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Globe editorial

Need and stimulus in harmony

From Tuesday's Globe and Mail

Putting money in the hands of low- and moderate-income Canadians as a way to stimulate spending makes more sense than broad-based middle-class tax cuts ...Read the full article

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  1. siren call from Canada writes: But the sensible answer is not to treat the country as a collection of interest groups, to be appeased and stroked according to their means. It is to get a bang for the buck, and not to dig the country into a hole it can't get out of.
    .................................

    Umm -- you do realize you are talking about President Harper, right?

    When has he done anything else?

    Last election Harper went to Welland, site of the closing of the John Deere plant that put some 800 people out of work --- and Harper addressed the vital issue of flavoured cigarettes.

    We can hope Harper will write a decent budget, one that is not too political, but precedent is sobering.
  2. Robert M from Canada writes: This editorial makes a number of points about the positive stimulative effect of putting money in the hands of people who need it.

    For readers who are interested in further support that broad-based income tax relief will not have a significant stimulative effect, the following three links are interesting:

    Mark Zandi, chief economist of Moody's Economy.com, in a July 2008 presentation, for a US-focused discussion http://www.economy.com/mark-zandi/documents/Small%20Business_72408.pdf

    Janet Yellen, president and CEO of the Federal Reserve Bank of San Francisco, gave a January 4, 2009 speech (also US-focused) http://www.frbsf.org/news/speeches/2009/0104a.html

    An International Monetary Fund Staff Position Note issued on December 29, 2008 http://www.imf.org/external/pubs/ft/spn/2008/spn0801.pdf

    As Canadians we need to question whether budget measures are good policy, or whether they are a ploy to buy votes.
  3. Keyser Soze from Canada writes: As always, we can expect Harper to do what is best for the Tories, not whats in the interest of the country.
  4. Mark Dip from Canada writes: With an unemployment rate four times the national average, the spouses of Canadian government employees serving overseas have been fighting EI inequities for over 3 decades and in the meantime it has been calculated that we lose over $1 million per year from being forced to pay overseas for EI while being ineligible for benefits. Quitting their job to accompany their partner and getting one’s EI revoked on arrival at an overseas capital has become the Canadian Foreign Service’s version of a diplomatic hazing ritual to welcome you to your posting. The way it typically goes is that spouses are forced to pay EI premiums overseas because CRA defines them overseas as Canadian “Factual Residents” (Residents of Canada) due to diplomatic status, but then they later get their EI social benefits revoked afterward because HRSDC says they’re not physically “Residents in Canada”. If a spouse manages to land a menial embassy McJob while overseas, CRA still sticks its hand out again for their cut, especially for EI premiums. At the end of the contract, you even get another pretty Record of Employment, followed by a letter from HRSDC stating that the EI social benefits for which you were just paying overseas have been revoked yet again. BTW, this also happens to non-diplomatic Canadians defined as “Factual Residents” by CRA while overseas, including paying $900 a year for OHIP that you’re not entitled to access because the Ontario Government also says that you’re a non-resident. Another bitter pill for any Canadian spouse that has been sentenced to 3 years less a day of overseas servitude to our foreign service is that although Corrections Canada won EI benefits for inmates being released from prison without having contributed to EI, for decades DFAIT Management has tried and failed at gaining this for its spouses. Apparently, Canada thinks that spouses would perform better at helping to represent their country overseas after being disenfranchised by their own government.
  5. Mark Dip from Canada writes: Canada should allow tax breaks for the spouses of government employees serving overseas who are living in high cost-of-living countries. If you are a government family overseas, the normal CRA formula for residency determination is overruled. Instead, the Vienna Convention on diplomatic immunity is the sole deciding factor used by CRA to declare them as “Factual Residents”. As a “Factual Resident”, overseas government families fill out a domestic tax form from overseas. This works fine for the government employees who are taxed solely to Canada and are getting overseas allowances to compensate for the high cost-of-living of the country where they are serving. Additionally, CRA has dual-tax treaties with foreign nations in order to keep getting its cut, especially from Canadians living in areas where taxes are low. However, an overseas Canadian Non-Resident will get tax breaks through these treaties if they reside in countries that have high living expenses – but only if they are classified by CRA as a “Non-Resident“. An overseas government spouse gets no such relief from either scheme owing to their CRA residency determination from their marriage to a government employee. Essentially what this means is that dual-income government families, which are common and ignored in Canada, are penalized for their two incomes by CRA when serving Canada overseas. As such, spouses are paid at the low foreign wage rate that was designed for locals (low wages because local taxes are low). However, the spouses are taxed by CRA at the high Canadian rate, leaving them with less after-tax take home pay than the janitor. This is despite having waived the Vienna Convention diplomatic immunities (a normal formality for government spouses to work in the host nation) that caused them to gain the CRA “Factual Resident” determination in the first place. The Income Tax Act was written before such immunity-waiving arrangements were designed, and has not been updated since.
  6. bill williams from Guelph from Canada writes: -

