Comment 65794

By A Smith (anonymous) | Posted July 08, 2011 at 02:51:37 in reply to Comment 65675

>> Give it a few years or have a look at recent bond rates for the PIIGS and then tell us what our debt payments will be under similar conditions.

Here is a counter example...

In 1990, 20.7% of the general budget of Japan went to paying for the national debt. Since that time, as the value of government bonds/GDP has gone from 36.8% to 138%, national debt charges have only moved to 23.3% and that is down from 24% in 2000.

In the U.S., debt charges are 2.85% of GDP. In 2000, they were 3.64% of GDP.

In Canada, debt charges were over 7% from 1982-2000. Today, they are around 3.75%.

As of May 2011, there were 469,902 people receiving public assistance in Ontario. That's 3.56% of the population. Even if it went to 10% and each of these people got $1,000/month, it would still only cost the province $15.8 Billion/year. In the most recent quarter, Ontario's GDP was $614.4B. That means the high end welfare cost would be 2.57% of the economy.

Even in the last seven years, as McGuinty has expanded central planning in the province, nominal GDP has increased by an average of 3.24%/year.

In other words, if the goal is to keep debt/GDP constant, you can do that with much higher welfare spending than we have today, PLUS have 0.67% of GDP to spend on other items, such as health or education.

There really is no fiscal rationale to not increase welfare. Moreover, I would argue that welfare spending is far better for the economy than spending on health and education, since at least welfare cash encourages business competition.

According to wikipedia, people on welfare in Germany receive 359EUR/month + the cost of adequate housing, along with health care.

If you look at the German economy, it is currently the best in Europe, exports more per capita than Canada and has a housing market that is one of the most affordable in Europe...

According to the CIA Factbook, Germany collected $17,128/person in revenue in 2010. In Canada, where welfare benefits are lower, the government collected $17,799/person.

Even the bond market likes "higher welfare" Germany better than Canada. Their 10 year bond yields 3.01%, while Canada's yields 3.12%.

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