Economic Plain Talk

I sure as hell am no Economist, nor am I some Corporate Executive or Union Boss. I am just a writer of gay fiction, married and living with Mother. Sounds odd, but she is 90 and both David & I take care of her. No Institution for us, even if it was something we could afford.

We are a three income family, and frankly we do okay. I mean we aren’t getting tons of calls to pay our bills, our Hydro, Phone, Cable bills are all current, and there is food in the house, and the Rent is paid on time each month. So I suppose you would call us ‘comfortable‘.

However, that doesn’t mean it is a bed of roses, or that we are immune from the reality of living in today’s world. Something I honestly think most politicians haven’t a clue about.

Seems to me that if you keep on trying to fix things, using the same piece of tape or bandage, you are doing more harm than good. Doesn’t make sense to keep on using an old bandage over and over again, specially when it infects the wound each time you do use it, but that seems to be the way our Leaders do things. They don’t look for new ideas, but keep on using the same old dirty bandage, to fix a wound that just seems to get worse and worse.

Tax Cuts

tax cut hysteriaI really wonder, what is it about Tax Cuts that gets Conservatives grinning & elected? I mean is it because with each tax cut they make, they get larger campaign contributions from Big Business?

Increased spending has the same effect on the Liberal side of Politics too, so what is it?

So what is the big draw that the electorate has when Politicians promise tax cuts? After all it did get George Bush elected to office back in 2000.

Plus, it isn’t like any of these so called ‘conservatives‘ actually spend less, though they do tend to cut a lot of important programs, in order to pay for the tax cuts they give. I mean look at Bush’s recent Budget, some 3.1 Trillion Dollars, that increases defence spending, while cutting Medicare.

Stephen Harper, just like his hero George Bush, offered us lots of goodies, including Tax Cuts. (same tax cuts that he scorned, in bringing down the Martin Government a few years back) Didn’t see the rebates though, even though it was a real possibility at the beginning. However, still Tax Cuts seems to be the order of Government, and I find it really does nothing for me.

It doesn’t make me go out and buy new things. It sure doesn’t cut down on the Electric Bill, or on the Rent either. Sure as hell doesn’t make it cheaper to go grocery shopping. So what good is it? Does it help you, because it sure as hell doesn’t help me?

If the goal of tax cuts is to help business improve its bottom line, okay, it does do that. I mean while the end user price isn’t dropping, Corporate Profits are rising, but I suppose that is good news. Not for you or me, but sure is for the Party that gave them those tax breaks. It gets them more campaign funds, and it does improve the quality of life for their workers. Course, those workers are actually Overseas, so it doesn’t really help us, and then too, does it even help them? Somehow I don’t think the average worker in the Mattel factories in China are getting more money, nor are they getting better working conditions, but hey the CEO’s are getting some nice fat bonus cheques.

I have been working since I was eleven years old. I have made some mistakes, lost a business or two, out of my own stupidity, but I know that no tax breaks ever made me buy new equipment, never made me hire new staff. Now I never ran a multi million dollar business, but I know that it is the small businesses, the Mom & Pop operations, that create the most new jobs. Plus, they are the jobs that last longer. So if the Tax Cuts aren’t geared for those type of business, what good are they?

Okay so maybe you aren’t a big business, but you earn a nice hefty salary working for one. Do the personal tax cuts for you, help? I mean let’s be honest here. If you have an annual income of over a few hundred grand each year, does getting a cut on your taxes make you run out and spend some money? I mean how many hot tubs can you have? Or will you buy a new stainless steel fridge? I kind of believe that you won’t, so why then should you get a tax cut?

So, if you are well have, have a substantial disposable income already, will the Tax Cuts encourage you to buy more, or will just pack up the bags and go travel Abroad?

If the goal of a tax cut is to spur retails sales, why is it that those who have the most, are expected to get the most cuts, and go shopping? They already have the latest Flat Screen Television set, if not several, and the latest SUV, so why give them the lion’s share of the tax cuts? Shouldn’t the goal be to give it to those who need it more?

Like the single mom who needs daycare? Or how about the struggling family who is desperate for a new washing machine, but both parents work at barely above minimum wage?

Now even if that was to happen, would it generate a massive splurge in shopping? Somehow I really doubt it, because people who need it, are going to use it for things that take priority. Like paying down the Credit Cards or maybe adding something to the Mortgage Payments that are behind? And if they don’t have that headache, they are more than likely to put some aside for retirement, or for the kids college education, if they have any.

