a province where there's a sales tax, and you'll see what I mean. Want to add 14% or 15% to all of your purchases? The GST also has never been value-added. So cutting it benefits consumers directly. Consumers of all income groups. And in the aggregate is spurs on consumer spending.

[JasonR]

Originally Posted by etownboarder

I never ever ever consider GST as a determining factor when making a purchase... and I doubt many people do for that matter. I truly doubt it played any effect in slowing the decline in the economy over the last year. People can argue that it did, but have no proof to back it up. GST is the last thing on my mind when making a purchase... if you choose not to make a purchase because of an extra 2% in GST costs (even when buying a house or car), then perhaps you shouldn't be making the purchase in the first place, cause you obviously can't afford it.

The GST definitely is noticed by consumers. It's not like the old manufacturer's tax, which was hidden. The GST is added on and therefore plays a role in anything that costs more than a candy bar. It especially factors in to large purchases like new homes, cars, computers and other things. Taxes like the GST have different mathematics behind them and graph differently, causing different deadweight loss to the economy.

[North Guy66]

Originally Posted by JasonR

That cut definitely helped consumer spending, yes. Without it, spending would have dropped faster than it did. It, in essence, softened our landing.

Now, before you call me a conservative knuckle-dragger (an ignorant thing to say), the GST was always too high at 7%. Try living in a province where there's a sales tax, and you'll see what I mean. Want to add 14% or 15% to all of your purchases? The GST also has never been value-added. So cutting it benefits consumers directly. Consumers of all income groups. And in the aggregate is spurs on consumer spending.

The GST is exactly that, a sales tax. Most economists would say if you want people to spend more, lower the personal income tax.

If I'm making $100,000/year, a 7% GST tax is not going to stop me from buying a new car or 52" flat screen.

If I'm only making $22,000/year, a 2% drop in the GST may mean I get to order pizza twice a month instead of once. Whooppeee!!!

p.s....I'm not personally calling you a knuckle-dragger because you are a Conservative supporter. But election promises of cutting the GST by 1% is appeasing to the lowest common denominator. If the GST is so evil, why don't Harper promise to eliminate it altogether?

[JasonR]

One of the most basic economic principles is the multiplier. This is a reality that isn't disputed by any economist.

Now, if you want to know what the difference is between 6% GST and 5% GST, then look at some larger purchases.

On a $20,000 car it would be $200. $200 that the consumer will spend elsewhere, causing a multiplier.
On a $400,000 new home it would be $4,000.
On a $1,200 computer it would be $12. Now you may discount that $12, but you shouldn't. In the aggregate it matters a lot. If every Canadian saves an average of $200 on GST in a year, that's $200 that they will spend. In a recession, money is tight. Savings go to thing that are needs.

[etownboarder]

Well if people choose not to purchase a home because the GST costs too much, we'll have less bankruptcies from dumb people purchasing things they can't afford. I don't see that as being a problem necessarily. And again, I never have, and never will... let GST determine what I do and do not purchase. I think you are placing way too much emphasis on the role GST plays in peoples purchase decision making.

[JasonR]

Originally Posted by North Guy66

The GST is exactly that, a sales tax. Most economists would say if you want people to spend more, lower the personal income tax.

If I'm making $100,000/year, a 7% GST tax is not going to stop me from buying a new car or 52" flat screen.

If I'm only making $22,000/year, a 2% drop in the GST may mean I get to order pizza twice a month instead of once. Whooppeee!!!

p.s....I'm not personally calling you a knuckle-dragger because you are a Conservative supporter. But election promises of cutting the GST by 1% is appeasing to the lowest common denominator. If the GST is so evil, why don't Harper promise to eliminate it altogether?

Evidence shows that that sales tax does affect consumer spending. Especially when you have one tax on top of another. We only see 5% GST. In other Provinces they have Provincial sales taxes. Now you may tell me that the GST doesn't affect your purchases. What about a sales tax of $12%? 15%? 16%? Get the idea?

And yes, lowering personal taxes is preferred by many economists, but it also costs a lot more than one point in the GST. Especially since a meaningful lowering of personal tax would mean lowering something beyond the lowest rate, which has already been lowered from 17% to 15%.

[JasonR]

Originally Posted by etownboarder

Well if people choose not to purchase a home because the GST costs too much, we'll have less bankruptcies from dumb people purchasing things they can't afford. I don't see that as being a problem necessarily. And again, I never have, and never will... let GST determine what I do and do not purchase. I think you are placing way too much emphasis on the role GST plays in peoples purchase decision making.

But that's not what I'm talking about, my friend. People make their choices, right or wrong. I'm only saying that a lowering of a tax has a stimulative effect on the economy.

I agree that lowering taxes without a balanced budget is a dumb thing to do. But Harper never did that, and his tax cuts didn't cause our present recession or deficit.