    Tax breaks - no matter how much and to whom- should be the smallest least significant part of any stimulus package. For stimulus policies to work (and it's extraordinarily difficult to craft effective stimulus) they have to be VERY focused. The effects of tax breaks can never be focused because it's impossible to know exactly what will happen to the money once it's in the hands of the recipient. The one important thing is that the money be spent. So tax breaks for the working poor who are paying some small amount of tax is probably best.

    One matter that is being largely ignored is the need for massive spending in post-secondary education. University applications are up because the job market is soft. This is a wise personal choice: When you can't work take time to improve your credentials. It's good for the individual and good for the country. But this also happens to be the year that university endowment funds have tanked along with the markets and other sources of funding are a dry stream bed. We need HUGE amounts of federal money to start flowing to universities. None of it need be permanent, all of it will be spent immediately, and it will contribute to Canada's ability to build wealth and move economic conditions in that direction Money invested in post-secondary education meets all the criteria for effective stimulus.

    -
  7. CR VAN KRALINGEN from PORT COLBORNE, Canada writes: If you want real stimulus our politicians need to stop watching CNN for thier respun answers. They need to really start "thinking" outside of the box. I have an idea for you;...... We have a lot of money tied up in RRSP's. ( Deferred income funds ) Lets create a program that allows the first $50,000.00 of deferred income to be pulled and used for specific purchases and debt reduction targeting those items that would maximise stimulus to our economy. It ht e money is used as per specific conditions and meets the stmulus requirements then it would be taxed at a fixed rate that is not tied to any income generated from other sources. This would be treated as a separated issue. Lets pick a rate of say 5% Think about the benefits. This would effectively reduce the paper loss experienced by all that were invested in the markets. Under this plan the money pulled and available to spend would be nearly the actual dollar amount that you would have had if the markets did not crash and you were being taxed as per the status quo rates in effect. This is a win win situation. Lets put some conditions on where the money is to be used. 1./ debt reduction ie. motgage, credit card;... money spent here would go back into the banks giving them some needed cash to work with. 2./ major renovations or new home "construction";....money spen here would go directly in to creating job stimulus 3./ 5% tax rate;....this would put some cash back into the government coffers to be distributed to those folks in the lower income brackets for use in spending in the same qulifying categories. Come on Ottawa ( all parties ) here is a good start on a plan that is truly out side of the box. Now get out there and do something to get my attention. Currently I find you uninteresting and void of any true leadership. I suspect many Canadians carry that same sentiment.
  8. agent sixtynine from Canada writes: Reward the under achievers.
    Like that's gonna save us.
  9. Alistair McLaughlin from Canada writes: All the chatter about "stimulus" reminds me of nothing more than a bunch of masturbating monkeys.
  10. Angus Elliott from Cambridge, Canada writes: If we are looking for productivity enhancing one time hits - let's build something that will be productive.

    We have a real problem with Green House gasses - how about building a trans-canada high speed rail link, nuclear plants to replace all the coal/gas planst?

    Agreed the projects aren't "shovel ready" - but the designers etc spend their paycheques too.
  11. D. Hall from Wpg, Canada writes: Here, Here!
  12. thomson gary from Canada writes: When did banks, western Canadian economists (we know who they are) and the poor become a remarkably wide consensus?
  13. Mike M from Canada writes: One matter that is being largely ignored is the need for massive spending in post-secondary education.

    How on earth will this be a stimulus? Have you heard of any professors being laid off recently?

