[Bruce_the_vii]

Jim Flaherty’s Economics

Finance Minister Flaherty has promised $50 billion of corporate taxes cuts over the next several years, which will all go on the deficit. The claim this will create jobs, encourage businesses to invest in equipment. However the unemployment rate is 8.5% and with growth in jobs at 1.5% per year there will be labour shortages in 2 years – as inflation from labour shortages picks up at around 6% unemployment. This will be met by increased immigration, which will quell the inflation with unemployment and allow the Bank of Canada to keep growing the economy. However immigrants come in families of four, with two children, and the advantage to the Canadian economy of getting larger is the compromised by the increase in dependants. The population gets bigger, costs increase, maybe not proportionally as some government costs are fixed. There is only a small net benefit, a shave. Flaherty intends to squeeze the $50 billion out of this shave to get his money back. This theory on getting his money back by shaving depends on the tax cut accelerating investment by all targeted businesses, which is entirely unlikely. Flaherty is trained as lawyer. These things go on with barely a comment. Probably you and I will be on the hook for another $50 billion.

[CommanderSock]

Not necessarily. Immigration is pegged as a % of the total population, therefore it will remain constant (as expected).

Unemployment will possibly fall, but even with a labour shortage, the increase in wages will be offset by rising prices (inflationary pressure). Purchasing power (real wages) will either remain the same or even fall. This trend should continue well into the 2020s as the labour supply curve remains depressed.

[Bruce_the_vii]

CommanderSock wrote:

Not necessarily. Immigration is pegged as a % of the total population, therefore it will remain constant (as expected).

Unemployment will possibly fall, but even with a labour shortage, the increase in wages will be offset by rising prices (inflationary pressure). Purchasing power (real wages) will either remain the same or even fall. This trend should continue well into the 2020s as the labour supply curve remains depressed.

What you say is generally true. Still I don't see any big payback for cutting corporate taxes. Flaherty will not get credit for cutting taxes with that as he did from cutting the GST 2%. There's no votes in it. This is what goes on in the guys head.

[CommanderSock]

Bruce_the_vii wrote:

CommanderSock wrote:

Not necessarily. Immigration is pegged as a % of the total population, therefore it will remain constant (as expected).

Unemployment will possibly fall, but even with a labour shortage, the increase in wages will be offset by rising prices (inflationary pressure). Purchasing power (real wages) will either remain the same or even fall. This trend should continue well into the 2020s as the labour supply curve remains depressed.

What you say is generally true. Still I don't see any big payback for cutting corporate taxes. Flaherty will not get credit for cutting taxes with that as he did from cutting the GST 2%. There's no votes in it. This is what goes on in the guys head.

Not necessarily a vote winner. I don't like the man, or his policies, but this is an ideologically conservative move and I can't fault him for it. He's doing what a conservative should be doing, cutting taxes and "hoping" for job growth.

[Bruce_the_vii]

The economics is actually hairier than the above. The Finance Minister is attempting to boost growth in the economy which means boosting consumer and business confidence. He has to control wage inflation if the growth materializes. The businesses have to all invest their funds from the tax break, that is the cut has to be efficiently translated to investment, but they will borrow heavily at the bank on their cash investment so there will be this multiplier. The total boost in jobs has to be very large because tax federal tax revenues are only 17% of the GDP, of the boost, and the increase in tax revenues has to cover (1) the cut to revenues made, (2) the $50 billion payback with interest and (3) the surplus that makes it worthwhile. The tax cut is some 3% of profits, and it has to do all this.

[sandorski]

Bad idea. The Deficit is more important than Tax Cuts. Get the Deficit under control and eliminated, then Cut Taxes with the Surplus. This shouldn't even be up for discussion. We have our own history of great success on this, yet he wants to follow the US path of failure.

WTF?

[Bruce_the_vii]

Harper got into power by defeating Paul Martin with some strategy. He canceled the billions for native Indians Kelowna accord in favour of a tax cut for the citizen voters, the GST penny. It worked, so good for him. Now he has gone off and cut taxes for corporations, which Joe Voter won't see. There's no strategy there. I don't get it. Nothing going on in Ottawa.

[Lemmy]

sandorski wrote:

Bad idea. The Deficit is more important than Tax Cuts. Get the Deficit under control and eliminated, then Cut Taxes with the Surplus. This shouldn't even be up for discussion. We have our own history of great success on this, yet he wants to follow the US path of failure.

WTF?

You're ignoring the Laffer Curve. Tax cuts can lead to greater tax revenues being generated, depending on where we are on the Laffer Curve. Canada is on the downslope of the Laffer Curve now, meaning that cutting tax rates in Canada would generate MORE tax revenue, bringing those surpluses sooner. But you're absolutely correct about deficit. The budget is out of control.

[sandorski]

Lemmy wrote:

sandorski wrote:

Bad idea. The Deficit is more important than Tax Cuts. Get the Deficit under control and eliminated, then Cut Taxes with the Surplus. This shouldn't even be up for discussion. We have our own history of great success on this, yet he wants to follow the US path of failure.

WTF?

You're ignoring the Laffer Curve. Tax cuts can lead to greater tax revenues being generated, depending on where we are on the Laffer Curve. Canada is on the downslope of the Laffer Curve now, meaning that cutting tax rates in Canada would generate MORE tax revenue, bringing those surpluses sooner. But you're absolutely correct about deficit. The budget is out of control.

I am ignoring it. It's bunk.

[andyt]

sandorski wrote:

Lemmy wrote:

sandorski wrote:

Bad idea. The Deficit is more important than Tax Cuts. Get the Deficit under control and eliminated, then Cut Taxes with the Surplus. This shouldn't even be up for discussion. We have our own history of great success on this, yet he wants to follow the US path of failure.

WTF?

You're ignoring the Laffer Curve. Tax cuts can lead to greater tax revenues being generated, depending on where we are on the Laffer Curve. Canada is on the downslope of the Laffer Curve now, meaning that cutting tax rates in Canada would generate MORE tax revenue, bringing those surpluses sooner. But you're absolutely correct about deficit. The budget is out of control.

I am ignoring it. It's bunk.

It's a misspelling - his name was actually Laugher, owned a joke shop. But don't tell Lemmy, he'll call you a troll.

[Lemmy]

sandorski wrote:

I am ignoring it. It's bunk.

Then you have no credibility on the subject of economics.

[ASLplease]

anytime a topic of economics leads to a Bruce the 7th thread, the results and conclusions are always same....immigrant taxi cab drivers are ruining the neighborhood

[2Cdo]

Lemmy wrote:

sandorski wrote:

I am ignoring it. It's bunk.

Then you have no credibility on the subject of economics.

Your post has 5 more words than neccesary to describe "Mr Fail".

[sandorski]

Lemmy wrote:

sandorski wrote:

I am ignoring it. It's bunk.

Then you have no credibility on the subject of economics.

O'rly?

[Bruce_the_vii]

ASLplease wrote:

anytime a topic of economics leads to a Bruce the 7th thread, the results and conclusions are always same....immigrant taxi cab drivers are ruining the neighborhood

That's true. Actually I also talk about the hidden unemployed.