[noodle]

Originally Posted by JasonR

One of the most basic economic principles is the multiplier. This is a reality that isn't disputed by any economist.

Now, if you want to know what the difference is between 6% GST and 5% GST, then look at some larger purchases.

On a $20,000 car it would be $200. $200 that the consumer will spend elsewhere, causing a multiplier.
On a $400,000 new home it would be $4,000.
On a $1,200 computer it would be $12. Now you may discount that $12, but you shouldn't. In the aggregate it matters a lot. If every Canadian saves an average of $200 on GST in a year, that's $200 that they will spend. In a recession, money is tight. Savings go to thing that are needs.

The $3800+ I got back from the GST on my condo going from 6% to 5% that I just got back certainly went right back into the economy.. Paid for half my blinds!

[moahunter]

Originally Posted by JasonR

In short, we are in a great position to emerge from this global recession faster and stronger than anyone else. Harper didn't put that in jeopardy. He helped make it possible. He can't take all the credit for it. In fact, he can only take about 25% of the credit. Most goes to Chretien and Martin. This is one of the reasons why I 100% believe that Chretien deserves all the accolades he gets, including shiny medals from the Queen. But Harper isn't a villain. All he did was continue down the same path that Chretien had been down.

I agree with that almost totally. The previous Liberal government had good financial policies. They got corrupt, which happens when parties are in too long, be they left or right wing. The Conservatives under Harper, have basically just followed the same policies. Tax cuts, same war in Afghanistan, same... They just get bad press from some, because their wacko element is social conservatives, versus the socialist wacko element of the Liberal party. Much of a muchness though, which is why I think votes could swing to either party, as Ignatieff I don't think, is that different from Harper, despite the rhetoric.

[MrOilers]

Originally Posted by edmonton daily photo

After watching the pasionate eye last night, there are some chilling commonalities between Harper policies and bush policies.

Harper is cutting taxes, but spending more and more and more.

Who is financing our debt? who are we selling our future to? CHina?

I have had it with Harper..

Obama is more like Bush than Harper ever will be.

After slamming Bush for spending too much money, Obama's administration is spending money at a level that the USA has never seen. They even all congratulated themselves with how fast they borrowed and spent it. And they are currently considering yet another stimulus package now.

Historically, whenever the Democrats have the House in the USA, spending goes insane. They only had a surplus when Clinton was President because the Gingrinch-backed Republican House forced limits on government spending in the 1990s. They even proposed an amendment that would have forced the US government to limit spending.

The executive branch (President) in the US government actually has a remarkably small influence on how spending occurs, unlike Canadian Prime Minister. Harper has far more power in Canada than Bush or Obama ever did in the USA, and I think he has done a better job leading our country than Bush and Obama has.

[JasonR]

Originally Posted by MrOilers

Obama is more like Bush than Harper ever will be.

After slamming Bush for spending too much money, Obama's administration is spending money at a level that the USA has never seen. They even all congratulated themselves with how fast they borrowed and spent it. And they are currently considering yet another stimulus package now.

Historically, whenever the Democrats have the House in the USA, spending goes insane. They only had a surplus when Clinton was President because the Gingrinch-backed Republican House forced limits on government spending in the 1990s. They even proposed an amendment that would have forced the US government to limit spending.

The executive branch (President) in the US government actually has a remarkably small influence on how spending occurs, unlike Canadian Prime Minister. Harper has far more power in Canada than Bush or Obama ever did in the USA, and I think he has done a better job leading our country than Bush and Obama has.

People do forget that the Republicans controlled the purse strings when they balanced the budget during the Clinton years. I do, however, think that the stimulus spending was appropriate in both countries.

[raz0469]

Originally Posted by MrOilers

Historically, whenever the Democrats have the House in the USA, spending goes insane. They only had a surplus when Clinton was President because the Gingrinch-backed Republican House forced limits on government spending in the 1990s. They even proposed an amendment that would have forced the US government to limit spending.

I hate to break it to you, but Democrats historically are better stewards of the economy and the budget in the US. All of the biggest deficit spenders in US history, more or less, have been Republican (Reagan, Bush, and Bush The Sequel: More Debt Than Daddy). The only US President to run a surplus in the past 3 or 4 decades was a Democrat.

http://www.washingtonmonthly.com/arc..._05/006282.php

http://currencythoughts.com/2008/08/...an-presidents/

[JasonR]

Originally Posted by raz0469

I hate to break it to you, but Democrats historically are better stewards of the economy and the budget in the US. All of the biggest deficit spenders in US history, more or less, have been Republican (Reagan, Bush, and Bush The Sequel: More Debt Than Daddy). The only US President to run a surplus in the past 3 or 4 decades was a Democrat.

http://www.washingtonmonthly.com/arc..._05/006282.php

http://currencythoughts.com/2008/08/...an-presidents/

I think his point was that it is congress that controls spending. He is correct in that. You do make a good point, though. Republicans love to spend on defense. But per capita, nobody spent like LBJ, a war mongering democrat who made W. look like a peacenick.

