Raise the Hammer
Our large and growing public debts should be paid off by those Canadians who have most benefited from them.
By Michael Borrelli
Published April 28, 2011
In mid-May I will turn thirty, and this impending collision with an arbitrary chronological marker combined with the ongoing Federal Election has got me thinking a lot about the future.
Lately, I've become increasingly focused on some of the inter-generational inequalities that have been growing over the past decades and wonder how they will influence what type of country my son will live in.
Three key issues concern me most when thinking about the legacy of the choices Canadian governments have made: 1) the ever-rising national debt; 2) the environmental deficit that will also be left behind; and, 3) the educational bubble that has been burdening young people with long-term debt and providing declining returns.
I hope to write more on the latter two items as the year goes on, but for now please indulge me in a brief discussion of the national debt and the abdication of generational responsibility in managing it.
When I was born in 1981, Canada's national debt stood at around $100 billion dollars. Since then it has expanded more than 450% to something greater than half a trillion dollars. The rate at which Canadians have spent beyond their means has grown at about 20% a year since the 1970s, save for a short time in the 1990s when the Liberals eliminated the deficit.
While this explosion of spending has paid for some very important social programs and helped turn Canada into one of the world's best places to live, it has done so at enormous cost to those who had little or no say in decision-making. Attention was not seriously directed at how to pay back this "investment" beyond the lazy conviction that economic growth would cover it.
Now, with young people facing a low-growth economy, their parents will continue to benefit from good services and low tax rates while also passing along the bill for their sprawling lifestyles, their pensions, and their old-age health care.
We could debate the pros and cons of individual budget line items until the debt clock reaches one trillion dollars and never come to any conclusions, but a fundamental issue of responsibility will remain: these debts should be paid off by those Canadians who have most benefited from them.
This means rejecting the constant refrain heard from the wealthiest generation in human history - the Baby Boomers, those born from the 1950s to mid-60s that may control upwards of 70% of Canada's wealth - that they are over-taxed.
It also means eliminating the scores of exemptions and tax credits that overwhelmingly benefit older, wealthier Canadians but which further weaken our ability to pay off what we owe.
A case in point is the much-lauded tax-free savings account (TFSA), introduced by the Conservative government in 2008. Canadians have been convinced that these accounts are excellent ways to retain their dwindling savings, but really they are a mechanism for wealthy individuals and families to avoid taxation on larger and larger portions of their income.
The government's own numbers suggest TFSAs have already added up to about $200 million in foregone revenue, and other pundits suggest the total cost could be more than $6.6B if our government continues to increase the TFSA contribution limits annually.
Most Canadians using TFSAs are suckers: they put whatever pittance they can sock away during the year in a low-yield savings account generating about 2% interest, but the real use of TFSAs is for sheltering investments such as stocks or mutual funds, which are overwhelmingly the playthings of Canada's wealthy.
As such, they can act as tax-sheltered gambling accounts for folks with wads of disposable income. How? Because TFSAs allow you to withdraw and re-contribute, providing a fantastic vehicle for the wealthy to protect growing amounts of investment capital from taxes.
Consider this: an individual making six-figures can use his $5,000 annual TFSA room to shelter a high-risk investment. By the end of the year if that investment is worth two, three or fifty times what it was worth before, our lucky investor can sell it and withdraw the returns from the account totally tax free.
Worse still, he won't lose contribution room in the TFSA. So someone fortunate enough to have a $5,000 investment grow to $10,000 now has double the TFSA space to protect wealth from the taxman the following year.
As you can imagine, young people saddled with enormous education debts, and facing inflation and wildly rising costs of living will mostly be shut out of this financial bonanza, since they have very little income leftover to save or invest.
This unjust state of affairs is compounded by the reality that these young people will ultimately shoulder the burden of these tax cuts once the Boomers are retired and drinking margaritas on the beach.
This is just one example of a system of governance that leans heavily towards the immediate interests of the wealthiest generation in human history, at the expense of the well-being of future Canadians.
It isn't just happening at the federal level. The abdication of responsibility for national fiscal security is occurring at the provincial and municipal levels too, as we see politicians pander to wealthy, older homeowners to lower their property and provincial taxes while leaving infrastructure deficits or rising health care costs to others to worry about.
When will tomorrow's leaders finally wake up and take charge of their collective future? If declining youth voting is any indicator, then perhaps not anytime soon.
But if you're like me and look for light at the end of the tunnel, then maybe the recent surge of the NDP in this federal election is a sign that, like the tenacious Arab youth who are risking their lives to better control their destinies, Canada's young people are ready to demand their fair share.
