Saturday, March 14, 2015

Only One Answer For All Time


Neo-Liberals have been preaching the same message for over thirty years: Debt -- all debt -- is bad. And they have relied on a well worn analogy. Public debt, they say, is like household debt. But, Scott Clark and Peter DeVries write:

We’ve said it before and we’re saying it again: When a government spends money on infrastructure that will provide services to Canadians for decades to come, that’s not the same as spending the same money on programs and services that only benefit current generations.

Programs and services that benefit people paying taxes now should be paid for by the people using them. But public infrastructure is different. Things like modern transportation systems are going to be around for 20, 30 years or longer, and will be used by Canadians who aren’t paying taxes now but will be in the future. So it’s fair and logical to expect future generations of taxpayers to share the burden — through debt.

And right now the economy reqiures public spending:

Build an efficient new highway system and you increase productivity for trucking companies — possibly earning them a return of five per cent, which is taxed. And given the government can issue 20-year bonds at 2.0 per cent right now, the argument for new infrastructure spending becomes bulletproof: cheap debt for higher productivity and higher tax revenue.

This means that if the federal government spends $5 billion fixing the Champlain Bridge — money which could be borrowed in financial markets on 50-year bonds in the first year of work — the spending wouldn’t show up in the budget until the work is done. At that point, the government would start recording $100 million in new spending in every federal budget for 50 years (assuming the bridge that lasts 50 years), along with the annual interest costs associated with the borrowing. Not really a big deal.

The answer to the problem of debt is the same answer to most of life's problems. It depends. But for Neo-Liberals, there are no extenuating circumstances. There is only one answer -- for all time.


Lorne said...

Therein lies the peril of ideological absolutism, Owen.

Owen Gray said...

It's interesting that some people can only live life in absolutist terms, Lorne -- in the midst of ever constant change.

Anonymous said...


Actually, in some to many cases it is because it is in times of such change that you get this reaction, this need for absolutist certainty, it is a coping mechanism. It is not one I share, but then I've never lived in anything but a universe of probabilities and never certainties, I've always had a hard time understanding those that did, and I'm in my late 40s, not exactly a product of the internet generation.

It is why dogmatic religions and ideologies can have strong appeal for some people, because it acts like an anchor for them, the problem though with that is that it acts much like computer programming, in that if it is something covered by the program the system works, but as soon as anything outside the programming parameters occurs/is involved things go wrong. Of course the preceding is qualified by the rule that generalizations have inherent limits, but it does tend to explain why especially in volatile times you tend to see more of this kind of reaction/behaviour, not less.


Owen Gray said...

Political conservatives tend to be absolutists, Scotian. William F. Buckley's introductory editorial in The National Review proclaimed what he saw as his magazine's mission -- which was "standing athwart history, yelling stop."

None of us can do that. And history proves that -- for the most part -- it's not a good idea.

The Mound of Sound said...

Like the Americans, we're about to get a brutal lesson in our refusal to invest in infrastructure, new and upgraded, that will be needed to meet the impacts of climate change. There have been estimates of up to a trillion dollars for what would be needed to see Canada's infrastructure through this century.

I never forgave Ignatieff for going along with Harper's "put a new deck on the cottage" stimulus budget in 2009. That was the perfect opportunity to create economic activity by investing in major cross-Canada infrastructure projects - roads, bridges, new rail lines, a new electrical grid for the east. Instead they borrowed billions and threw it to the winds.

Owen Gray said...

They're nickel and dimmers, Mound. And they can only think in terms of small change.

Anonymous said...

So why have we not built MagLev Trains yet to solve commuter problems eh?

Done correctly I could go from Vancouver to Toronto in a couple of hours. And not consume diesel fuel.

Why are we wasting our time on dinosaur fossil fuels that are destroying our planet?

Oh sheesh I forgot nobody cares because they all want: The biggest house, the fastest car, the biggest TV screen, the latest and fastest computer [mine is now 15 years of age and works fine] a speed boat an RV and a quad. So now that you are saddled with debt for life you cannot think outside the bounds of your own life and material possessions.

Mogs Moglio

Owen Gray said...

As long as we think in terms of consumer debt to meet our immediate needs, we'll mortgage our futures, Mogs.

The Mound of Sound said...

@ Mogs. As I understand it, maglev is suited to really dense population corridors but is uneconomical to move smaller populations over greater distances. Windsor to Montreal might work.

That said we should be investing in a better cross-Canada rail corridor for freight and passenger transport. Long haul trucking is inefficient and modern diesel locomotives can move tonnage far less expensively, using far less fossil fuel. Trucking should be limited to regional delivery from rail hubs. We really need to come to grips with that.

BTW, the Germans recently came out with a study at engineered obsolescence in major appliances (they don't last nearly as long as they once did) and the number of appliances and electronics that people replace simply to have the latest, shiny thing (about 30% of sales). There's a role for government to play in thwarting our excessive consumption but that would offend their neoliberal ideology. In the end, we all lose.

Anonymous said...

privitize profit ..socialize debt?

Owen Gray said...

Yes and no, Anon. Neo-Liberals believe in privatizing the profits and socializing the debts of the wealthy.

They believe that the debts of everybody else should be privatized.That's what led to the collapse of 2008.

Anonymous said...

@ Mound of Sound,

I beg to differ it a question of using the existing railroad tracks versus putting in MagLev systems they are far less expensive to operate quieter and can move more people and goods. Here:

MagLev's were built for long distance not inter city travel.

They have them in Asia and Europe:


Hugh said...

I agree that infrastructure needs to be kept up.

But the thing with debt is that it seems to keep building up, government and individual debt both.

We are massively in debt, worldwide it seems. We ultimately get to the point where we can't pay the interest.

Huge debt is "sustainable" now because of low interest rates. Central banks are now cramming down interest rates because if they went up massive defaults would occur.

This situation is not tenable in the long term.

Owen Gray said...

That's why low interest rates should be taken advantage of, Hugh. Lots of time has been wasted. Rates won't be at their rock bottom for long.