[Wayne Smith]

As for proportional representation, that might work if we didn't have a fused executive and legislative parliament. But since we do, it would result in a constant cycle of elections every year.[/QUOTE]

We don't have to resort to unfounded speculation on how proportional representation would work in practice. Proportional representation and minority/coalition government are normal practice in almost all developed countries, and have been for most of the last century.

By and large, in over 80 countries, PR results in stable, effective government, well managed economies, generous social programs, and greater citizen satisfaction with politics and government.

It is important to understand that it is our current, winner-take-all system that gives us unstable minority governments, when it is not giving us corrupt and arrogant phony majorities.

[JasonR]

Originally Posted by Wayne Smith

We don't have to resort to unfounded speculation on how proportional representation would work in practice. Proportional representation and minority/coalition government are normal practice in almost all developed countries, and have been for most of the last century.

By and large, in over 80 countries, PR results in stable, effective government, well managed economies, generous social programs, and greater citizen satisfaction with politics and government.

Many countries that have PR for their legislative bodies have a separate executive branch. In Canada our legislative and executive branches of government are fused into the House of Commons. So minorities result in regular elections. It is this way because the legislative branch can lose confidence in the executive branch. So, if Canada elected the Governor General, and then by association, did away with confidence votes, then PR would work fine.

[moahunter]

Originally Posted by raz0469

I hate to break it to you, but Democrats historically are better stewards of the economy and the budget in the US.

I'm not really sure about that - it is worth bearing in mind that the Republicans tend to be in power in times of war (Vietnam for example, was devastating for the US economy, I seem to remember from economy classes, that it is why the gold standard was dropped).

Clinton was a truly great President who focused on the economy. He benefited from the Regan years, Regan's tax breaks started to pump the economy as part of a natural lag, but even so, he did very well to control spending. He put in place an excellent economic team - even Alan Greenspan (Federal Reserve Chairman), a Republican through and through, said Clinton was the most engaged, and best President, that he worked with, on the economy.

But contrast Clinton with Jimmy Carter. I'm too young to have memories of Carter, aside from the residual lag of the huge inflation and interest rates that dogged the late 70's and early 80's. My fear right now, is that Obama is more like Carter in respect to the economy, than Clinton. I like Obama on non-economic issues, but the economy, I fear, is not his forte. Time will tell though.

[JasonR]

I remember Carter. Nice fellow. Lousy President.

It was the Democrats that got the US into Vietnam.

[Wayne Smith]

Minority government results in quick elections in Canada because we have a winner-take-all system. A small shift in votes can result in a large shift in seats. Every election is a crap shoot. Thirty-eight percent of the votes will get you a "majority" government and unbridled power for five years.

With proportional voting, there is no incentive for quick elections because another election right away will just get you the same result and there are no phony majorities to be had.

[MrOilers]

Originally Posted by JasonR

if Canada elected the Governor General, and then by association, did away with confidence votes, then PR would work fine.

I really, really like that idea.

[JasonR]

Originally Posted by Wayne Smith

Minority government results in quick elections in Canada because we have a winner-take-all system. A small shift in votes can result in a large shift in seats. Every election is a crap shoot. Thirty-eight percent of the votes will get you a "majority" government and unbridled power for five years.

With proportional voting, there is no incentive for quick elections because another election right away will just get you the same result and there are no phony majorities to be had.

I think you misunderstand my meaning. Because Canada has a fused executive (PM and cabinet) and legislative (MPs) branch the executive must keep the confidence of the legislative. It is this mechanism that causes elections in minority situations, not our electoral system. In fact, our single member plurality system allows for majorities with far less than majority support. It is more stable, yet inflates support for the victor.

Removing the confidence mechanism would eliminate the frequent elections. However, if you still had a fused executive and legislative branch, then you would remove the incentive for the executive to work with the legislative (something that naturally goes away with a majority government).

[JasonR]

Originally Posted by MrOilers

I really, really like that idea.

It would work. But remember, there's give and take to different systems. Canada's system is much more efficient than one that has separate executive and legislative branches (USA, France, others). When you separate them, things slow down.

[moahunter]

Originally Posted by MrOilers

I really, really like that idea.

I'd be open to it then as well. Something like single transferable vote could work, with a directly elected President at the top.

