Source: Bureau of Economic Analysis, Credit Suisse

she highlights the fact that an increasing amount of  wages as a percentage of income are no longer coming from income earned through work, but from entitlement programs, or what she calls, “transfers.”

Catherine is correct to use the term “Dependence Economy”. I’d like to take her point one step further by linking rising deficits with persistent unemployment. CEOs claim they’d invest more in America if tax rates were lower. Don’t buy into this canard. Although the U.S. has one of the highest headline corporate tax rates in the world at 35%, thanks to loopholes effective tax rates are among the lowest in the developed world. How much lower do we have to go before CEOs invest in America?

The real reason that CEOs aren’t investing in America is because of something so massive they don’t even mention it- fiscal adjustment costs. FACs are off-balance sheet liabilities on every company and household balance sheet. As the probabilities of crisis-driven spending cuts and tax increases rise, companies will take protective action, and in fact many are already doing so. They want to minimize their U.S. footprint, so they invest abroad in fiscally sound countries and don’t create jobs here.

Putting in place a credible plan to tackle the deficit will reduce the FAC burden on companies and reduce the fiscal risk associated with investing at home and creating jobs here. That means Americans will rely less on transfer payments. That means we get a virtuous circle to reverse the “Dependence Economy”.

Thanks to these nontaxable transfer payments, which include Social Security, Medicare, Medicaid, health insurance, unemployment, welfare and disability benefits, inflation-adjusted personal income per capita rose nearly $2,200 since 2000, despite America’s worst economic recession since the Great Depression.

But when growth in transfer payments and employer-paid benefits are excluded, U.S. taxable income per capita actually decreased 3.4 percent from $32,403 to $31,303, says economist Don Grimes of the UM Institute for Research on Labor, Economics, and the Economy.

“Last week, the Bureau of Economic Analysis released preliminary personal income statistics for all states and the data shows that personal income per capita in the United States increased,” Grimes said. “But, why don’t we feel better off? Because the personal income per capita data includes ‘spending’ that we don’t recognize as contributing to our economic well-being. Most people are not going to feel better off if their employer has to pay higher health insurance premiums, even if to government statistics experts it is the appropriate way to measure our well-being, which strictly speaking it is.”

Grimes analyzed personal income statistics — both taxable and nontaxable — in the United States going back each decade to 1929. He adjusted the data for inflation and population, and categorized taxable personal income into major component parts: private sector wages and proprietors’ income; government wages; and dividends, interest and rent (capital income). 

The disparity between the growth in taxable and nontaxable income since 2000 is not new, although it was undoubtedly exacerbated by the recession, Grimes says. In the last 50 years, inflation-adjusted taxable income per capita has doubled ($15,368 to $31,303), while nontaxable income per capita has increased six-fold ($2,007 to $12,528). In 1960, we had taxable income of $14.58 for every dollar of transfer payments, but by 2010 the ratio was down to $4.21 of taxable income for every dollar of transfer payments.

Grimes said that in 1929, the year of the stock market crash, taxable income accounted for 98 percent of adjusted personal income, while nontaxable income was just 2 percent of adjusted personal income. By 2010, taxable income had fallen to 71 percent of adjusted personal income and nontaxable income had risen to 29 percent of adjusted personal income. 

“This 80-year-long trend is unsustainable and is now reaching the breaking point,” Grimes said. “Between 1929 and 2000, we were able to sustain the growth in transfer payments by increasing the tax rate on higher and higher levels of taxable income. So long as taxable income per capita was increasing, there was a social consensus, more or less, that we would share an increasing proportion of earned income with people collecting transfer payments.

“But, after 2000, taxable income per capita not only didn’t grow, it actually declined by 3.4 percent. At the same time, transfers per capita increased 53 percent or $2,567 — the largest dollar increase ever recorded. It would have taken a massive tax increase to pay for the additional transfer payments. 
 
“Instead the Bush and Obama administrations cut taxes, but that still left after-tax ‘taxable’ income only slightly ahead of where it was in 2000. Thus, the federal government had to borrow money to accommodate the growth in transfer payments and, to a much lesser extent, wage and benefit payments to government workers.”

Grimes says the good news is that the current economic recovery will help correct this imbalance as it will increase private wages and salaries, proprietors’ income and capital income per capita, the ultimate source of all other income. It also will help reduce some transfer payments that respond to the business cycle, such as unemployment insurance, food stamps, welfare payments, and other income support programs — which only accounted for 16 percent of transfer payments in 2009. 

“On the other hand, Social Security, Medicare and Medicaid accounted for 73 percent of transfer payments, and these programs will continue to grow, probably at an accelerating pace because of the aging of the baby boomers, unless there is a major policy change,” Grimes said. “The benefits from the economic recovery will simply not be enough to correct our fiscal imbalance.”

Grimes says policymakers face hard choices between raising taxes or cutting transfer payments and government activity.

“Even if we increase taxes, the hard truth is that the growth in transfer payments is unsustainable,” he said. “At some point in the very near future, the growth in transfer payments will have to be limited to being no greater than the growth in ‘taxable’ income, which will be painful for those collecting transfer payments. The alternative is sharply and continuously increasing taxes on all of the working population.

“The best news is that in 20 years, almost everyone will have a higher income. The policy question will be how to distribute those gains between people collecting transfer payments and those paying for transfer payments.”

