Tuesday, December 30, 2014

The Conventional Wisdom Is Failing


Our prime minister believes that "no taxes are good taxes." He simply parrots what has been the conventional wisdom for the last forty-five years. But, Alex and Jordan Himelfarb write, the conventional wisdom is failing:

According to the government’s own figures, federal revenue as a share of the overall economy is hitting lows not seen for 70 years. Cash-strapped governments behave as we all do when money is tight, cutting corners and focusing on getting through the day rather than investing in the future — even when this short-termism ends up costing far more down the line. We see this, for example, in crumbling infrastructure as governments put off necessary investments, increasing risks to health and safety, undermining competitiveness and passing on even higher costs to future generations.

We see this as well in the increasing concentration of income and wealth and persistent poverty as tax cuts weaken the programs that reduce inequality and mitigate its consequences — from child care to medicare. Today, fewer unemployed Canadians than ever have access to EI, this at a time when our labour market performance has been particularly shabby. Twenty-five years after our Parliament committed to ending child poverty, shamefully, things are actually worse. And perhaps most worrisome, we start to believe this is all normal and inevitable. Little wonder that trust in government continues to decline and more Canadians are asking whose interests government serves.

Now organizations like the IMF and the OECD are arguing that inequality impedes economic growth:

Over this past year, however, some unexpected voices have started to talk about taxes not as a burden, part of the problem, but as a key part of the solution to our challenges. Even some organizations that have always embraced and promoted the low-tax austerity agenda have started to wonder out loud whether this has all gone too far. The IMF, the OECD, bond rating agency Standard and Poor’s — past champions of austerity — have all published reports this year making the case that the costs of tax cuts now outweigh whatever benefits they were supposed to deliver.

For an economist, Stephen Harper remains breathtakingly ignorant of the latest work in his field. He will run in the next election on a platform of family friendly tax cuts. The myth that he is a smart fellow -- like the conventional wisdom -- is failing.


Dana said...

He's not an economist, Owen. You know that. He's a schlub with a degree in economics. He's never published an economics paper or written an economics article. Please don't perpetuate mythology you know to be mendacious.

Owen Gray said...

I read somewhere that one of the people who reviewed Harper's Master's thesis came away with the impression that its author was an aspiring politician, not an economist, Dana.

Anonymous said...

This is an article, by the lady who apparently invented the term "Petro-states", that is well worth reading, Owen, if you have not seen it yet: http://thetyee.ca/News/2014/12/18/Terry-Lynn-Karl-Interview/

According to her, things will get even more interesting if the price of oil falls lower and stays low. She is suggesting that the states which depend heavily on their petro dollars will have to cut government services, that there could be a major fall in housing prices, and banks could be affected as well. She is saying that would be a recipe for citizen unrest.

Consider that Dear Closet Leader had already spent his cupboard bare before the latest plunge in oil revenues and you can see the fun that is about to begin, if oil prices stay low. Consider also that the oil was priced above $90 per barrel in his budget at the beginning of the year and was then reduced to $81 only in Novemeber. It is of course trading around $53 per barrel. Yet both Dear Closet Leader and his Finance Minister were still insisting that the plunge in oil price would not have a major effect on their balancing their budget.

Harper an economist? Please someone explain to him that Canada, and his glorious Alberta, both have a big revenue problem because this so called economist put all his oily eggs in one basket.

Owen Gray said...

I'm familiar with the article, Anon. In fact, I made reference to it a few posts ago.

It's interesting that the man Harper paints as his arch foe finds himself in the same boat. The two men share more than an oily economy.

Anonymous said...

Flaherty had said. There are the oil and gas robber barons and all of the wealthy barons, sitting on all of the money. That stops the cash flow around the globe. Flaherty said, that is dead money.

However, Harper works for all the wealthy barons. Even bringing over cheap foreign labor, for the robber barons to exploit.

Every time big business lines up at the trough and squeal for more money? Harper gives them another $60 billion in tax reductions.

Owen Gray said...

It's called trickle down economics, Anon -- except the wealth doesn't trickle down.

mogs moglio said...

Dana so true so true...

Pamela Mac Neil said...

The only economics Harper follows Owen is neo-liberalism. Being a true believer facts and reality that economically it does not work are meaningless to him. He has gone rogue in shaping our country into the neo-liberal vision. Creating a market state is hard work!! There are so many services and programs in our democracy that have to be destroyed or privatized. Your one of the bloggers I visit daily, thanks for all you write and have a wonderful 2015.

Owen Gray said...

Strange, isn't it Pam, that a man who calls himself an economist has such little regard for facts and evidence?

Best wishes for 2015.

Steve said...

Owen nothing has changed. Those in power want money. Those with money want power.
John Prine said in this world a long time ago, that common sense does not make sense anymore. That is the world we live in where natural laws like gravity still work as far as I know. Mans laws are all over the map. With enough money and will people will believe deep down to thier souls anything. Reminds me of all religons. Its like when politicians complement each other for having served. One day it was that way, but today its more about how large your snoze is when you belly up to the trough.

There are many wonderful authors out there telling us the truth. Klien, Piekity and Krugman. The problem is that this is not victorian England. Nobody reads, few have the skills to criticaly understand. In the world today there is no such thing as changing ones mind.

But Maybe there is a new baby. Its called Interstellar. Watch this movie its so hopeful it makes me realize we are going forward in time every day, because going backward is not a easy option.

Do not go to the adrees below unless you have seen the movie.


Owen Gray said...

Thanks for the link, Steve. Going backwards -- as much as Mr. Harper might wish to do so -- is not an option.

Happy New Year.