So again, can someone tell me why Tax Cuts are the preferred way to stimulate an Economy?

I’ll grant you that it does get more investors buying stocks, and the financial markets go up, but it doesn’t make your mortgage payment go further, it doesn’t reduce your credit card debts, so does it matter?

Tax Rebates

I love this one. I mean here comes the Government, giving me back some money, money I already paid them. I mean come on, it isn’t like they get the money from those Corporate Executives and their Multi Million Dollar bonus cheques, nor is it from the Unions who can spend millions of worker dollars on campaign advertising. It is the money we pay them, and they are kind enough to give some back.

George Bush and the US Congress is about to deliver about $ 600 for a hundred plus million citizens, in an effort to give their economy a boost. They hope that the people getting this money, which will be borrowed from China (most likely), will give retail sales a much needed boost. In doing so, it will spur business to hire more workers, and buy new equipment from the quick boost of sales.

I have been in business, quick spurts don’t go getting me hiring more employees, nor did it get me buying new equipment. It did let me order more inventory that was selling, did let me bring down my payables, but that is all it did. So how does Bush & Harper believe a one shot boost is going to get business to invest in new employees?

The concept is flawed.

rushing to spend rebatesPeople who need the cash, are not going to rush out and buy a new car. Like $ 600 would get you a car? They are not going to go buy a new dryer, a new dishwasher either. These are people who have bills, who have pressing expenses such as feeding their families, or buying medication, which is also why they are up to their necks in credit card debt.

Most people who get a rebate will spend it on debt, or save it for a rainy day. The vast majority will not rush out shopping. So the spill over effect of spurring sales is false, and yet that is what the Politicians seem to believe in. Now, who in hell is giving them this stupid crap? Could it be Big Business? You know, the one’s who fund their political campaigns?

I mean look at how much the Oil Industry has contributed to both Bush & Harper. Then take a look at the price of gas at the pump, or the price of heating oil. Do you see it going down when the price per barrel goes down on those markets? I don’t, in fact I don’t see it going down but up at some times. Like we had gas go up when the price per barrel went down. Yet is the Government investigating or threatening regulation?

Every quarter, while some companies like Banks, Mortgage Firms, or Retail corporations are reporting losses, the Oil Industry is reporting RECORD PROFITS. Kind of tells you something, doesn’t it? Kind of also shows why the price at the pump is not going to go down, specially when you start looking at how much is spent by these Oil Companies on political campaigns. Right Stephen Harper?

Heating Subsidies for Seniors, for the Poor, wasn’t even a thought in the Bush package, nor is it one being thought of in our own budget. And yet those are the areas where Government needs to step in and help, not in bailing out greedy Mortgage Brokers, who lie, steal. Adding regulations, to insure that business deals honestly with the public are needed, not ignored or discarded. The entire mortgage debacle in the USA is about a lack of regulation and greed. Yet the solution is to give tax cuts & rebate cheques.

Makes no sense.

housing crisisWhile Canada is not in the same boat as the United States, yet. It could be. I mean housing starts are down here, and prices are inflated. The same thing can happen here, but the Conservatives aren’t interested in looking at tweaking regulations, but are about removing them. The mantra that the Market Place will adjust, will make the necessary corrections is bullshit. Would you put a fox in charge of protecting the chickens?

Yet that is what Conservative Governments under Bush & Harper prefer to do. They both expect Big Business to reduce profits, to insure consumer safety, to cut profits to insure jobs are kept here, not overseas. Frankly that isn’t just naive, but STUPID.

Now I don’t know, but it seems to me that too many of our Political Parties are looking for money more than they are looking at Serving. I mean rebates, tax cuts, are gimmicks, nothing else. They are at best band aids for serious cuts, and instead of using a fresh band aid, these tired old hacks are using old and well worn solutions.

I suppose it is one reason why I perked up a little when I heard about the Liberal Leader, Stephane Dion, talking about Infrastructure Funding.

Infrastructure » the underlying structure, that supports the main building or organization. Roads Bridges, Rails, Utilities, that all are essential to support Industry, which in turn supports the people of a society. (source – Wiki)

Infrastructure Funding

Now I know, the Conservative types will call this ‘make work‘ projects, and for the most part they have totally ignored these type of solutions, but I wonder if it isn’t time we tried them again? I am not saying we put a pile of bricks somewhere, then hire people to move it to another spot, then hire others to move them back.