PR systems are not a panacea, they bring with them their own set of problems, the worst potential one is stagnancy, sometimes decisions just can't get made. The tail can wag the dog too, my experience is in respect of NZ MMP, where a racist anti immigration party (NZ First), started dictating which party would be in power. There was no way to remove this party, because they had a set base of just over 5% of the population who supported them. These nut-cases, always got represented on the list. I don't like that, IMO all politicians should be accountable to a riding, to keep extremism out of Parliament. The Nazis may never have come to power in Germany, if they had a FPP system.

STV is a bit better though, but its flaw is that if can be too local, local issues start to override national concerns, which can lead to more Pork Barreling. It could work if we had a president at the top, perhaps to offset that. Not sure if worth the effort to change though, Canada's system is doing OK when you consider how strong the economy is right now.

[JasonR]

Concepts like STV and Alternate vote solve the problem of individual candidates getting elected with minority support. They also make for long election nights because counting is slow and prone to error.

Proportional Representation usually means party lists either on a national level or in each province. In that case, the party decides the order of precedence of candidates. You also lose the local representative. That's something that a lot of people find useful when they have issues with the government.

[etownboarder]

Deficits could remain until 2019-20: economist
Last Updated: Thursday, July 16, 2009 | 3:33 PM ET
CBC News

The federal government could wind up running deficits until its 2019-20 fiscal year if it chooses to rely on economic expansion to get out of the red, according to a report released Thursday.

Dale Orr of Economic Insight said the government's current forecast of being out of deficit by 2013-14 is not feasible. Orr expects the country will still be running a $17-billion deficit that year.

Orr said the country's deficits will top $10 billion through the federal government's 2015-16 fiscal year if it opts not to increase taxes or cut spending.

"We tried to grow our way out of deficits before and got knocked off base in 1980, 1981 and it was 1997 before we balanced the budget," Orr said.

"Do Canadians really want to pass on that much debt to their children? This is like a sea-change in Canadians' thinking about deficits from where they were a year ago, and [Harper's] own party's thinking."

Full Story: http://www.cbc.ca/money/story/2009/0...ecade-orr.html

[JasonR]

Wow. It's like a competition to see who can give the gloomiest forecast. If these same economists are correct and we'll see positive GDP growth by Q1 2010, then there's no way we'll still be in deficit 10 years from now.

Not unless the NDP gets power.

[raz0469]

Originally Posted by JasonR

If these same economists are correct and we'll see positive GDP growth by Q1 2010, then there's no way we'll still be in deficit 10 years from now.

I would imagine they have assumed moderate growth to make their calculations, and came to the conclusion that moderate growth won't grow revenues enough to get rid of the deficit without either spending cuts or tax increases. In fact, the article pretty much says so. So what would you like them to do, assume 4% growth in perpetuity?

I'm willing to bet that when we look back in 10 years, the PBO and the legion of private industry economists who have largely agreed with him, will be a lot closer to the truth than what Flaherty and friends are hoping for.

[moahunter]

Originally Posted by raz0469

I would imagine they have assumed moderate growth to make their calculations, and came to the conclusion that moderate growth won't grow revenues enough to get rid of the deficit without either spending cuts or tax increases. In fact, the article pretty much says so. So what would you like them to do, assume 4% growth in perpetuity?

People keep predicting that economies will stop growing at some point, just like people keep predicting the world will end. It never happens though - 3-4% over the long term is probably about right, the idea of long term lower than that is nonesense given the on-going rate of technological change.

[raz0469]

Originally Posted by moahunter

People keep predicting that economies will stop growing at some point, just like people keep predicting the world will end.

Well that's nice. However, the "people" in the article did no such thing. What's your point, exactly?

It never happens though - 3-4% over the long term is probably about right, the idea of long term lower than that is nonesense given the on-going rate of technological change.

No, 2-3% is more reasonable for a developed country, which is what they would have used in all likelihood. And using that, unless spending is reduced or taxes increased we will continue to have a deficit for the next decade using that moderate growth scenario. That's what is called a structural deficit, which the Conservatives will swear up and down we do not have. And that's the point the PBO, TD Bank, and numerous other people have been trying to make.

[moahunter]

Originally Posted by raz0469

And using that, unless spending is reduced or taxes increased we will continue to have a deficit for the next decade using that moderate growth scenario. That's what is called a structural deficit,.

Infrastructure deficit, structual deficit, ... I love the way these terms are "thrown around" to suppport a political view. Yes, moderate growth "could" happen for the next decade. If it does take 10 years to pay off the deficit though, that doesn't neccesarily mean our debt to GDP ratio will increase, as our economy will still be growing. I actually think the tax cuts that are being phased in right now are going to boost the economy much more than this - Canada is setting itself up to be incredibly competitive to the US, with as much as a 10% tax advantage. That means jobs and business will set up here, not there. I'm willing to bet we are out of "current" deficit within 5 years, but time will tell.