Tables showing distribution of personal income in the United States and Michigan since 1929 are available at http://ns.umich.edu/Releases/2011/Mar11/personal_income.xlsx.

The principle of equalization is a fundamental part of the Canadian way. At its most basic level, equalization promises that kids in Brandon, Manitoba can attend school systems as good as those in Vancouver, or that a sick child in Moncton, New Brunswick will be able to get the same quality of medical care as the one in Oakville, Ontario.
Equalization is an expression of Canadians’ commitment to the principle that all of us, wherever we live, should have full access to the benefits of Canadian citizenship and equality of opportunity.
According to our Constitution, the federal government is required to make equalization payments to ensure that all “provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation.” Over the life of the program, it has redistributed $267 billion, mostly from Canadians in Ontario (and Alberta) to the governments of other provinces. Few question the rationale for the program.
However, given the magnitude of the redistribution, it is surprising that the federal government has never sought to assess whether in fact provincial governments have sufficient revenues to provide reasonably comparable levels of public services. Canadians simply do not know how we are performing against this constitutional principle. This has allowed some provincial governments to use the program as a platform for extracting more and more revenue from Ottawa.
Many provincial governments see equalization payments as entitlements and their demands for “more equalization” are now permanent features of their relations with the federal government and the rest of the country. Unfortunately, they are often rewarded for making ever-escalating demands – even though they may have no evidence to back up their claims that more equalization is needed.
The funds to satisfy these demands do not magically grow on trees. They come from the general tax base of the federal government and Ontarians pay a disproportionately large share of that bill.
The fact that Ontario has received a small equalization cheque in the past two years doesn’t change the fact that Ontarians still pick up the tab for the lion’s share of inter-regional redistribution in Canada, even at a time when the Ontario economy and many Ontario businesses face real challenges.
The politicization of the program by many governments outside Ontario is tragic. The commitment of equalization speaks to what is best within Canadians and expresses our desire to share good fortune across the country; the politicization of the program speaks to what is
worst about our regional politics and has compromised a key principle of our social contract.
We need to return in Canada to principle-based federal fiscal transfers that ensure that all provincial governments are able to offer their residents good quality public services at comparable levels of taxation. That means that the way federal fiscal transfers are calculated needs to adjust to the changing economic capabilities of various provinces. The work of David MacKinnon, supported by the Ontario Chamber of Commerce, is an important attempt to engage in that principled dialogue and discussion.
MacKinnon and the Ontario Chamber of Commerce have been working tirelessly on these issues for many years and they continue to focus
on the key question – do all provincial governments have the fiscal means to offer comparable levels of programs at comparable levels of taxation? The Ontario Chamber of Commerce paper finds that the answer is ‘no’ – that it is in fact the less prosperous provinces – due to generous federal fiscal transfers – that have more fiscal means than Ontario.
Some will no doubt question this conclusion, but this paper has the courage to conduct this analysis and present its data for others to judge. It should be equally incumbent upon critics – including the federal government or other provincial governments – to present their data as openly and subject it to the scrutiny that David MacKinnon and the Ontario Chamber of Commerce are prepared to face.
Let the debate begin!

Matthew Mendelsohn, Director
Mowat Centre, School of Public Policy and Governance, University of Toronto
(Former Ontario Deputy Minister of Intergovernmental Relations and Associate Secretary of the Cabinet)

By Livio Di Matteo

Transfer payments from Ottawa to the provinces have been a feature of the Canadian federation since 1867. Federal transfers began with the Dominion subsidies that provided the provinces with a per-capita payment that essentially acknowledged the new federal government’s stronger tax base. Since then, transfers to the provinces have grown, with the creation of Equalization in 1957 and then health transfers as a result of the Medicare Act of 1966.

Today Ottawa transfers about $56-billion to the provincial and territorial governments, the three main provincial transfer programs being the Canada Health Transfer at $27-billion, the Canada Social Transfer (for child, post-secondary education and social programs) at $12-billion and Equalization (funds for those provinces with a weaker fiscal capacity) at almost $15-billion.

Equalization payments were recently reformed with a new funding formula, but attention is now shifting to health transfers, as the generous funding provisions of the Health Accord reached in 2004 will expire in 2014. The Canada Health Transfer to the provinces has grown from $20.3- billion in 2005 to $27-billion in 2011 — an annual growth rate of nearly 6%.

Given the recent recession and the slowdown in economic growth combined with large federal deficits, the odds are high that the growth rate of these transfers will be circumscribed. However, public health spending over the last five years has grown at a rate of just over 6% annually. Needless to say, there will be a scramble to curtail health costs should health transfers not continue in a manner the provinces have grown accustomed to.

However, the situation is more complicated than that because the federal government not only transfers money to provincial governments but it also transfers money to individuals via income support programs and to bond holders via debt interest payments. Indeed, the role of the federal government over the last 50 years has morphed into a giant check-writing agency. In 2009, along with sending $56-billion to the provincial and territorial governments, it also sent $69-billion to persons (e.g. Old age security, guaranteed income supplements) and another $29-billion to Canadian bondholders as debt interest payments. As a result, almost 60% of federal expenditures is now transfers of one type or another, with the other 40% going to the provision of public goods and services that we usually associate with government. In the early 1960s, the division was the other way around.

