ed_rex

Some informal remarks in praise of taxation

Ottawa got a sad bit of news this past Sunday: skating on the Rideau Canal is done for the season.

Had I been the better blogger I promised to be back in December, you all would know that Raven and I have been making use of this, most wonderful, public amenity, the nearly eight kilometre path of pleasure that is the Rideau Canal in winter.

Though Raven was born and raised in a warm clime off the coast of southern China, she has taken to winter like the proverbial Esquimaux, and has thus allowed me the great of introducing her to the joys of ice-skating.

We started off only a day or three after the canal opened for the season, back in early January. I hauled out my hockey skates and we went down the canal and rented a not-too-good pair of figure skates for Raven.

She quickly decided that the pics on the end of such skates are just face-plants waiting to happen and the next time we went out she had on a pair of hockey skates. (Which, I've noted, now seem to be the skates of choice for probably a majority of the women I've seen skating out there; when I was a kid the sight of a woman or girl wearing anything but figure skates would have been shocking.)

I'll spare you tyhe blow-by-blow account of our progress, but suffice it to say that she began as a terrified, arm-clinging newbie, to a relatively confident skater who, last time we went out, soloed for more 400 metres.

We froze on cold days, and sweated through the warm ones, but we made good use of a marvellous public amenity. And Gentle Readers, there were days Raven and I were out there with what must have been thousands of our fellow citizens, making making joy of the hardship of winter on "the world's largest skating rink"."

At no out-of-pocket expense to anyone but those hungering for hot chocolate or Ottawa's famous beaver-tails (the greasy pleasures of which, I am ridiculously pleased to say, I have yet to sample).

And naturally, I'll turn a private joy (and a public one, which is the point) into some consideration of things political. (Sorry about that.)

Ten minutes or so with Google haven't seen me located any official numbers, but blog post quoting an article from the Montreal Gazette suggests the National Capital Commission spent around $1 million anually "for skating purposes".

Though I can imagine — and am sure examples are online for the having — a neo-conservative (or neo-liberal, if you want to wax historically pedantic) argument for the abolition of this "waste" of tax-payers' money, it is precisely this kind of un-quantifiable and, indeed, arbitrarily-defined, public "good" that civilization is for.

I'm sure there are arguments to sell off the canal — or rather, to sell off the right to turn the canal into a skating rink and make a profit in so doing — though I suspect most proposals would leave the canal itself in government hands — a 19th century national defence transportation system is unlikely to be fully profitable in the 21st.

A million bucks might sound like a lot of money — and it is by most individual measures — but it is a very small price to pay for vastly improving the quality of life for a great many of Ottawa's citizens. Human beings are not just economic animals, as some would have it. If we are any one kind of animal at all, we are social animals, and if the benefits of public parks are not easy to quantify only a fool would deny they exist.

So here's to "wasteful" spending of tax-payers' dollars and all the joy it can bring. (And yes, that is me coming to an awkward halt in the video.)

Cross-posted from my blog at Edifice Rex Online.

Cross-posted from my website and to canpolitik. It will also be the lead story in tomorrow's True North Perspective.

Harper's budget both incompetent and dishonest
Ignatief gives a pass to Harper's not-so hidden agenda

The front page of Wednesday's Globe and Mail said it all:

$12-billion in new infrastructure spending, $20-billion in income tax cuts.

If the recent, panic-driven consensus of both liberal and conservative economists around the world is true — that what is needed to stave off the worst financial disaster since the Great Depression is a massive and concerted boost in spending by governments around the world, then the Harper government has just delivered a budget that almost completely contradicts that consensus.

In the midst of bank failures, an international real-estate crash, bankruptcies and layoffs, deficit spending is supposed to provide immediate and concentrated stimulation of the economy. In other words, to create jobs and services that private money is currently unable or unwilling to do, and to do it now.

Canadians all over the country know all too well the results of cut-backs in government spending since the Chrétien government slew the deficit in the 1990s: crowded hospitals, pot-hole riddled streets and collapsing bridges. With or without the current economic shambles, it is glaringly obvious the someone needs to start spending money on the literal and figurative arteries that knit our country together.

Estimating the amount of money it would take to maintain and repair the physical backbone of this country is not easy task, but there is a general agreement that far too much work has been put off for far too long. A CBC news report as far back as 2007 suggested we need to spend $123 billion just to maintain what we have now, never mind building for the future.

In other words, in a time of economic distress, when even the Harper Tories who, only a couple of months back claimed their next budget would see the government narrowly in the black, have accepted the need for a return to deficit-spending, spending a good chunk of that borrowed money on infrastructure seems a no-brainer.

But what does the budget offer?

I repeat: $12-billion in infrastructure spending and $20-billion in income tax cuts! (Which, even worse and as the Globe and Mail's John Barber has pointed out, in this case comes with all kinds of red-tape when what is needed is money spent now.)

Maybe a politically smart move, "giving" tax-payers a $20-billion gift in borrowed money is the Great Stimulus That Isn't. $20-billion sounds like a lot of money — it is a lot of money — but spread out over the entire population it isn't going to repair any roads or sewers, build new transit lines or replace aging buses; it isn't going to stop more bridges from falling down or hire more doctors and nurses.

It will knock $417.00 off your tax bill next year if you're a two-income family with two kids. Enough, maybe to buy a new flat-screen television set, but not enough to fund a librarian at your local public school.

