Raise the Hammer

If you are over 18 and believe that politicians don't lie, I feel bad for you.

That being said, how does giving money to politicians to spend, no matter how nice they sound, improve Ontario's productivity?

In the free market, the goal of investing is to make profits. In govt, the goal of investing is to get re-elected.

The Ontario Liberals wasted a billion dollars, not because they were stupid, but because they were smart. The incentive structure we gave them made it worth their while to write off this huge amount.

Incentives matter. Imagine if McGuinty/Wynne were given monetary bonuses if they could verifiably improve students test scores, while spending as little money as possible. Same for health care, or any other govt program.

How would their decision making change?

I guarantee you that if the provincial cabinet could be financially rewarded for making smart, money saving investment decisions, they would do a far better job with out tax dollars than they do today.

However, since we don't have that pay structure in place, the best we can do is to leave the money where it does exist, the private sector.

Wondering what a "professional accountant" has to say about $325 billion in public debt and $11 billion a year on interest. Because more than half of that figure was racked up by the Liberals and there was no plan on paying it off. What does a "professional accountant" have to say about selling publicly owned revenue generating businesses (Hydro One brought in $700 million a year) to purchase depreciating assets (municipal transit)? "Professional accountant?" Must have worked for the Liberals. Oh, and by the way, the AG found hundreds of millions in waste. You sound disappointed that it wasn't billions but I don't think Ford ever made the claim that the billions were to be found purely in waste. What a joke.

What's with this fancy-pants "graphs" and "statistics" and "facts"! The people are feeling overtaxed. And that's all that counts, not your downtown elite pinko mathematics!

The Doug Ford corporate tax cut will deliver a massive, huge boost to all businesses in Ontario! Except, of course, to the company owned by Doug Ford, Deco Labels and Tags. That business will get probably very little benefit from the Doug Ford corporate income tax cuts. But for every other company, these tax cuts will be huge!

Comment edited by KevinLove on 2018-06-23 08:35:12

the government no longer collects enough revenue to pay for essential public services

Provincial revenue in Ontario grew by 5.2% between 2003-17.

If we assume that inflation averages 2% and real growth of 3.2% is historically high, how is it possible the Libs couldn't balance the books over this period?

The goal in govt is not to just spend, it's to spend wisely so that services can be delivered at the lowest possible cost to taxpayers. This requires a focus on productivity.

So let's look at some numbers...In 2003, there were approximately 2M public school students in Ontario. By 2010, it was down to 1.9M. (http://www.hwdsb.on.ca/secondaryarc/files/2011/01/Item5-MinistryofEducation_Enrolment-Trends-2002-2014.pdf). However, in this same time period, provincial education spending jumped from $14.8B to $21.4B. Per student spending increased by 6.2%.

The good news is, graduation rates increased from 68% in 2004, to 81% in 2010. However, the primary goal of education spending is to make the economy more productive and thus boost economic growth. How did the spending increases between 2003-10 help Ontario's economy? Well, between 2003-17, Ontario's labour productivity ( Table: 36-10-0480-01 (formerly CANSIM 383-0033) averaged 0.97%. In contrast, between 1996-2003, the dreaded Harris years, worker productivity averaged about 1.6%.

Politicians can make claims about how important their "investments" are, but in the real world, people make investments to increase wealth. Higher grad rates means nothing if the economy is less productive and taxes/debt higher. That's a terrible trade off.

In 2003, there were approximately 2M public school students in Ontario. By 2010, it was down to 1.9M. (http://www.hwdsb.on.ca/secondaryarc/files/2011/01/Item5-MinistryofEducation_Enrolment-Trends-2002-2014.pdf). However, in this same time period, provincial education spending jumped from $14.8B to $21.4B. Per student spending increased by 6.2%.

Hmmm....

2 Million students and $14.8 billion spent is $7,400 per student. 1.9 million students and $21.4 billion spent is $11,263 per student. My downtown elitist pinko math says that's actually a per student spending increase of 52%.

But hey, if it feels to you like it really is 6.2% after all, then there is a job opportunity waiting for you in Doug Ford's Ministry of Finance.