If one looks back over the last 20 years, one sees that the share of federal spending accounted for by transfers to persons has stayed approximately constant at 25%. After declining in the 1990s, the share of federal spending going to provincial and territorial government transfers has grown from 14% to about 21%.

Meanwhile, the share of spending going towards debt service dropped from a peak of 30% in the mid-1990s to about 10% at present. The federal fiscal dividend from its balanced budget and the lowest interest rates in 40 years went to increased provincial transfer spending as well as some tax relief at the federal level. Since 1990, total federal transfers to the provinces have grown by 140% while total federal spending has only grown by 79%.

However, the federal government again has a deficit and mounting debt and debt service costs. Maintaining the growth rate of health and other transfers to the provinces at the rates of the last decade will be much more difficult if interest rates begin to spike upward. Servicing the growing debt will require either cuts to transfers or cuts to programs and services. The calculus is bleak.

Given that transfers now make up the lion’s share of federal spending, transfer reductions will also make up the lion’s share of federal spending restraint. What transfers to reduce? It won’t be debt interest unless Canada decides to make history by joining the international list of sovereign defaulters. That leaves transfers to persons and transfers to other governments.

If the federal government must choose between affecting voters directly via cuts to personal transfers or indirectly by hitting their provincial governments, then the choice is obvious. The provinces are heading towards transfer restraint.

Livio Di Matteo is professor of economics at Lakehead University.

Issue: Bill 101
Bernier Position (Feb 2011): “We don’t need Bill 101 to protect the French language.”
Conservative Position: “Taisez-vous!”

Issue: National Securities Regulator
Bernier Position (Jan 2011): “I personally believe that securities regulation is a provincial responsibility.”
Conservative Position: Jim Flaherty has spent the better part of the past three years arguing for a national securities regulator.

Issue: Cutting transfer payments to the provinces
Bernier Position (Oct 2010): “Instead of sending money to the provinces, Ottawa would cut its taxes and let them use the fiscal room that has been vacated.”
Conservative Position: When it comes to government, the bigger the better.

Issue: Federal government intervention into provincial areas of jurisdiction.
Bernier Position (Oct 2010): “The federal government today intervenes massively in provincial jurisdictions, and in particular in health and education, two areas where it has no constitutional legitimacy whatsoever. This is not what the Fathers of Confederation had intended.”
Conservative Position: John A. was a Conservative. I think we know what he intended.

Issue: Sports arena funding
Bernier Position (Sept 2010): “We cannot continue in this way to pass on to our children the bills for all the projects that we cannot afford to pay ourselves. We cannot continue to distribute ever larger amounts of money to please everyone and buy social peace, while refusing to face the consequences. We cannot ask governments to manage our money in a responsible manner while at the same time demanding that they devote some more money to an irresponsible venture that will benefit us.”
Conservative Position: Go Nords Go!

Issue: Climate change
Bernier Position (Feb 2010): “We can now see that it’s possible to be a ‘skeptic,’ or in any case to keep an open mind, on just about all the main aspects of warming theory. It would certainly be irresponsible to spend billions of dollars and impose exaggeratedly severe regulations to solve a problem whose gravity we’re still far from discerning.”
Conservative Position: As Bernier suggests, doing nothing…but placing a nicer spin on it.

Issue: Government Spending
Bernier Position (Jan 2010): “And I’m not saying zero growth adjusted for inflation and population or GDP increase. Just zero growth.”
Conservative Position: Spending up around 40% during Harper’s time in power.

National Post

Read more at Dan Arnold’s blog, Calgary Grit.

According to a new poll, the average American thinks that 25 percent of the federal budget is spent on foreign aid (or, more accurately, government-to-government transfers). They would like it cut to about 10 percent.

The actual figure is under 1 percent.

As Aid Watch’s Laura Freschi points out, that means most Americans want to increase government-to-government transfers ten-fold from current levels while also cutting them in half.

That most people think like this is a major reason why cutting the federal government’s $3.5 trillion budget is so difficult. The issues that people get worked up about tend to be small potatoes, in budgetary terms.

Besides transfer payments to other governments, earmarks are another lightning-rod issue. But even if earmarks were abolished entirely, that’s only about 2 percent of the budget. It would put the smallest of dents in spending.

Entitlement spending is the single largest driver of current and future deficits. That’s where the battle is. Aid spending and earmarks are not threatening to bankrupt the country. Social Security and Medicare are. And those programs are extremely popular. No politician with an eye on 2012 would be willing to cut them.

The government has made promises it can’t possibly keep. But most people refuse to believe that. So they don’t. As a guarding mechanism, they instead make grand assumptions about how much things like transfer payments to other governments and earmarks cost.

Gary Hershorn / Reuters

Pierre Trudeau died 10 years ago this week, so of course the tributes and legacy analyses have been coming thick and fast. Among my favourites was offered up by Chantel Hebert, one of the few people worth reading at the Toronto Star.

Well, I have one, too. But unlike most commentators, I come to bury Trudeau (or at least make sure he’s still buried), not to praise him.

While he certainly had a profound impact on Canada, it was mostly destructive. Even the few positive changes he made might be called inevitable; they were the type of changes that were coming to every western society by dint of cultural evolution anyway.

Trudeau was by and large a social engineer convinced of his own intellectual superiority and the cloddish unimaginativeness of nearly everyone else. Not only was he arrogant enough to believe that the natural laws of society and economics can be ignored by determined central planners without consequences, he was also arrogant enough to imagine the light had been given to him more than anyone else, so that he alone possessed the superior knowledge required to see what needed doing and everyone else should defer to him.

