Comment 70159

By A Smith (anonymous) | Posted September 29, 2011 at 17:20:09

From 1993-98, federal debt/GDP stayed flat, while Ontario debt/gdp went up (27.4% - 30.3%). During this time frame, rents ( http://www.ontariotenants.ca/research/rents-vacancy.phtml ) for
1 bedroom apartments jumped an average of 9%.

From 2003-08, Canada's federal debt went from around 63% of GDP to 42%, while Ontario's debt/GDP fell from 30.4% to 28.0%. Rent increases for the same 5 cities averaged 19.2%.

In Japan, they have been running big deficits for decades and almost every year housing prices fall. If you look at the U.S. housing keeps get cheaper as the federal deficit keeps increasing.

So, if we know that cheaper shelter costs help poor people AND we see that government deficits seem to help in this regard, why are we so concerned about running balanced budgets?

In fact, the only people who seem to benefit from balanced budgets are people who are mortgage free. When house prices climb, they see nothing but equity gains, while the average/poor person sees nothing but added costs.

What we call "government debt" is actually another term for "private savings". Think about it, if the government spends $100 and only gets back $80 dollars in taxes, where is the other $20? Did it disappear into thin air? No, the only place it can be (assuming a simple closed economy) is in the hands of the people it was given to in the first place, the private sector (people, businesses).

So, when the government says it NEEDS to pay down its debt, it is really saying it needs to reduce the level of private sector savings in the economy.

These are some ways to increase private sector savings...

1) Abolish the GST and save consumers $27 billion.
2) Eliminate the first $20K from federal income tax will save us $1,085
3) New infrastructure like LRT, stadiums, etc.
4) Welfare/income support for people who for whatever reason aren't that good at making money. No person of sane mind chooses to be poor. It's more likely they are lacking in the ability/motivation (depression) that productive people take for granted.

All of these things will reduce household debt AND increase the deficit.

If you don't believe me, consider that from 1980-1996, when the government(s) ran big deficits, Canadian households saved on average $32 billion/year. From 1998-08, when governments ran surpluses, household savings was negative $25 billion/year. This also explains why Canadian households are currently at record debt levels. The government has taxed all of our savings away.

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