What I do know, is last thing we need right now in the thick of a recession, is a tax increase - that really would be a job killer.

[JasonR]

Just remember that these forecasts predict our level of spending to continue on it's present path. It won't. You have to factor in that some of the spending in the last 8 months has been "stimulus" spending and is not meant to be permanent. For example, some of the "economic action plan" includes temporary measures like the home retrofit program. You also have to remember that the government of Canada just dumped a tonne of cash into General Motors. Take these measure out of your future spending trajectory and you don't have a structural deficit.

[raz0469]

Infrastructure deficit, structual deficit, ... I love the way these terms are "thrown around" to suppport a political view.

It's not a political view, it's a fact. The Liberals took most of the 90's to eliminate the deficit, and when the Conservatives took power the country had an annual surplus. Even once the current recession is over, which no one in their right minds would blame on the Conservatives, we will still have a deficit by every estimation except for Flaherty's and the government line (and we can quite easily look back over the past 18 months to see a string of overly rosy forecasts).

The Conservatives in their several years of power have increased spending by something like 6-10% a year. That has absolutely NOTHING to do with the current economic situation. When you pile stimulus spending on top of that, and throw in various tax cuts and credits, you end up with a structural deficit that will take a decade and discipline to eliminate.

If it does take 10 years to pay off the deficit though, that doesn't neccesarily mean our debt to GDP ratio will increase, as our economy will still be growing.

You don't "pay off" a deficit. You budget properly and eliminate it. You pay off debt.

Originally Posted by JasonR

Just remember that these forecasts predict our level of spending to continue on it's present path. It won't. You have to factor in that some of the spending in the last 8 months has been "stimulus" spending and is not meant to be permanent. For example, some of the "economic action plan" includes temporary measures like the home retrofit program. You also have to remember that the government of Canada just dumped a tonne of cash into General Motors. Take these measure out of your future spending trajectory and you don't have a structural deficit.

The forecasts anticipate program spending growing due to population, inflation etc. They do NOT include stimulus spending, or new programs. Unless there are outright CUTS to spending, yes, spending WILL continue to increase as forecasted. So either there needs to be a tax increase, spending cuts, or exceptional economic growth to eliminate the deficit. That's why it is called "structural." You can't easily grow your way out of it.

Again, that's why so many private economists and the PBO are crying foul about our current budget situation. The deficit will not go away in the next 5-10 years without one of the three things mentioned above: tax increases, spending/program cuts, or exceptional and completely unanticipated economic growth.

[moahunter]

Originally Posted by raz0469

The deficit will not go away in the next 5-10 years without one of the three things mentioned above: tax increases, spending/program cuts, or exceptional and completely unanticipated economic growth.

Some economists are predicting exactly that, others are predicting otherwise. I am expecting 3 to 4% growth over the next decade once this "blip" has finished, I think that's reasonable as recessions tend to "overeact" and then there is "catch up" (I already see some "catch up" on my equity investments).

As to spending out of control - that's a minority government. There's nothing the Conservatives can do about that without forcing an election, which will lead to another minority government (maybe a Liberal one that will spend more, or raise taxes killing growth / jobs). I disagree that it is some magical fundamental "infrastructure" deficit that we can't get out of though, anymore than Canada has got out of deficits in the past. When the economy kicks into gear, the surpluses will flow thick and fast again. Most importantly there is nothing to indicate Canada's Debt to GDP is going to get out of control (the US may be in a different position). In a recessed economy, nows not the time to be belt tightening or raising taxes, that's a recipe for depression.

[raz0469]

Originally Posted by moahunter

Some economists are predicting exactly that, others are predicting otherwise. I am expecting 3 to 4% growth over the next decade once this "blip" has finished, I think that's reasonable as recessions tend to "overeact" and then there is "catch up" (I already see some "catch up" on my equity investments).

Developed countries tend to have GDP growth rates of around 2.5%, give or take, over the long term. I don't personally think that it's particularly prudent to budget for our country's spending based on overly optimistic growth predictions. 3-4% growth over the next decade is extremely optimistic.

http://www.tradingeconomics.com/Econ...spx?Symbol=CAD

http://www.indexmundi.com/g/g.aspx?c=ca&v=66

Originally Posted by moahunter

I disagree that it is some magical fundamental "infrastructure" deficit that we can't get out of though, anymore than Canada has got out of deficits in the past.

It's not an "infrastructure" deficit. It is a structural deficit: http://en.wikipedia.org/wiki/Structural_deficit

http://en.wikipedia.org/wiki/Deficit...the_fiscal_gap

There's nothing magic about it.

When the economy kicks into gear, the surpluses will flow thick and fast again.

And that's the problem: a structural deficit means that even if the economy is operating at capacity, government revenues aren't enough to cover spending.