Some have argued that legalizing abortion, divorce and homosexuality were bold innovations by Trudeau. Yet nearly every Western nation did the same at around the same time. Trudeau merely ensured Canada was riding the same waves as the rest.

Give him some due. Trudeau faced down the FLQ during the October Crisis of 1970 and a decade later, while much of our chattering class trembled with fear at the prospect of Quebec separation, he shouldered the burden of defeating the sovereigntists in Quebec’s 1980 referendum.

Still, he backed down the separatist terrorists by invoking the War Measures Act and proving just how shallow his vaunted commitment to individual liberties truly was at crunch time. And he won the 1980 referendum at the price of the Charter of Rights and Freedoms — which opened the Pandora’s box of judicial activism — as well as two decades of expensive Quebec appeasement that ended in Adscam.

Of course Adscam came long after Trudeau left office. Still, it was a natural and predictable outcome of throwing gobs and gobs of money at Quebec in an attempt to win the province’s federalist loyalty. When the first money thrown failed to buy Quebec’s love, more and more was thrown until there was so much money being sloshed around at projects of diminishing significance that it was inevitable sticky fingers would grab up some.

While not directly Trudeau’s fault, Adscam was a by-product of his chosen method of fighting Quebec nationalism.

His impact on culture was devastating. He implemented official bilingualism in the vain hope that Quebecers would feel more at home in Canada if they knew the post mistress in Houston, B.C. was fluently bilingual. In the process, though, he failed to placate the Quebecois, but managed to alienate millions of anglophones.

Today, four decades and several billion tax dollars later, we are barely more bilingual as a nation than we were when Trudeau began this social experiment and just as divided (or more so) along linguistic lines.

He imagined that multiculturalism would unify us in our diversity – although he never explained how, practically, that logical non sequitor was supposed to happen. Instead, it has led to divisive ethnopolitics, political correctness dictating national policy, the importation of overseas animosities and the ghettoization of large blocks of new Canadians. Even the inflow of refugee claim jumpers can be traced back to the way that Trudeau thought multiculturalism and easy immigration would make Canada more cosmopolitan.

Human rights commissions are part of his legacy, as was the Court Challenges Program that paid minority plaintiffs to file court cases demanding that they be given Charter rights.

After he left office, Trudeau frequently insisted he had fought for a Charter of Rights to protect individuals from the state, and claimed Court Challenges and the Charter’s provisions authorizing judges to “read in” in rights had both been meant to make that protection easier.

How naive.

Activist judges and activist special interest groups quickly learned they could use one another to advance a radical social remake of Canada, and Ottawa would pay for their court appearances. What was meant to be a shield from the power of the state instead created a cozy little cabal among lefty legal scholars and judges that simply shifted the might of the state from the elected Parliament to the unelected judiciary. Both are, after all, branches of government. So the Charter didn’t protect citizens from the excesses of the state, it merely managed to change the whip from one had to another.

Sure, having politicians vote away our rights is bad, but is it really worse than having overreaching judges do the same? At least the politicians we can vote out of office from time to time. Thanks to the Charter, the new boss is the same as the old boss, only also unreachable by the people.

The CRTC is a Trudeau creation, the people who tell us what we may watch on television and listen on radio. So, too, is the notion of the CBC as mouthpiece of social and political activism.

But as bad as that litany is, it is probably on the economy that Trudeau was at his worst.

Inflation, national debt, lost opportunities due to protectionism and economic nationalism — all were Trudeau’s legacy. Because he understood so little about economics and entrepreneurship, Trudeau was easily convinced that history would leave capitalism behind and replace it, if not with socialism, then with some form of command-and-control economy.

His reforms to unemployment insurance (now euphemistically renamed Employment Insurance) ensured our labour market would be badly distorted for nearly 30 years. His scheme of regional transfers — that at one time accounted for 40% of have-not provinces revenue — helped freeze poorer regions’ economies in amber and delay the day when their own desperation would lead to innovation and growth.

He presided over the largest expansion of government in our history; from 1974 to 1976, alone, Ottawa’s spending increased by 50%. He believed we could inflate our way out of debt, so never concerned himself with budget deficit, the consequence of which is an enduring national debt (although Conservative prime ministers have helped him out there). And he implemented wage-and-price controls that further damaged the economy they were meant to resurrect.

He even convinced himself it made sense to beggar a productive region — the West – for the enrichment of less productive ones. So he implemented the National Energy Program, which hurt both the economy and national unity.

Trudeau may have been a great theoretician, but if a solution required even a centesimo of practical understanding — and all successful solutions do — he wasn’t interested.

He may have had more impact on Canada than any other 20th century prime minister. Yet on balance, that impact was mostly bad.

National Post

Government’s role in the economy has reached an unprecedented scale by at least one measure.

A record 30 cents of every dollar in personal income comes directly from government, Commerce Department data show.

And since government produces nothing and gets it money from you and me (the private sector) and there is now 47% of the people who don’t pay taxes at all and One in six Americans receives some form of government aid because of effects of the recession that started in 2007, a review of data indicates.

More than 50 million people are on Medicaid, a program principally designed to help the poor, and nearly 10 million Americans receive unemployment benefits, USA Today said Monday in a report based on data from state officials.