By mrgrande (registered) | Posted April 28, 2011 at 13:41:17
Most Canadians using TFSAs are suckers: they put whatever pittance they can sock away during the year in a low-yield savings account generating about 2% interest
Have you taken a look at other savings accounts lately? The 2.5% I'm getting on my TFSA is the best interest rate I can find.
By the end of the year if that investment is worth two, three or fifty times what it was worth before, our lucky investor can sell it and withdraw the returns from the account totally tax free.
First of all, where can I invest a measly five grand and come out with $250,000? Sign me up for that investment! That being said, if they do hit the jackpot and have a huge ROI, don't they have to pay taxes on that? So sure, the original $5K doesn't get taxed, but the new money does, right?
By 123 (anonymous) | Posted October 12, 2012 at 18:19:37 in reply to Comment 62815
No tax
By randomguy (anonymous) | Posted April 29, 2011 at 14:49:31 in reply to Comment 62815
If somehow you could find an investment that would multiply your $5,000 in your TFSA fifty times in one year, then if you withdrew it, you wouldn't be taxed on the increased amount. That's the good part of TFSAs.
By Borrelli (registered) | Posted April 28, 2011 at 14:01:39
Hi Mr Grande,
You're right, you can definitely get better rates than the 2% I used as an example there, but that's not really the point. What I was trying to highlight is that banks promote simple TFSA savings accounts as the main use of TFSAs, but this obscures the fact that most TFSA 'power-users' (if I can characterize them as such) wouldn't think of wasting their limited TFSA room on a measly savings account with 2-3% return--they would use their TFSA to shelter investments with higher returns like stocks. With the TSX up more than 14% between 2009 and 2010, you can see why. There are many investors forums online where this strategy is eagerly promoted because, well, it's more profitable.
RE: your second question, you pay absolutely no taxes on ANY withdrawals from your TFSA, ever. Check out that pamphlet I linked to above, from the GoC website:
"Your contributions to a TFSA are not deductible for income tax purposes but the investment income, including capital gains, earned in your TFSA is not taxed, even when withdrawn."
By Undustrial (registered) - website | Posted April 28, 2011 at 14:26:49
One need only look south for a truly grim picture. And what's ugliest is how it tends to be used politically. The national debt, other than a small jump at WWII, remained relatively constant for decades, until the Reagan years. After 1980, it begins to skyrocket, continuing under both Bush presidencies as well as Obama, but with a bit of a drop during the Clinton years. What's so interesting is that Reagan was also the one who declared war on government spending claiming that it was "out of control", a process which has been repeated many times since.
http://en.wikipedia.org/wiki/File:USDebt...
The fact that so many conservative politicians, here as well, tend to grow the debt at such rates really says something. It's true in the US, it's true here, and it's true in most of the developing world. Health care and public spending don't drain public funds anywhere near as fast as military spending and tax cuts. It's a kind of delayed shift in funding - run up a big bill then come back crying the next year that social service spending is "out of control". Every time it's done, though, it eats up a slightly bigger chunk of our overall costs.
Debt is a virtual public resource, but it's still limited by real-world factors. It can exist only as long as we can pay it.
By A Smith (anonymous) | Posted April 28, 2011 at 15:40:48
From 2000-current, provincial spending on education has gone from $11.5B to $21.4B, an increase of 86%. In that same period of time, the Ontario economy has grown from $429.5B to $614.4B, or 43%. Regardless of where you think the tax level should be, the fact remains that government has NOT been rewarding rich people at the expense of average people.
As for the level of debt we have, from 2000-08, as governments cut tax rates (primarily out west, but also federally), interest charges to all levels of government fell from 7.11% of GDP to 3.89%, a reduction of 45.2%. In contrast, from 1991-2000, when tax rates went up (partially through not indexing for inflation), interest charges only fell from 9.31% to 7.11%, a decrease of 23.6%.
In other words, by lowering tax rates, the government ended up getting more money for program expenditures. In fact, from 1991-2000, non-interest expenditures by government only increased by 18.8%. However, from 2000-08, non interest expenditures grew by 55%.
By cutting tax rates, the government has NOT gotten less money for program expenditures, it has gotten more.
If the argument is over particular tax cut preferences, say reducing the GST versus tax savings accounts for rich people, then maybe there is a debate. But there is really no debate regarding tax cuts in freeing up money for average people. Even the U.S. which does have high levels of debt relative to GDP, is actually paying less in interest charges than in 2000, when they had a surplus and a booming economy. In 2000, debt charges in the U.S. were 3.64% of GDP, while today they are only 2.80%. The debt may be higher, but the actual debt burden is 23% lower.