And remember, that tax "saving" is borrowed money. We, citizens and tax-payers, are going to have to pay it back.

This is trickle-down Reaganomics in Keynesian clothing. And since Steven Harper is an economist, he has to know it.

So what is it really all about?

It's the neo-conservative agenda, hidden in plain sight, an ideology-driven attempt to capitalize on the current panic to ensure that, when the recession is over, there still won't be any money to spend on the public good — on the services and infrastructure that even the wealthy need whether they know it or not.

After all, what politician will have the courage to run a campaign two or three or four years down the line saying, in effect, Remember those tax-cuts we gave you at the start of the recession? Well, we need that money to pay that money back — with interest!

No, whatever government comes after this one will find its hands politically tied and Harper knows it. This is his chance to cripple the federal government for a generation.

And what about the Official Opposition? What does Michael Ignatief have to say about it?

Quite a lot, as it turns out. The budget is "far from perfect," it "threatens pay equity for women," it "breaks [the Conservative's] promise to every province from only two years ago on equalization." Ignatief's statement goes on to blame the crisis on "choices made by a government that has systematically mismanaged our public finances for the last three years."

That's quite an indictment. What are the Liberals going to do about it?

Nothing at all, as it turns out.

They're going to propose an amendment to the budget which will, "include a requirement that the Government report back to the House of Commons repeatedly, with the first report being required within 60 days on their progress. Mr. Harper must accept these accountability measures or his Government will fall."

And that's it. A regular "accountability report" to the House of Commons.

Choosing political expediency over the common good, the Liberals are going to go along to get along, preferring a dream of impotent power a year or two down the line to taking a principled stand now.

P.S. A tip 'o the hat to deweyintoronto, from whom I've shamelessly snagged that lovely photo.

If economics is "the dismal science" those MBAs, turned out like so many widgets during the past 20 years, who now control billions upon billions of dollars of investment capital have - yet again - proven to anyone paying attention that a university degree is no proof of intelligence, let alone of wisdom.

Google stock closed down 7%, or $27.75 per share, today.

Why has this happened, I hear you cry. Has Google blown a major investment? Is it being sued for copyright infringement or has it been targetted by US anti-trust investigators?

Er, no.

Well, has another company launched a vastly superior search engine?

No again.

Apparently, Google is "worth" 7% more now than it was this time last night because one of its executives, George Reyes told an obvious truth when asked about Google's prospects for growth in the short-term future. He said that Google is unlikely to continue growing at the pace it has maintened over the past 18 months.

To quote from the CBC's story,

"Most of what's left is just organic growth, which means you have to find ways to grow your traffic," Reyes said. "Clearly, our growth rates are slowing, and you see that each and every quarter."

Reyes later put a more positive spin on his remarks. "I am not turning bearish at all," he said near the end of a 45-minute session that was webcast. "I think we have a lot of growth ahead of us. I think it's just a question of at what rate."

I suppose it proves only that I am naive in thinking that, possibly, some of the traders out there investing your wealth (not mine; I don't have an RRSP to speak of) might have learned something from the last bust following a lunatic boom. After all, it was only 5 or 6 years ago, wasn't it, the last time we all expected economic growth to continue at an exponential rate for, er, ever?

But of course, the market isn't rational. That is, it operates according to certain mechanical rules, but the steering is done almost entirely by (almost entirely) men who are not nearly so clever as they believe themselves to be. And its original purpose - to raise funds for industry and enterprise - has been almost entirely lost in the short-term gambling that is stock trading as opposed to investing.

In other words, the stock market has become a game, a casino, where monomania is not just the rule, it is virtually a requirement. Like a conclave of shamans poking the entrails of a deer with a magic stick, stock "analysts" read corporate pronouncements for their "signals" and then, with a terrifyingly consistent mob-like behaviour, they buy or sell as one man.

Don't get me wrong. Investment is (often) a good thing. Capital liquidity is (often, and within reason) a good thing. But moving investments around like so many poker chips does no good for anyone but the traders themselves, who get a percentage of every trade.

It's time to make the stock market useful again. I just happen to have a Modest Proposal as to how this could be accomplished.

Basically, the idea is a variant of the Tobin Tax, in the economist James Tobin proposed "[a] uniform international tax payable on all spot transactions involving the conversion of one currency into another, in both domestic security markets and foreign exchange markets..." with the goal of discouraging speculation for and against, for example, the Canadian dollar.

I propose something simpler and possibly more radical: A graduated tax on financial gains from stock transactions.

In essence, traders would be punished for making a quick buck in the stock market, rather than investing for the long term. To do this, profits from "stock-flipping" would be taxed at a descending rate.

If one "earns" a profit of $1.00 on a $1.00 investment within one year, the tax would be 100%.

If one flips the stock within two years, the tax would be 75%.

Three years, 50%

Four years, 25%.

After 5 years holding on to the same stock, any profit would be the investors to keep.

What this would accomplish is two-fold. First, it would put an awful lot of stock brokers out of a job and force them to find honest work, while freeing up a good deal of potentially useful investment capital in the process. Second, it would strongly encourage those investors who remain to think about the long-term value of their investments, rather than to focus on their reading of the psychology of the market.

All right. That's it. There are at least two of you (probably) reading this who I know will think this the most stupid idea they've ever heard of. Have at me, kids. But no ad hominen attacks, this time, okay? I really don't like those.