“Virtually every Medicaid director in the country would say that their current enrollment is the highest on record,” said Vernon Smith of Health Management Associates, a company that compiles data for the Kaiser Family Foundation.

More than 40 million people now receive food stamps, a jump of nearly 50 percent since the recession began, the report said. The unemployment rate in the United States remains above 9 percent.

You have more people dependent on less people for more money!

But don’t worry, this was the “Summer of Recovery” and everything is fine. It just needs more time , according to our Harvard Educated Academic Elites — aka the Obama boys and girls.

And they just need to explain it better and suddenly you’ll have an epiphany and see how wonderful they are!
Including transfer payments (income support and health insurance benefits) and compensation to public employees, government paid out $3.8 trillion of $12.5 trillion in total personal income in July on an annualized basis.

And remember their “urgent” August bailout of state workers for  $26 billion was supposed to be partially paid by cuts in Food Stamps in 2014 (when the Health Care Mandate is set to kick in).

So if they just explain better how their Wimpy “I’ll bailout you today for a payment in 4 years” economics work for you, you’ll suddenly fall madly in love with them and bask in their greatness.

That 30.3% share of personal income compares to 25.5% before the recession and 23.5% in 2000. The level topped 27% in the wake of the 1991 recession and hit a prior peak of 28% in 1975.

So government workers personal income has risen 7.5 % SINCE the recession started (and Congress was taken over by Democrats in 2007). And you’re on the hook for it. Doesn’t that make you happy?

The government’s record share reflects the dismal state of private wages and the ramping of federal transfer payments from a historically high base.

“The private economy has been put through the wringer and thus policymakers have been working hard to fill the hole,” said Mark Zandi, chief economist at Moody’s Analytics.

Real private wages remain 8.4% below their December 2007 level and just 1.3% above their February bottom. That low was a level first reached in March 2001.

The weakness in private wages reflects deep layoffs and shorter workweeks due to the recession, and the “not terribly robust” prior economic expansion, said Josh Feinman, chief economist at Deutsche Asset Management in the Americas.

Meanwhile, government income payments are up 17% in real terms since the start of the recession. The real mover has been transfer payments, which accounted for a record 18.4% of personal income in July. That’s up by nearly half from 12.7% in 2000 and more than a quarter from 14.4% in 2007.

The growth is a combination of the inexorable rise of spending on Social Security and health care entitlement programs, as well as a spike in unemployment compensation, food stamps and Medicaid due to weak labor markets and expanded benefits included in the Recovery Act.

Real personal income less government transfer payments remains 5.5% below its December 2007 peak, yet real disposable income is up 2.7% since the start of the recession. That’s due to increases in government income payments and lower tax payments.

Too Much To Get Out?

The government’s role in supporting the recovery is already raising questions about how the economy will fare as the crutches are removed.

“Given how significant its role has become, it does make it more difficult for the government to exit out in a graceful way,” Zandi said.
The stimulus has already begun to fade, with more than a million unemployed exhausting jobless benefits of up to 99 weeks.

Zandi says even further government stimulus would be prudent, given the current slowdown.

In addition to tax cuts and spending hikes, another option would be a government-led mortgage refinancing push to make low-rate loans available to those with insufficient equity in their homes to qualify.

“To have a meaningful recovery, the private sector has to step back up to the plate,” Feinman said.

In prior recoveries, policy stimulus and inventory building eventually allowed for a handoff to a healing private sector, he says.

That handoff “is just not happening” said Feinman. He expects “a long climb back.”

The one area of private compensation that is growing, nonsalary benefits, is not as helpful as wage growth, which puts cash in people’s pockets, Zandi notes.

Real nonsalary compensation (private and government) is up 4.1%, likely reflecting rising health care costs and perhaps some catchup pension contributions.

During the Great Depression, when fiscal stabilizers and safety nets were in their infancy, the government’s share of personal income peaked at just over 16%. Even in World War II, when the government payroll ballooned, its share only briefly neared 25%, falling back below 20% until the 1960s.

The share of personal income is an incomplete gauge of government’s economic role because it doesn’t include direct spending. A better, though imperfect, measure would be the combined federal, state and local government budgets as a share of gross domestic product.

By this score, government was far bigger during World War II, when the federal budget alone topped 43% of GDP. While state and local figures are out of date, total government spending probably will be around 40% of GDP this year. (IBD)

And Obama & Co’s solution, they want to spend more money and still raise taxes on 1/1/11.

The definition of insanity is doing the same thing over and over again and expecting a different result.

But that’s what happens when you’re in an ideological ditch and you can’t get out.

So bring out the talking points:

“In the month I took office, we were losing 750,000 jobs a month,” the president said. “This morning, new figures show the economy produced 67,000 private sector jobs in August, the eighth consecutive month of private job growth.  Additionally, the numbers for July were revised upward to 107,000. Now that’s positive news, and it reflects the steps we’ve already taken to break the back of this recession.”

The net job loss for August is largely because of the layoffs of 114,000 Census temporary workers.