It's not a coincidence that the highest taxed provinces in Canada also have the highest debt. When you tax economic activity, whether that is working, spending, or investing, you get less of it. Ask yourself this, would you work harder for someone that is nice to you, or for someone that is constantly berating you? Dalton McGunity has followed the latter route and has turned one of the fastest growing economies in Canada into one of the slowest.
By Woody10 (registered) | Posted April 29, 2011 at 22:52:02 in reply to Comment 62825
And god help us if he gets in again. Thankfully that seems a long shot.
By Borrelli (registered) | Posted April 28, 2011 at 16:15:24
Very interesting and selective use of facts there, Smith. In your first paragraph what does education spending have to do GDP growth and how is it related to rewarding the rich?
In your second paragraph, interesting how those interest charges also generally mirror falling interest rates over that period--you've drawn a spurious correlation between tax rates and interest charges, and conveniently chosen the pre-recessionary period to demonstrate this. Would love to see the sources of your data so I can take a look at the interest charge to GDP ratio over a period when (according to the CTF) Harper has added more than $83B to the total debt while lowering taxes dramatically--while interest rates have been at all-time lows.
But as you point out, the issue really isn't whether low taxes are good for economic growth--sure the booming 2000s in the USA demonstrates that they can be, but there's the little matter of who benefits most when the times are good, and who pays the piper when the house of cards falls.
What you're advocating, it seems, is some version of the wholly discredited model of economics: lower taxes, something that only those with lots of money to be taxed truly benefit from, and then hope that this trickle-down effect provide the illusion of spreading the wealth.
It's the classic economic fairy tale, supply-side economics, and has been tried time and time again in that great economic laboratory called the USA. And it's failed every time, too, from the 1890s, to Reaganomics, to Bush's Bubble.
By A Smith (anonymous) | Posted April 29, 2011 at 17:14:40 in reply to Comment 62826
>> lower taxes, something that only those with lots of money to be taxed truly benefit from
A person earning $20K in Ontario pays $1,970 in income taxes (fed + prov), an average tax rate of 9.85%. A person earning $50K pays an average tax rate of 18.16%. A person earning $200k a year pays $72,945 in taxes, an average rate of 36.47%.
Looking at these numbers, it would appear the government has set tax rates to discourage work and reward poverty.
By drunken monkey (anonymous) | Posted April 30, 2011 at 09:47:40 in reply to Comment 62868
"A Smith" said: "Looking at these numbers, it would appear the government has set tax rates to discourage work and reward poverty."
Adam Smith (the economist) had this to say about "progressive" taxation in book 5 of "An Inquiry into the Nature And Causes of the Wealth of Nations":
"The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be anything very unreasonable. It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion."
By A Smith (anonymous) | Posted April 28, 2011 at 20:38:20 in reply to Comment 62826
>> Would love to see the sources of your data so I can take a look at the interest charge to GDP ratio
This ...
http://www.tpsgc-pwgsc.gc.ca/recgen/pdf/49-eng.pdf
will give you the public accounts for the 2010 Federal government. On page 22, near the bottom of the table, you should see a row called "public debt charges".
These numbers show that from 2006-10, debt charges as a percent of revenue have fallen from 15.2% to 13.5%, even as tax rates were cut and program spending accelerated.
The numbers I presented in my previous comment are from the these two tables...
http://www.statcan.gc.ca/pub/11-210-x/2008000/t002-eng.htm
("GDP at market prices" column)
http://www.statcan.gc.ca/pub/11-210-x/2008000/t008-eng.htm
("Interest on the public debt" column)
and include all levels of government.
>> there's the little matter of who benefits most when the times are good, and who pays the piper when the house of cards falls.
From 2000-08, social benefits went from $1,049.2B to $1,857.8B, an average increase of 7.4% a year. Under Clinton, these benefits increased 42.6%, or only 4.5% a year. All this, even while debt charges have fallen.
If Obama wants to help the economy of the U.S., he should cut tax rates and let average people direct the economy, rather than the government. Central planning doesn't work.
By Brandon (registered) | Posted April 28, 2011 at 21:27:25 in reply to Comment 62838
If Obama wants to help the economy of the U.S., he should cut tax rates and let average people direct the economy, rather than the government. Central planning doesn't work.
Because when taxes dropped in 2001 the economy took off and has never been better! Less taxes on the "job creators" and they'll create more jobs!
Except for the fact that they haven't, what's happened is that the "job creators" have extracted a whole pile of wealth for themselves.
Here's another theory: If taxes are low, it costs them less to take their money out. With a 20% rate if I pull $100k out it costs me $20k. With a 50% rate I only get $50k out of it so I'm less likely to want to pull it out, which leaves more for the company to spend on things like employees.
By Woody10 (registered) | Posted April 29, 2011 at 22:55:55 in reply to Comment 62840
But they won't and have shown that. So better for you to spend it and give it back in your sales taxes right?
