Trudeau's policies hinder economic growth

[Gone_Fishin]

Don't overlook how government policies hinder economic growth

— September 21, 2016


Let’s start with federal policies. The Trudeau Liberals remain committed to a misguided fiscal policy approach that spends borrowed money in the hopes of increasing prosperity. The government itself projects deficits over the next five years totaling $113 billion, but that total could reach up to $200 billion under more realistic spending scenarios. With no end in sight to budget deficits, the government is set to pile on more government debt, increasing uncertainty, burdening future generations, and slowing growth in the process.

But the evidence shows that growing the economy through increased deficit-spending isn’t likely to work. For example, Harvard University professor Alberto Alesina analyzed several cases internationally from 1970 to 2007 where governments tried to increase spending to stimulate growth. The conclusion: “a one percentage point higher increase in the current [government] spending-to-GDP ratio is associated with a 0.75 percentage point lower growth.”

That does not bode well for Canada’s growth prospects, given that the Liberals plan to increase federal spending as a percentage of GDP by almost two percentage points by the end of next year (from 12.9 to 14.6 per cent of GDP).

And critically, virtually none of the debt-financed spending is being used to invest in growth-enhancing infrastructure.

On top of increased spending and debt, Ottawa has hiked taxes on our most skilled and educated workers, resulting in Canada’s top personal income tax rate being second highest in the G7, behind only France. Such high and uncompetitive tax rates discourage people from working, saving, investing and being entrepreneurial—all things that propel the economy forward.

The federal government is also planning to raise taxes on middle income Canadians—contrary to their campaign promise. Specifically, a looming payroll tax hike to expand the CPP will more than wipe out the reduction to the second lowest personal income tax rate, with negative implications for wages, jobs and overall economic growth.

Full report: https://www.fraserinstitute.org/blogs/d ... mic-growth

[LiamHaddock]

But the evidence shows that growing the economy through increased deficit-spending isn’t likely to work. For example, Harvard University professor Alberto Alesina analyzed several cases internationally from 1970 to 2007 where governments tried to increase spending to stimulate growth. The conclusion: “a one percentage point higher increase in the current [government] spending-to-GDP ratio is associated with a 0.75 percentage point lower growth.”

prior to 2007 in other countries didnt succeed so we are doomed here in Canada in 2016.....I'm not to sure about that but hey I'll give JT some more time...

So far so good imo...

http://www.cnn.com/2016/09/20/world/intv-amanpour-justin-trudeau-canada-unga/

While there's a "very real anxiety about the economy, about our job prospects and about security," Trudeau insisted that telling the story of hope and progress is possible by making inclusive growth work for everyone.
This is being done, he told Amanpour, by increasing taxes on the wealthy, through a new child benefit program, and by taking advantage of record-low interest rates to invest in infrastructure.
"These are the things people have been asking for, that we said now is the time to invest in our future."

"And what we're doing in Canada is very much focused on showing inclusive growth, diversity, opportunities for everyone is a path forward, and I'm finding a lot of reflection of the desire for that on the world stage."

Ten months into his tenure, Trudeau is still remarkably popular, with one recent Nanos Research poll showing that 69% of respondents agreed he had the qualities of a good political leader.

Don't worry Justin just needs to spend a few billion more and we will start to see changes... if not atleast it's being spent on noble goals like fighting climate change and peackeeping atleast

[Gone_Fishin]

Inclusive growth? If that's his new buzzword for higher unemployment, higher taxes on working Canadians, and higher debt, then I guess he has succeeded. Sadly, for those of us who actually understand and have training and experience in economics, every move he has made has been bad for working class Canadians.

[LiamHaddock]

Inclusive growth? If that's his new buzzword for higher unemployment, higher taxes on working Canadians, and higher debt, then I guess he has succeeded. Sadly, for those of us who actually understand and have training and experience in economics, every move he has made has been bad for working class Canadians.

My understanding is higher taxes on the higher income workers...taking from the rich and giving to middle class and poor...if your in a higher tax bracket now then I have to assume you are doing quite well financially and if thats the case I appreciate you paying more in taxes...it was log over due... you should feel good you are in a tax bracket high enough that allows you to give back and help out those less fortunate than you and grow our economy and make society better for everyone

[hobbyguy]

The Fraser Institute, as a lobby group, represents the interests of "Wall St.". In essence, primarily the interests of large corporations, and especially multinationals.

The Liberals are attempting to do some minor re-balancing toward the "Main St." economy.

The Fraser Institute only looks at "economic growth" through the flawed lens of GDP growth, and the "this quarter" flawed "share price today" view of "Wall St.". Unfortunately that view has not and will not translate into making things better for "Main St.".

In the simplest example: Oil is at about $45/bbl. If oil rises to $55/bbl GDP will go up. However, that rise in GDP will create very little for "Main St.", as it is not sufficient to pass the threshold where new jobs will be created (most of those would be short term construction) - and it would have no impact on earnings for current employees (except those at the very top where fat bonuses kick in).

I don't really fault the Fraser Institute folks for believing what they say makes sense. They are MBA types, and they are following the "groupthink" of their educations. However, as the leaders in economic theory are pointing out, the old economic theories are no longer functioning. Jeffrey Sachs writes about this, and he identifies six kinds of capital that have to be maximized in order for a country to become more prosperous. The Legatum Institute comes very close to agreement with Sachs with their "Prosperity Index".

While I don't totally buy it, the socioeconomists, like Robert Prechter, identify cycles that explain some of the irrationality of the stock market. That irrationality is related (at least in part) to the "mood" of the country. It makes some sense, although is also a bit narrow. If your employees are really angry with an autocratic management, or demotivated by poor pay (you can not motivate a lot of people with money, but you can sure demotivate them them if you underpay them), then productivity will suffer.

I think the reason that Christine Lagarde is so enthusiastic about the Liberal economic agenda is that it addresses some of the intangibles that lay the foundation for a sound economy. Those intangibles have been ignored for a lengthy period.

http://www.prosperity.com/#!/ This will give you a wider look.

If you take that broader view, then the Liberal policies look decent. However, I would caution that "there is never a shortage of good ideas, only a shortage of good implementations". So we have to see how it plays out.

I would argue that the Liberals, so far, are working on the neglected portions of the prosperity mix. Those will not have "this quarter, or even "this fiscal year" impacts, but down the road will lead to higher prosperity, and from higher prosperity comes a stronger economy.

In that regard, remember what Dick Cheney said, "deficits don't matter"...