All about Money

Hi Everyone,

I hope everyone is having a great summer. I will be doing a series of emails over the next month or so on different topics. As always I look forward to your comments. This will also be posted on my blog www.wayneclements.blogspot.com.

For those of you who are Green Party members I hope to see you at the Annual General meeting in Ottawa this August. For those of you who are members and won't be going to Ottawa, you should have received ballots in the mail to elect a new Green Party leader, new Council members and to vote on certain constitutional amendments. These must be mailed in (postmarked no later than) August 4th.

For those of you who are not yet Green Party members we need you to sign up (go to www.greenparty.ca). Yearly membership is free with a $ 10.00 (non-election time) donation. Being a member allows you to vote for Council Members as indicated above and allows you to participate at the local level as well.

It looks like the Conservatives are going to reduce the amount each person can contribute on a yearly basis, likely because the Liberals have many donors who contribute $ 5,000.00 while most donors for the Conservatives contribute on average $ 200.00. (In the last election Conservatives raised more money than the Liberals by a 2 to 1 margin, more than the NDP by a 4 to 1 margin and the Green Party by about … 20 or more to 1.). Rasing money is not one of our strong points.

Fall Election?

It looks more and more like we will have a Federal Election in the fall (I'd say over 50% chance now). Harper has set a fixed election date for 2009 and he also said in the spring of 2006 that he would have an election within the year. He constantly says that he could not do what he wanted to do (i.e. implement the legislation he prommised in his last election) because he doesn’t have a majority. The Liberal's are still headless and recent events have removed their leadership campaign from the headlines and perhaps even the consciousness of the Canadian Public. The only reason not to have an election in the fall is that people may already have reached their political contribution limit for the year and that there may be some backlash saying this election call was opportunistic.

Lebanon Evacuation

Harper's recent decision to fly home from Paris via Cypress bringing back a plan load of stranded Canadians is playing very well in the media and is further diminishing the "fear" that was in the minds of Canadians of a Harper led Conservative majority.

I think it is a good thing that he did this. Political gesture or not, it was the right thing to do. In general, this situation highlights how unprepared the government is for such events however and that is not just a Conservative issue but also a Liberal issue who was in power for many years prior and in my mind the ambassadors we have in those countries. Go figure we have a war in the middle east - what a surprise? Extensive evacuation plans should have been drafted years in advance and updated annually. I hope that the government remedies this in the future so this situation is not repeated.

Conservative Spring 2006 Budget - All show little substance

I know the Conservative budget is now old news but I did want to say a few things about it. How is it that the Liberal's and NDP conveniently missed the vote in parliament allowing the budget to pass through without debate and without amendments? [The Bloq actually were supporting the budget so we can't count them]. Either they are both incredibly inept or … or I don't know or what.. I hesitate to call it a conspiracy of the parties in opposition not to challenge the budget.. I think I'll stay with inept.

The budget is designed to be all show. It does focus on Harper's 5 priorities as promised though much of that is cut back.
As Jeffrey Simpson said in the Globe and Mail: "This Conservative minority government is determined to win a majority by highly visible, tightly targeted, largely ineffectual but politically attractive policies, and will worry later, after winning a majority, about the big issues on which the country's future economic and social welfare depends. So popcorn and candy now; steak and potatoes later."
The budget offers short term comfort and does not look toward increasing productivity or prosperity in the long term. The budget puts $ 200 million into R and D which is our future and $ 2 billion into farm subsidies - Forsake the long term for the short term.

Keep in mind the Conservative platform 2006 says they will cut $ 22.5 billion from federal expenses but we wont see that until they have a majority. They have said they will find $ 2 billion over the next year - per this budget.

Good News in the Budget

Post secondary students who received bursaries and scholarships were taxed on amounts above $ 3,000.00. With the budget these are now fully exempt. There are also tax breaks for students to buy text books. [Of course some provinces deduct the amount a student receives in this way from any grants or loans they provide (claw back) and a tax credit for books only helps you if you pay taxes which many students don't.

GST

GST notes: The GST in its current incarnation is a really dumb tax in that it taxes the good and the bad equally. So books and feminine products are taxed, the same as doughnuts (bought individually but not if you buy more than 5 of course - who thought that one up?). The GST was brought in by the Conservatives in 1991 to replace the MST (manufacturer's sales tax) which was a necessary step for free trade. The government is still (after 15 years) dealing with trying to implement a new computer system to replace the old system that was cobbled together in 18 months when the GST was first introduced by the Conservatives.

Reducing the GST:

It costs the same to collect the GST regardless of the GST rate. So it costs the same to collect 5% or 6% GST as it does 7%.