By A Smith (anonymous) | Posted April 29, 2011 at 14:45:02 in reply to Comment 62840
>> Less taxes on the "job creators" and they'll create more jobs!
Since the middle of of 2007, the U.S. federal minimum wage has increased three times, a total of 40.77%. In contrast, the minimum wage only jumped 21.17% from 1992-2000.
In May 2007, just prior to the first hike, unemployment was 4.6%. Six months later, unemployment was up to 5%. Six months after that, it was up to 5.5%. Six months after that, the jobless number was 7.4%. Six months after that, it was up to 9.5%. But that wasn't enough for the politicians, so the minimum wage went up once more and in six months time, unemployment hit 10%.
Does it take a genius to realize that increasing the price of labour 40% in 2.5 years would not be good for job creation?
By Woody10 (registered) | Posted April 30, 2011 at 19:09:33 in reply to Comment 62860
I agree but You're talking to the minimum wagers I'm afraid.
By wordman z (anonymous) | Posted April 28, 2011 at 16:30:46
I think taxes are a bad thing. That's why I do what I do for the love of music and keep turning down these giant record contracts.
By SpaceMonkey (registered) | Posted April 28, 2011 at 17:08:33
I think the TFSA is great. I am using it to fund my future retirement. With pensions becoming a thing of the past for most people, vehicles such as the TFSA will become increasingly more important.
Saving money should be encouraged. If Canadians can't fund their own retirement, Canada will be in big trouble. I see nothing wrong with rewarding/encouraging people to save their money.
By Robert D (anonymous) | Posted April 28, 2011 at 17:26:42
I agree with the OP that TFSAs reward the rich much more than the poor.
First of all, consider that the vast majority of RRSP contribution room goes UNUSED by Canadians - because most can't afford to put any money into their RRSP.
Similarly, while many Canadians have opened TFSA accounts, the vast majority of contribution room remains unused.
The only people who can contribute to both, are those wealthy Canadians who have enough to pay for all their expenses, and max out their RRSP, and have at least $5,000 left over.
Borrelli is also correct when he talks about the optimum use of the TFSA - it is not putting $5,000 in every year in a 5 year GIC, or even in a mutual fund. The true beauty of the TFSA is that you can put $5,000 inot a HIGH RISK investment, and gamble it. Sure you might lose, this is a high risk investment after all, but if you win, the tax free shelter and the contribution room you free up is worth more than enough to cover your losses. Of course this strategy is limited to people who are already comfortably maxing out their RRSP and don't mind gambling $5,000 - or rather, would gamble it anyways, just not in a tax free manner.
Let's not forget the government altered the rules regarding TFSAs in the last year or so, in response to sophisticated tax minimization schemes that were dreamed up by wealth management experts as a way of sheltering the investments of their wealthy clients.
I'm not saying the TFSA is entirely bad - it serves a purpose, but the good that it does for the vast majority of Canadians is nothing compared to the good it does to the top 10% of income earners.
By phantom (anonymous) | Posted April 28, 2011 at 19:43:56
The writer has an opinion, alright, howver it is slanted and tainted where he attacks pensions, yet the majority of working people have nothing to retire with nor can they afford GIC's or even RRSP's which are not very effective becuase the market crashes, so do the investments.
The writer fails to put the blame in the right spot, in my view. How come no blame on the banksters, the rich elite, the corporate monsters, our politicians who have sold us out?
By davidvanbeveren (registered) | Posted April 28, 2011 at 21:07:13
As children of the 1980's we might as well embrace Galbraith's notion of an Affluent Society because that's the direction we're going in whether we like it or not. If we wish to preserve anywhere near the same standard of public services and infrastructure that our parents enjoyed it will be paid for largely through higher personal income and property taxes. The baby boomers will remain an influential voting block for a good portion of our working lives, and I don't expect that any political party would risk alienating this group by forcing them to pay for the excesses of their generation in their retirement years.
By Kiely (registered) | Posted April 28, 2011 at 22:42:20
Attention was not seriously directed at how to pay back this "investment" beyond the lazy conviction that economic growth would cover it
Economic growth IS debt. Yours, mine, our governments', that is when there is economic growth. When "money" is being leant, debt and by proxy "wealth" are created.
Run the banks... or be slaves. Our choice.
Comment edited by Kiely on 2011-04-28 22:42:50
By Shempatolla (registered) - website | Posted April 28, 2011 at 22:59:15
And who stands to inherit this wealth? Your generation of course. Who worked to build the wealth in the first place? The people of the generation before. Who sacrificed their youth to put the country in a place where such wealth could be made? The generation before that.
