Comment 13778

By Locke (registered) | Posted November 09, 2007 at 00:32:48

Ryan, I absolutely agree with your analysis of good vs. bad debt. In fact, I'm OK with debt and have plenty to prove it... almost all of which (you'll be happy to know) is in our home (including cosmetic and energy improvements) and none of which is in our vehicle (which is paid off).

I'm really not aiming for debt free... The point I was making (rather sloppily by writing about US and CDN policy at the same time) is that the increasing US debt and (in particular) the deficit are concerning.

1) The US deficit is in large part funding the war in Iraq (bullets & bombs are definite consumables) and not being invested in US society or in infrastructure to make the economy more competitive or immune to an energy crisis. 2) A net deficit since Bush took over has increased the US national debt which is now about 25% owed to foreign debt owners who increasingly hold economic sway. It's one thing to owe your debts to your own pension plans, federal savings bonds and neighbours and another to watch wealth leave your nation forever.

With foreign debt holders diversifying away from the dollar an unwillingness to accept US debt could lead to higher interest rates and deepen the mortgage crisis in the States. If the US consumer (who drives the US economy) finds him or herself 'all maxed out' I think we can expect more than the auto industry to get hit. An economy in recession also won't need as much energy, forestry products, industrial goods, etc.

As you write, for the moment we in Canada seem to be in much better shape with a shrinking debt, record trade surpluses, lower GDP to debt ratio and lower foreign ownership of debt. But if the US economy tanks, all bets are off.

Those positive Canadian numbers should mean more money to invest in our civilization with infrastructure, education and healthcare spending and an opportunity to ensure future health and competitiveness for Canadians.

Instead, we Canadians received (or are about to receive) promised tax cuts which have not proven very effective north or south of the border in stimulating the economy. Ironically, the 'Right' has moved away from Manning's 'keeping our house in order' and embraced tax cuts as a way to drive the economy while the 'Centre-Left' calls for fiscal responsibility. At best, tax cuts are proving to be 'tax revenue-neutral' while mainly benefiting the wealthy and putting further burden on those less fortunate, our pubic institutions and our socity.

"Taxes are the price we pay for civilization." -- Oliver Wendell Holmes, Jr.

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