    Education may be a worthwhile investment, but the point of a stimulus should be to stimulate the economy (thus the name, stimulus). A sector of the economy, like education, that is already running at full employment is not an area where spending will act as an effective stimulus.
  14. thomson gary from Canada writes: While the spending that is being proposed here is sound politics, it would not meet the requirements of an effective stimulus. The editors should read their own paper. The requirements of an effective short term expenditure were laid out just yesterday, I think it was.
  15. thomson gary from Canada writes: Yep, just yesterday by Jim Stanford, in the Globe and Mail.
  16. Auroran Bear from Montreal, Canada writes: Actually the $177 bio bailout that Bush tried put money in the hands of these people and only 17% of it got spent.
  17. Zarny YYC from Canada writes: Thanks but I'll take middle class tax cuts in lieu of directing more money stolen off my paycheque on a bi-monthly basis to the poor.
  18. CR VAN KRALINGEN from PORT COLBORNE, Canada writes: come on people I put an idea on the table;....give me some feed back. Let's hear what you have in mind as well. It is easy to critisize these chumps , but at least put an idea on the table as well.
  19. CR VAN KRALINGEN from PORT COLBORNE, Canada writes: I agree with your comment;.....the money needs to target specific areas to get the punch we need;.....
  20. Donalda Williams Clogg from Hudson, Canada writes: Yes, it is most important to help the most vulnerable and this in turn should help the economy. I agree that tax cuts to the middle class should not be considered now. And why not spending on much needed public housing.
  21. j b from Canada writes: CR VAN KRALINGEN from PORT COLBORNE, Canada writes: come on people I put an idea on the table;....give me some feed back. Let's hear what you have in mind as well. It is easy to critisize these chumps , but at least put an idea on the table as well.
    -----------------------------------------------------------------

    I think your idea is fantastic, really,...just when the RRSP is falling out of favor as an investment vehicle this would make removing those tied up monies viable,...let's hope other's are thinking this.
  22. john may from writes: Federal efforts should also ensure provinces and municpalities make similar efforts. Make sure they alter their tax structure and for municiplaities make sure they don't grab building permit revenue form projects. The FCM crowd are always crying poor and then sticking extra fees on people and business every chance they get, all to feed a bloated civil service. The taxation of low iincome earners is disgusting.
    Pouring money into universities sends a message to continue the cushy life of tenured profs teaching useless programmes. They all need a long dose of fiscal prudence.
    The best stimulus I see is the spending on basic infrastructre of safe water, safe sewers, safe streets, safe homes and publicy available free after school facilities for youth.
    I had them 50 years ago and I see no reason why the kids today are denied what I had.
    And don't give a cent to Mississauga- debt free and $1,000,000,000 in the bank. They can afford their own stimulus package.
  23. Peter Lucas from langley, Canada writes: Robert M cited web pages that he asserted supported the idea that tax cuts don't work. I read one of the cited sites, the San Fran. Federal Reserve speech. It did not state that tax cuts don't work as a stimulus, it only stated temporary cuts are ineffective. Furthermore recent empirical studies by reputable universities show that tax cuts that are perceived as long-term are quicker and have a better mutiple than government spending.

    Money is spent most wisely by the person who owns it, not by an entity that has confiscated it. How about another gazillion dollar gun registry?
  24. peter jones from Canada writes: tax the frickin rich and abolish the Tax Free Savings ccounts, and cancel the Afghan war...NOW.

    the gun registry is small potatoes compared to the Afghan war and it probably accomplished more...and no Canadian died from it.
  25. Peter Lucas from langley, Canada writes: peter jones, taxing the rich more than they're taxed now will only lead to less tax as the rich will simply move.

    For example, the do-gooder Bono of U2, who advocated all kinds of relief for a lot of causes, moved his tax satus from Ireland where he paid tons of tax to the Netherlands where he will only pay a little tax - hardly any.
  26. Gary Dare from Portland, Oregon, Canada, writes: Nobody seems to bother looking at reducing tariffs, which can have the combined effects of a sales tax cut (lower take on lower sticker price) and an income tax cut (greater post-tax purchasing power). As well as go towards addressing cross-border pricing disparities.
  27. Sylvia Wilson from Canada writes: Temporarily increase child allowances paid to families as well as payments to seniors that help relieve increased heating costs and higher property taxes as well as offset higher prices paid for groceries (based on a ceiling of earnings that affect the middle to lower classes.)

    Ensure that the part of the population that are really struggling are given funds that will be spent rather than hoarded.
  28. Dan LeRoy from Lethbridge, Canada writes: Government cannot provide stimulus. Government has no wealth; it can only redistribute that what the individuals in the private sector have created or it can print money. That's it. Both alternatives are counterproductive and a recipe for disaster.
  29. CR VAN KRALINGEN from PORT COLBORNE, Canada writes: Dan LeRoy, Sylvia Wilsonm, Peter Lucas, john may, Mike M

    Hi Folks, Ihave read your comments and agree;..... the money needs to target specific areas to get the punch we need. You have all made some very valid and sound points. Creating access to our "deferred income funds" ( RRSP's ) with the application of your points of thought would really get us going in the right direction.