Winston Churchill on socialism:
""Let them quit these gospels of envy, hate, and malice. Let them abandon the utter fallacy, the grotesque, erroneous, fatal blunder of believing that by limiting the enterprise of man, by riveting the shackles of a false equality...they will increase the well-being of the world."
By BobInnes (registered) - website | Posted April 29, 2011 at 00:04:30
Borrelli's song is the sweetest music I've heard for a long long time, even though I'm right in the middle of his cross hairs. He isn't the only person who worries about such things but its much clearer from his perspective than my own, and hopefully his peers will get interested in these vital issues.
My own view is that the gummerment has become bloated, taking on too many mandates so now it soaks up roughly 40% of the economy. Confucius warned many thousands of years ago that any kingdom which took more than 10% in taxes would become unstable and end badly. Taxing 4x above this rate has to be unsustainable. One might argue that the modern technical world demands more regulation so maybe 20% might be accepted by the people, maybe. Social services and health are the biggies, but these are entirely discretionary. I see health as the carrot that Trudeau put in front of the taxpaying donkey.
My own recollection is that Trudeau singlehandedly built an enormous federal cake, with a bunch of -isms for icing, destroyed our Bank of Canada and therefore got a credit card from Phantom's banksters (who rewarded him with Club of Rome footstool), and then walked away. Despite huge debt charges, it was like we just let interest pile up, especially when rates hit 20% 'under Volker'. Mulroney, unable to keep up, got blamed for deficit spending. Thanks Pierre. My penance for voting for him (Trudeau) is now, via the Canadian Action Party, to try to undo his BOC move so we can better control banks and where interest payments go. Right now we pay $57bn to banksters. Free tuition for all would be a fraction of that amount.
A Smith raises good points about how taxes burden the economy, but what is the limiting factor? This truly shocking podcast made me realize that the limit is zero which might gladden the heart of any Libertarian. Canada is rapidly lowering corporate taxes in an effort to respond to this kind of 'competitive' environment but the nearest tax haven is less than 9 hours drive. One could argue that no corporation ever paid a tax since tax is just another cost to pass on to the customer. Also, since health is a people issue, perhaps the burden should fall squarely on the people who demand the service - only when we feel the true cost can we have a proper dialog.
I think we must look squarely at all our main programs and ask how, as Borrelli puts it, are the generations to be squared with each other - hopefully sometime before we boomers expire at 100. It's a long time to wait, but hey, we can't take it with us!
There has to be a better way to have a social supporting mechanism. I say break the pot and start afresh. Something new, something Canadian.
Health care will probably have to be severely limited for us oldsters. Good health is really up to the individual but too often folks rely on the medical profession instead of their garden and the gym. The free service is thus abused as A Smith would likely predict.
The student debt issue is truly an outrage, especially given the rapidly vanishing jobs outlook. Most of my colleagues in CAP want to smash NAFTA as a means to staunch further job destruction - one way to tackle the problem that is reminiscent of former cycles - ie. free trade collapsed under WW1. We would miss our cheap IPODs and such. But if our warnings go unheeded and something is not done to reign in excessive corporate bullying, manipulating, evading, outsourcing, temping, etc. by 'gentle' means, such drastic action will be unavoidable, and not just for generational reasons.
Tackling these issues will go a long way to easing Borrelli's pain.
By Kiely (registered) | Posted April 29, 2011 at 08:51:57 in reply to Comment 62844
The problem is money and the economy aren't REAL. If I go to a bank and take out a $100K mortgage they don't call the mint and order up more bills. The "money" simply comes into existence as debt. That debt is the "money". The bank can sell that debt.
The entire system is designed to make real wealth for a select few off of the increasing debt load of the majority. The system cannot stop creating debt or it risks collapse.
We can free-market our asses off that isn't going to help us. The list of philosophers, intellectuals, politicians, ex-presidents, even some economists and bankers that have warned us about this system and its inevitable dire results is a long one... but don't worry, just believe in the "invisible hand".
We need to educate ourselves about what "wealth" is, how "money" comes into being... what is "The Economy", who benefits when it grows and who doesn't. If anything is going to change for working people, for the "average" family, we need (at minimum) election and banking reform. But reform born from ignorance, like money born from nothing, isn't going to help us.
It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." - Henry Ford
By SpaceMonkey (registered) | Posted April 29, 2011 at 23:19:44 in reply to Comment 62849
If anyone is interested, here is an educational video that explains the above in more detail.
By Kiely (registered) | Posted May 01, 2011 at 19:14:23 in reply to Comment 62873
Yep, that's a good one Spacemonkey. Lays it out plain and simple.
By Undustrial (registered) - website | Posted April 29, 2011 at 01:38:06
Isn't "investment" just another word for debt? And if so, can this debt burden private entities (businesses, individuals etc) in ways similar to national debts?