When May’s job numbers showed a net increase of 431,000 jobs – 411,000 of which were Census jobs — the president did note that “most of these jobs this month that we’re seeing in the statistics represent workers who’ve been hired to complete the 2010 census.” But in those June 4 remarks the president didn’t detail just how many of the 431,000 jobs were Census jobs – 95% of them — and he cited the overall report, and its deceptively large number as evidence that businesses are “starting to hire again. Workers who were laid off, they’re starting to get their jobs back. Companies that were almost forced to close their doors are making plans to expand and invest in new equipment.” (ABC)

So you can have you’re cake and eat it too! So Let them Eat Cake!

…and said he would “in the weeks ahead” be detailing “further steps to create jobs and keep the economy growing, including extending tax cuts for the middle class and investing in the areas of our economy where the potential for job growth is greatest.”

And judging from past performance that means more government jobs and more bailouts for states and unions.

Yeah, that’s the ticket…:(

Asked to what degree he regrets his administration’s decision to call this Recovery Summer, the president stammered then said, “I don’t regret the notion that we are moving forward, but because of the steps that we’ve taken.  And I’m going to have a press conference next week, where, after you guys are able to hear where we’re at, we’ll be able to answer some specific questions.” (ABC)

Oh god, he’s going to EXPLAIN IT AGAIN! Just in case you were too stupid to understand it every other time he’s said it!

If he just explains it repeatedly enough you’ll get it.

And it could have been so much worse.

“This is what change looks like,” Obama said on signing into law the Health Care Cram down Bill.

So in November, we have to show HIM what change looks like then we have change ourselves too because they are the pimps, and we are the ho’s.  So we have to take them out of the drug dealing business and we have to stop using them.

 During a speech in England in which he praised the British national health care system, Dr. Berwick said:  

 ”Any healthcare funding plan that is just, equitable, civilized, and humane must, must redistribute wealth from the richer among us to the poorer and the less fortunate. Excellent healthcare is by definition redistributional.” (view here) 

 As the head of Medicare and Medicaid, Berwick will play an instrumental part in implementing the new health reform laws that, by Tax Foundation estimates, will redistribute $104 billion annually from the top half of American families to the bottom half.

 Below is a table summarizing how the changes in tax and spending policies will benefit some families while costing others. Virtually every income group will see a tax increase, either directly because of the new Medicare tax on investment income, or indirectly because of the way the taxes on medical devises will flow through to consumers.

 While the majority of the health care bill’s new spending is targeted to low-income families, its interesting to note that families up to the 90^th percentile ($252,000 in market income) will also benefit – though not enough to offset their higher tax burden. As a result, they will be net losers under the bill, as will every family over the 50^th percentile.

 When these individual changes are summed up, we can see how much income the legislation will redistribute by income group. The big losers will be the top 1 percent of families who will have more than $61 billion redistributed from them to others. Overall, the bill will redistribute $104 billion from the top half of families to the bottom half and Dr. Berwick will be at the helm.

Source: http://www.taxfoundation.org/news/show/26200.html

You have heard some of those pundits talk about how it would be cruel or unconscionable to not pass these pieces of legislation because people are in pain and suffering and they will die without our help, at least to hear them tell it.   They paint a picture of the most dire circumstances for people and make the case that if Government, Inc. doesn’t step in and help they will starve and be without food or shelter.

There is certainly nothing wrong with charity and having a charitable outlook on your fellow-man.  It is good for everyone when someone offers a helping hand to another in need.   I ponder though if all these programs or good for the intended recipients or for society generally.  Other than complete dependence on politicians do these programs really promote and encourage the kind of society we want?

One thinks back about 3 generations to the Great Depression.   That wasn’t merely a couple of years of pain.  It lasted until 1942 after starting in 1929.  The unemployment rate was never less than the mid teens and often was over 20%.   There was no food stamp programs, there were no free lunches, there was no Federal welfare program like we have now, there were no unemployment benefits remotely comparable to those of today, there was no medicaid, medicare or social security.  They didn’t get student loans and there was no j0b retraining programs sponsored by the Feds.   The reality was that you were pretty much on your own.   Oh, sure there was the CCC and the TVA  and WPA but those were temporary jobs with low pay.  No one made a career of working there.  

The current group of some politicians seem to think that we are completely helpless without the Feds in our lives to take care of us.    Don’t take my word for anything, please go talk to some people who lived through the Great Depression.  There are plenty of them around still.  You have a grandfather or great-grandmother or someone likely who grew up during that era.   All the States and most counties had a local welfare system that was over loaded during that entire period.  They did what they could for people with the resources available.  There were lots of charitable groups, primarily the churches, that helped people with needs.   Often it would be the local neighborhood or community that would pitch in for those with needs.   Even those helping out didn’t have anything.   Everyone learned to make do.   They made out one way or another.  

With all its horrors the fact is people had babies, although not as many (check the census records for that dip),  they worked when they could, they planted their own gardens anyplace with a bit of land and did without.   They did without lots of things.  Bunches of them would have loved to own a radio but the cost was beyond the reach of some.   But just as today most find a way to get one for their favorite radio shows in the evening.   There weren’t piles of dead bodies on the streets.   The kids were a smart and did as well as any other generation in school.   Everyone had some kind of r0of over their head and something on the plate at night.  It might have only been potatoes and rice but they had something.  Sure there were some hobo camps and the scenes from the Grapes of Wrath but those were temporary again.  The reality is no one lived there for years.  And the Grapes of Wrath remember is fiction to promote an agenda of the era for a more socialist form of government. 