    Leader ship has been lost in this country. Here in Niagara we are closing hospitals based upon the balance sheet and with little regard to the human cost of not getting emergency care when needed in short. We have had many closures ( John Deere, Welland Works) and Steven Harper stops by wareing his rose coloured glasses completely clueless of the issues at hand. The other parties are no less innocent , leadership is void. We need to start voting for the individual in our Primeminsters chair and not the party. In my opinion only then will true tallent rise to the top.

    What shall we call our party. Hmmmm.

    Hey J.B. thanks for the nod.
  30. Comments closed, censored, hidden, deleted, disappeared from Mini Bush-Obamatieff village, Canada writes: More of the same, unsustainable, consumerism.... Lysiane Gagnon (in essence): "Let's consume until we drop." --- Lack of vision. Therefore, it is back to the future. --- This country needs to have its economy transformed, diversified, through creativity and innovation. It need to trade massively with the whole world. New, essential paradigms for the twenty-first century...
  31. N. Ontarian from Canada writes: Yes, there's a great stimulus - more money for the poor. They'll buy a few more groceries, maybe. Or maybe a few more Chinese made dollar store items. How the hell does that stimulate the economy?
  32. roger price from Andorra writes: Lets eliminate the PST & GST on new homes, that would help the construction industry get going again.

    Lets allow non-residents to be allowed to own a vacation property in Canada without becoming deemed residents for tax purposes. That way many non-residents would buy or build vacation homes and get the construction industry going again.
  33. Concerned Canadian from Nova Scotia, Canada writes: Let me see if I understand this. Take $100 from the "rich" and give it to the "poor". The poor are more likely to spend (i.e. consume) out of necessity, so the money "will come back into the economy". However, if they are merely giving this $100 back to the rich in exchange for stuff, isn't this effectively a one-time transfer of stuff from the rich to the poor?

    Why would the rich suddenly be inclined to spend this re-acquired $100 when they weren't inclined to before? How does this get the economy going?

    Pure economic nonsense!
  34. Randal Oulton from Toronto, Canada writes: >> Saving the country through the pockets of the less well-off is not likely to a big vote-getter

    It used to be considered good policy to have a proof-reader go over the paper's leading editorial for that day.
  35. Robert in and around Calgary from Calgary, Canada writes: In times of economic downturn we seek to protect the poor, children and fututre generations from rich and powerful companies seeking to take advantage of to few jobs for too many workers. In times of economic boom we seek to protect the poor, children and future generations from rich and powerful companies seeking to take advantage of to many jobs for too few workers. Again we hear the rallying cry of the left. Future generations, children, the poor and how to protect them etc. Lets tax the middle and they will roll like sheep into the night to be slaughtered. Lets reduce taxes for ALL Canadians regardless of income, status, age etc. In fact lets reduce government and get them out of the way so the markets, industries and businesses can get back to creating jobs, wealth and consumer confidence. More programs for the social elites who are forever connected top the government trough.
  36. Wayne Neon from Toronto, Canada writes: agent sixtynine from Canada writes: Reward the under achievers.
    Like that's gonna save us.

    "Under achievers" here includes the young, the old, the sick and the disabled, not to mention the unlucky. Why not just shoot them all?

    Even the most capable and hard working of us are just a quick fall down the stairs from a life of underachievement. Stop bashing the poor and blaming the victims.
  37. John Di Gasbarro from Thornhill, Canada writes: Stephen Harper is a inept economist. He should be the money in the hands of the people who are going to spend it. He should know better. The country would be better off if this guy left office.
  38. Mike M from Canada writes: Wayne Neon from Toronto, Canada writes: "Under achievers" here includes the young, the old, the sick and the disabled, not to mention the unlucky. Why not just shoot them all?

    Actually, that's not what the article mentions. It's really quite shameful for you to say otherwise.

    The article primarily highlights Employment Insurance and the WITB.

    These primarily avoid the young (who usually don't have the length of experience to be included in any EI program and nor is EI the appropriate means for covering them), the sick / disabled (CPP covers them through disability), and the old (CPP). So I fail to see how any of those are included in this article.

    I have no idea what you mean by the "unlucky" - do you mean people who did not win the lottery?

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