This morning Flaherty says that the 6% annual growth in transfer payments will be maintained year after year. He also says that the increasing health care costs are of great concern to him and the provinces.

As for the return to the PST, talks had been ongoing with Ottawa way before the actual HST vote and they still are.

Based on the CBC story, they are only committing to the 6% until 2016/2017 and it will be tied to nominal GDP growth after that (although 3% would be guaranteed).

Based on that same CBC story, some ministers were against the announcement and some seemed to be okay with it. Per the CBC article, “British Columbia Finance Minister Kevin Falcon pointed to global financial instability and said Canada has to be responsible and maintain its strong reputation. We cannot ignore what is taking place around the world”.

Okay so let me get this straight.

– Canada is entering a period where the largest segment of our population (baby boomers) are going to be relying on the medical system in droves
– We’re making a conscious decision to reduce future funding to the medical system

I guess we just don’t have the money given the amounts that are already allocated to overpriced fighter jets and the fact that we could never bear to ask the wealthy amongst us to pay a little bit more to adequately fund the things that every person in this country sees as being important?

Am I the only one who sees something wrong with the way our future is unfolding?

It’s quite a bit more complicated than that, NMG.

The fighter jets are tied in with our ability to keep selling our exports to the USA, and thereby maintain employment here in those industries that provide those exports. If we don’t buy something from them, and provide
Americans some employment in the process, they can’t continue to buy what they buy from us.

As for taxing the wealthy more, what would you tax them on? Their ‘incomes’? They already pay a graduated income tax on them. And if their consumption is greater than that of the rest of us, they’ll be paying more in consumptive taxes, like the HST.

So what’s left? Do we tax them on their ‘capital’? That always sounds like a good way of dispossessing those who we deem to have too much wealth of some of it.

Until it’s realised that the wealthy don’t hold most of their ‘capital’ in actual MONEY, only in the way of Assets that are PRICED in money.

There’s a BIG difference.

The tax, a new Capital Levy on the wealthy, say, is to be paid in ‘money’. Now where do you suppose the wealthy are going to get the ‘money’ to pay it? Sell some of their Assets, perhaps?

A possibility, to be sure, but just where then is the ‘buyer’ of those Assets going to get the purchase price from? Whether the Assets taxed are retained, and the wealthy borrow against them to pay the tax; or whether they are sold to some other party to get the money to pay the tax, the ‘money’ has to be borrowed.

And there is a cost to that borrowing. And that cost will be recovered the only place it can be recovered, in HIGHER prices that will be charged for the products enabled by those Assets as those products are purchased for public consumption.

We continue to chase rainbows when we think we can somehow solve our funding problems through a “re-distribution” of something which is collectively insufficient in its totality in the first place. That something is MONEY. That comes about because of the way the ‘accounting’ that governs our whole financial system currently works in its (flawed) relationship with ‘money’ itself. It would not be difficult to correct ~ but well nigh near impossible to try to get anyone to realise this is where the problem really lies.

The ONLY ways the government can get money is tax it, borrow it, or print it. The more they borrow, the more they have to pay back. With interest. As an aside, I once showed my 12 year old how compound interest works. Showed him with a pencil and paper I did. Boy! Did his eyes light up. I also said it is better to “get” compound interest than it is to “pay” it. The more money the government prints, the less it is worth. Please see Zimbabwe’s economy for example. And lastly is taxing it. Ergo, our underground economy due to perceived over taxation. Any suggestions as to how to get away from these government wealth building schemes, feel free to tell me.

“As for taxing the wealthy more, what would you tax them on? Their ‘incomes’? They already pay a graduated income tax on them”

Actually, EVERYONE pays graduated income tax on their incomes, not just the “wealthy”. In fact, the highest bracket starts at $127,021. So that basically means that everyone making over that amount pays the same rate on their income over that amount.

I don’t know about you, but I wouldn’t normally consider someone making $130,000 to fall into the “wealthy” category. Heck, I know guys doing grunt labour in the patch that pull in that much in a year and good on them by the way. That said, I’m not sure I would advocate that they should pay the same top end rate as someone making half a million a year or more. It just seems out of balance to me.

In these challenging economic times (where have I heard that before?) I think maybe we all have a duty to contribute the overall well being of the country. If you have more to contribute, then perhaps you should. Not popular I know, LOL.

Why do I get the sense that if you are wealthy, you would typically subscribe to the “heads I win tails you lose” philosophy when it comes to fiscal policy and doing what’s right for the “collective” group of people in the country?

Heck, even Bill Gates and Warren Buffet said they should pay more tax than they do. But hey, what do they know about being wealthy, finance and paying tax?

Interesting article (talks about the US but similar discussion):

http://blogs.wsj.com/wealth/2011/10/27/most-millionaires-support-warren-buffetts-tax-on-the-rich/

For the record, I’m certainly not wealthy but even I could afford to pay a little more. I wouldn’t like to as it would cut into my discretionary spending, but I could.

Governments only pay compound interest when their debts are not being serviced, and interest then accrues on both the defaulted principal payment plus the unpaid interest owing.

Pre-oil Alberta defaulted on its bonds in the 1930’s. Never paid a dollar back in principal for around ten years or so, but they kept the interest payments current, so the debt didn’t compound.

Most Third-world government debt that ends up compounding is periodically written off. It’s uncollectable, they have no way to pay without further impoverishing themselves. Then the modern industrialised countries lend them more, so they can buy our products, and employment is preserved in the lending country. Those all important “jobs”. We could drop different stuff on them as bombs, etc. and save the pretence we’ll ever be paid, but that doesn’t look so good. Even though it has the same effect, you just kill the victims quicker.

Every sovereign country is ‘self-financing’. The individual citizen and the government are always on opposite sides of the ledger. It does no good to be ‘self-financing’, though, unless the “means of production” are present with a population willing and capable of operating them.

That’s Zimbabwe’s trouble. Plenty of resources. As Rhodesia they were the breadbasket of central Africa, huge food exporter to there and far beyond. And even when sanctions were applied against them as a pariah ‘racist’ government their currency was stronger than Britain’s.

Now they’ve not only let the means of production fall into complete disrepair, they’ve murdered or driven out all those who were most capable of operating them. And no ‘money system’ can ever possibly work without an ‘industrial system’ behind it capable of generating real wealth.

It is true that a government (or its central Bank) that prints too much money devalues its currency, making it progressively worthless in terms of what it will buy.

But the same thing happens when there is a so-called ‘boom’ in the economy, and we get a rise in prices (inflation). And mistake it, as we always do, for ‘prosperity’.

If we want real ‘prosperity’, Prices have to FALL relative to Incomes. And they could, without ruining every producer, if we applied a percentage rebate to every retail price based on whatever ratio overall national ‘production’ exceeds overall national ‘consumption’ by in any chosen successive same fiscal period.

As it sits right now, we are continually charged in retail prices for ‘capital depreciation’, which is entirely right and proper from an accounting standpoint in regards to the books of each individual Firm. But we are never fully credited with ‘capital appreciation’, which, if we truly are becoming more productive and efficient as a country overall, is always greater.