We’ve been warned. The BS avalanche is about to happen. The official campaign for the October 19th federal election has begun. But when it comes to economics and finance, the BS meter is going to go off the charts. In fact, it’s already started with certain ads on the air.
Canadians can expect a gold mine of self-serving wishful thinking, misleading statements, and half-baked ideas by politicians and special interest groups. All of this will be based on their undying belief in our stupidity. And sadly there are a lot of people who are determined to prove them right on that score. Media included.
I don’t care which party you support. I’m talking about the consequences of economic and financial policies. My concern isn’t the political parties and their fortunes. My concern is the people. I have no doubt that over the course of the election campaign, there will be lots of opportunity to point out misleading, self-serving or outright ignorant statements.
Let’s set the stage for one of the BIGGIES. That biggie suggests that the Federal Government controls the economy. I cringe when I hear members of the media buying into that nonsense with absurdly naive questions like ’who do you think will manage the economy better?’ You’d think we were electing the Wizard of Oz and somehow going to choose a magician who will stand behind the curtain, pull the levers and PRESTO… the economy is going to grow.
The list is endless, but lets start with three things that are important:
1) The only tools available to the federal government are taxation, regulation and intervention. And all three of these are detrimental to growth in the private sector. Higher taxes always restrict private sector growth in favour of the public sector. Another factor that is consistently misunderstood is that increasing taxes is ALWAYS deflationary. And we are seeing both consequences on display in weak economic growth stats throughout the Western world.
2) The next issue in the parade of misleading statements is that we focus only on the federal government when, in fact, provincial and municipal governments also play a significant role. Any political party can commit to pro growth at the federal level, but they could be sabotaged at the provincial and municipal level. Higher provincial taxes and more regulations in provinces such as Alberta, New Brunswick and of course ONTARI-OWE, are going to have a significant negative impact on economic growth. It doesn’t matter what the Feds do.
3) There are going to be lots of promises by campaigning politicians of government action to create jobs or support specific industries. But what won’t be talked about is the overall impact of taking money from SUCCESSFUL businesses to prop up failed ones. The bottom line is that intervention comes at a cost. If the government is borrowing the money to pay for the intervention, then all it’s doing is taking money from future tax revenues, thereby hurting future economic growth. If it’s using current tax revenue, then it’s impacting spending from both individuals and businesses today.
Here’s the other problem — and again it’s a biggie — and that is that government intervention is almost never motivated by what’s best for the economy. Instead, political considerations dictate where the money goes. Take a look at the numbers just gathered by Sun Media’s Parliamentary Bureau Chief, David Aikin: 84 cheques worth $839 million were designated for Conservative ridings… another $53.8 million for NDP ridings, and $68.6 million for Liberal ridings. Obviously, politics prescribe where most of that money ends up.
Europe’s flatlining growth and massive unemployment are giving us a pretty good illustration how ineffective and dangerous the government intervention and high tax models are. But despite the evidence, I’m always smiling when I see public sector unions who actually believe that governments do create jobs.
Look at France with its big spending socialist government and galactic deficit. And the number of people without jobs has risen 80 consecutive months. But that doesn’t seem to register. Sure the government creates PUBLIC sector jobs, but that comes at the expense of PRIVATE sector jobs as well as economic growth.
But that brings me to the biggest ace in the hole during this election campaign. This one is manna from heaven for parties promising more intervention and more taxation. And that fatal flaw in our collective psyche — which all politicians drool over and count on — is our willingness to forego critical thinking and common sense.
John McKellar
hopenow2004 