In a recessed economy, nows not the time to be belt tightening or raising taxes, that's a recipe for depression.

No one's advocating either right now. The point I'm making is that the Conservatives have badly mishandled our fiscal policy over the past 3 years, whether as an intentional political tool ("starving the beast"), or because Harper abandoned most of his principles and settled on blatant populism to try to build support for a majority.

[JasonR]

raz, those projections anticipate a trajectory of spending that does take in to account the stimulus spending. It takes our current level of spending and projects it out into the future based on population growth and forecasted GDP growth.

I've seen this game a million times. You give me 5 private sector predictions and I'll give you 5 predictions that will be off the mark by far more than they ever get called on. Is the Finance Minister projecting an overly rosy future? Sure. It's politics. No argument there. But to suggest that somehow the government has engaged in enough non-stimulus spending to drive us into a structural deficit when we were running surpluses with 3% GDP growth only 18 months ago is very questionable, in my opinion. As if to say that if we were not in recession that spending would not be able to increase. It makes no sense.

I don't think it takes a genius to say that spending cannot be sustained at current levels even if the economy were growing by 4%. But the fact is that spending will not continue at current levels because much of the spending in the last year has been temporary or one-time. So when private sector forecasters state that spending will have to be cut, or taxes increased, to get out of deficit, remember that a large chink of the spending of the last year will not be continued over the long term. Now, that's dangerous politically for the government because once you spend it once, people expect it to continue. But it will not continue if the government sticks to the rules they have set out for themselves. Is it possible that they won't act responsibly? Sure.

Take a few things into account. First of all, revenues are down across the board. Personal income tax, corporate tax, GST, all business taxes. This is due to economic slowdown. But the government faces financial pressures of a large nature due to unemployment as well. EI expenditures are greatly outstripping EI premium revenues. And remember, the government increased the benefits for EI on a temporary basis. Also remember that the opposition wanted the government to go much further.

Don't take my word for it. The Department of Finance publishes the numbers monthly in a report called "The Fiscal Monitor". The latest numbers are from March. They can be viewed here:
http://www.fin.gc.ca/fiscmon-revfin/2009-03-eng.asp

Some highlights include:
Personal Income taxes: down 12%
Corporate Income Taxes down 42%
Other Income taxes down 23%
Major transfers to persons (including EI) up 17%
EI Premiums March 2009 1.8B
EI Benefits March 2009 2.0B

edit: Remember that EI deficit when the Liberals and NDP threaten an election over EI this fall. $200 Million in one month. That's $2.4 Billion over a year. So, $2.4 Billion in deficit just from EI alone.

[moahunter]

Originally Posted by JasonR

Some highlights include:
Personal Income taxes: down 12%
Corporate Income Taxes down 42%
Other Income taxes down 23%
Major transfers to persons (including EI) up 17%
EI Premiums March 2009 1.8B
EI Benefits March 2009 2.0B

That sums it up pretty well. With an anomaly like that, it is nonsense to suggest something structural is going on, projecting out this depressed revenue into the future. All of those numbers above will return when the economy turns around. For example, companies are taking a hit now, often intentionally, cutting costs and similar in line with the economy. They will come out leaner and stronger, a lot of dead wood from the bubble is being burned off right now, we can expect a rapid turnaround. The sole concern, being state of US economy and impact of that on Canada (which no Federal government can control or even adequately plan for one way or the other, it is just an unknown right now).

[JasonR]

Originally Posted by moahunter

That sums it up pretty well. With an anomaly like that, it is nonsense to suggest something structural is going on, projecting out this depressed revenue into the future. All of those numbers above will return when the economy turns around. For example, companies are taking a hit now, often intentionally, cutting costs and similar in line with the economy. They will come out leaner and stronger, a lot of dead wood from the bubble is being burned off right now, we can expect a rapid turnaround. The sole concern, being state of US economy and impact of that on Canada (which no Federal government can control or even adequately plan for one way or the other, it is just an unknown right now).

If the government were to spend the same way every year it would indeed be structural. But if we see positive GDP growth next year then we'll be spending less on EI benefits, and generating more tax revenue of all kinds.

[raz0469]

Originally Posted by JasonR

If the government were to spend the same way every year it would indeed be structural. But if we see positive GDP growth next year then we'll be spending less on EI benefits, and generating more tax revenue of all kinds.

So what you're saying is that you're basically taking the government's projections on faith, even though no private economists that I'm aware of have much of any faith in them and in fact have much gloomier forecasts. According to what you and Moahunter are saying, everyone else doesn't know how to make economic and budget predictions except for the Conservatives, even though every prediction and comment they've made on the economy since August 2008 has been completely off the mark.

Makes sense to me, I guess.