The concept is similar to what FDR proposed during the Depression1. While it wasn’t the best solution, still isn’t, and a World War did come around to help end it, it is still a better solution than Tax Cuts & Rebates.

“We need to guard against the possibility that our children will inherit a crippling infrastructure deficit that includes crumbling bridges, leaky water pipes and insufficient public transit,” Dion said in a speech at a Federation of Canadian Municipalities conference. (source – CBC News)

What has me interested, is that this is a different approach, that hasn’t been tried for some time, Plus it makes sense in more ways than Tax Cuts do. I mean the infrastructure just isn’t drain pipes, sewers, or bridges & roads either. It is about Public Transportation, about Rail & Air routes.

In discussing the choices between all of these options, it is the infrastructure that creates the long term jobs, the high paying jobs that we need. It keeps people at home, working, instead of shipping them off overseas. I mean the more we build our highways, improve our bridges, the more skilled labor we will need. The more we improve public transportation, so that it is efficient and affordable, the less harmful emissions will pollute the air, and the less dependent we will be on fossil fuels.

Now those make sense.

«I mean we can always build a new bridge after the old one collapses. After all, it will only cost a whole lot more money to do, and then too, it will possibly have decreased the population some too.» Or we can be truly conservative, by spending the least amount of money required, by fixing the problem now, before we have to spend ten times the amount, than it would cost now.

That is being truly Fiscal Responsible, in my book. And that is being a True Conservative as well, not what Stephen Harper & his Hero George Bush have turned conservatism into being.

“This may be one of the most significant federal policy announcements of the last decade. It is bold, and it is visionary, with the potential to change the face of our country.” (source – CBC News)

While Mr. Dion talks about using surplus funds for this approach, I would like to see it go further. I mean the issue is critical now, and I think we do need to spend the bucks now, before the costs skyrocket. I also believe that we need to examine the whole concept of rebuilding, to an eye of making it last.

A well structured year by year building program, addressing the critical infrastructure issues, is essential to spur not just economic stability, but growth. It has other spin offs too, in that it generates interest in fields that are slipping out of the focus. By that, I mean that if there aren’t jobs in specific sectors, then the youth aren’t going to be attracted to learn those fields, whether as an apprentice or as a University Course.

I mean who wants to spend years learning something that you won’t be able to use to make a living at?

That is why Science & Math is in decline, because the future application is dim. A solid Infrastructure Plan will help spur interest in those fields, so we have to insure that when they do come out of school, the jobs are still there. To me, this plan goes a step forward, but we also need to address our failed Trade Policies. Like those implemented by Stephen Harper’s good buddy and mentor, Brian Mulroney.

However, that is another topic.

Nations survive tough times, when they have something to fall back on. If we learned anything from the Depression Era of the thirties, it is that we spent way too much energy on the Stock Market, on the phony wealth generated by hype. The Stock Market isn’t about reality. I mean come on, do you really care if General Motors had a bigger loss than expected or a better profit than projected?

The whole Mortgage Crisis in the United States is a paper nightmare, generated by the greed of those trying to appease the gurus on Wall Street. This isn’t about real life, but its impact is killing the Middle Class. So a plan that takes things out of their hands has to be good. A plan, such as one that builds our infrastructure up, and ignores the advice of Wall Street has to be preferred.

failed policies of tax cuts, rebatesWhether we like it or not, we are in an economic decline. Tax Cuts, Tax Rebates, are failed policies, while a plan that improves the Infrastructure is something different, something fresh. I don’t know, but I’d rather start looking at New Ideas, than at Failed Ones.

Quick fixes are fine, to stop the bleeding, but you need more. The cut is still there, what caused the bleeding is still there, so after the quick fix, we need to heal the wound, to prevent the bleeding from returning. Tax Cuts & Rebates have been used now for decades. Yet the problem, the bleeding, keeps on coming back.

Isn’t it time to stop the bleeding from returning?

Isn’t it time to start healing the wound, not just covering it up with old bandages?

(1) Depression / Recession » When an economy slows down and its GNP is in a negative or decline, for a period of time. Basically when jobs are lost, inflation is rising, or prices are falling but not costs. Recession is short term, Depression long term. (source – Wiki)