There has been an enormous boom of wealth in the last few decades - reflecting much higher productivity and much larger markets, but almost none has gone to the bulk of the working population. 80% of people aren't making any more in real terms now than they were in the early 1970s. What this shows is that profits made from investments (public, private, individual etc) are largely being recycled into more credit, rather than a rising tide which lifts all boats.
It's easy to complain when a chunk of our tax dollars vanishes as interest payments on old loans. What we don't see is the chunk of our rent, power bills or purchases at stores which also goes to such payments. What isn't financed these days? And how much does that end up costing the consumer at the end of the line? And what does it cost us to once-again finance all these costs?
By Borrelli (registered) | Posted April 29, 2011 at 09:15:26
"What this shows is that profits made from investments (public, private, individual etc) are largely being recycled into more credit, rather than a rising tide which lifts all boats."
Thank you for writing this, Undustrial--real per capita income in Canada and USA, while rising over the past decade, still has far to go before catching up with what it was in the 1970s.
By Borrelli (registered) | Posted April 29, 2011 at 09:47:08
Bob, thanks for the link to your blog posts on the higher ed. bubble. For some recent reading on that topic, here's a piece that someone passed along to me that I found quite eye opening.
By Mogadon Megalodon (anonymous) | Posted April 29, 2011 at 12:26:40 in reply to Comment 62852
Another along that line:
http://nplusonemag.com/bad-education
By Borrelli (registered) | Posted April 29, 2011 at 13:06:50 in reply to Comment 62857
Thanks for the link MM--unbelievable. As in the USA, we too have moved to a model where student debt is permanently yoked to graduates, regardless of their ability to turn it into a job:
"We know the consequences of default for lenders, investors, and their backers at the Treasury, but what of the defaulters? Homeowners who found themselves with negative equity (owing more on their houses than the houses were worth) could always walk away. Students aren’t as lucky: graduates can’t ditch their degrees, even if they borrowed more money than their accredited labor power can command on the market. Americans overwhelmed with normal consumer debt (like credit card debt) have the option of bankruptcy, and although it’s an arduous and credit-score-killing process, not having ready access to thousands in pre-approved cash is not always such a bad thing. But students don’t have that option either. Before 2005, students could use bankruptcy to escape education loans that weren’t provided directly by the federal government, but the facetiously named “Bankruptcy Abuse Prevention and Consumer Protection Act” extended non-dischargeability to all education loans, even credit cards used to pay school bills."
By Mogadon Megalodon (anonymous) | Posted May 16, 2011 at 19:07:44 in reply to Comment 62858
"A record share of students are leaving college with a substantial debt burden, and among those who do, about half (48%) say that paying off that debt made it harder to pay other bills; a quarter say it has made it harder to buy a home (25%); and about a quarter say it has had an impact on their career choices (24%)."
http://pewsocialtrends.org/2011/05/15/is-college-worth-it/#about
By Mogadon Megalodon (anonymous) | Posted May 16, 2011 at 12:02:40 in reply to Comment 62858
Another related bit from NPR today.
"I can see someone borrowing perhaps $10,000 a year if they're majoring in science, technology, engineering, mathematics, computer science or nursing," says Kantrowitz, the publisher of the FinAid and Fastweb websites.
"But I can't see borrowing that amount of money for a degree in art, or humanities, or sociology, because the jobs just don't pay as well for those fields of study," he says.
That might make some people wince — especially those who focused on liberal arts in college. Kantrowitz says it's not that those majors are worthless, but that students have to face the reality of how they're going to pay back the money they've borrowed for their education.
http://www.npr.org/2011/05/16/136214779/college-student-debt-grows-is-it-worth-it
By A Smith (anonymous) | Posted April 30, 2011 at 12:07:14
A great reason why taxes should be lower, not higher...
http://www.thespec.com/news/local/article/524740--hecfi-already-1m-in-the-red-but-pleased
By Robert D (anonymous) | Posted May 01, 2011 at 21:14:36 in reply to Comment 62880
Alright, I have to agree with you on this one, HECFI is freaking ridiculous...
By A Smith (anonymous) | Posted May 01, 2011 at 15:01:49
According to the Ontario 2010 budget, from 2001-2 to 2010-11, Ontario program spending increased from 13.58% of GDP to 19.57%. If spending the spending ratio had stayed constant at 13.58% and we assume the same GDP growth (which likely would have been higher due to higher productivity in the private sector) program spending would have been $80.4B, rather than $115.9B, a saving to taxpayers of $35.5B.