I have no idea how I would have dealt with such hardship.   It must have been terribly depressing to go year after year  with no improvement in sight.   Kids got one pair of shoes a year and sure didn’t need a walk-in closet to hold their duds.   Without government help for the most part they all figured out a way to  survive and they built character.   Those young people became the Greatest Generation and brought us to a new level of living both materially and morally.   Their were severely challenged and stood up to the hardships of their day.   Their souls and characters were hardened like steel going through those experiences.  I don’t advocate hardship as a learning experience but I do wish that some would have more confidence in the people than they do in government.   I hope we are not becoming a dependent and soft class of people who believes the world owes them a living.  

Will our footprints be worthy of following?   http://www.olcranky.wordpress.com

In a May 28, 2010 letter to Representative Dave Camp and Senator Kent Conrad, JCT reports that between 2000 and 2006 the number of returns with refundable credits in excess of the employee’s share of payroll taxes increased from 11.8 million to 16.1 million. In 2009 and 2010, those figures jumped to 23 million because of such things as the making work pay credit and the lowering of the income threshold for determining the refundable portion of the child credit to $3,000.

JCT projects that the number of returns with refundable credits exceeding the employee’s share of payroll taxes will hover between 14 million and 15 million for the next ten years.

Of course, employers pay the other half of an employee’s payroll taxes so JCT estimated how many returns receive refundable credits in excess of both portions of the payroll tax. In 2000, 8.7 million returns got more in refundable credits than they paid in total payroll taxes. The number jumped to nearly 12 million in 2006 and then up to 15.5 million in 2009 and 2010. It will hover between 10.6 million and 11.3 million for the next decade.

There are two elements to this story. The obvious first one is the increased roll of the IRS in delivering what are essentially welfare benefits to people who don’t pay income taxes. Whatever we think of the IRS that is generally not a roll we want it to play. As I’ve said repeatedly, too many people see April 15^th as payday, not Tax Day.

Lastly, not only are these people not paying any income taxes to fund the general cost of government from which they benefit, but they are effectively not paying into the Social Security or Medicare systems for which they will benefit in retirement. That’s a free ride in any book.

BigGovernment.com

by Larry Kudlow

Posted May 29th 2010 at 8:17 am

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Clearly one has to wonder how long the U.S. can sustain these trends without seriously affecting the economy’s ability to grow.

 And as add on’s first lets refresh on three most used and abused words of politico-economics. Trade Deficit, Current account deficit and Budget deficit.

 Remember, all these tree deficits are related to one another.

 Trade Deficit:

Its trade… Inflows versus outflows… Countries measure this by more outflow of the local currency than the inflow. I.e. more imports (u pay more and money goes out) and fewer exports (no one buy’s goods from u)… Do I need to say whether India is on deficit or surplus?

 Budget deficit:

 It’s the same again… what govt earns  as income from tax revenues and other sources, is not sufficient to meet the expenses it makes for public…( why we all blame a govt who wishes to spend more on us :-) )

And here comes the source of all,

current account deficit:

In simple terms, its the difference between the net exports and imports.

Current account = balance of trade + Income (a.k.a Factor Income) + Transfer Payments.

so, in next post, let’s see in detail on what is balance of payment, Income, Transfer payments and more on current account – deficits and surplus, and much more.

Yes, the GOP is as amenable to “bipartisanship” in opposition as they were in so-called leadership.  Why should WE?!!  They march in goose-step, hoping with Rush Limbaugh that America goes down like the Titanic … apparently even McCain, Mr. Conciliatory, is celebrating the Depression.  (‘Why do “conservatives” hate America?’)  Not hurting THEM too much, is it!  I’ll take a “Limousine Liberal” over a hypocritical, self-declared ”Compassionate Conservative” any day!!!

In the interest of Full Disclosure, apparently I’m going to get a few more dollars in Food Stamps, and that one-time $250 lump-sum in my SSI/Disability (which will probably claw-back the Food Stamps!  Talk about taking from Peter to pay … well … Peter!).  Again, frankly, most individual beneficiaries of Bailout 2.0 are gonna sock it away in the bank and not “Go shopping” like us pobres who have NEEDS, so really, it would’ve done more good going more to us.  But then, apparently not even Specter, Snowe, and Collins, as Repugs, could stomach that.  And Specter comes from Philly….  With friends like him….  But hey, where else are we gonna get the money to pay your “Eat the poor,” upward-transfer taxes, eh?!!!  Wages?  Lotto?  Dean Graziosi?!

http://www.theglobeandmail.com/servlet/story/RTGAM.20090203.wPOLliberals0203/BNStory/politics/home

To recap: the Liberals needed only vote against the budget to become the Government.

And, after due and careful consideration, this is the response so far:

1) They decide to support the budget, with the wimpiest of wimpy conditions — that is, regular up-dates to the House.

2) Only after the fact, they realize that there is an issue in the budget substantial enough that some of their MPs must vote against it (More LAB&NFLD transfer payment nonsense). Don’t they pay people to read this stuff?

3) Not surprisingly, Harper suddenly seems a lot less conciliatory now that Ignatieff and his Liberals not only blinked but bent over and said, “Please and thank you, sir”.

4) Ignatieff announces he will let some of the Liberal caucus vote against the budget but everyone else will vote for it, while saying nasty things about Harper and the budget. Net result: defacto Liberal – Conservative coalition. Not quite Butch Cassidy and the Sundance Kid. More like, Me and my Shadow.