All this stuff you bring up, like the one time spending on stimulus and increase outlays for EI etc, is taken in to account by these forecasts. Otherwise they'd be completely useless. Why would private economists from the various banks even bother coming up with these forecasts, if they're so completely useless? And who gave Flaherty the ability to do what no one else can do, and properly take such things in to account with his own projections (that still see us adding 80-100 billion to the debt in the next 5 years)?

[JasonR]

raz, I didn't use any government projections. In fact, I stated quite clearly that the government paints a rosy picture of the future. However, the numbers from The Fiscal Monitor are results, not projections.

The projections made by those who state that we have a structural deficit make the assumption that the level of spending from this year will continue and increase at a rate that they have predicted.

If their assumptions are correct, then we do have a structural deficit. They have stated that without either tax increases or spending cuts we will be in deficit even with economic growth. The reality is that that is correct. However, its underlaying assumption is that the current level of spending will, unless otherwise curtailed, continue. All I'm saying is that that certainly isn't the government's plan. So let's be fair here. Stimulus spending is not intended to be permanent. And outlays on Employment Insurance naturally shrink as you gain employment. So spending will be cut by temporary programs ending, one-time spending not re-occurring, and demand for EI shrinking.

[raz0469]

So you honestly think that TD Bank would issue a big forecast on the economy, and they forgot to take in to account declining unemployment and EI payments, or to not include one-time stimulus spending, and so on?

Again, such a forecast would be laughably useless.

Here's the report, you can see they specifically mention auto bailouts and other "one time" spending: http://www.td.com/economics/special/db0609_fiscal.pdf

[moahunter]

^TD has come out with a very pessimistic forecast, perhaps the most pessimistic of private forecasters. They have basically assumed the worst case scenario. It is a good way to get media attention, which raises the profile of TD Bank economists, be they right or wrong, and the TD brand. That's what economists do, they fiddle the inputs to reach an outcome they want for their employer. There is no objective way to forecast, it is all speculation. TD didn't predict what we are in now 18 months ago when the economy was strong (their forecasts back then were laughable useless it seems), so why should I believe them, or any other doomsday prophets, now?

[JasonR]

Originally Posted by raz0469

So you honestly think that TD Bank would issue a big forecast on the economy, and they forgot to take in to account declining unemployment and EI payments, or to not include one-time stimulus spending, and so on?

Again, such a forecast would be laughably useless.

Here's the report, you can see they specifically mention auto bailouts and other "one time" spending: http://www.td.com/economics/special/db0609_fiscal.pdf

I do think that their forecast is pessimistic. However, I don't think that they forgot anything. They simply stated that at current levels of spending and/or taxation that we will not grow out of deficit. And technically they are correct. However, if the government sticks to their "economic action plan" current levels of spending will NOT be maintained. A fact that was conveniently left out of the forecasts by TD and others.

[JasonR]

Take a look at the results for March 2009 in The Fiscal Monitor.

If you extrapolated the results over a 12 month period, you'd have results that looked like this.

Personal Income Tax Revenue: down $15Billion
Corporate Income Tax down $24Billion

That's a huge decline. Add in $2.4Billion in EI deficit.

Beginning to see where a large portion of this $50B+ deficit is coming from?

[JasonR]

Wow. Look at that. The Bank of Canada has now revised their economic outlook for this year and next year. Previously they forecasted a 3% contraction for this year and 2.5% growth next year. Now they say the contraction will only be 2.3% and the growth will be a full 3% next year. It also stated that the combination of stimulus spending and lower interest rates seem to be working.

Jeez. Who would have thought?

[raz0469]

That's nice. Their latest predictions match fairly closely with the assumptions TD used, save for 2010:

Year TD Bank BoC
2009 -2.4 -2.3
2010 1.3 3
2011 3.3 3.5

So what you're saying is that this latest BoC outlook matches very closely with the assumptions used for TD's report from 7 weeks ago. Jeez. Who would have thought?

[JasonR]

I'd say that there's a pretty big difference between 1.3% growth and 3% growth tax revenue wise. But in any case, my point throughout this discussion is that a large portion of our deficit can be traced back to the decreases in revenues due to economic contraction. The rest has to do with stimulus spending and auto bailouts. The latter cannot be relied upon to be part of the government's spending in future years. The former can be expected to recover sooner than TD had forecasted.

[raz0469]

Originally Posted by JasonR

I'd say that there's a pretty big difference between 1.3% growth and 3% growth tax revenue wise. But in any case, my point throughout this discussion is that a large portion of our deficit can be traced back to the decreases in revenues due to economic contraction. The rest has to do with stimulus spending and auto bailouts. The latter cannot be relied upon to be part of the government's spending in future years. The former can be expected to recover sooner than TD had forecasted.