According to the same document, sales tax revenue in 2010-11 was $19.1B, while income tax revenue was $25.9B. In other words, even if we use the historically low GDP growth figures over the past decade, keeping government spending at 2001-02 levels, as a proportion of GDP, would have allowed the Ontario government to completely abolish the 8% PST/HST and reduce the income tax by 63.3%.
If we assume that the economy would have grown faster with this lower government spending ratio, than it is quite likely that we could have gotten rid of both the PST and the income tax.
By jacob (registered) | Posted May 02, 2011 at 15:47:00 in reply to Comment 62900
A Smith, while I almost always disagree with your conclusions, being generally utopian, some of your posts can't be ignored. Every progressive should be intent on curbing government excess because otherwise the result is G20, HECFI etc. Rightwing govts can go ahead and screw up governing because it supports their ideology that govt is inefficient. Leftwingers should be more diligent and informed on these issues.
By Kiely (registered) | Posted May 02, 2011 at 16:27:54 in reply to Comment 62962
Rightwing govts can go ahead and screw up governing because it supports their ideology that govt is inefficient.
Quite true jacob.
By A Smith (anonymous) | Posted May 01, 2011 at 16:18:40
When is RTH going to set up an LRT fund?
By TreyS (registered) | Posted May 01, 2011 at 21:15:54
5 years ago the economists were warning us that with the massive retirement of the baby boomers we'd be in a labour shortage.
hmmm how things changed. the 18-35 year old demographic has an unemployment rate around 16% double the national rate. So when are the baby boomers going to retire? move on people and let the next generation make some money too.
Besides us having to clean up their environmental and sprawl mess, they hang on to their 6-figure jobs until they're 70 now. Please step aside. It's amazing how the baby boomers embraced the Woodstock trend only to eventually get jobs and become the establishment that they were so 'anti' against. The wealthiest generation in history forgot about what their Woodstock years meant.
Back then if you graduated from Mohawk you could write your ticket to a safe secure high paying job. Heck grade 10 would get you a good paying factory job for life. Now, getting a B.A. means nothing, and guess who's deciding if our university degrees are worth anything when applying for a job... a baby boomer. sitting there reading our resumes that have double their education and understanding of the new economy and still don't hire young people. In fact when they need to make budget cuts, in a depression, to save their own ass they lay-off three 30-year olds, with university degrees barely making $40k, to make up for their one wage.
I hope history totally tells the true story about the baby-boomers. The best part is, they can't write it. It has to be following generations that judge the baby-boomers for posterity.
Baby-boomers are bracketed by their parents, "the greatest generation", whom went through two world wars, and the great depression, and between the generation following them that is going through the second great depression and an environmental collapse. It must be nice for them. To make things more sick, the wealthiest generation benefits from not only consuming the planet, but reaps the inheritance from their parents whom saved every penny, only to pass on the largest transfer of wealth in the world's history to only be squandered in Las Vegas and Margarittas in the Caribbean just like Michael Borrelli wrote.
Comment edited by TreyS on 2011-05-01 21:34:07
By Kiely (registered) | Posted May 02, 2011 at 15:17:02 in reply to Comment 62918
I believe one of the main problems with the Baby Boom generation and why it has become increasingly popular to criticize them (I'm not above it myself) is the propaganda and rhetoric that surrounds the generation and has become part of their mythos: countercultures, student protest, the beats, hippies, Woodstock, "revolutions", etc… is so askew to the modern realities that era led to. They are often romanticized, celebrated and self-congratulated for being more progressive, accepting, and enlightened than the generation before. But to younger eyes, often the Baby Boomer legacy does not warrant the celebration.
So posts like TreyS' are a predictable backlash to the media-fueled self-importance of the Baby Boomers.
That does not mean you can blame the entire generation (I would not blame any entire generation for anything). Out of that generation came some genuinely compassionate people who stayed true to their convictions well beyond the Reagan years. If you have ever had the opportunity to talk to one of them, read some of their works or listened to their music, you'll hear about fairness, free and equal education, looking out for the little guy and about beliefs and truths long buried by media obfuscation, "official histories" and the meaningless narcissistic pursuits my generation and those younger have been subjected to.
However in defense of TreyS I will say this. Having read, listened and been personally lectured to by Boomers, many of them were not without some amount of antipathy towards certain elements of their generation… and could be far more vitriolic about those elements than TreyS' post.
By Undustrial (registered) - website | Posted May 03, 2011 at 12:25:00 in reply to Comment 62958
There's just something about blaming a generation for the world's problems that doesn't quite sit right with me.
Most Boomers weren't anywhere near Woodstock. Most didn't wear flowers in their hair, burn bras or any of that, either. Of those who did, how many were really adherents to a totally different worldview, rather than more focused on single issues (civil rights, war, etc) and or drugs/music? I don't know, I wasn't there, but it seems to me to be far more complicated than a sell-out en-masse. Nothing I've seen in my own generation suggests it's that simple.