You're an accountant. You work with numbers. You know full well I was referring to the annualized growth, not the total growth. Next time I will be more clear in my phrasing, obviously not my strong suit.

That said, as someone who works with numbers, should govt spending be analyzed for return on investment? And if not, why not?

...should govt spending be analyzed for return on investment? And if not, why not?

Kevin's answer: Sometimes yes, sometimes no. It depends upon the goals that the government is trying to achieve. For example, consider National Defence. It is difficult to quantify the goals achieved to determine if they are worth the spending.

However, it is my opinion that victory in WWII was worth every dollar and drop of blood spent. In a similar way, my own personal military service was during the Cold War. To have the Fall of the Berlin Wall and the overthrow of European communist tyranny without WWIII was also worth every dollar spent.

On the other hand, it is my opinion that spending well over $30 billion with numerous casualties in Afghanistan provided a return upon this investment that was not worth while. Other people may have different opinions.

Some government operations are amenable to financial cost/benefit analysis. For example, the GTHA Medical Officers of Health produced a report showing that motor vehicle operators poison and kill over 712 people every year in the GTHA, with associated costs of over $4.6 billion. See page 20 of above link. There are, of course, other enormous costs motor vehicle operators impose upon everyone else.

So on a cost/benefit basis, it is worth spending rather a lot in order to progressively reduce and eliminate motor vehicle use in Ontario. One specific project, Metrolinx's "Big Move," is extensively analysed in the above link.

Comment edited by KevinLove on 2018-06-24 13:11:19

The driver of any budget is the available funds. Once you spend more then what's available you have a spending problem. Let's say I have $2k income to budget. I budget $2k. I don't say to myself that I deserve to be making $5k so I'll budget $5k and live with a $3k deficit and let my debt accrue. If you feel there's a revenue problem then you budget what you have to start with and then you deal with the revenue problem. You don't let debt accrue to the tune of $325 billion. That's ridiculous.

You don't know the first thing about how budgets work. I don't know how you're a professional accountant. I'll give you a pro-tip: budget only the dollars you have. Not the dollars you wish you had or that you think you should have.

What? You can't increase your family income by telling your employer how much to pay you? And you don't give back money to your boss in the form of specific grants to encourage specific boss behaviour?

:)

Yes, the analogy is somewhat absurd. Approximately every government in the entire world has no problems imposing taxes to get the money they "think they should have."

Ryan is absolutely right. And I must add that the effect of the last 23 years of corporate and income tax cuts has been to put so much money into the private sector that it has sparked a lot of wasteful luxury spending.

Although client confidentiality prevents me from getting specific, I have seen all kinds of crazy wasteful luxury spending in my career as an Accountant. I will point out that people somehow manage to prepare food on Formica countertops instead of granite. And very few can tell the difference between a $50 bottle of wine and a $5,000 bottle. And some of the most unhappy, messed-up people I have seen have been the richest.

Through the magic of taxes, all that waste can be magically transformed into education, health care, housing and other real, genuine needs of real, genuine people.

It depends upon the goals that the government is trying to achieve.

Unless one of the goals is to increase productivity growth, the other goals don't matter. When you run our of money, because you have invested in a way that does not promote GDP growth, what then?

If a business boosts salaries for it's employees, but the result is costs go up more than revenues, that business has just increased the chance it will go bankrupt. When that happens, there will be no salaries, low or high. Good intentions don't pay the bills.

Unlimited growth is the goal of a cancer cell.

The largest item of provincial government expense, at roughly half the total, is health care. The goal of this spending is to have a healthy population.

Do you believe that it is more important to have money than to be healthy?

Revenue as a percent of Ontario's GDP is near an all time high. Corporate rates are a bit lower than recent history and income tax rates are higher. I'm not sure how you establish that Ontario is under taxed...