GST accounts for 15% of government revenues - a 1% cut will cost the government about $ 4.35 billion in revenue per year. (E.I. Premiums account for almost 10% of revenues, Corporate Income tax 15% and Personal Income tax 45%).

Many companies will not reduce their prices to reflect the lower GST so the companies will benefit not the consumer.

Most countries around the world are reducing income taxes and raising consumption taxes. Reducing the GST goes against this trend.

To help pay for the GST reduction, the lowest tax rate increased from 15% to 15.5%.

Cutting income taxes is better than cutting the GST, because people only benefit from GST cuts when they spend whereas people benefit from income taxes cuts whether they save, invest or spend.

The GST may increase consumption because things are "cheaper" but many of those benefits will be lost on the Canadian economy because they will be spend on imports.

The Best thing about the GST cut is that it looks good - so cutting GST is perhaps good politics but not good economics.

Family Allowance Payment

$ 100.00 (taxable) per month per child to families with kids up to 6 years of age is another move that sounds good and certainly appeals to the typical Conservative supporter but again is not really that helpful. My biggest problem with it, is this again represents government not appreciating they are spending our money. Money that we worked hard for and give to them through taxes so they can use it wisely (well we can all hope). I think there are many people who do not need this money and therefore should not get it. How many people noticed that their day care rates went up after the budget?

Spending More Money

The Conservative budget represents an increase in spending over the Liberals - in fact $ 16.7 billion more than the last Liberal budget. The only reason the Conservatives can do this is because of huge unexpected revenues of $ 4 to 5 billion per year thanks in large part to high oil and gas prices. Remember the 2004 election where Harper promised to cap increased taxes on gas once it surpassed 80 cents a litre? You did not see that in the 2006 election because he needs that extra revenue.

The finance department has for decades fought to simplify the tax system by applying broad based rather than target taxes and tax cuts. The Conservatives have reversed this trend with credits for enrolling kids in sports and transit passes etc. All things that sound good but in reality do very little and the cost to administer these programs are likely more than the benefit that those targeted would receive. These are all moves to buy a majority government and really don't have anything to do with long term prosperity for Canadians. In fact, the Conservatives and Liberals have been keen to keep on spending money as fast as revenues increased to the point where the 2006 budget is about $ 50 billion more per year than it was when the first surplus was declared by Paul Martin. When the economy decides to slow or go into a recession - which we know will happen at some point - all this focus on more spending and not paying down the $ 500 billion debt will catch up to us and if you thought Paul Martin could cut programs wait till you see what Mike Harris I mean a Ralph Klein I mean a Steven Harper Government can do.

The Environment

The budget has almost nothing in it for the environment or global warming. One small paragraph out of a 25 page document. There is a tax credit for those who already take transit however it is unlikely this pittance will be enough to get people to switch to public transit. I don't have a huge problem with some of the funding being taken away from Kyoto since I don't think the Liberals were getting very far with it anyway. I do have a problem that they cut R and D - this is a huge problem. 30% of the Green houses gases generated in Canada now come from Alberta where it takes the equivalent of 1 barrel of energy to get 2 barrels of oil. [Total GHG are up 24% since 1990.] They are using coal to separate the oil from the sand. Burning coal is why Canada's Green House Gases are up with respect to the U.S. and because much of the Conservative support comes from Alberta you are not going to see the Conservatives do much about this.

The Conservatives propose instead a "made in Canada plan" to reduce smog - as if the plans to meet Kyoto were made elsewhere. Keep in mind that most countries that signed Kyoto have met their targets or are on their way to meeting their targets by the 2012 deadline.

The Green Solution

OK so I have spent the last few paragraphs saying how the Conservative's are buying the next election which by the way the Liberal's tried to do as well. So what would the Green Party do different? I personally would like to see a cap on spending at least until the debt is paid off. So if we cap spending at say $ 180 billion per year, we work to improve how efficient that money is being spent and any surpluses go to paying down the debt and reducing taxes. I believe there is already more than enough money in the system to do what we need to do. The Green Party would look at long term solutions - not just what will help us to win the next election. Specifically the Green Party would reform the tax system (slowly so as not to adversely affect the economy). The Green Party would like to see all income tax ended and replaced with a Green consumption tax. While this is not likely to happen at least not in the near future, it is the way most countries in the world are moving. The consumption tax would tax polluting products and unsustainable practices such as mining. We can easily add taxes to the mining of commodities in Canada and let the countries that are buying up our resources (China and so forth) pay for our social programs. This is deceptively simple but very effective.

Questions - let me know.

Upcoming issues will deal with the Green Party Leadership election, Global warming and more.