Also, there's a pretty serious history of political repression, particularly through the 1970s. What would the world look like today without COINTELPRO? Without the wave of CIA-backed coups in Latin America and elsewhere? People didn't just give up and go home - they were targeted, groups were broken up, leaders arrested, and many (particularly black or native leaders) were simply murdered. That kind of thing really squelches effective organization.
By Kiely (registered) | Posted May 05, 2011 at 11:38:46 in reply to Comment 63018
No argument from me on any of that Undustrial.
The idea that the problems with the world lie squarely on the shoulders of any generation is false. As I point out, much of it is media fueled propaganda that leads to the condemnation of the entire generation by later generations. Unfortunately for those that didn't live through it and only understand the generation through mass media stories and images, that becomes the reality of that generation.
The media propaganda surrounding the Boomers has long leaned toward the self-congratulatory. Now the animosity created by that propaganda has spawned the media message of "The Baby Boomers ruined the world". Google that and you get half a million results.
The pitting of generations against one another has been a function of the media for decades.
Just add it to the long list of ways we are divided and conquered.
By mystoneycreek (registered) - website | Posted May 02, 2011 at 06:06:12 in reply to Comment 62918
How wonderful it must be to have the omniscience to regard an entire generation 'en masse'.
A collective.
As if everything Boomers did was the result of concerted, organized efforts, planned in advance. According to some -misguided- agenda.
As if 'they' weren't responding to what had unfolded around them, as if they hadn't taken what they had been given and merely proceeded according to all the influences, as if they weren't doing precisely what every generation before them had done: muddled through.
If you want to be angry at an administration, a corporation, a particular leader, if you feel the need to vent, to spew bile, feel free. But to go off on a generation because you feel they were willfully irresponsible, as if they had some nefarious plan they were implementing, to vilify them according to your own childish interpretation is the most hilarious...and saddening...thing possible, given all the variables.
But I'm going to guess you see that as your right, given that you've been so horribly aggrieved.
Good luck with that.
By Undustrial (registered) - website | Posted May 01, 2011 at 22:51:30 in reply to Comment 62918
In defence of our elders, most of this reckless spending and environmental destruction took place under a system that required them to do such things in order to feed their kids. And those kids were us.
I hope our own children are as generous with us when we're done with the planet.
By phantom (anonymous) | Posted May 02, 2011 at 15:12:32
Rebuttal to Trey S.:
Wow, you have some issues. I find your rant uninformed and completly off track as to the real reasons, why young people with post secondary education are struggling. I am considered a baby boomer and even though I worked at minimum wage jobs, when getting a post secodnary education, I lay the blame on the neo-liberal economic policies that have been imposed on us, which have left me living in low income. I was questioning the role of NAFTA and free trade back in the day, as we, the people were not given the correct information, in which to make an informed decision. In my mind our so called elected officials have sold us out.
We have seen the rise of precarious, temp or contract work, workers have immense problems trying to get the rights enforced, while unionized workers and their leadership being oppressed as well.
The problem in my view, is that people are afraid to stand up. I f you feel you are underpaid, unappreciated worker, then do something about it, participate in general strike, go out a support other working people.
You come across as a whiner and not someone who is proactive about the working conditions and rights and how the ruling elite as pushing us all down tho the low common denominator.
By BabyBuster Generation (1957 - 1964) (anonymous) | Posted June 04, 2012 at 00:33:23
The answer to the debt is simple: Take one day at time. There is no quick fix. It will take generations to pay it down. Remember, each generation has its challenges. Take those who were unlucky to land their life at the time of the world wars and during the great depression - they had to sacrifice immensely - we cannot imagine what it was like. The boomers had challenges as well. It was a very competitive generation given the huge number of boomers competing for work. They also faced huge inflation in the 1970's and 1980's. My generation has faced low employement, high house prices, huge taxes, and having to cope with immense automation in the work place. Younger generations today face living is a world that has around 3 times the global population when I was born, yet global resources have not changed. Population continues to sky rocket, therefore, future generations will need to learn to share more and be wise in the use of the relatively scarce resources per capita. Take one day at a time. Make the best of it. Have some real fun. Live your life and not the lives of those you see on Tv. Don't measure wealth strictly in terms of your ability to consume more products (my 10 year old Honda gets me to work cheaper than the new SUV's on the lot) - we are not the "Jones'".
By Noted (anonymous) | Posted August 23, 2013 at 20:04:50
American, granted. But...
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/08/22/you-give-religions-more-than-82-5-billion-a-year/
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