Ont.Govt Revs GDP Rev % of GDP, Ont.Corp.Tax.Rate, Top.Inc.Tax.Rate 1989-90 41.2 278.7 14.78% 14.5 16.59 1990 42.9 280.2 15.31% 14.5
1991 40.8 281.1 14.51% 14.5
1992 41.8 286.4 14.59% 14.5
1993 43.7 293.1 14.91% 13.5
1994 46 307.4 14.96% 13.5 21.9 1995 49.5 324.8 15.24% 13.5
1996 49.5 333.1 14.86% 13.5
1997 52.1 350.4 14.87% 13.5
* 1998 55.8 377.9 14.77% 13.5
1999 65 409 15.89% 13.5 17.9 2000 66.3 440.8 15.04% 12.9
2001 66.5 454 14.65% 11.75
* 2002 74.7 477.8 15.63% 11
2003 74.3 493.1 15.07% 11
2004 83.9 516.1 16.26% 14 17.4 2005 90.3 537.4 16.80% 14
2006 96.6 560.6 17.23% 14
2007 103.6 593.9 17.44% 14
2008 96.9 584.5 16.58% 14
2009 95.8 578.2 16.57% 14 17.4 * 2010 113.6 631 18.00% 14
2011 116.4 659.7 17.64% 12
2012 120.3 680.1 17.69% 11.5
2013 123 695.4 17.69% 11.5 20.5 2014 126.2 726.1 17.38% 11.5
2015 136.1 762 17.86% 11.5
2016 140.7 762 18.46% 11.5
2017-18 150.1 830 18.08% 11.5 20.5

1.) GDP growth increases tax revenues. 2.) Tax revenues pay for health care/education/etc.

What am I missing? If you want more govt programs, how are you going to pay for them if not by increasing Ontario's productivity?

As for growth being equated to cancer. Cancer is bad because it hogs resources. It starves the host. The same could be said of govt. When the govt taxes the economy too highly, it starves the economy of savings. Without adequate savings, the economy can't replace machinery/equipment needed to produce the necessities of life.

I'm not sure how you establish that Ontario is under taxed...

I establish that Ontario is under taxed because of the large amounts of wasteful luxury spending by wealthy corporations and individuals. Taxes can convert that waste into useful goods and services.

1.) GDP growth increases tax revenues.

This is a false statement. GDP growth only increases tax revenue if that growth is taxed. All too frequently, it is not. And all too frequently that growth is tremendously harmful to human beings and the natural environment. That grave harm is a very good reason to be skeptical of policies aimed at increasing GDP.

For example, the #1 way of boosting GDP growth is through a large war or natural disaster. That is a good example of GDP growth that is not taxed. Governments tend not to pay sales taxes upon their arms purchases. And I would suggest that boosting GDP growth may be a poor reason to start a large war.

How many rich people do you know that got rich by wasting money?

If it`s possible, please tell me how. It sounds like the perfect investing strategy. Spend stupidly and get rich.

Im not being a d*ck. I think youre wrong, but who knows, maybe you`re right. The older I get, the more I realize how little I know.

GDP growth only increases tax revenue if that growth is taxed. All too frequently, it is not.

In Ontario, provincial revenue has gone up from 14.8%/GDP in 1989, to 18.1% for 2017.

Are govt services 25% better in Ontario now, than in 1989? They should be, because our taxes are 25% higher.

all too frequently that growth is tremendously harmful to human beings and the natural environment.

Not true...https://www.telegraph.co.uk/travel/maps-and-graphics/most-polluted-countries/

The parts of the world that are poor and not polluted are places like the Brazilian rainforest, or remote areas of Africa. They are clean, but they are also extremely poor, with short life expectancies.

the #1 way of boosting GDP growth is through a large war or natural disaster.

Sure, if you think giving up food for bullets is ideal. The growth I'm referring to is consumer led growth. Growth that gives us better cars, homes, tech, clothes, etc.

Quite a lot, actually. Most of them were just like Doug Ford in that they were born multi-millionaires. A few of them managed to blow all they inherited, but most have enough sense to "only" waste on frivolous luxury spending enough to last for a lifetime of being the idle rich. And, to be fair, some also took that money and did useful things with it.

The point is, of course, that our tax system can convert this waste to useful goods and services for the people of Ontario. For those who do useful things with this money, there are charitable tax credits.

Comment edited by KevinLove on 2018-06-29 09:19:23