I acknowledged that there was a significant difference in the forecasts for 2010, however the difference in terms of government revenues would amount to around 3-4 billion (1.7% of 220ish billion).

Even before stimulus spending and the recession, program spending had been rising at 6-10% for the past 5 or more years, basically since Martin and then through Harper. No one's saying that our current budget situation is solely the fault of Harper. However, it's equally disingenuous to claim that it's all the fault of the recession. Harper has exercised little to no spending restraint in his time as PM while also cutting taxes, and that certainly plays a part in our deficit situation.

[moahunter]

Originally Posted by raz0469

Even before stimulus spending and the recession, program spending had been rising at 6-10% for the past 5 or more years, basically since Martin and then through Harper..

You do realize that Canada's population continues to grow, and age (giving rise to more health care), and that we have troops in Afghanistan (will be coming back soon perhaps, a big saving in itself)?

[JasonR]

Originally Posted by raz0469

Even before stimulus spending and the recession, program spending had been rising at 6-10% for the past 5 or more years, basically since Martin and then through Harper. No one's saying that our current budget situation is solely the fault of Harper. However, it's equally disingenuous to claim that it's all the fault of the recession. Harper has exercised little to no spending restraint in his time as PM, and that certainly plays a part in our deficit situation.

If we were running consistent surpluses while increasing spending and decreasing taxes, it certainly is not disingenuous to state that economic contraction and stimulus spending are to blame for our deficit. I've posted the evidence, my friend. Look at the decrease in tax revenues. Look at the increase in EI benefits. Look at the sheer volume of stimulus spending. Now, of course that can't continue, but I don't think you're being fair to Harper or Martin. Canada has massive transfer payment and infrastructure obligations. And Provinces and municipalities have been asking the feds for a greater share of the pie for years. And under both administrations they've been getting some of it. That helps to account for the increases in spending during the good times.

My friend, I'm not saying that Harper (or Martin) is the be all end all or anything. But as somebody who has worked in and around politics for most of my adult life, I just hate seeing partisanship get in the way of fairness. I think that overall, Harper and his government have managed things pretty well. I also think that Chretien and Martin did a great job with our finances.

[JasonR]

Bold claim by the Bank of Canada this morning. According to the, the recession is now over.
http://www.ctv.ca/servlet/ArticleNew...hub=TopStories

[moahunter]

Hmmm, 3% growth prediction? Who else thought that could happen (hint - post 48 )?

The Liberals had better hope this is wrong. If the economy rebounds with vigor, and Canada is the first country in the world out of recessions (looks likely), then its going to be a hard sell that the Conservatives haven't managed the crisis very well.

[JasonR]

They're saying 1.3% growth in THIS quarter! If true, that's miraculous.

[raz0469]

Originally Posted by moahunter

Hmmm, 3% growth prediction? Who else thought that could happen (hint - post 48 )?

The Liberals had better hope this is wrong. If the economy rebounds with vigor, and Canada is the first country in the world out of recessions (looks likely), then its going to be a hard sell that the Conservatives haven't managed the crisis very well.

You said 3-4%. Once again, a developed nation maintaining a growth rate much past 3% for more than a couple years is very rare. This is fact. Furthermore, 3% growth immediately following a recession isn't much to brag about.

Regardless, it's good news that it appears the worst is over. However, don't confuse the economy with jobs. Job losses tend to continue well after a recession has "officially" ended.

If you want to play around with a really neat website that has a ton of stats, not just on economies, I would go here: http://www.gapminder.org/

Pretty cool the stuff you can do with it. But regardless if you look at economic growth rates of Europe and other developed countries, you'll see that average economic growth over the long term tends to be around 2.5%. Expecting 3-4% growth for the next decade in Canada is overly optimistic.

[JasonR]

Of course this all relies upon Carney being correct. If not, his cred is zilch.

[Cal76]

There is a third option apart from majority and minority govt.s It's called a coalition govt. Most countries with parliamentary systems have used it...... think of places such as Australia, India, Germany and France. And no, it is not anti-democratic by any stretch of imagination either and it is perfectly legal. Maybe we should just get used to the coalition idea !

[moahunter]

^Dion as PM? No thank you. Our 3% growth would probably be -1.5% if right now he was trying to tax the crap out of the Oil sands (based on, it seems, faulty data about how damaging they are).

[Marcel Petrin]

Did a search for "Harper deficit structural" and this thread came up.

http://www.cbc.ca/money/story/2010/0...ce-report.html

So the situation has not changed. The PBO (along with virtually every private sector economist) continues to stress that Canada will have a structural deficit absent tax raises or program spending cuts or a miraculously fast growing economy, while Finance continues to claim otherwise.

I'm curious as to what the Conservatives plan on doing to confront this problem. Oh right, we'll have to wait until the end of February since they're on vacay.