Which begs the obvious questions: why vote for the budget? Doesn’t this all seem a tad familiar? Did any of this work before? Wait a minute isn’t Ignatieff also the guy who supported the latest invasion of Iraq and argued publicly that torture is sometimes justifiable? Why would I give a penny of my money to these clowns?

For more of my political commentary, click here.

Manitoba’s stability is based on having a diversified economy that includes a mix of agriculture, resources, manufacturing and services.  While a general economic downturn affects Manitoba, is doesn’t affect our province as quickly or as severely as other provinces because we don’t have an economy tied heavily to one sector.  This diversity has always been Manitoba’s strength, but it’s a strength that has been underused.

There are several important steps that need to be taken to strengthen our economy:

1. Increase funding for Research and Development: with R&D spending that is among the lowest in Canada, our province’s high tech industries are not being properly nurtured.
2. Phase out the Payroll Tax: not only is this a tax on growth, it also results in lower wages for Manitobans compared to other provinces.
3. Invest more in Infrastructure: After forty years of underfunding, Manitoba’s infrastructure (including roads, bridges, water and waste) has been in crisis for years.  The talk nowadays is for improvements in infrastructure around CentrePort, but this plan fails to account for other serious shortfalls in infrastructure renewal.
4. Reduce Personal Income Taxes: Personal income taxes have a bigger impact on regional growth differences than corporate income taxes.
5. Organize a Small and Medium-Sized Business Fund: Sound businesses that create jobs and enhance our economic diversity should be given access to start-up, expansion, and research grants.
6. Create a Culture of Energy Innovation at Manitoba Hydro: there is not enough work being done to use other renewables such as wind, geothermal, and biofuel from waste products.  Energy R&D in Alberta and British Columbia are preparing those provinces to lead energy sectors in the reconomy, while Manitoba’s alternative energy programs are faltering.

Manitoba should not be a have-not province.  British Columbia, Alberta, and Saskatchewan are all have provinces.  Out of all four Western provinces, Manitoba has the best energy prospects and economic diversification.  We also have a cultural dynamic that welcomes immigrants, and we have a hard-working and young population ready to continue our economic development.  With all of these assets, there is no excuse for Manitoba not moving towards becoming a have province.

We need a change in our legislature to move the good ideas forward.  We need more independent voices to offer opinions that aren’t part of the tired NDP and Tory playbooks.

He urged Ottawa to avoid glitzy tax cuts and instead focus on levy reductions such as airport rent fees charged to airlines – which discourage flight routes between smaller airports. “Tax reductions shouldn’t be public relations exercise: they should be targeted for areas that can make a difference for Canadians.”

In the article, a number of references are made to the Liberal-NDP coalition, the first time I have seen it put in the media correctly.  Interesting.  I hope that Michael Ignatieff is paying close attention to all of this.  There just might be an opportunity presenting itself to him, especially if the provincial premiers, who have put forward some excellent ideas, are not heard in a way that is reflected in the budget to come on January 27th.  The door is opening for Ignatieff as the latest poll reaffirms.  Canadians are worried and would welcome Liberals led by him to solve the economic mess.

“Man has no property in man; neither has any generation a property in the generations which are to follow.” – Thomas Paine

I remember watching an episode of Oprah (though I should clarify that this is not a habit of mine) a couple of years ago, featuring a woman who had been duped by her fraudulently bankrolled husband–he seemed to have everything (on credit), but actually could not afford any of it, and when the bills came due, he disappeared, and left her holding the yacht payments.  She was bankrupt, and would have been left in a position of pseudo-slavery for the rest of her life had Oprah not stepped in–all because someone who was supposed to care about her abused her trust.

This woman’s financial situation is a microcosm of the generational explosion of debt that will soon torment the United States and much of the world.  The baby boom generation is about to retire and start collecting Social Security and Medicare benefits, the costs of which have traditionally been underestimated.  Current budgeting practices are unsustainable, which of course means they cannot be sustained. 

The problem is not the baby boom generation’s politics but its size–there are 77 million of them, but there’s still only one Oprah, and only one American labor force, which isn’t growing at near the rate of the retirement-benefit force.  The only long-term solutions are massive government cuts or massive tax increases, neither of which are very good campaign platforms.

Boomers did not have as many children as their parents did, so in order to support the boomers the way the boomers have supported the elderly, the new American worker must be prepared to pay a confiscatory income tax rate or go to jail, or leave the country.  Unfortunately, a number of the most talented individuals of my generation (perhaps even I) will choose to abandon ship and keep their finances above water.

The sad thing about this reality is that everyone knows it, and no one will stop it.  Our nation faces a fiscal tsunami of debt that is growing every year, with no end in sight.  When our leaders choose to ignore it, and when we choose to ignore that our leaders ignore it, we are committing a moral crime no less severe than (and almost exactly the same as) the slavery of old, asserting that one group of people (those working in America today) may steal the labor of another (those to work in America in the future) against their will, and for no greater reason than the chance timing of their births.

The only morally just way to handle the debt and obligations of the American government is to stop deficit spending now.  Anything that can be cut must be cut.  Start with the war, which almost everyone now agrees was a mistake to begin with.  Move on to other government boondoggles until we have trimmed them down to an approachable size.  Until we can get the budget under control, we should consider the American government fiscally and morally bankrupt.